Highlights MINNEAPOLIS, Nov. 3 /PRNewswire-FirstCall/ -- Health
Fitness Corporation (NYSE Alternext US: FIT), a leading provider of
integrated employee health and productivity management solutions,
today announced financial results for the third quarter ended
September 30, 2008. For the third quarter, revenue increased
approximately 8 percent to $18.5 million, from $17.2 million for
the same period in 2007. Gross profit during the quarter rose to
$6.0 million, from $4.9 million during the prior-year period.
Operating income totaled $1.51 million for the quarter up from
$0.23 million for the same period in 2007. Net earnings were $0.8
million, or $0.09 per diluted share, versus $0.02 million, or $0.00
per diluted share, in the prior-year period. 2008 Third Quarter
Business Segment Information Revenue and gross profit information
by segment: Health Management (in thousands) REVENUE Q3 2008 Q3
2007 Staffing Services $4,552 $4,017 Program Services 3,624 2,514
Total Health Mgt $8,176 $6,531 GROSS PROFIT Q3 2008 Q3 2007
Staffing Services $1,280 $1,036 Program Services 2,142 1,378 Total
Health Mgt $3,422 $2,414 During the 2008 third quarter, health
management segment revenue grew 25.2 percent compared to the same
period in 2007. Within the segment, staffing services revenue
increased 13.3 percent, which is attributable to new customers and
the expansion of services to existing customers. Program services
revenue grew 44.2 percent compared to the 2007 third quarter. This
gain was primarily driven by new and existing customers in the
areas of eHealth platform participation, biometric screenings and
health coaching and advising services. Gross margin for the health
management segment was 41.8 percent for the quarter, up from 37.0
percent for the prior-year period. Within the segment, gross margin
for program services increased to 59.1 percent, from 54.8 percent
for the prior-year period, driven by revenue growth and
productivity enhancements related to biometric screenings and
health coaching and advising services. Gross margin for staffing
services expanded to 28.1 percent for the quarter from 25.8 percent
for the prior-year period, reflecting lower costs for employee paid
time off and expense savings for marketing initiatives, operating
supplies and staff training. Fitness Management (in thousands)
REVENUE Q3 2008 Q3 2007 Staffing Services $9,702 $10,042 Program
Services 619 580 Total Fitness Mgt $10,321 $10,622 GROSS PROFIT Q3
2008 Q3 2007 Staffing Services $2,356 $2,177 Program Services 209
294 Total Fitness Mgt $2,565 $2,471 During the 2008 third quarter,
fitness management segment revenue decreased 2.8 percent compared
to the same period last year, which primarily reflects the impact
of 2007 contract cancellations. Gross margin for the fitness
management segment increased to 24.9 percent, from 23.3 percent
during the prior-year period, reflecting lower costs for employee
paid time off and medical benefits, in addition to expense savings
for equipment maintenance, group classes, operating supplies and
liability insurance. "We are certainly pleased with the company's
revenue growth and significant margin expansion during the third
quarter, especially in our health management segment," said Gregg
Lehman, Ph.D., president and chief executive officer. "Although
market conditions continue to be challenging, we secured six new
commitments during the quarter, which is an improvement from the
five commitments we reported in Q3 of last year." Operating
expenses as a percent of revenue were 24 percent, a 3 percent
reduction in comparison to the same period last year. The company
anticipates that operating expenses, as a percent of revenue, will
continue to decline over time as it achieves additional revenue
growth, productivity enhancements and operating expense leverage.
Lehman continued, "The market drivers that provide the rationale
for our service offerings remain the same and are expected to
intensify. Costs of health care will continue to rise, and
companies will place an ever-increasing emphasis on employee
wellness and productivity. As a result of this emphasis, we believe
employers will continue to seek out ways to mitigate the direct and
indirect costs of health care. These dynamics, coupled with the
strength of our integrated health and fitness management service
offerings, give us much cause for optimism about our strategic
direction and long-term growth prospects." Third Quarter
Commitments and RFPs During the quarter, the company secured four
new health management commitments and two new fitness management
commitments, which combined may realize annualized revenue of $1.7
million. This growth will be partially offset by a potential
annualized revenue loss of $1.1 million from fitness and health
management contract cancellations. Additionally, during the 2008
third quarter, the company received 20 new RFPs for health
management services and five new RFPs for fitness management
services. Lehman added, "Due to current economic conditions, we
witnessed continued lengthening of sales cycles during the quarter
as companies take longer to evaluate our services among a broad
array of other corporate initiatives. We are encouraged that
companies seem to be taking a long-term view and are still
demonstrating significant interest in the value proposition that
our health and fitness services can provide to their companies.
This bears itself out in the relatively robust condition of our RFP
pipeline during the quarter. In the quarters ahead, we will
maintain our keen focus on providing an attractive suite of
services to our corporate customers, further refining our sales
approach and closely monitoring and controlling expense levels."
