to what
Connecting to what
Matters
Matters
2011 annual report
contents
2011: year
in review
2
connecting
our success
to our
clients’
success
5
connecting
science, marketing,
and product
innovation
10
connecting
to a healthy
connecting
the dots: 2011
future
16
financials
17
Multiple support Choices
Multiple support Choices
Over 70 Medifast Meals
Over 70 Medifast Meals
to Choose From
to Choose From
Proud Us Manufacturer
Proud Us Manufacturer
success story Jessica Westmoreland lost
success story Jessica Westmoreland lost
85 lbs* on the Medifast 5 & 1 Plan
85 lbs* on the Medifast 5 & 1 Plan
whether we are empowering clients with choices, building on
initiatives set forth in prior years, or setting new milestones to
conquer, medifast is always connected to what matters most—
getting people healthy and helping them find hope, health, and
happiness. it is this connection that continues to drive us forward.
*Results will vary. Typical weight loss on the Medifast 5 & 1 Plan® is up to 2–5 pounds per week.
1
2011
letter to shareholders
Year in Review
When Medifast began its transformation from a regional, doctor distributed, meal
replacement plan to a clinically proven, multi-channel weight control program,
Medifast has continued to achieve unprecedented annual growth—from both a
financial perspective and in terms of the sheer number of people we have been
able to help, nationwide, every year.
michael c. macdonald
executive chairman
of the board,
chief executive officer
In 2011, Medifast celebrated 31 years of developing, manufacturing, and
marketing healthy, portion-controlled, nutritionally balanced meal replacements
for weight loss. Our product selection has expanded to offer more than 70
delicious Medifast Meals and snacks. And as our clients get slimmer, Medifast
continues to report healthy sales growth, achieving a five-year Compound Annual
Growth Rate (CAGR) of 37%.
Of course, we have a time-tested, clinically proven program, and healthy,
medically formulated meals recommended by over 20,000 doctors since 1980.
What truly differentiates Medifast from its competitors is how we connect our
clients to success through multiple, distinct distribution channels under the
Medifast brand. Take Shape For Life (TSFL), Medifast Direct, Medifast Weight
Control Centers (MWCC), and Medifast Medical Providers offer our clients a
choice that improves their chances for long-term success by offering support that
works with their own specific needs, goals, lifestyle, and personalities.
2011 was a year of continued growth, new initiatives, and organizational
development. Medifast remains solid financially, and poised for even greater
success in the future—through growth and transformation. We are determined to
carry forward the vision of our leader Bradley T. MacDonald, despite the profound
personal and professional loss his recent passing brings.
In 2011, the Company reported a year-over-year gain of 16% in net revenues,
to $298.2 million from $257.6 million in 2010. Each of our primary distribution
channels contributed to this year-over-year revenue increase.
margaret e. sheetz
president,
chief operating officer
2 | 2011 AnnuAl RepoRt
Gross profit for the year ending December 31, 2011, increased 17% to $224.5 million, compared to
$192.5 million in the same period last year. The Company’s gross profit margin increased 60 basis points
to 75.3% in 2011 versus 74.7% in 2010.
The Company’s balance sheet remains strong, with stockholders’ equity of $73.4 million and working
capital of $43.7 million as of December 31, 2011.
As we move forward in 2012 and beyond, Medifast is focused on responsible long-term growth
throughout all channels. Medifast ended the year with a renewed strategic focus on driving excellence
throughout these sales channels, and our internal support divisions, to better position our business for
maximum profitability as we continue to grow in the future.
Our executive team is continuing to review and enhance our overall cost structure to further leverage
our sales momentum and deliver improved earnings results, while continuing to focus on enhancing the
client experience in each of our distribution channels.
As always, Medifast remains dedicated to reducing the strain that America’s obesity epidemic places on
our citizens, our healthcare system, and our economy. We look forward to sharing a healthy future with
our partners and offer sincere thanks to our valued clients, Medifast employees, Take Shape For Life
Health Coaches, Medifast Weight Control Centers operations, Medifast Medical Providers, Board of
Directors, and Shareholders for their continued support of Medifast, Inc.
Sincerely,
Michael C. MacDonald
Michael C. MacDonald
Executive Chairman of the Board,
Chief Executive Officer
Margaret E. Sheetz
President,
Chief Operating Officer
about mr. macdonald
Michael C. MacDonald joined Medifast’s Executive
North American Solutions Group, a $6.5 billion division
Committee of the Board of Directors in 1998 and has
of Xerox. In addition, Mr. MacDonald was President of
served as Executive Chairman since November 2011. He
Global Accounts and Marketing from 2004 to 2007,
was promoted to Chairman & Chief Executive Officer in
where he led the re-branding of the Xerox Corporation.
