MINNEAPOLIS, Aug. 8 /PRNewswire-FirstCall/ -- Health Fitness
Corporation (OTC Bulletin Board: HFIT) today announced financial results
for the second quarter and six months ended June 30, 2006.
For the second quarter 2006, revenue grew 13.9% to $15,575,130, from
$13,678,615 for the same period last year. Gross profit during the quarter
increased 20.6% to $4,160,014, from $3,450,616 for the same period last
year. Operating income fell 22.1% to $686,773, from $881,669 for the same
period last year. Net earnings applicable to common shareholders increased
46.0% to $727,474, from $498,183 for the same period last year. Net
earnings per diluted share fell to $0.02, from $0.03 for the same period
last year.
For the six months ended June 30, 2006, revenue grew 11.0% to
$30,142,391, from $27,143,716 for the same period last year. Gross profit
increased 12.7% to $7,764,494, from $6,892,418 for the same period last
year. Operating income fell 46.0% to $1,067,716, from $1,979,099 for the
same period last year. Net earnings applicable to common shareholders
increased 14.6% to $1,290,737, from $1,126,117 for the same period last
year. Net earnings per diluted share fell to $0.03, from $0.07 for the same
period last year.
"Our second quarter progress reflects the success of our continued
focus on executing the Company's business plan," said Jerry Noyce, Health
Fitness Corporation CEO and President. "The new business we've won,
combined with new revenue from our December 2005 acquisition of HealthCalc,
is contributing toward our important goal of consistent, double-digit
revenue growth. Our second quarter revenue grew 13.9%, up from 8.2% for our
first quarter of 2006. Of the 11.0% growth we achieved for our first six
months, 7.4% was a result of organic growth and 3.6% a result of revenues
from the integration of HealthCalc, which has solidified our health
management business model and improved our competitive position. Our gross
margins, as a percent of revenue, have increased over last year due to the
addition of new, more profitable health management business. Finally, our
balance sheet continues to strengthen, with cash of $1.3 million, no
long-term debt, working capital of $5.6 million and stockholders' equity of
$21.9 million. As a result of our strong balance sheet, we are able to
continue the investments necessary to complete the implementation of our
strategies."
Financial Highlights for Three and Six Months Ended June 30, 2006
-- For the second quarter, our Health Management revenue grew 41.0% to
$4,958,073, from $3,515,714 for the same period last year. Fitness
Management revenue grew 4.5% to $10,617,057, from $10,162,901 for the
same period last year. For the first six months of 2006, Health
Management revenue grew 32.1% to $9,224,507, from $6,981,967 for the
same period last year. Fitness Management revenue grew 3.8% to
$20,917,884, from $20,161,749 for the same period last year.
For the second quarter of 2006, the $1,896,515 revenue growth over 2005
is attributed to revenue growth of $385,612 from HealthCalc, in
addition to revenue growth of $1,510,903 from new contracts and
incremental business from existing contracts as discussed below. For
the first six months of 2006, the $2,998,675 revenue growth over 2005
is attributed to revenue growth of $976,476 from HealthCalc, in
addition to revenue growth of $2,022,199 from new contracts and
incremental business from existing contracts as discussed below.
-- During the first six months of 2006, we have won a number of new
contracts, as well as expanded our services at existing contracts,
within our Health Management and Fitness Management business areas. In
Health Management, we have won twenty-six new contracts, and expanded
five existing contracts, which may realize annualized incremental
revenue of approximately $6.4 million. In Fitness Management, we have
won seven new contracts, and expanded one existing contract, which may
realize annualized incremental revenue of $2.7 million. The value of
our new and expanded contracts is a forward looking statement, is based
upon an estimate of the anticipated annualized incremental revenue, and
should be used only as an indication of the sales activity we have
recently experienced in our two business areas. These estimates should
not be considered an indication of the total incremental revenue growth
we expect to generate in 2006, or in any year, as actual growth may
differ from these estimates due to actual staffing levels,
participation rates and contract duration, in addition to other revenue
we may lose due to contract termination.
-- As a result of our new and expanded business opportunities, our total
revenue of $15,575,130 for the second quarter represents a 6.9%
increase over our total revenue of $14,567,261 for our first quarter
ended March 31, 2006.
-- For the second quarter, gross profit as a percent of revenue increased
to 26.7%, from 25.2% for the same period last year. For the first six
months, gross profit as a percent of revenue increased to 25.8%, from
25.4% for the same period last year. These increases are due primarily
to the increase in health management revenue discussed above.
-- For the second quarter, operating expenses increased $904,294 to
$3,473,241, from $2,568,947 for the same period last year. Of this
increase, $455,282 is attributed to salaries, operating expenses and
asset depreciation related to our acquisition of HealthCalc, $162,945
is attributed to stock option compensation expense from the adoption of
SFAS 123R, with the remaining $286,067 attributable to additional staff
we hired during 2005 to execute our health management business plan.
For the first six months, operating expenses increased $1,783,459 to
$6,696,778, from $4,913,319 for the same period last year. Of this
increase, $882,598 is attributed to salaries, operating expenses and
asset depreciation related to our acquisition of HealthCalc, $238,404
is attributed to stock option compensation expense, with the remaining
$662,457 attributable to additional staff we hired during 2005 to
execute our health management business plan. We will continue to incur
these expenses on a quarterly basis.
-- Operating margin was 4.4% for second quarter, down from 6.4% for the
same period last year. Operating margin was 3.5% for the first six
months, down from 7.3% for the same period last year. Excluding stock
option compensation expense, operating margin was 5.5% and 4.3% for
three and six months ended June 30, 2006.
