MEDIFAST, INC.

MED
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MEDIFAST : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

11/03/2020 | 05:09pm

Note Regarding Forward-Looking Statements




This report contains information that may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Generally, the words "believe," "expect," "intend," "estimate," "anticipate,"
"project," "will," and similar expressions, which are not historical in nature,
identify forward-looking statements. However, the absence of these words or
expressions does not necessarily mean that a statement is not forward-looking.
All statements that address operating performance, events or developments that
we expect or anticipate will occur in the future, including statements relating
to future operating results, are forward-looking statements. Management believes
that these forward-looking statements are reasonable as and when made. However,
caution should be taken not to place undue reliance on any such forward-looking
statements because such statements speak only as of the date when made. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise,
except as required by law. In addition, forward-looking statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from our historical experience and our present expectations or
projections. These risks and uncertainties include, but are not limited to,
those described in our 2019 Form 10-K, the Form 10-Q for the Quarter ended March
31, 2020
and the Form 10-Q for the Quarter ended June 30, 2020, and those
described from time to time in our future reports filed with the SEC.


The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and related notes appearing
elsewhere herein.



Overview




Medifast is the company behind one of the fastest-growing health and wellness
communities called OPTAVIA®, which offers Lifelong Transformation, One Healthy
Habit at a Time®. Reflecting the success of its approach to health and wellness
for its clients, Medifast has consistently grown revenue for the past three
years. Of equal importance, our business model is expected to deliver long-term
growth in the foreseeable future. Medifast has redefined direct selling by
combining the best aspects of the model, while eliminating those dimensions that
have typically challenged other companies. Medifast is often compared to diet
and weight loss-only companies or to multi-level marketing companies, but our
model is very different. The Company supports clients through independent
OPTAVIA Coaches, the majority of whom were clients first.

Our operations are conducted through our wholly owned subsidiaries, Jason
Pharmaceuticals, Inc.
, OPTAVIA LLC, Jason Enterprises, Inc., Jason Properties,
LLC
, Medifast Franchise Systems, Inc., Medifast Nutrition, Inc., Seven Crondall
Associates, LLC
, Corporate Events, Inc., OPTAVIA (Hong Kong) Limited, OPTAVIA
(Singapore) PTE. LTD and OPTAVIA Health Consultation (Shanghai) Co., Ltd.

We sell a variety of weight loss, weight management and healthy living products
all based on our proprietary formulas under the Medifast®, OPTAVIA, Thrive by
Medifast, Optimal Health by Take Shape for Life, and Flavors of Home® brands.
Our product line includes more than 145 consumable options, including, but not
limited to, bars, bites, pretzels, puffs, cereal crunch, drinks, hearty choices,
oatmeal, pancakes, puddings, soft serve, shakes, smoothies, soft bakes, and
soups. The Thrive by Medifast and Optimal Health by Take Shape for Life lines
include a variety of specially formulated bars, shakes, and smoothies for those
who are maintaining their weight for long-term healthy living. We identify
opportunities to expand our product line by regularly surveying our clients and
studying industry and consumer trends. This allows us to introduce new, high
quality products that we expect to meet consumer demand.

Our nutritional products are formulated with high-quality ingredients. Products
include individually portioned, calorie- and carbohydrate-controlled meal
replacements that share a similar nutritional footprint and provide a balance of
protein and good carbohydrates. Our meal replacements are also fortified to
contain vitamins and minerals, as well as other

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nutrients essential for good health. We offer our OPTAVIA clients exclusive
OPTAVIA-branded nutritional products, or "Fuelings," and also offer a variety of
other weight loss, weight management, and healthy living products under other
brands. OPTAVIA Fuelings come in a variety of flavors that appeal to a broad
variety of tastes. Our products are nutrient-dense, portion-controlled,
nutritionally interchangeable and simple to use.

