Business Segments

6 Months Ended

Jun. 30, 2011

Business Segments

11. Business Segments

Operating segments are components of an enterprise about which separate financial information is available that is regularly reviewed by the chief operating decision maker about how to allocate resources and in assessing performance.  The Company has two reportable operating segments:  Medifast, and MWCC and Wholesale.  The Medifast reporting segment consists of the following distribution channels:   Medifast Direct and Take Shape for Life. The MWCC and Wholesale segment consists of Medifast Corporate and Franchise Weight Control Centers as well as Medifast Wholesale Physicians.

Total assets and operating expenses not identified with a specific segment are listed as “Other” and include items such as auditors’ fees, attorney’s fees, stock compensation expense and corporate governance related to NYSE, Sarbanes Oxley, and SEC regulations.   Evaluation of the performance of operating segments is based on their respective income from operations before taxes. The accounting policies of the segments are the same as those of the Company.  The presentation and allocation of assets, liabilities and results of operations may not reflect the actual economic costs of the segments as stand-alone businesses. If a different basis of allocation were utilized, the relative contributions of the segments might differ, but management believes that the relative trends in segments would likely not be impacted.

We previously included Medifast Weight Control Centers in “Other” segment, however, in 2010 due to the Weight Control Centers growth we separated this segment along with the Medifast Wholesale Physicians.  In addition, we reclassified segment amounts for the prior periods.

The following tables present segment information for the three and six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,2011
	Medifast		MWCC & Wholesales		Other			Consolidated
Revenues	$	68,603,000	$	9,652,000	$	0		$	78,255,000
Cost of Sales		16,920,000		2,294,000		0			19,214,000
Selling,General and Administrative Expense		39,735,000		6,664,000		1,640,000			48,039,000
Depreciation and Amortization		1,648,000		283,000		84,000			2,015,000
Interest(net) and other		3,000		0		(158,000	)		(155,000	)
Income before income taxes	$	10,297,000	$	411,000	$	(1,566,000	)	$	9,142,000
Segment Assets	$	51,687,000	$	10,849,000	$	39,370,000		$	101,906,000
	Three Months Ended June 30,2010
	Medifast		MWCC & Wholesales		Other			Consolidated
Revenues	$	59,675,000	$	6,985,000	$	0		$	66,660,000
Cost of Sales		15,499,000		1,695,000		0			17,194,000
Selling,General and Administrative Expense		34,074,000		3,370,000		1,347,000			38,791,000
Depreciation and Amortization		1,138,000		203,000		78,000			1,419,000
Interest(net) and other		87,000		0		(35,000	)		52,000
Income before income taxes	$	8,877,000	$	1,717,000	$	(1,390,000	)	$	9,204,000
Segment Assets	$	46,349,000	$	6,553,000	$	28,812,000		$	81,714,000
	Six Months Ended June 30,2011
	Medifast		MWCC &  Wholesales		Other			Consolidated
Revenues	$	134,700,000	$	17,850,000	$	0		$	152,550,000
Cost of Sales		32,650,000		4,179,000		0			36,829,000
Selling,General and Administrative Expense		78,129,000		11,820,000		3,073,000			93,022,000
Depreciation and Amortization		2,965,000		532,000		165,000			3,662,000
Interest(net) and other		10,000		0		(396,000	)		(386,000	)
Income before income taxes	$	20,946,000	$	1,319,000	$	(2,842,000	)	$	19,423,000
Segment Assets	$	51,687,000	$	10,849,000	$	39,370,000		$	101,906,000
	Six Months Ended June 30,2010
	Medifast		MWCC &  Wholesales		Other			Consolidated
Revenues	$	113,551,000	$	13,694,000	$	0		$	127,245,000
Cost of Sales		28,830,000		3,181,000		0			32,011,000
Selling,General and Administrative Expense		65,703,000		6,781,000		2,477,000			74,961,000
Depreciation and Amortization		2,221,000		440,000		155,000			2,816,000
Interest(net) and other		97,000		0		(58,000	)		39,000
Income before income taxes	$	16,700,000	$	3,292,000	$	(2,574,000	)	$	17,418,000
Segment Assets	$	46,349,000	$	6,553,000	$	28,812,000		$	81,714,000