MINNEAPOLIS, Nov. 11 /PRNewswire-FirstCall/ -- Health Fitness Corporation
(OTC Bulletin Board: HFIT) today announced financial results for the third
quarter and nine months ended September 30, 2003.
For the quarter ended September 30, 2003, revenue was $7,445,094, up
$510,336 or 7.4% over revenue of $6,934,758 for the same quarter last year.
Earnings before income taxes for the quarter, which is net of $54,722 in
interest and other charges related to acquisition financing, were $145,989, a
decrease of $4,840 or 3.2% from $150,829 for the same quarter last year. Net
earnings for the quarter were $87,786, down $689,679 or 88.7% from $777,465
for the same quarter last year. This decline in net earnings is distorted
because of a $625,300 deferred tax benefit recognized in the third quarter of
last year related to the reversal of a deferred tax asset valuation allowance.
For the nine months ended September 30, 2003, revenue increased
$2,386,966, or 11.8%, to $22,695,925, compared to $20,308,959 for the same
period in 2002. Earnings before income taxes were $952,038, up $262,803 or
38.1% from $689,235 for the same period last year. Net earnings decreased
$1,762,875 or 75.5% to $573,099 compared to $2,335,974 for the same period in
2002. This decline in net earnings is primarily due to the fact that the first
nine months of 2002 included a $1,875,900 deferred tax benefit related to the
reversal of a deferred tax asset valuation allowance.
"The third quarter marked an important milestone for our Company," said
Jerry Noyce, CEO and President. "On August 25, 2003, we signed an agreement
to acquire the business assets of the Health & Fitness Services Division (HFS
Division) of Johnson & Johnson Health Care Systems Inc. We are tremendously
excited about this opportunity, which will broaden our program offerings and
strengthen our client list. After this transaction closes, we will have the
largest market share and geographical presence in the corporate wellness and
fitness industry, which will allow us to generate more opportunities to grow
our Company.
"Looking at our financial performance through September 30, we've grown
our 2003 revenues almost 12% over the same period in 2002. This was
accomplished primarily from new management contracts secured in 2002.
However, our year-over-year growth rate is beginning to decline from earlier
levels. In an effort to reduce expenses because of the tight economy, certain
hospital customers have recently terminated their fitness center management
contract. A couple of our corporate customers have closed some of their
plants, which has eliminated the need for fitness center staffing. We've also
experienced lower activity for new contract sales due primarily to an increase
in price competition. On the other hand, revenue from our Health Enhancement
Programs, which include personal training, massage therapy and other health
management services, has exceeded our plan objective through the end of the
third quarter.
"Our operating income as a percent of revenue has decreased slightly from
2002 as a result of higher expenses at new corporate fitness centers where we
have assumed profit and loss responsibility. In the months to come, we expect
margin improvement at these centers as these programs mature.
"Our working capital borrowings, exclusive of the long-term debt we
secured to finance our pending acquisition, were repaid in full by the end of
the quarter. We consider this a significant accomplishment considering that
our working capital and other short-term borrowings were as high as $3 million
about 3 years ago. As we look towards the closure of our pending acquisition,
I feel very good about our market position and the future prospects for HFC,"
Noyce concluded.
Health Fitness Corporation is the leading provider of results-oriented
fitness, assessment, wellness, and occupational health services to
corporations, hospitals, universities and communities. HFC has been serving
clients since 1975 and manages approximately 200 sites across the United
States and Canada. For more information about HFC, visit http://www.hfit.com .
This press release contains forward-looking statements within the meaning
of federal securities laws. These statements include statements regarding
intent, belief, or current expectations of the Company and its management and
specifically include the statement regarding the Company's expectation for
margin improvements and future prospects after closure of the Company's
pending acquisition. These forward-looking statements are not guarantees of
the future performance and involve a number of risks and uncertainties that
may cause the Company's actual results to differ materially from the results
discussed in these statements. These statements should be read in conjunction
with the various factors affecting the Company's operations and financial
condition discussed in the section titled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained within
the Company's Annual Report on Form 10-K for the year ended December 31, 2002,
as well as the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2003. There is no assurance that the Company will be able to
capitalize on any of these forward-looking statements.
Financial tables follow.
HEALTH FITNESS CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
REVENUE $7,445,094 $6,934,758 $22,695,925 $20,308,959
COST OF REVENUE 5,979,326 5,514,309 17,994,616 15,960,684
GROSS PROFIT 1,465,768 1,420,449 4,701,309 4,348,275
OPERATING EXPENSES
Salaries 834,781 702,243 2,407,539 2,058,319
Selling, general
and admin. 393,018 463,824 1,223,937 1,293,757
Total Operating
Expenses 1,227,799 1,166,067 3,631,476 3,352,076
OPERATING INCOME 237,969 254,382 1,069,833 996,199
OTHER INCOME
(EXPENSE)
Interest Expense (59,031) (100,586) (82,987) (298,710)
Other, net (32,949) (2,967) (34,808) (8,254)
EARNINGS BEFORE
INCOME TAXES 145,989 150,829 952,038 689,235
Income Tax Expense
(Benefit) 58,203 (626,636) 378,939 (1,646,739)
NET EARNINGS $87,786 $777,465 $573,099 $2,335,974
NET EARNINGS PER
SHARE
Basic $0.01 $0.06 $0.05 $0.19
Diluted 0.01 0.06 0.05 0.19
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING
Basic 12,341,284 12,289,558 12,324,292 12,173,442
Diluted 12,743,441 12,413,530 12,542,024 12,332,195
HEALTH FITNESS CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, December 31,
2003 2002
ASSETS
CURRENT ASSETS
Cash $744,480 $91,658
Trade and other accounts receivable,
less allowances of $94,000
and $88,900 3,600,307 4,036,888
Prepaid expenses and other 207,105 266,734
Deferred tax assets 731,500 731,500
Total current assets 5,283,392 5,126,780
PROPERTY AND EQUIPMENT, net 225,125 176,206
OTHER ASSETS
Cash held in escrow 5,250,000 -
Goodwill 5,308,761 5,308,761
Deferred tax assets 1,929,244 2,254,876
Other 609,616 89,188
$18,606,138 $12,955,811
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable $- $304,589
Trade accounts payable 289,108 409,150
Accrued salaries, wages and payroll
taxes 1,606,228 1,072,982
Other accrued liabilities 293,917 415,856
Accrued self-funded insurance 261,856 267,042
Deferred revenue 1,229,136 1,407,437
Total current liabilities 3,751,137 3,877,056
LONG-TERM OBLIGATIONS, less current
maturities 5,250,000 -
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value;
5,000,000 shares authorized;
none issued or outstanding - -
Common stock, $0.01 par value;
25,000,000 shares authorized;
12,351,084 and 12,297,661 shares
issued and outstanding 123,510 122,977
Additional paid-in capital 17,020,873 16,997,367
Accumulated deficit (7,468,490) (8,041,589)
9,675,893 9,078,755
$18,606,138 $12,955,811
SOURCE Health Fitness Corporation
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Related links:
http://www.hfit.com
CONTACT:
Wes Winnekins, CFO of Health Fitness
Corporation, +1-952-897-5275, wes.winnekins@hfit.com , or Dennis
B. McGrath of McGrath Buckley Communications Counseling,
+1-651-646-4115, dennis@mcgrath-buckley.com
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