OPTAVIA is a highly effective lifestyle solution for people for whom diets alone
have failed. Habits of Health®, encompasses our community of OPTAVIA Coaches,
our OPTAVIA health and wellness programs, and our proprietary OPTAVIA-branded
products. This approach developed by OPTAVIA co-founder and independent OPTAVIA
Coach, Dr. Wayne Scott Andersen, combines clinically proven plans with
scientifically developed products and the ongoing support of OPTAVIA Coaches.
The OPTAVIA integrated coaching model is centered around providing focused,
individualized attention to our clients. Our OPTAVIA Coaches provide the support
and encouragement for clients to successfully learn and adopt a more healthy
lifestyle. This clinically-proven plan translates into better client results
when compared to programs that leave individuals to adopt and maintain healthy
habits on their own. Our clients receive personalized attention from our OPTAVIA
Coaches who share, educate, motivate and pass along their passion for healthy
living. We believe this personal, direct-sales and service strategy is optimal
for activating and supporting our clients. In a clinical study published in
Obesity Science and Practice in 2018, the OPTAVIA model's effectiveness was
validated when its meal plan was combined with education and support from
OPTAVIA Coaches.

Our OPTAVIA Coaches are independent contractors, not employees, who support our
clients and market our products and services primarily through word of mouth,
email and via social media channels such as Facebook, Instagram, Twitter and
video conferencing platforms. As direct-sales entrepreneurs, OPTAVIA Coaches
market our products to friends, family and other acquaintances with whom they
have established strong relationships.

The entrepreneurial success of our OPTAVIA Coaches is the key to our success. We
are focused on scaling our OPTAVIA Integrated Coaching Model by offering
economic incentives that are attractive to independent entrepreneurs and
reflective of the new "gig economy." Our successful clients frequently become
enthusiastic health and wellness advocates themselves and may choose to become
OPTAVIA Coaches. This process of clients becoming OPTAVIA Coaches underpins our
growth.

As we previously disclosed, global expansion is an important component of our
long-term growth strategy. In July 2019, we commenced our international
operations, entering into the Asia Pacific markets of Hong Kong and Singapore.
The Company outsources a distribution center in Hong Kong to give the Company
adequate product distribution capacity for the foreseeable future. Our decision
to enter these markets was based on industry market research that reflects a
dynamic shift in how health care is being prioritized and consumed in those



countries.



COVID-19 Update




In December 2019, a novel strain of coronavirus ("COVID-19") was identified in
Asia. Over the next several months, COVID-19 quickly spread across the world. In
March 2020, the World Health Organization declared COVID-19 a worldwide
pandemic. As of October 2020, the virus continues to spread, infecting more than
40 million people worldwide, and impacting worldwide economic activity. In
response to the pandemic, many governments implemented policies intended to stop
or slow the further spread of the disease, such as social distancing and
shelter-in-place orders. This has resulted in the temporary closure of schools
and non-essential businesses. Because the Company sells products that are
essential to the daily lives of consumers, the COVID-19 pandemic has not had a
material impact to our consolidated operating results for the nine-month period
ended September 30, 2020.




While the duration and severity of this COVID-19 pandemic is uncertain, the
extent to which the pandemic ultimately impacts the Company's business,
financial condition, results of operations, cash flows, and liquidity may differ
from management's current estimates. The difference is due to inherent
uncertainties regarding the duration and further spread of the outbreak, its
severity, government actions taken to contain the virus or treat its impact,
changes in consumer behavior resulting from the pandemic and how quickly and to
what extent normal economic and operating conditions can resume. These
uncertainties make it challenging for our management to estimate our future
business performance. However, we continue to actively monitor the impact of
COVID-19 and related developments on our business.

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Although the COVID-19 pandemic has impacted our business operations in multiple
ways, our manufacturing facility remains fully operational to date and we have
not experienced any meaningful disruption to our worldwide supply chain.
Additionally, nutritional supplements and health foods have been designated
critical/essential infrastructure in the U.S. and, as such, we have continued to
actively manufacture and distribute our products in our markets around the
world. We will continue to communicate with our supply chain partners to
identify and mitigate risk and to manage inventory levels. While our
manufacturing and distribution employees continue to work on site, they are
following additional health and safety guidelines. In response to the public
health crisis posed by COVID-19, we took numerous actions, including:




? successfully implementing a work-from-home plan for all non-essential employees



to comply with guidelines from government and health officials;



? changing this year's OPTAVIA convention from a live event in July to a virtual



event;



prioritizing production to our highest volume products limiting our stock



? keeping unit ("SKU") assortment to ensure that we are able to meet anticipated



product demand across core items;



employing incentives and promotions to help OPTAVIA Coaches adjust to the



? adverse effect of overall economic conditions and the nationwide actions taken



to control the spread of the virus;



providing additional health and safety precautions in our headquarters,



? manufacturing and distribution centers, including use of personal protective



equipment and frequent sanitization;



? process controls in relation to social distancing, visitors, travel and



quarantine.




