Planting Seeds for
a Healthy Future
ANNUAL REPORT 2013
A Healthy Appetite
Every story of growth begins with seeds. What began as chocolate, vanilla,
and strawberry shakes in doctors’ cabinets has grown into more than 90 Medifast
products available online or through health care providers, Health Coaches,
weight-loss centers, and international distributors.
Customers on the Medifast Program begin to feel it right away—the desire to fuel
up with foods that help them slim down. And behind every pound lost, every inch
whittled away, is a Medifast Meal replacement that promotes health.
This year, Medifast added seven new products to our respected line of meal
replacements: Pineapple Mango Smoothie, Triple Berry Smoothie, Peanut Butter
Chocolate Chip Chewy Bar, Cookie Dough Chewy Bar, Blueberry Muffin Soft Bake,
Tomato Basil Bisque, and Ziti Marinara. And 2014 will move us into the Healthy
Living territories, with launches of brand-new product categories, Lean & Green™
style meals, Infusers, a Maintenance line, technological alliances, and more.
What was planted as Medifast has blossomed into three burgeoning channels,
with two more branches taking shape. And what was, in 2000, a $3.9 million
company has in just 13 years become firmly rooted, amassing more than $356
million in annual revenue.
2013
2013HIGHLIGHTS
In 2013, our net revenue was $356.9 million, as compared to $356.7 million in 2012.
Despite nominal revenue growth, we are pleased to report earnings of $1.73 per
diluted share.
Net income for the fiscal year 2013 increased $8.1 million to $24.0 million, or $1.73 per
diluted share based on approximately 13.8 million shares outstanding, compared to net
income of $15.9 million, or $1.16 per diluted share for the comparable period last year
based on approximately 13.7 million shares outstanding. Fiscal year 2012 net income
includes $3.7 million from the previously disclosed FTC charge in the second quarter of
2012 and $2.0 million net of tax sales tax accrual. Excluding these items, net income for
fiscal year 2012 would have been $21.6 million or $1.57 per diluted share in 2012.
The Company’s balance sheet remains strong with stockholders’ equity of $98.4 million
and working capital of approximately $64.9 million as of December 31, 2013.
Cash, cash equivalents, and investment securities for the year ending December 31, 2013
increased $7.8 million to $67.8 million compared to $60.0 million on December 31, 2012.
2013 Happy Afters Winners
Letter to Shareholders
It’s impossible to look at the future of weight loss apart from healthy living and wellness. The global weight-loss
marketplace is constantly evolving with new competition, bringing a multitude of choices for calorie-conscious
consumers. New trackers, apps, and accessories are entering the market, and consumers are exploring new
weight-loss strategies in order to achieve their goals. At the same time, consumers are shifting their focus away
from just immediate-term weight loss to wanting a more holistic approach for weight management, healthy
living, and overall wellness.
These trends make it inherently clear that in order for Medifast to achieve long-term success, we must constantly
evaluate our offerings in order to evolve with the times.
A PIVOTAL YEAR
In 2013, Medifast successfully managed our profit performance through a challenging
environment. While we were able to achieve our profit targets, we did not see the traditional
double-digit revenue growth to which we have become accustomed. In the coming year, our
objective is to spark more aggressive revenue growth while we continue to improve
our profitability.
Just two short years ago, we built our first five-year strategy plan and have made great strides
in implementing many of our strategic initiatives across Take Shape For Life®,
Medifast Direct®, Medifast Weight Control Centers®, and Medifast® Medical Providers.
We have also advanced our strategic plan and continued to grow our functional expertise in
finance, human resources, information technology, supply chain, marketing, and research and
development. In particular, our team showed strong business management skills, as we
generated increased operational efficiencies, resulting in an annual improvement in operating
margin of 290 basis points in 2013.
We are committed to the long-term success of our brand and Company, and we are
continually re-evaluating our strategies in order for us to grow. To this end, we’ve been
updating and refining our five-year strategic plan to leverage our strengths and capitalize on
the trends in the global competitive market. Processes are in place for evaluating the market,
gathering consumer feedback, and planning and implementing our strategies for growth.
We will continue to focus on our talent management efforts to develop our people and
ensure we have the competencies we need to grow the company. We are energized and
optimistic about Medifast’s future and look forward to sharing some of the highlights with you.
GROWTHSTRATEGIES
We are focused on implementing strategies that will grow our products and programs and
expand our scope in the healthy living arena. We will work to expand our offerings across
all channels so we can play a more significant role in the consumer’s journey from weight loss
to weight management to healthy living. New technologies and new product categories
will be introduced. The expansion of our distribution domestically and internationally is
already underway.
