Q4 2008 Highlights: MINNEAPOLIS, March 4 /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 fourth quarter
and the year ended December 31, 2008. For the fourth quarter,
revenues increased 12.6 percent to $21.7 million compared to $19.2
million in the fourth quarter of 2007. Gross profit during the
quarter rose to $6.9 million, from $5.2 million in the comparable
quarter last year. Operating income totaled $2.1 million for the
quarter, up from $0.4 million for the same period in 2007. Net
earnings were $1.2 million, or $0.12 per diluted share, versus $0.2
million, or $0.02 per diluted share, in the fourth quarter of 2007.
2008 Fourth Quarter Business Segment Information Revenue and gross
profit information by segment: Health Management (in thousands)
REVENUE Q4 2008 Q4 2007 ------- ------- Staffing Services $4,724
$4,202 Program Services $6,912 $4,352 Total Health Mgmt. $11,636
$8,554 GROSS PROFIT Q4 2008 Q4 2007 ------- ------- Staffing
Services $1,332 $1,016 Program Services $3,273 $1,533 Total Health
Mgmt. $4,605 $2,549 During the fourth quarter, health management
segment revenue grew 36.0 percent compared to the same period in
2007. Within the segment, staffing services revenue increased 12.4
percent, which is attributable to new customers and the expansion
of services to existing customers. Program services revenue grew
58.8 percent compared to the 2007 fourth quarter. This gain was
primarily driven by 98 percent growth in biometric screenings, 178
percent growth in health coaching and advising services and 89
percent growth in flu shots. Gross margin for the health management
segment was 39.6 percent for the quarter, up from 29.8 percent for
the prior-year period. Within the segment, gross margin for program
services increased to 47.4 percent, from 35.2 percent for the
prior-year period, which was driven by a gross profit increase of
$910,000 for biometric screenings, an increase of $562,000 for
health coaching and advising services, and an increase of $352,000
for flu shot services. These increases are attributed to higher
revenue, better pricing and more productive utilization of service
delivery labor. Gross margin for staffing services expanded to 28.2
percent for the quarter from 24.2 percent for the prior-year
period, which reflects better pricing on new business, a better
utilization of full-time labor and lower variable operating
expenses. Fitness Management (in thousands) REVENUE Q4 2008 Q4 2007
------- ------- Staffing Services $9,453 $9,903 Program Services
$572 $778 Total Fitness Mgmt. $10,025 $10,681 GROSS PROFIT Q4 2008
Q4 2007 ------- ------- Staffing Services $2,022 $2,365 Program
Services $246 $277 Total Fitness Mgmt. $2,268 $2,642 During the
2008 fourth quarter, fitness management segment revenue decreased
6.2 percent compared to the same period last year, which primarily
reflects revenue loss related to contract terminations during 2007
and 2008. Gross margin for the fitness management segment decreased
to 22.6 percent, from 24.7 percent during the prior-year period,
reflecting a margin decrease of 250 basis points for staffing
services, which is attributed to the revenue loss from contract
terminations. Gregg Lehman, PhD, president and chief executive
officer, said, "Our financial results for the fourth quarter were
very strong. With revenues increasing 12.6 percent, and a focus on
managing expenses, we generated net income of $1.2 million versus
$0.2 million for last year's fourth quarter. The results for the
quarter were positively impacted by a substantial increase in
screening, health coaching and flu shot services. In fact, almost
40 percent of our screening participants for the year occurred
during the fourth quarter, which is attributed to many customers
requesting delivery of these services prior to the start of a new
benefit year." Dr. Lehman continued, "From a strategic standpoint,
this is the first quarter where revenues in our higher margin
health management business exceeded revenues in our fitness
management business. This is an important inflexion point for
HealthFitness as our plan to develop an integrated health
management company is achieving real traction." Fourth Quarter and
Fiscal Year-end Commitments and RFPs During the quarter, the
company secured one new health management commitment, one health
management expansion and one new fitness management commitment,
which combined may realize annualized revenue of $0.8 million.
