Highlights
- Total revenue increased 13 percent
- Health management segment revenue grew 42 percent
- Revenue mix shifted to 45 percent health management and 55 percent
fitness management from 36 percent health management and 64 percent fitness
management a year earlier
- Company announced share repurchase plan
MINNEAPOLIS, May 5 /PRNewswire-FirstCall/ -- Health Fitness Corporation
(OTC Bulletin Board: HFIT), a leading provider of integrated employee
health and productivity management solutions, today announced financial
results for the first quarter ended March 31, 2008.
For the first quarter, revenue increased 12.7 percent to $18.7 million,
from $16.6 million for the same period in 2007. Gross profit during the
quarter rose to $5.3 million, from $4.8 million during the prior-year
period.
Operating income totaled $0.56 million for the quarter compared to
$0.89 million for the same period in 2007. Net earnings were $0.32 million
versus $0.51 million in the prior-year period. Net earnings per diluted
share were $0.02 for the quarter compared to net earnings per diluted share
of $0.03 for the same period last year.
"We are pleased with our results during the first quarter of 2008 and
believe they further reflect our efforts to build a solid platform for
future revenue and margin growth. During the quarter, we continued to shift
our mix of business toward our health management segment, which is our
growth driver," said Gregg Lehman, Ph.D., president and chief executive
officer. "Gross margin slightly decreased, compared to last year, as a
result of lower pricing for new health management business we won during
2007. Gross margin was also impacted by the additional screening and health
coaching staff we hired in late 2007 to meet forecasted future demand for
these services. As we secure and implement new health management business
during the remainder of 2008, we believe our opportunity to achieve higher
service fees will improve, which should allow us to better leverage our
service delivery investments, and thus realize higher margins."
Operating expenses as a percent of revenue were approximately 26
percent, versus 24 percent for the same period last year. This increase
reflects the impact on overall expense structure related to the 2007
investments made in the company's management infrastructure to address
current and forecasted future business growth. The company anticipates that
operating expenses, as a percent of revenue, will begin to level off as its
business investment plan is largely complete.
First Quarter Commitments and RFPs
During the quarter, the company secured nine new health management
commitments, compared to 12 health management and three fitness management
commitments in the first quarter of 2007. Additionally, during the 2008
quarter, the company received 26 new RFPs for health management services
and 13 new RFPs for fitness management services, compared to 28 health
management and eight fitness management RFPs during the first quarter of
2007. The potential annualized revenue that may be realized from first
quarter 2008 health management commitments is $2.0 million. This potential
$2.0 million will be offset by a potential annualized revenue loss of $0.4
million from fitness management contract cancellations.
Lehman added, "We continue to execute in a challenging economic
environment. While we believe economic conditions are causing some
companies to lengthen their evaluation periods preceding a commitment,
there is considerable enthusiasm for employee health improvement services
as a means to minimize the effect of rising health care costs. Our sales
pipeline remains strong and we anticipate that the longer sales process we
are witnessing will result in a more evenly distributed level of commitment
activity over the course of 2008."
Balance Sheet
The company ended the first quarter of 2008 with $0.9 million in cash,
compared to $1.9 million at the end of 2007. Working capital at March 31,
2008 totaled $9.4 million, a $0.9 million gain compared to December 31,
2007. At March 31, 2008, the company carried no long-term debt and
stockholders' equity totaled $27.2 million.
2008 First Quarter Business Segment Information
Revenue and gross profit information by segment is:
Health Management
(in thousands)
REVENUE Q1 2008 Q1 2007
Staffing Services $4,296 $3,680
Program and Consulting Services 4,081 2,236
Total Health Mgt $8,377 $5,916
GROSS PROFIT Q1 2008 Q1 2007
Staffing Services $939 $912
Program and Consulting Services 2,050 1,435
Total Health Mgt $2,989 $2,347
During the 2008 first quarter, health management segment revenue grew
41.6 percent compared to the same period in 2007. Within the segment,
staffing services revenue increased 17 percent, which is attributable to
new customers and the expansion of services to existing customers. Program
and consulting services revenue grew 83 percent compared to the 2007 first
quarter. This increase is primarily driven by an increase in biometric
screening services, health coaching and advising services and recurring
revenue growth from e-health platform sales.
Gross margin for the health management segment was 35.7 percent for the
quarter, compared to 39.7 percent for the prior-year period. This decrease
is due in part to lower pricing for new health management business won
during 2007. Gross margin was also impacted by the additional screening and
health coaching staff hired in late 2007 to meet forecasted future demand
for these services.
Fitness Management
(in thousands)
REVENUE Q1 2008 Q1 2007
Staffing Services $9,706 $9,981
Program and Consulting Services 620 694
Total Fitness Mgt $10,326 $10,675
GROSS PROFIT Q1 2008 Q1 2007
Staffing Services $2,116 $2,100
Program and Consulting Services 237 363
Total Fitness Mgt $2,353 $2,463
During the 2008 first quarter, fitness management segment revenue
declined slightly compared to the same period last year, due primarily to
the termination of a large automotive contract in the first quarter of
2007.
Gross margin for the fitness management segment slightly dropped to
22.8 percent, from 23.1 percent during the prior-year period, reflecting
the impact of customer attrition and higher costs to deliver fitness
program services, including personal training, massage therapy and the
company's branded walking program.