Take Shape For Life® will continue in its role as the leading promoter of lifelong Optimal
Health. We will increase the number of TSFL Health Coaches and create the tools,
technologies, and programs to enable their success. We will continue the transition of our
corporate Medifast Weight Control Centers® to franchises, encourage expansion from our
current franchise owners, and add many new franchise partners. We’ll grow our Medifast
Direct® channel by excelling at e-commerce and implementing best digital marketing practices.
And we will re-energize our heritage Medical Providers channel by adding new capabilities
for our health professionals to offer weight-management solutions to their patients. Building
on our successful relationship with Medix, our partner in Mexico, South America, and Central
America, we will continue our international expansion. We will launch Medifast into Canada
while we develop additional new partnerships to distribute our products in more countries.
Our multi-channel model will continue to afford us a unique position in the market.
We will take full advantage of our vertically integrated operations and capitalize on
our role as the manufacturer and wholesaler of highly effective and clinically proven
weight-management products.
Many companies and their employees could benefit from Medifast Products & Programs,
and we will work to make those possibilities a reality. Developing a corporate wellness
offering will allow us to take advantage of opportunities created from health care
policy changes.
Now that you’ve seen a snapshot of some of our growth strategies, we hope you’re as
excited about the future of Medifast as we are. The most important takeaway is this: our
ability to change, adapt, and evolve will be critical to our success. We fully intend to not
only go where the industry is headed, but lead the way in weight management, wellness,
and healthy living.
Many thanks,
Michael C. MacDonald
Executive Chairman of the Board and
Chief Executive Officer
Margaret E. Sheetz
President and Chief Operating Officer
A Healthy Discovery
Take Shape For Life® (TSFL) is the direct-selling division of Medifast. Clients work with a free personal
Health Coach, who guides them from weight loss through transition to maintenance and beyond,
ultimately encouraging them to pay forward their good health by becoming Coaches themselves.
And to help more Clients make that transition and discover their own Optimal Health, we ushered
in 2013 with the cover story in Success From Home Magazine. This 96-page February issue
showcased TSFL’s leaders and motivational gurus, including Take Shape For Life Medical Director
and Co-founder Dr. Wayne S. Andersen.
In July, Dr. A’s book, Discover Your Optimal Health, was published to rave reviews, reaching #4 on
the New York Times Bestseller List (Advice and How-To category) and #1 on both Amazon’s and
Barnes & Noble’s lists. The book followed a five-city tour—Chicago, Denver, Charlotte, Salt Lake City,
and Minneapolis—in May and June.
Take Shape For Life’s 11th National Convention, the largest ever, saw more than 3,125 registered
Health Coaches converging on the Gaylord Opryland Resort in Nashville. There, more than 1,700
of them became certified or re-certified at Live Certification.
On September 12, we celebrated National Discover Your Optimal Health Day with one-mile walks held
in more than 200 communities across the country. That day, we collectively traversed more than 19,000
miles on foot to promote the stemming of obesity’s tide. And that evening, more than 900 Healthy
Happy Hours went even further to reverse its course.
A Healthy Self
Medifast Direct® is the division for customers who prefer to order their products online at
our website or by phoning our Client Solutions Center. This year, we continued to promote the idea
of reaching Your goal. Your way.™ and expanded on the flexibility of this self-guided approach.
We nurtured our social media sites to engage more of our
customers and encourage sharing. We sponsored Google
Hangouts with members of our Nutrition Support Team,
filmed Medifast Meal Makeover segments, and got customers
excited for new products with contests and promotional
teasers. Also in 2013, we launched Medifast Minute, a
newsletter featuring our best weight-loss stories of the week
and other items of interest from our blog, Pinterest, and
Facebook shares.
How do customers feel about Medifast? We know now,
thanks to the L.O.V.E. (Listen, Observe, Validate, and Enhance)
Program, which gains insight into our clients’ experiences with
everything from product taste to website interaction. Thanks to
L.O.V.E., we’re able to improve based on their direct input.
Finally, in November, we reached out to all channels with
Fit & Festive Holiday Recipes, our campaign to keep
customers motivated and on track throughout the food
season. Giving them healthy options that included the flavors
of the season, we encouraged them to stay on plan with
almost-as-tempting but less-risky versions of holiday favorites.
One recipe was shared each day from Thanksgiving through
Christmas on Pinterest and Facebook, and the campaign was so popular that we continued making over
favorites for holidays throughout 2014.
So while Medifast Direct is the channel for those who need less support, we continue to offer
our customers more.
2013 REVENUE: $228.7 MILLION
2013 REVENUE: $75.5 MILLION
A Healthy Practice
Medifast® Medical Providers are licensed health care providers who recommend the Medifast
Program to patients in their practice. So Medifast comes with not only a ringing endorsement
from a medical professional but also support from that professional. Patients can buy meals
directly from practitioners.