February 2012. Prior to this role, he was Executive Vice
He also has international experience in marketing, sales,
President of OfficeMax, overseeing the Contract Division:
and operations with both Xerox and OfficeMax.
a $3.6 billion division of the OfficeMax Company. He
has spent an additional 33 years in sales, marketing, and
In addition to serving as Chairman and CEO of Medifast,
general management at Xerox Corporation. Among his
Inc., Mr. MacDonald also serves on the Jimmy V.
most significant roles was leading the turnaround in North
Foundation and the Archdiocese of Baltimore Catholic
America from the years 2000 to 2004 as President of the
Community Foundation.
3
board of directors
SEATED (left to right): George Lavin, Esq.; Jeannette M. Mills; Margaret Sheetz, President and Chief Operating
Officer, Medifast, Inc.; Sr. Catherine T. Maguire, RSM; Barry B. Bondroff, CPA; STANDING (left to right): Jason
L. Groves, Esq., Executive Vice President and General Counsel, Medifast, Inc.; Donald F. Reilly, OSA; Michael
C. MacDonald, Executive Chairman of the Board, Chief Executive Officer, Medifast, Inc.; John P. McDaniel;
Jerry D. Reece; NOT PICTURED: Harvey C. “Barney” Barnum, Charles P. Connolly, Jr.
4 | 2011 AnnuAl RepoRt
2011
connecting our success to
our clients’ success
Multiple Distribution Channels, One Mission
Medifast is fueled by our medically formulated products and clinically proven program. It is
our unique business model that propels us to greater success for both the Company and its
customers.
Our multiple distribution channels allow for greater access to the Medifast products and program
in varying markets and by different individuals, and helps empower our clients to choose the
support that works best for their personal needs, goals, and lifestyle. It also provides opportunities
for our physicians and for those who want to become Take Shape For Life Health Coaches to
benefit financially from a great product, program, and our shared passion to “pay it forward.”
5
BEFORE
TAkE SHAPE FOR LIFE
David Johnson
Take Shape For Life (TSFL) is the direct selling division of Medifast. At the heart of this business
model is the Take Shape For Life Health Coach, who is trained and educated to support and
mentor Clients on the Medifast 5 & 1 Plan®. The combination of the Medifast Program, the
support of the Health Coach, and co-founder Dr. Wayne S. Andersen’s Habits of Health system
make up the “triad of health” that is the basis for the TSFL program. Clients also have access to
support from registered, licensed dietitians, certified personal trainers, and behavior specialists
through phone access, email, and online discussion boards.
This business model provides an exciting business opportunity for Clients who wish to share their
success with others and pay it forward by becoming Health Coaches themselves.
Revenue in this direct sales channel increased 12% to $186.2 million in the fiscal year 2011. The
channel added 600 new Health Coaches, an increase of 7% compared to 2010. Growth in revenue
was driven by increased Client product sales as a result of an increase in the number of active
Health Coaches. In 2011, TSFL introduced a cutting-edge training and e-Learning initiative. The
initiative ensures that both new and experienced Coaches receive unparalleled training in product,
program, and how to grow their business.
”
With the support of my Health Coach, I started the
program and I am no longer a bystander to life—now I’m a
fully engaged and active participant in my own life.
–David Johnson, lost 205 lbs* with the support of a Take Shape For Life Health Coach”
6 | 2011 AnnuAl RepoRt
”
The Medifast 5 & 1 Plan® offered me healthy, long-term
results with tasty food and an easy-to-follow plan.
–Jessica Westmoreland, lost 85 lbs* with Medifast Direct”
MEDIFAST DIRECT
In this direct-to-consumer channel, customers order Medifast products directly through the
Company’s website or through its in-house contact center, for shipment right to their door.
Medifast Direct is a popular choice for those who are self-motivated or want to pursue their
weight-loss goals independently. Support is provided through an online community called
MyMedifast, and access to registered, licensed dietitians, certified personal trainers, and behavior
specialists through a call center, email, and online discussion boards.
The Company’s online, direct-response marketing channel experienced a 14% increase in 2011
revenue to $73 million, compared to $64.2 million for the same time period in 2010. Medifast
Direct updated its website and created an improved checkout process that enhanced the
customer experience.
BEFORE
*Results will vary. Typical weight loss on the Medifast 5 & 1 Plan® is up to 2–5 pounds per week.
Jessica
Westmoreland
7
”
My weekly meetings with the staff were critical to my
success, and the support I received was irreplaceable!