The Company's priorities during the COVID-19 pandemic continue to be protecting
the health and safety of our employees and their families, OPTAVIA Coaches;
maximizing the availability of products that help consumers with their needs;
and the use of our employees' talents and our resources to help society meet and
overcome the current challenges. The senior management team meets regularly to
review and assess the status of the Company's operations and health and safety
of its various constituencies, and will continue to proactively respond to the
situation and may take further actions that alter the Company's business
operations as may be required by governmental authorities, or that are
determined to be in the best interests of employees, OPTAVIA Coaches and
consumers.




Critical Accounting Policies and Estimates



Our unaudited condensed consolidated financial statements are prepared in
accordance with GAAP. Our significant accounting policies are described in
Note 1 to the unaudited condensed consolidated financial statements included in
this report. We consider all of our significant accounting policies and
estimates to be critical.






The preparation of our financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenue and expenses
during the reporting period. Management develops, and changes periodically,
these estimates and assumptions based on historical experience and on various
other factors that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates under different assumptions or
conditions.



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Overview of Results of Operations



Our product sales accounted for 98% of our revenues for the three months and
nine months ended September 30, 2020 and 2019, respectively.






The following tables reflect our income statements (in thousands,
except percentages):


Three months ended September 30,
2020 2019 $ Change % Change

Revenue $ 271,470 $ 190,061 $ 81,409 42.8%
Cost of sales 67,434 47,128 (20,306) (43.1%)
Gross profit 204,036 142,933 61,103 42.7%



Selling, general, and administrative 159,477



122,671 (36,806) (30.0%)

Income from operations 44,559 20,262 24,297 119.9%

Other income
Interest income, net 44 324 (280) (86.4%)
Other income (expense) 30 (3) 33 (1100.0%)
74


321 (247) (76.9%)



Income from operations before income taxes 44,633



20,583 24,050 116.8%



Provision for income tax 10,180



4,681 (5,499) (117.5%)

Net income $ 34,453 $ 15,902 $ 18,551 116.7%

% of revenue
Gross profit 75.2% 75.2%



Selling, general, and administrative costs 58.7%



64.5%



Income from operations 16.4%



10.7%



Income from operations before income taxes 16.4% 10.8%






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Nine months ended September 30,
2020 2019 $ Change % Change

Revenue $ 669,930 $ 543,040 $ 126,890 23.4%
Cost of sales 171,354 134,250 (37,104) (27.6%)
Gross Profit 498,576


408,790 89,786 22.0%




Selling, general, and administrative 402,385 336,458 (65,927) (19.6%)

Income from operations 96,191 72,332 23,859 33.0%

Other income
Interest income, net 212 1,061 (849) (80.0%)
Other income (expense) 12 (11) 23 (209.1%)
224


1,050 (826) (78.7%)



Income from operations before income taxes 96,415



73,382 23,033 31.4%



Provision for income taxes 21,550 15,347 (6,203) (40.4%)