The best part about having trusted health care providers as partners is that they are now able
to address the growing crisis of diabetes, heart disease, and hypertension with a proven,
successful program that will help reduce the risk of obesity-related disease.
The Company offers extensive resources to assist providers, staff, and patients in achieving
success on the Program. Medifast Medical Providers have access to marketing assets and
training modules to help their practice grow.
Providers were also given new Provider Kits, with implementation tools based on industry best
practices, a New Content Marketing Plan and customer engagement platform, and expanded
marketing support.
This holistic approach enables the practice to expand services and help improve
its patients’ quality of life through lasting lifestyle changes.
A Healthy Center
Customers who want in-person, highly structured support for weight loss, transition, and
maintenance can find it here. Medifast Weight Control Centers® (MWCC) provide members with
custom programs, including a body composition analysis, assessment of resting metabolism,
measurements, counseling, and more. Center members can purchase food in their Center any
time but find it most convenient to do so at one of their weekly one-on-one counseling sessions,
which are held in a comfortable private office.
In 2013, MWCC was still
Here for You Before,
During, and Beyond®,
emphasizing the
consistent behavioral
support given members
by well-trained staff.
This year, we announced
our intention to transition
our corporate centers to
the franchise model. We
also initiated our work
with marketing partners
to help us attract
interested, qualified
business owners and see
them through to
becoming Medifast
franchisees.
Through the Door,” our DR-TV spot, featured rotating offers that helped members find their healthy centers.
In late 2013, we added five new Centers through franchisees.
2013 REVENUE: $52.6 MILLION
(INCLUDES WHOLESALE PHYSICIANS AND INTERNATIONAL SALES TO PHYSICIANS AND WEIGHT CONTROL CENTERS)
A Healthy World
Our exclusive licensing agreement with Medix continued in 2013. Medix, a leader in obesity
pharmaceuticals, was granted an exclusive license to distribute Medifast Products and
Programs through physicians and Weight Control Centers in Mexico and Latin America
under the Medifast brand.
In September, the Medifast/Medix partnership held the grand opening of the first international
Medifast Weight Control Center in Mexico City. By the end of 2013, three centers were in full
operation, including one in Bogota, Colombia, our first in South America.
In the next year, we will expand into Canada,
where, by the end of 2014, we expect to
have more than 50 products for sale.
OUR SCIENTIFIC ADVISORY BOARD
Medifast has a strong foundation in science. Members of Medifast’s Scientific Advisory Board
represent a range of medical, nutrition, and scientific disciplines, and their specialties have included
weight management, cardiology, nutrition, internal medicine, exercise physiology, and psychiatry,
among others.
Our Scientific Advisory Board:
Supports Medifast’s clinical heritage and helps the company stay on top of emerging research and
consumer trends
Reviews the safety, effectiveness, and nutritional benefits of each Medifast Product and Program
Offers guidance for specific populations such as nursing mothers, teens, seniors, and persons living
with diabetes or gout
Our Distinguished Scientific Advisory Board
John E. Hayes, Ph.D.
Associate Professor of Food Science, Director, Sensory
Evaluation Center, The Pennsylvania State University
George Bray, M.D.
Boyd Professor, Pennington Biomedical Research Center,
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; Adjunct Professor, University of
Massachusetts, Amherst; President, SR Strategy
Lawrence Cheskin, M.D., F.A.C.P.
Associate Professor of Health, Behavior and Society,
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
BOARD OF DIRECTORS
EXECUTIVE TEAM
Michael C. MacDonald
Executive Chairman of the Board
& Chief Executive Officer
Brian Lloyd
Executive Vice President,
International & Business Development
Margaret E. Sheetz
President and Chief
Operating Officer
Timothy G. Robinson
Chief Financial Officer
Don Gould
Executive Vice President,
Information Technology
Jeannette Mills
Executive Vice President,
Take Shape For Life
Guy Sheetz
Executive Vice President,
Supply Chain
Jeanne Uphouse
Executive Vice President,
Human Resources
Jason L. Groves, Esq.
Executive Vice President
& General Counsel
Dominick Vietri
Executive Vice President,
Medifast Weight Control Centers
Brian Kagen
Executive Vice President
& Chief Marketing Officer
Our Distinguished Board of Directors
Top row: Charles P. Connolly; H.C. “Barney” Barnum, Jr.; Reverend Donald Francis Reilly, O.S.A.;
Jerry D. Reece; John P. McDaniel; Kevin G. Byrnes; Carl E. Sassano
Bottom row: Jason L. Groves, Esq.; Margaret E. Sheetz; Michael C. MacDonald, Chairman of the Board;
Sr. Cathy T. Maguire, RSM; Barry B. Bondroff, CPA
Medifast Inc.
11445 Cronhill Drive
Owings Mills, Maryland 21117