Discontinued Operations, Exit Activities, and Clinic Obligations

3 Months Ended

Mar. 31, 2015

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations, Exit Activities, and Clinic Obligations

12. Discontinued Operations, Exit Activities, and Clinic Obligations

In 2014, the Company exited the MWCC corporate center model by selling 41 centers to existing franchise partners (24 centers were sold in June 2014 and the remaining 17 centers were sold in December 2014) and closing the remaining 34 corporate centers. In accordance with ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity the assets, liabilities, operating results, and cash flows of the MWCC corporate center channel have been presented separately as discontinued operations in the Consolidated Financial Statements for all periods presented.

The following is a summary of the Company’s operating results for discontinued operations for the three months ended March 31, 2015 and 2014:

	2015		2014
Revenue	$	-	$	7,296,000
Income/(loss) before income taxes from discontinued operations		45,000		(924,000)
Income tax/(benefit) provision		17,000		(346,000)
Income/(loss) from discontinued operations, net of tax	$	28,000	$	(578,000)

The following table presents the aggregate carrying amounts of the major classes of assets and liabilities divested as of March 31, 2015 included in discontinued operations:

	2015
ASSETS
Current assets:
Receivables, net	$	14,000
Inventory		-
Prepaid expenses and other current assets		4,000
Total current assets		18,000
Other assets		19,000
Total assets	$	37,000
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses	$	2,348,000
Total current liabilities		2,348,000
Long-term lease obligations		1,712,000
Total liabilities	$	4,060,000

The following table summarizes the exit obligations primarily closed clinic lease obligations, severance accruals, and customer refunds incurred as of March 31, 2015:

Ending accrued balance as of December 31, 2014	$	6,534,000
Charges incurred during the period		-
Adjustments recorded during the period (1)		(549,000)
Payments during the period		(2,042,000)
Ending accrued balance as of March 31, 2015	$	3,943,000
(1)- The adjustments to the accrual recorded in the first quarter of 2015 relate primarily to favorable termination agreements reached with landlords of closed Corporate Medifast Weight Control Centers.
These charges were recorded in the balance sheet as of March 31, 2015 as follows:
Total current liabilities of discontinued operations	$	2,231,000
Total long-term liabilities of discontinued operations		1,712,000
Ending accrued balance as of December 31, 2014	$	3,943,000