–Cynthia Lujan, lost 73 lbs* with Medifast Weight Control Centers”
MEDIFAST WEIGHT CONTROL CENTERS
Medifast Weight Control Centers (MWCC) are a great choice for those who prefer a more
structured approach and personal accountability. Members benefit from comprehensive Medifast
plans for weight loss and maintenance, a medical review, customized member counseling, and
body composition analysis. A personal weight-loss Counselor works with each member to ensure
they receive the nutritional and full-scale behavioral support tools needed for enduring health and
wellbeing—all based on the member’s individual goals.
MWCC opened the 100th Medifast Weight Control Center in 2011, an effort that included
expanding the number of corporate centers to 70—an 80% increase compared to fiscal 2010.
Combined with the wholesale segment, MWCC reported a 41% increase in revenue in 2011 to
$39 million, compared to $27.7 million at the same time in 2010. In 2012, the Company is focused
on improving operational effectiveness and efficiency—
balancing sales growth and profitability.
BEFORE
*Results will vary. Typical weight loss on the Medifast 5 & 1 Plan® is up to 2–5 pounds per week.
8 | 2011 AnnuAl RepoRt
Cynthia lujan
MEDIFAST MEDICAL PROVIDERS
Medifast Medical Providers are licensed health care providers who recommend the Medifast
Program within their practices. Providers carry an inventory of Medifast products that they
resell to their patients, or they simply recommend the program to their patients through in-
office program materials. They also provide the appropriate monitoring for their patients on the
Program. This is especially crucial for patients with comorbidities such as diabetes, heart disease,
and hypertension.
The Company offers an additional in-house support program to assist Medical Providers and their
staff, including access to registered, licensed dietitians, certified personal trainers, and a behavior
specialist.
”
I chose Medifast because, for the first time, I have a
solution that gives people a likelihood of success, and
a program that’s easy to do.
”
–Gary Manko, M.D., Medifast Medical Provider
9
2011connecting initiative
and innovation
To Create a Platform for Growth
Medifast has set a solid platform of initiatives and innovations
across infrastructure, science, product development, education,
and marketing with the goal of driving growth and increasing
profitability in 2012 and beyond. We look to that future with
confidence.
10 | 2011 AnnuAl RepoRt
scaling for future growth
TALENT DEVELOPMENT
• Attracting seasoned executive leadership to help the Company scale operations for
growth and increase profitability
• Implementing competency-based employee development and just-in-time learning
technologies
• Building a Leadership Development Institute designed to grow future
leaders from within the Company
INFORMATION TECHNOLOGy
• Expanding robust IT systems infrastructure across operations and
e-commerce platforms while focusing on implementation of industry
best enterprise solutions
• Expanding data warehouse capabilities to provide robust, real time
measurement tools
• Driving cost savings and revenue expansion
opportunities via predictive and business
process modeling
OPERATIONS
• Executing capacity expansion initiatives across
manufacturing and distribution networks
11
science innovation
SCIENTIFIC ADVISORy BOARD
Founded in 2008, the Scientific Advisory Board’s role is to continually review the effectiveness,
safety, and nutritional benefits of Medifast’s products and programs. The team of specialists
also assists in the development of new Medifast Meals and supplements, as well as weight-loss
approaches for specific medical needs (e.g., patients with heart disease), people in certain groups
(e.g., teens and nursing mothers), or those who make certain lifestyle choices (e.g., vegetarians).
The work of this cross-disciplinary group builds on Medifast’s heritage of medically sound
approaches to weight loss and the incorporation of leading-edge clinical research into the
company’s products and programs.
From left to right: John E. Hayes, Ph.D., Assistant Professor of Food Science, Director, Sensory Evaluation Center, The
Pennsylvania State University; George A. Bray, M.D., Boyd Professor, Pennington Biomedical Research Center at Louisiana State
University; Mark Messina, Ph.D., Adjunct Associate Professor, Department of Nutrition, School of Public Health, Loma Linda
University, President, Nutrition Matters, Inc.; Sylvia B. Rowe, MA, Adjunct Professor, Tufts Friedman School of Nutrition Science
and Policy, Adjucnt Professor, University of Massachusetts, Amherst, President, SR Strategy; Lawrence J. Cheskin, M.D., F.A.C.P.,
Associate Professor of Health, Behavior and Society at the Johns Hopkins Bloomberg School of Public Health, Director, Johns
Hopkins Weight Management Center; John P. Foreyt, Ph.D., Professor, Department of Psychiatry and Behavioral Sciences,
Department of Medicine, Baylor College of Medicine; Param Dedhia, M.D., Physician of Integrative Medicine, Canyon Ranch
12 | 2011 AnnuAl RepoRt
product innovation
In 2011, the Company expanded the Medifast product line in response to our customers’ requests
for more savory meals, breakfast foods, and additional convenience items.