Fitness and health management contract cancellations totaled $2.7
million for the quarter, which is comprised of $1.2 million for
fitness management and $1.5 million for health management. These
cancellations reflect the continuing weakness in the economy and
the challenges companies expect to face during 2009. During the
fourth quarter, the company received 11 RFPs for health management
services and two RFPs for fitness management services. For the year
ended December 31, 2008, the company received a total of 16 health
management commitments and expanded services with three existing
health management customers. In addition, the company received
three fitness management commitments and expanded services with
four fitness management customers. Combined commitment and
service-expansion activity for 2008 may realize annualized revenue
of $6.9 million, to be partially offset by a potential annualized
revenue loss of $4.5 million from contract cancellations, of which
$2.7 million is attributed to fitness management and $1.8 million
is attributed to health management. For the year, the company had
received 82 RFPs for health management services and 23 RFPs for
fitness management services. Year-End 2008 Financial Results For
the year ended December 31, 2008, revenue increased 11.0 percent to
$77.7 million, from $70.0 million in the previous year. Gross
profit rose 20.9 percent to $23.7 million, or 30.6 percent of
revenue, from $19.6 million, or 28.1 percent of revenue, for the
prior year. Operating income was $4.8 million for the year ended
December 31, 2008, up from $1.9 million during the prior year,
primarily reflecting a 250 basis point increase in gross margins,
which is attributed to the 32.6 percent growth in higher margin
health management services. For the year, net earnings applicable
to common shareholders climbed to $2.7 million from $0.9 million
last year. Net earnings per diluted share totaled $0.28 compared to
$0.09 last year. "Our financial results for the year were also very
strong," said Dr. Lehman. "The health management business achieved
32.6 percent revenue growth and featured much better margins
compared to 2007. Over time, we expect that health management will
continue to grow as a percentage of our overall business, which
historically has enhanced our margins and profitability. We also
believe that fitness management will continue to be a very
important component of our overall business in the coming years. In
addition to generating predictable revenue and cash flow, our
fitness customers represent an opportunity to further grow health
management revenue by introducing the benefits of our employee
health improvement programs." "All of that said, customer reaction
to the deteriorating macroeconomic conditions did take a toll, as
we experienced a higher level of customer attrition during the
fourth quarter. Health management annualized revenue losses
amounted to $1.5 million for the quarter, and fitness management
annualized revenue losses amounted to $1.2 million. We believe that
2008 attrition will be largely offset by the development of new
business this year. At the same time, the economy has also
lengthened the sales cycle for new opportunities, which we believe
will challenge our ability to increase 2009 revenues on a basis
consistent with past growth. We do, however, expect 2009
profitability to remain strong." "During 2009, we will maintain our
focus on expense management, process improvement and cash
accumulation to improve the financial strength of the company. With
a growing cash position and no long-term debt, we believe
HealthFitness is well positioned to benefit as economic conditions
return to more normal levels," concluded Dr. Lehman." Balance Sheet
The company ended 2008 with $1.3 million in cash, compared to $1.9
million at the end of 2007; the decrease primarily reflecting the
company's $2.3 million stock repurchase during the second quarter
of 2008. Working capital at December 31, 2008 totaled $10.7
million, up approximately $2.2 million compared to December 31,
2007. At December 31, 2008, the company had no balance outstanding
on its $3.25 million credit facility, and had stockholders' equity
of $28.0 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 The Company will conduct a
conference call to discuss its financial results for the fourth
quarter and fiscal year ended December 31, 2008. The call will be
at 5:00 p.m. ET on Wednesday, March 4, 2009. Participants can dial
(888) 396-5640 or (706) 643-0580 to access the conference call, or
can listen via a live Internet web cast, which can be found at
http://www.hfit.com/. A replay of the call is available by visiting
http://www.hfit.com/ for the next 30 days or by calling (800)
642-1687 or (706) 645-9291, access code 83087940, through March 7,
2009. About HealthFitness HealthFitness is a leading provider of
integrated employee health improvement services to Fortune 500
companies, the health care industry and individual consumers. With
30-plus years of experience, HealthFitness partners with employers
to effectively manage health care and productivity costs by