2008 Nine-Month Results For the nine months ended September 30,
2008, revenue increased 10.4 percent to $56.0 million, from $50.7
million for the same period last year. Gross profit rose 16.7
percent to $16.9 million, or 30.1 percent of revenue, from $14.5
million, or 28.5 percent of revenue, for the prior-year period.
Operating income was $2.7 million for the nine months ended
September 30, 2008, up from $1.5 million during the prior-year
period, primarily reflecting revenue increases and gross margin
enhancement. Net earnings applicable to common shareholders climbed
to $1.5 million from $0.7 million during the same period last year.
Net earnings per diluted share totaled $0.15 compared to $0.07 for
the same period last year. For the nine months ended September 30,
2008, the company received a total of 15 health management
commitments and expanded services with two existing health
management customers. In addition, the company received two fitness
management commitments and expanded services with four fitness
management customers. Combined commitment and service-expansion
activity for the first nine months of 2008 may realize annualized
revenue of $6.1 million, to be partially offset by a potential
annualized revenue loss of $1.7 million from contract
cancellations. Through the first nine months, the company had
received 71 new RFPs for health management services and 21 new RFPs
for fitness management services. Balance Sheet The company ended
the third quarter of 2008 with $0.5 million in cash, compared to
$1.9 million at the end of 2007; the decrease primarily reflects
the company's $2.3 million stock repurchase during the second
quarter of 2008. Working capital at September 30, 2008 totaled $9.0
million, up approximately $0.4 million compared to December 31,
2007. At September 30, 2008, the company had no balance outstanding
on its $3.25 million credit facility, and had stockholders' equity
of $26.6 million. Reverse Stock Split On October 6, 2008, the
company completed a one-for-two reverse split of its common stock.
All common share information and all "per share" information
related to our common stock in this release has been restated to
reflect the one-for-two reverse split. HealthFitness listed on NYSE
Alternext US On October 21, 2008, the company announced the
approval of its application to list its common stock on the NYSE
Alternext US, formerly the American Stock Exchange. Trading on the
NYSE Alternext US began on Wednesday, Oct. 22, 2008 under the
ticker symbol FIT. Conference Call Health Fitness Corporation will
host a conference call today, November 3, 2008, at 4 p.m. Central
(2 p.m. Pacific; 5 p.m. Eastern). Participating in the call will be
Gregg Lehman, Ph.D., president and chief executive officer, and Wes
Winnekins, chief financial officer. To listen to the call from the
U.S., dial 1-888-258-7584; internationally, dial 1-706-902-1477. To
access the call, enter ID number 70207413. A replay of the call
will be available until Monday, November 17, 2008, 11 p.m. EST. To
access the replay from the U.S., dial 1-800-642-1687 and enter ID
number 70207413, from outside the U.S., dial 1-706-645-9291 and
enter ID number 70207413. The call will also be broadcast live over
the Internet and accessible through the Investor Relations section
of the company's Web site at http://www.hfit.com/, where the call
will be archived for 30 days. About HealthFitness HealthFitness is
a leading provider of employee health improvement services to
Fortune 500 companies, the health care industry and individual
consumers. Serving clients for more than 30 years, HealthFitness
partners with employers to effectively manage their health care and
productivity costs by improving individual health and well-being.
HealthFitness serves more than 300 clients globally via on-site
management and remotely via Web and telephonic services.
HealthFitness provides a complete portfolio of health and fitness
management solutions including a proprietary health risk assessment
platform, screenings, EMPOWERED(TM) Health Coaching and delivery of
health improvement programs. HealthFitness employs more than 3,000
health and fitness professionals in national and international
locations who are committed to the company's mission of "improving
the health and well-being of the people we serve." For more
information on HealthFitness, visit http://www.hfit.com/. Forward
Looking Statements Certain statements in this release, including,
without limitation, the company's anticipation that operating
expenses, as a percent of revenue, will continue to decline over
time as it achieves additional revenue growth, productivity
enhancements and operating expense leverage; and the company's
belief that employers will continue to seek out ways to mitigate
the direct and indirect costs of health care and that these
dynamics, coupled with the strength of the company's integrated
health and fitness management service offerings, give the company
much cause for optimism about its strategic direction and long-term
growth prospects, are forward-looking statements. In addition, the
estimated annualized revenue value of our new and lost customers
and expanded services is a forward looking statement, which is
based upon an estimate of the anticipated annualized revenue to be
realized or lost. Such information should be used only as an
indication of the activity we have recently experienced in our two
business segments. These estimates, when considered together,
should not be considered an indication of the total net,
incremental revenue growth we expect to generate in 2008 or in any
year, as actual net growth may differ from these estimates due to
actual staffing levels, participation rates and service duration,
in addition to other revenue we may lose in the future due to
customer termination. Furthermore, there can be no assurance that
any RFPs we receive will develop into customer commitments. Any
statements that are not based upon historical facts, including the
outcome of events that have not yet occurred and our expectations
for future performance, are forward-looking statements. The words
"potential," "believe," "estimate," "expect," "intend," "may,"
"could," "will," "plan," "anticipate," and similar words and
expressions are intended to identify forward-looking statements.