-- For the second quarter and six months ended June 30, 2006, we recorded
$406,694 and $841,215 of non-cash income related to a change in fair
value for 1,530,000 warrants we issued in connection with the sale of
$10.2 million of our Series B Convertible Preferred Stock in November
2005. At the time of this financing, the warrants were deemed a
derivative liability, which required us to revalue these warrants on a
quarterly basis, with the resulting change in value to be reflected as
non-cash income or expense in our statement of operations. On June 15,
2006, we reached an agreement with the investors of this financing to
amend the terms of the investment documents, which resulted in the
warrants to be reflected as equity.
About The Company
Health Fitness Corporation is a leading provider of fitness and health
management services to corporations, hospitals, and communities. Serving
clients for over 30 years, HFC provides fitness and health management
services to more than 400 on-site and remote locations across the U.S. and
Canada. For more information about Health Fitness Corporation, go to
http://www.hfit.com .
Forward-Looking Statements
Certain statements in this release, including, without limitation,
those relating to management's belief that the integration of HealthCalc
has solidified the Company's health management business model, and improved
its competitive position, in addition to management's estimate of
incremental annualized revenue from new sales activity, are forward-looking
statements. 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 "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, our
inability to successfully cross-sell health management services to our
fitness management clients, 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 2005 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 STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
REVENUE $15,575,130 $13,678,615 $30,142,391 $27,143,716
COSTS OF REVENUE 11,415,116 10,227,999 22,377,897 20,251,298
GROSS PROFIT 4,160,014 3,450,616 7,764,494 6,892,418
OPERATING EXPENSES
Salaries 1,805,533 1,406,562 3,484,367 2,794,485
Other selling,
general and
administrative 1,560,098 942,631 2,996,339 1,679,497
Amortization of
acquired intangible
assets 107,610 219,754 216,072 439,337
Total operating
expenses 3,473,241 2,568,947 6,696,778 4,913,319
OPERATING INCOME 686,773 881,669 1,067,716 1,979,099
OTHER INCOME (EXPENSE)
Interest expense (2,470) (16,326) (4,150) (28,249)
Change in fair value
of warrants 406,694 - 841,215 -
Other, net 14,071 (340) 10,061 (1,990)
EARNINGS BEFORE
INCOME TAXES 1,105,068 865,003 1,914,842 1,948,860
INCOME TAX EXPENSE 377,594 345,220 527,695 779,543
NET EARNINGS 727,474 519,783 1,387,147 1,169,317
Dividend to
preferred
shareholders - 21,600 96,410 43,200
NET EARNINGS
APPLICABLE
TO COMMON
SHAREHOLDERS $727,474 $498,183 $1,290,737 $1,126,117
NET EARNINGS
PER SHARE:
Basic $0.04 $0.04 $0.08 $0.09
Diluted 0.02 0.03 0.03 0.07
WEIGHTED AVERAGE
COMMON SHARES:
Basic 18,931,169 12,652,370 17,005,769 12,636,465
Diluted 20,310,830 16,618,997 20,305,674 16,617,853
HEALTH FITNESS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2006 2005
ASSETS
CURRENT ASSETS
Cash $1,295,045 $1,471,505
Trade and other accounts receivable,
less allowances of $183,300
and $200,700 9,270,835 8,839,046
Prepaid expenses and other 644,506 509,273
Deferred tax assets 347,701 337,800
Total current assets 11,558,087 11,157,624
PROPERTY AND EQUIPMENT, net 413,122 347,820
OTHER ASSETS
Goodwill 13,005,498 12,919,689
Software, less accumulated amortization
of $176,200 and $0 1,749,531 1,762,000
Customer contracts, less accumulated
amortization of $1,746,500
and $1,626,100 68,472 188,889
Trademark, less accumulated amortization
of $196,700 and $147,000 296,432 346,057
Other intangible assets, less accumulated
amortization of $129,700 and $88,000 399,414 441,086
Deferred tax assets 366,300 374,500
Other 35,434 47,105
$27,892,290 $27,584,770
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $565,423 $687,125
Accrued salaries, wages, and payroll taxes 2,922,422 2,693,927
Other accrued liabilities 370,396 763,115
Accrued self funded insurance 344,297 250,000
Deferred revenue 1,752,863 1,868,446
Total current liabilities 5,955,401 6,262,613
LONG-TERM OBLIGATIONS - -
COMMITMENTS AND CONTINGENCIES - -
WARRANT OBLIGATION - 2,210,889
PREFERRED STOCK, $0.01 par value,
10,000,000 shares authorized, 0 and
1,000 issued and outstanding - 8,623,546
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value;
50,000,000 shares authorized;
18,931,718 and 13,787,349 shares
issued and outstanding 189,317 137,874
Additional paid-in capital 25,733,284 15,625,425
Accumulated comprehensive income 372 1,245
Accumulated deficit (3,986,084) (5,276,822)
21,936,889 10,487,722
$27,892,290 $27,584,770
SOURCE Health Fitness Corporation
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Related links:
http://www.hfit.com
http://www.prnewswire.com/comp/000921.html /
CONTACT:
Wes Winnekins, CFO of Health Fitness
Corporation, +1-952-897-5275, wwinnekins@hfit.com , or Dennis B.
McGrath of McGrath Buckley Communications Counseling,
+1-651-646-4115, dennis@mcgrath-buckley.com
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