improving individual health and well-being. HealthFitness provides
a portfolio of health and fitness management solutions, including
best-in-class integration, INSIGHT(R) Health Risk Assessments,
screenings, EMPOWERED(TM) Health Coaching, and fitness facility
design and management. For more information on HealthFitness, visit
http://www.hfit.com/. Forward-Looking Statements Certain statements
in this release, including, without limitation, management's
expectation that the company's health management segment will
continue to grow as a percentage of the overall business, which
should allow the company to further enhance margins and
profitability, management's belief that the company's fitness
management segment will continue to be a very important component
of future business because fitness customers represent an
opportunity to further grow health management revenue, management's
belief that 2008 attrition will be largely offset by the
development of new business in 2009, management's belief that the
weak economy will challenge its ability to increase annual revenues
on a basis consistent with past growth, and management's
expectation that the company's 2009 profitability will remain
strong, are forward-looking statements. In addition, the estimated
annualized revenue value of our new and lost customers 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 2009 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. 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, 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, continued delays
in obtaining new commitments and implementing services, the
continued deterioration of general economic conditions, 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. 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. CONTACTS Company Contact: Investor
Relations Contact: Wes Winnekins, CFO Joe Dorame, Robert Blum, Joe
Diaz Health Fitness Corporation Lytham Partners, LLC (952) 897-5275
(602) 889-9700 E: HEALTH FITNESS CORPORATION FOR THE QUARTERS AND
YEARS ENDED DECEMBER 31, 2008 AND 2007 (UNAUDITED) Three Months
Ended Twelve Months Ended December 31, December 31, 2008 2007 2008
2007 REVENUE $21,660,861 $19,235,793 $77,676,409 $69,958,051 COSTS
OF REVENUE 14,787,471 14,044,969 53,936,883 50,317,174 GROSS PROFIT
6,873,390 5,190,824 23,739,526 19,640,877 OPERATING EXPENSES
Salaries 2,903,283 2,949,641 11,852,588 10,769,048 Other selling,
general and administrative 1,856,216 1,831,851 6,937,189 6,840,621
Amortization of acquired intangible assets 36,682 42,770 164,993
171,081 Total operating expenses 4,796,181 4,824,262 18,954,770
17,780,750 OPERATING INCOME 2,077,209 366,562 4,784,756 1,860,127
OTHER INCOME (EXPENSE) Interest expense (1,104) (12,400) (21,487)
(35,771) Other, net 296 (6,771) 708 (8,627) EARNINGS BEFORE INCOME
TAXES 2,076,401 347,391 4,763,977 1,815,729 INCOME TAX EXPENSE
883,082 139,334 2,041,896 905,978 NET EARNINGS $1,193,319 $208,057
$ 2,722,081 $909,751 NET EARNINGS PER SHARE: Basic $0.12 $0.02
$0.28 $0.09 Diluted 0.12 0.02 0.28 0.09 WEIGHTED AVERAGE COMMON
SHARES: Basic 9,620,705 9,943,563 9,783,384 9,842,990 Diluted
9,665,190 10,414,416 9,894,025 10,296,556 HEALTH FITNESS
CORPORATION CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2008 AND 2007
(Unaudited) 2008 2007 ASSETS CURRENT ASSETS Cash $1,300,620
$1,946,028 Trade and other accounts receivable, less allowances of
$317,600 and $243,300 16,306,197 14,686,879 Inventory 347,510
569,458 Prepaid expenses and other 354,257 226,891 Deferred tax
assets 288,626 406,367 Total current assets 18,597,210 17,835,623
PROPERTY AND EQUIPMENT, net 1,243,413 1,400,570 OTHER ASSETS
Goodwill 14,546,250 14,546,250 Software technology, less
accumulated amortization of $1,301,300 and $795,100 1,977,071
1,734,920 Trademark, less accumulated amortization of $438,700 and
$345,500 54,400 147,561 Other intangible assets, less accumulated
amortization of $313,600 and $241,700 215,500 287,334 Other - 9,807
$36,633,844 $35,962,065 LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES Trade accounts payable $1,470,440 $2,121,154
Accrued salaries, wages, and payroll taxes 2,632,329 4,011,580
Other accrued liabilities 1,664,710 1,187,045 Accrued self funded
insurance 310,511 333,724 Deferred revenue 1,820,960 1,722,254
Total current liabilities 7,898,950 9,375,757 DEFERRED TAX
LIABILITY 751,769 108,623 LONG-TERM OBLIGATIONS - - COMMITMENTS AND
CONTINGENCIES - - STOCKHOLDERS' EQUITY Common stock, $0.01 par
value; 25,000,000 shares authorized; 9,647,404 and 9,964,294 shares
issued and outstanding at December 31, 2008 and 2007 96,474 99,643
Additional paid-in capital 28,263,803 29,449,853 Accumulated
comprehensive income from foreign currency translation (83,835)
(56,413) Accumulated deficit (293,317) (3,015,398) 27,983,125
26,477,685 $36,633,844 $35,962,065 DATASOURCE: Health Fitness
Corporation CONTACT: Company Contact, Wes Winnekins, CFO of Health
Fitness Corporation, +1-952-897-5275, or Investor Relations, Joe
Dorame or Robert Blum or Joe Diaz, all of Lytham Partners, LLC,
+1-602-889-9700, , for Health Fitness Corporation Web Site:
http://www.hfit.com/
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