Net income $ 74,865 $ 58,035 $ 16,830 29.0%

% of revenue
Gross Profit 74.4% 75.3%



Selling, general, and administrative costs 60.1%



62.0%



Income from Operations 14.4%



13.3%



Income from operations before income taxes 14.4%



13.5%




Revenue: Revenue increased $81.4 million, or 42.8%, to $271.5 million for the
three months ended September 30, 2020 from $190.1 million for the three months
ended September 30, 2019. The total number of active earning OPTAVIA Coaches for
the three months ended September 30, 2020 increased to 42,100 from 32,200 for
the corresponding period in 2019, an increase of 30.7%. The average revenue per
active earning OPTAVIA Coach was $6,329 for the three months ended September 30,
2020
compared to $5,715 for the three months ended September 30, 2019. Increase
in the productivity per active earning OPTAVIA Coach for the quarter was driven
by an increase in both the number of clients supported by each Coach as well as
an increase in average client spend. Revenue increased $126.9 million, or 23.4%,
to $669.9 million for the nine months ended September 30, 2020 from $543.0
million
for the nine months ended September 30, 2019. This increase in revenue
for the quarter and nine months ended September 30, 2020 resulted from temporary
program initiatives which drove more clients to be on our plans, aided by the
ongoing transition of clients to higher priced OPTAVIA-branded products.
OPTAVIA-branded products represented 83.0% of consumable units sold for the
three months ended September 30, 2020 compared to 78.0% for the corresponding
period in 2019 and 82.0% of consumable units sold for the nine months ended
September 30, 2020 compared to 76.0% for the corresponding period in 2019.

Costs of sales: Cost of sales increased $20.3 million, or 43.1%, to $67.4
million
for the three months ended September 30, 2020 from the corresponding
period in 2019 and increased $37.1 million, or 27.6%, to $171.4 million for the
nine months ended September 30, 2020 from the corresponding period in 2019. The
increase in cost of sales was primarily driven by an increase in product sales.

Gross profit: For the three months ended September 30, 2020, gross profit
increased $61.1 million, or 42.7%, to $204.0 million from the corresponding
period in 2019. As a percentage of sales, gross margin remained flat at 75.2%
for the three months ended September 30, 2020 as compared to the corresponding
period in 2019. For the nine months ended September 30, 2020, gross profit
increased $89.8 million, or 22.0%, to $498.6 million from the corresponding
period in 2019. As a percentage of sales, gross margin decreased 90 basis points
to 74.4% for the nine months ended September

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30, 2020 from 75.3% for the corresponding period in 2019. The decrease in gross
margin percentage for the year-to-date periods was primarily the result of
promotional activity as well as higher production costs in 2020.






Selling, general and administrative: Selling, general and administrative
("SG&A") expenses were $159.5 million for the three months ended September 30,
2020
, an increase of $36.8 million, or 30.0%, as compared to $122.7 million from
the corresponding period in 2019. As a percentage of sales, SG&A expenses were
58.7% as compared to 64.5% for the three months ended September 30, 2020 and
2019, respectively. SG&A expenses included research and development ("R&D")
costs of $0.8 million and $0.6 million for the three months ended September 30,
2020
and 2019, respectively. The $36.8 million increase in SG&A for the quarter
was primarily due to higher OPTAVIA commission expense as a result of growth in
OPTAVIA sales, increased salaries and benefits related expenses partially offset
by a decrease in sales and marketing expenses. For the nine months ended
September 30, 2020, SG&A expenses increased $65.9 million, or 19.6%, to $402.4
million
from $336.5 million for the corresponding period in 2019. SG&A expenses
included $1.9 million and $1.8 million in R&D costs for the nine months ended
September 30, 2020 and 2019, respectively. As a percentage of sales, SG&A
expenses were 60.1% for the nine months ended September 30, 2020 as compared to
62.0% for the corresponding period in 2019. The $65.9 million increase in SG&A
for the nine months ended September 30, 2020 was primarily due to higher OPTAVIA
commission expense as a result of growth in OPTAVIA sales, incremental
professional service costs in connection with the Schedule 13D filing and
increased salaries and benefits related expenses partially offset by sales and
marketing expenses. For the nine months ended September 30, 2020, Non-GAAP
adjusted SG&A expenses increased $58.9 million to $395.3 million and Non-GAAP
adjusted SG&A as a percentage of revenue decreased 300 basis points
year-over-year to 59.0%. Non-GAAP adjusted SG&A excludes expenses in connection
with the Schedule 13D filing of $5.8 million and severance related costs of $1.2
million
resulting from the departure of the Company's previous Chief Financial
Officer.