Such statements are based upon the current beliefs and expectations
of our management. Actual results may vary materially from those
contained in forward-looking statements based on a number of
factors including, without limitation, our inability to deliver the
health management services demanded by major corporations and other
clients, the level of demand for our services, customer acceptance
of higher service pricing, our inability to successfully cross-sell
health management services to our fitness management clients, our
inability to successfully obtain new business opportunities, our
failure to have sufficient resources to make investments, our
ability to make investments and implement strategies successfully,
our ability to limit and manage expenses, continued delays in
obtaining new commitments and implementing services, and other
factors disclosed from time to time in our filings with the U.S.
Securities and Exchange Commission including our Form 10-K for 2007
as filed with the SEC. You should take such factors into account
when making investment decisions and are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date on which they are made. We undertake no
obligation to update any forward-looking statements. Financial
tables follow ... HEALTH FITNESS CORPORATION CONSOLIDATED BALANCE
SHEETS (UNAUDITED) SEPTEMBER 30, 2008 AND DECEMBER 31, 2007
September 30, December 31, 2008 2007 ASSETS CURRENT ASSETS Cash
$452,719 $1,946,028 Trade and other accounts receivable, less
allowances of $241,900 and $243,300 13,437,875 14,686,879 Inventory
521,794 569,458 Prepaid expenses and other 476,943 226,891 Deferred
tax assets 325,748 406,367 Total current assets 15,215,079
17,835,623 PROPERTY AND EQUIPMENT, net 1,215,042 1,400,570 OTHER
ASSETS Goodwill 14,546,250 14,546,250 Software, less accumulated
amortization of $1,164,700 and $795,100 1,916,976 1,734,920
Trademark, less accumulated amortization of $420,000 and $345,500
73,124 147,561 Other intangible assets, less accumulated
amortization of $295,600 and $241,700 233,459 287,334 Other - 9,807
$33,199,930 $35,962,065 LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES Trade accounts payable $ 1,372,933 $ 2,121,154
Accrued salaries, wages, and payroll taxes 3,008,169 4,011,580
Other accrued liabilities 551,666 1,187,045 Accrued self funded
insurance 278,050 333,724 Deferred revenue 1,106,371 1,722,254
Total current liabilities 6,317,189 9,375,757 DEFERRED TAX
LIABILITY 261,327 108,623 LONG-TERM OBLIGATIONS - - COMMITMENTS AND
CONTINGENCIES - - STOCKHOLDERS' EQUITY Common stock, $0.01 par
value; 25,000,000 shares authorized; 9,639,039 and 9,964,295 shares
issued and outstanding at September 30, 2008 and December 31, 2007,
respectively 96,390 99,642 Additional paid-in capital 28,076,859
29,449,854 Accumulated comprehensive loss from foreign currency
translation (65,199) (56,413) Accumulated deficit (1,486,636)
(3,015,398) 26,621,414 26,477,685 $33,199,930 $35,962,065 HEALTH
FITNESS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) Three Months Ended Nine Months Ended September 30,
September 30, 2008 2007 2008 2007 REVENUE $18,497,423 $17,153,058
$56,015,548 $50,722,258 COSTS OF REVENUE 12,510,045 12,268,332
39,149,412 36,272,205 GROSS PROFIT 5,987,378 4,884,726 16,866,136
14,450,053 OPERATING EXPENSES Salaries 2,950,618 2,775,532
8,949,305 7,819,407 Other selling, general and administrative
1,485,206 1,835,136 5,080,973 5,008,770 Amortization of acquired
intangible assets 42,771 42,771 128,311 128,311 Total operating
expenses 4,478,595 4,653,439 14,158,589 12,956,488 OPERATING INCOME
1,508,783 231,287 2,707,547 1,493,565 OTHER INCOME (EXPENSE)
Interest expense (16,252) (16,681) (20,383) (23,371) Other, net
(662) (4,432) 412 (1,856) EARNINGS BEFORE INCOME TAXES 1,491,869
210,174 2,687,576 1,468,338 INCOME TAX EXPENSE 650,519 193,151
1,158,814 766,644 NET EARNINGS $841,350 $17,023 $1,528,762 $701,694
NET EARNINGS PER SHARE: Basic $0.09 $- $0.16 $0.07 Diluted 0.09 -
0.15 0.07 WEIGHTED AVERAGE COMMON SHARES: Basic 9,610,238 9,917,429
9,837,994 9,809,111 Diluted 9,688,941 10,433,468 9,982,990
10,288,673 DATASOURCE: Health Fitness Corporation CONTACT: Wes
Winnekins, CFO of Health Fitness Corporation, +1-952-897-5275; or
David Heinsch of Padilla Speer Beardsley, +1-612-455-1768, for
Health Fitness Corporation Web site: http://www.hfit.com/
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