New products introduced include Spiced Pancake, Sugar-Free Syrup, Original-Style Eggs with
egg whites, and Southwest-Style Eggs with egg whites. Orange Blend, a zingy citrus drink, and
ready-to-eat, gluten-free Medifast BBQ Bites and Medifast Cheese Pizza Bites were also added
to our ever-expanding menu. Based on the popularity of the
“freshly baked” Brownie, the Chocolate Chip Soft Bake was
developed. We also added our newest savory selection, the
Hearty Vegetarian Sloppy Joe. The Company also upgraded its
Accessories line, adding a 17-piece Medifast Blender with BPA-
free plastic traveling cups.
spiced pancake & sugar-free syrup
original-style eggs
southwest-style eggs
bbq bites
cheese pizza bites
orange blend
chocolate chip soft bake
17-piece blender and accessories
13
educational innovation
THE MACDONALD CENTER FOR OBESITy PREVENTION AND
EDUCATION (C.O.P.E.)
The MacDonald Center for Obesity Prevention and Education (C.O.P.E.) in the College of Nursing
at Villanova University was established in 2011 through the support of the MacDonald Family
Foundation and the Take Shape For Life Foundation. C.O.P.E. is a nonprofit center that focuses on
interdisciplinary collaboration in the prevention of obesity through education and research.
C.O.P.E. fosters the growing need for education by supporting the development of healthy
lifestyles and behaviors among Americans through:
• Practical experiences for nursing students and the student population
• Educational opportunities for health professionals and educators, through conferences,
webinars, and additional resources
• Training programs for community groups
• Obesity and weight-management resources for professionals and consumers
• Creative nutrition educational programs for school children
• Continuing education opportunities for organizations, health professionals, corporations,
and institutions
the october 6 inauguration of the
macdonald center for obesity prevention
and education at villanova university
college of nursing
From left to right: Marcia Costello, Ph.D., RD, LDN,
Assistant Professor and Chair of the Cope Advisory
Committee; M. Louise Fitzpatrick, EdD, RN, FAAN,
Connelly Endowed Dean and Professor; Col.
Bradley T. MacDonald, USMC (ret.); guest speaker
Sylvia Escott-Stump, MA, RD, LDN, President of the
American Dietetic Association; and Denice Ferko-
Adams, MPH, RD, LDN, Director of COPE
14 | 2011 AnnuAl RepoRt
marketing innovation
While maintaining each channel’s unique attributes and identity, in 2011, Medifast strengthened
customer perception and awareness by uniting all four channels under the umbrella of one, strong
Medifast brand. key initiatives will forge a clearer and more approachable presence in the national
marketplace. Highlights include:
Web Initiatives: Although each channel maintained a unique web presence, they were
brought together within one, unique web test portal that explains the fast, simple, safe,
portable, and long term Medifast Program, and allows the customer to choose which channel
site to investigate.
Broadcast Advertising and Branding: Medifast also launched its first primetime television
commercial, entitled, Become Yourself, which differentiated Medifast from the clamor of
other weight-loss programs by featuring real-life Medifast success Jessica Westmoreland in
lieu of industry-standard celebrity endorsements.
“customs” commercial featuring medifast direct
success story jessica westmoreland
15
2011
connecting to a healthy
future
our mission at Medifast is to combat the obesity epidemic and
improve the health of our nation in two ways: first, through
clinically proven, weight-management products and protocols;
and second, through multiple, innovative support channels. We’ve
come a long way since we launched this multi-channel business
model, and an even longer way since Medifast was introduced to
physicians in the 1980s.
Our history of growth and the investments made to facilitate initiatives and expansion in 2011
provide a solid base for achieving future goals. In 2012 the Company will continue to:
• Review and enhance our overall cost structure to further leverage our sales
and profitability
• Focus on enhancing the customer experience in our distribution channels
• Expand our product selection
• Empower our employees at every level to serve our clients’ needs and offer them
more options to create long-term health
• Support programs such as Target 100, with the goal of recycling 100% of waste and
becoming a green company
• Sponsor charities such as the American Heart Association, American Diabetes
Foundation, and the Marine Toys for Tots Foundation
16 | 2011 AnnuAl RepoRt
BEFORE
”
Medifast is the
best thing that ever
happened to me!
It gave me the life
I always wanted,
and the confidence
I needed. I am so
grateful.
”
–Christine Kirkpatrick
Lost 55 lbs* with Medifast
*Results will vary. Typical weight loss on the Medifast 5 & 1
Plan® is up to 2–5 pounds per week.
11445 Cronhill Drive
Owings Mills, Maryland 21117