Share Repurchase Plan
On March 24, 2008, the company announced that its board of directors
authorized a plan to repurchase up to $2.5 million of the company's
outstanding common shares. Under the plan, the company may repurchase
shares on the open market in amounts and at times deemed appropriate by
management and in accordance with applicable securities rules and
regulations. The share repurchase plan was effective on April 1, 2008 and
will continue for a period of six months from the commencement date,
subject to the company's right to announce earlier termination or an
extension of the plan. The company's insiders will be prohibited from
trading in the company's stock throughout the duration of the plan.
Share repurchases will be funded by the company's available working
capital. The timing of any such repurchases under the plan will depend on
price, market conditions and applicable regulatory requirements.
Conference Call
Health Fitness Corporation will host a conference call today, May 5,
2008, at 4:00 p.m. Central (2:00 p.m. Pacific; 5:00 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 45514659. A replay of
the call will be available until Monday, May 19, 2008, 11:00 p.m. EDT. To
access the replay from the U.S., dial 1-800-642-1687 and enter ID number
45514659, from outside the U.S., dial 1-706-645-9291 and enter ID number
45514659. The call will also be broadcast live over the Internet and
accessible through the Investor Relations section of the company's Website
at http://www.hfit.com, where the call will be archived for 30 days.
About Health Fitness Corporation
Health Fitness Corporation is a leading provider of integrated employee
health and productivity management solutions to Fortune 500 companies, the
health care industry and individual consumers. Serving clients for more
than 30 years, Health Fitness Corporation partners with employers to
effectively manage their health care and productivity costs by improving
individual health and well-being. Health Fitness Corporation serves more
than 300 clients globally via on-site management and remotely via Web and
telephonic services. Health Fitness Corporation 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. Health Fitness
Corporation 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 Health Fitness Corporation, visit
http://www.hfit.com.
Forward Looking Statements
Certain statements in this release, including, without limitation,
management's belief that first quarter 2008 results further reflects the
Company's efforts to build a solid platform for future revenue and margin
growth; management's belief that the Company's health management segment is
its growth driver; management's forecast of future demand for additional
screening and health coaching services; management's belief that the
Company's opportunity to achieve higher service pricing will improve as new
business is secured and implemented during the remainder of 2008, which
should allow the Company to better leverage past investments in service
delivery, thus realizing higher margins; management's belief that operating
expenses, as a percent of revenue, will begin to level off as the Company's
investment plan is largely complete; management's belief that economic
conditions are causing some companies to lengthen their evaluation periods;
and management's belief that the Company's sales pipeline remains strong
and that the longer sales process will result in a more evenly distributed
level of commitment activity over the course of 2008, 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 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. 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, 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)
March 31, December 31,
2008 2007
ASSETS
CURRENT ASSETS
Cash $915,684 $1,946,028
Trade and other accounts receivable, less
allowances of $241,800 and $243,300 13,079,407 14,686,879
Inventory 431,199 569,458
Prepaid expenses and other 548,372 226,891
Deferred tax assets 406,367 406,367
Total current assets 15,381,029 17,835,623
PROPERTY AND EQUIPMENT, net 1,307,309 1,400,570
OTHER ASSETS
Goodwill 14,546,250 14,546,250
Software technology, less accumulated
amortization of $914,100 and $795,100 1,721,732 1,734,920
Trademark, less accumulated amortization
of $370,300 and $345,500 122,748 147,561
Other intangible assets, less accumulated
amortization of $259,700 and $241,700 269,375 287,334
Other 5,607 9,807
$33,354,050 $35,962,065
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $1,397,450 $2,121,154
Accrued salaries, wages, and payroll taxes 2,618,128 4,011,580
Other accrued liabilities 331,121 1,187,045
Accrued self funded insurance 300,888 333,724
Deferred revenue 1,365,811 1,722,254
Total current liabilities 6,013,398 9,375,757
DEFERRED TAX LIABILITY 108,623 108,623
LONG-TERM OBLIGATIONS - -
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 50,000,000
shares authorized; 20,273,817 and
19,928,590 shares issued and outstanding at
March 31, 2008 and December 31, 2007 202,738 199,285
Additional paid-in capital 29,776,646 29,350,211
Accumulated comprehensive income from
foreign currency translation (56,669) (56,413)
Accumulated deficit (2,690,686) (3,015,398)
27,232,029 26,477,685
$33,354,050 $35,962,065
HEALTH FITNESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
March 31,
2008 2007
REVENUE $18,702,667 $16,590,033
COSTS OF REVENUE 13,360,402 11,780,139
GROSS PROFIT 5,342,265 4,809,894
OPERATING EXPENSES
Salaries 2,972,377 2,398,802
Other selling, general and administrative 1,763,665 1,482,525
Amortization of trademarks and other
intangible assets 42,770 42,770
Total operating expenses 4,778,812 3,924,097
OPERATING INCOME 563,453 885,797
OTHER INCOME (EXPENSE)
Interest expense (923) (2,099)
Other, net 2,285 (1,514)
EARNINGS BEFORE INCOME TAX EXPENSE 564,815 882,184
INCOME TAX EXPENSE 240,103 370,517
NET EARNINGS $324,712 $511,667
NET EARNINGS PER COMMON SHARE:
Basic $0.02 $0.03
Diluted 0.02 0.03
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 20,080,747 19,306,797
Diluted 20,412,464 20,252,110
SOURCE Health Fitness Corporation
 back to top
Related links:
http://www.hfit.com
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
|