OPTAVIA commission expense, which is a variable expense, increased $37.7
million
, or 48.8%, to $114.9 million for the three months ended September 30,
2020
from $77.2 million for the corresponding period in 2019. For the nine
months ended September 30, 2020, OPTAVIA commission expense increased $57.5
million
, or 25.7%, to $281.2 million from $223.7 million for the corresponding
period in 2019. The increase was primarily the result of increased product
sales. As OPTAVIA revenue increased as a portion of the Company's total sales
mix, the commission rate as a percentage of revenue increased 170 basis points
to 42.3% for the third quarter of 2020 compared to 40.6% for the third quarter
last year and increased 80 basis points to 42.0% for the nine months ended
September 30, 2020 compared to 41.2% for the corresponding period in 2019. This
is an outcome of the success we are experiencing with our OPTAVIA integrated
coach model.



Income from operations: For the three months ended September 30, 2020, income
from operations increased $24.3 million to $44.6 million from $20.3 million for
the corresponding period in 2019 primarily as a result of increased gross profit
partially offset by increased SG&A expenses. Income from operations as a
percentage of sales was 16.4% and 10.7% for the three months ended September 30,
2020
and 2019, respectively. For the nine months ended September 30, 2020,
income from operations increased $23.9 million to $96.2 million from $72.3
million
for the corresponding period in 2019 primarily as a result of increased
gross profit partially offset by increased SG&A expenses. Income from operations
as a percentage of sales was 14.4% and 13.3% for the nine months ended September
30, 2020
and 2019, respectively. For the nine months ended September 30, 2020,
Non-GAAP adjusted income from operations increased $30.9 million to $103.2
million
and Non-GAAP adjusted income from operations as a percentage of revenue
increased 210 basis points year-over-year to 15.4%.




Other income: For the three and nine months ended September 30, 2020, other
income (including interest income) was $0.1 million and $0.2 million,
respectively, and for the three and nine months ended September 30, 2019, other
income (including interest income) was $0.3 million and $1.1 million,
respectively.




Income from operations before income taxes: Income from operations before income
taxes was $44.6 million for the three months ended September 30, 2020 as
compared to $20.6 million for the three months ended September 30, 2019, an
increase of $24.0 million. Income from operations before income taxes as a
percentage of sales increased to 16.4% for the three months ended September 30,
2020
from 10.8% for the three months ended September 30, 2019. Income from
operations before income taxes was $96.4 million for the nine months ended
September 30, 2020 as compared to $73.4 million for the nine months ended
September 30, 2019. Income from operations before income taxes as a

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percentage of sales increased to 14.4% for the nine months ended September 30,
2020
from 13.5% for the nine months ended September 30, 2019.






Provision for income tax: For the three months ended September 30, 2020, the
Company recorded $10.2 million in income tax expense, an effective tax rate of
22.8%, as compared to $4.7 million in income tax expense, an effective tax rate
of 22.7%, for the three months ended September 30, 2019. The slight increase in
the effective tax rate was primarily driven by an increase in state income tax
rate and a decrease in tax benefit of stock compensation, partially offset by an
increase in R&D tax credit and a decrease in meals and entertainment. For the
nine months ended September 30, 2020, the Company recorded $21.6 million in
income tax expense, an effective tax rate of 22.4%, as compared to $15.3 million
in income tax expense, an effective tax rate of 20.9%, for the nine months ended
September 30, 2019. The effective tax rate was negatively impacted by an
increase in state income tax rate and a decrease in tax benefit of stock
compensation and in R&D tax credit, partially offset by a decrease in meals and
entertainment.

Net income: Net income was $34.5 million and $74.9 million, or $2.91 and $6.32
per diluted share, for the three and nine months ended September 30, 2020 as
compared to $15.9 million and $58.0 million, or $1.32 and $4.77 per diluted
share, for the three months and nine months ended September 30, 2019. The
period-over-period changes were driven by the factors described above in the
explanations from operations. Non-GAAP adjusted net income was $80.3 million
or $6.78 per diluted share for the nine months ended September 30, 2020.


Non-GAAP Financial Measures



In an effort to provide investors with additional information regarding our
results, we disclose various Non-GAAP financial measures in this Form 10-Q, our
quarterly earnings press release and other public disclosures. The following
GAAP financial measures have been presented on an as adjusted basis: SG&A
expenses, income from operations, net income and diluted earnings per share.
Each of these as Non-GAAP financial measures excludes the impact of certain
amounts as further identified below that the Company believes are not indicative
of its core ongoing operational performance. A reconciliation of each of these
Non-GAAP financial measures to its most comparable GAAP financial measure is
included below. These Non-GAAP financial measures are not intended to replace
GAAP financial measures.




We use these Non-GAAP financial measures internally to evaluate and manage the
Company's operations because we believe they provide useful supplemental
information regarding the Company's on-going economic performance. We have
chosen to provide this information to investors to enable them to perform more
meaningful comparisons of operating results and as a means to emphasize the
results of on-going operations.





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The following tables reconcile the Non-GAAP financial measures included in this
report (in thousands):




Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019



Selling, general, and administrative $ 159,477 $ 122,671 $ 402,385 $ 336,458
Adjustments
Professional services for 13D Filing


- - 5,811 -
Incremental severance costs - - 1,237 -
Non-GAAP Adjusted selling, general,
and administrative $ 159,477 $ 122,671 $ 395,337 $ 336,458


Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019

Income from operations $ 44,559 $ 20,262 $ 96,191 $ 72,332


Adjustments



Professional services for 13D Filing - - 5,811 -
Incremental severance costs - - 1,237 -
Non-GAAP Adjusted income from
operations $ 44,559 $ 20,262 $ 103,239 $ 72,332


Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019

Net income $ 34,453 $ 15,902 $ 74,865 $ 58,035
Adjustments, net of tax
Professional services for 13D Filing - - 4,512 -
Incremental severance costs - - 961 -
Non-GAAP Adjusted net income $ 34,453 $ 15,902 $ 80,338 $ 58,035

Diluted earnings per share (1) $ 2.91 $ 1.32 $ 6.32 $ 4.77
Impact for adjustments (1) - - 0.46 -
Non-GAAP Adjusted diluted earnings
per share (1) $ 2.91 $ 1.32 $ 6.78 $ 4.77





(1) The weighted-average diluted shares outstanding used in the calculation of
these Non-GAAP financial measures are the same as the weighted-average shares
outstanding used in the calculation of the reported per share amounts.


Liquidity and Capital Resources



The Company had stockholders' equity of $140.0 million and working capital of
$105.5 million at September 30, 2020 as compared with $104.8 million and $74.8
million
at December 31, 2019, respectively. The $35.2 million net increase in
stockholders' equity reflects $74.9 million in net income for the nine months
ended September 30, 2020 offset by $5.0 million spent on repurchases of the
Company's common stock, and $39.9 million for declared dividends paid to holders
of the Company's common stock as well as the other equity transactions described
in the "Condensed Consolidated Statements of Changes in Stockholders' Equity"
included in our condensed consolidated financial statements included in this
report. The Company declared a dividend of $13.4 million, or $1.13 per share, to
holders of the Company's common stock as of September 22, 2020 that will be paid
in the fourth quarter of 2020. While we intend to continue the dividend program
and believe we will have sufficient liquidity to do so, we can provide no
assurance that we will be able to continue to declare and pay dividends. The
Company's cash, cash equivalents, and investment securities increased from $92.7
million
at December 31, 2019 to $169.9 million at September 30, 2020.

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Net cash provided by operating activities increased $60.3 million to $125.4
million
for the nine months ended September 30, 2020 from $65.1 million for the
nine months ended September 30, 2019 as a result of a $16.8 million increase in
net income and $47.0 million increase in operating assets and liabilities.

Net cash used in investing activities was $1.9 million for the nine months ended
September 30, 2020 as compared to $5.5 million for the nine months ended
September 30, 2019. This change resulted from a $5.4 million decrease in cash
used in capital expenditures for the nine months ended September 30, 2020 from
the corresponding period in 2019 partially offset by a $1.7 million decrease in
sale and maturities of investment securities.

Net cash used in financing activities decreased $15.8 million to $44.0 million
for the nine months ended September 30, 2020 from $59.8 million for the
nine months ended September 30, 2019. This decrease was due to a $28.1 million
decrease in stock repurchases partially offset by a $13.2 million increase in
cash dividends paid to stockholders.


In pursuing its business strategy, the Company may require additional cash for
operating and investing activities. The Company expects future cash
requirements, if any, to be funded from operating cash flow and financing
activities.



The Company evaluates acquisitions from time to time as presented.

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