MINNEAPOLIS, Nov. 16 /PRNewswire-FirstCall/ -- Health Fitness Corporation
(OTC Bulletin Board: HFIT) today announced its financial results for the third
quarter and nine months ended September 30, 2005 and the closing of a
$10.2 million equity financing transaction.
For the third quarter 2005, revenue grew 2.4% to $13,464,278, from
$13,154,340 for the same period last year. Gross profit during the quarter
increased 4.5% to $3,498,814, from $3,347,083 for the same quarter last year.
Net earnings applicable to common shareholders increased 8.9% to $506,488,
from $465,164 for the same quarter last year. Net earnings per diluted share
were $0.03, which is unchanged from $0.03 for the same quarter last year.
For the nine months ended September 30, 2005, revenue grew 4.3% to
$40,607,994, from $38,950,429 for the same period last year. Gross profit
increased 5.2% to $10,391,232, from $9,876,378 for the same period last year.
Net earnings applicable to common shareholders increased 28.3% to $1,632,605,
from $1,272,625 for the same period last year. Net earnings per diluted share
were $0.10, which is a 25% increase from $0.08 for the same period last year.
"For our third quarter, revenue growth compared to the same period in 2004
was 2.4%, which is lower than the 5.2% revenue growth rate that we realized
for the first six months of this year and will likely give us a revenue growth
rate between 4% and 4.5% for 2005," said Jerry Noyce, Health Fitness
Corporation CEO and President. "This decreased rate of growth is primarily
due to revenue lost from contract terminations exceeding revenue added from
new contracts, which is a timing issue we often have to deal with in making
quarter-over-quarter comparisons." Noyce added that "We generally evaluate
revenue trends in our fitness and health management services business based
upon 12-to-18 month periods, and we do not view quarterly revenue as
necessarily indicative of the Company's outlook or results to be expected in
future quarters. During the past two months we have discussed future annual
revenue growth rate targets with investors and potential investors based on
two different business scenarios that we may follow, and we communicated these
targets to the broader investment community in our September 9 Regulation FD
disclosure." Noyce said the Company does not plan to revise these future
targets as to 2006 and beyond based on 3rd Quarter results and referred
investors to the Company's September 9 Regulation FD disclosure for
appropriate cautionary statements and risk factors relative to the assumptions
underlying these future targets.
Revenue data: Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 % 2005 2004 %
Change Change
Fitness
Management
Revenue
Staffing
Services $9,504,194 $9,855,438 (3.6)% $28,801,495 $29,336,224 (1.8)%
Program
Services 769,924 470,988 63.5% 2,350,584 1,411,836 66.5%
Consulting
Services 50,941 43,323 17.6% 163,658 114,588 42.8%
10,325,059 10,369,749 (0.4)% 31,315,737 30,862,648 1.5%
Health
Management
Revenue
Staffing
Services 2,982,339 2,659,217 12.2% 8,829,253 7,860,008 12.3%
Program
Services 146,518 116,525 25.7% 438,211 209,443 109.2%
Consulting
Services 10,362 8,849 17.1% 24,793 18,330 35.3%
3,139,219 2,784,591 12.7% 9,292,257 8,087,781 14.9%
Total Revenue
Staffing
Services 12,486,533 12,514,655 (0.2)% 37,630,748 37,196,232 1.2%
Program
Services 916,442 587,513 56.0% 2,788,795 1,621,279 72.0%
Consulting
Services 61,303 52,172 17.5% 188,451 132,918 41.8%
$13,464,278 $13,154,340 2.4% $40,607,994 $38,950,429 4.3%
Financial Highlights for the Three and Nine Months Ended September 30,
2005
-- The decrease in Fitness Management Staffing revenue for the third
quarter and year-to-date is attributed to higher-than-normal revenue
attrition from contracts that were acquired in December 2003. Since
contract attrition can be unpredictable, the Company generally does not
view short-term changes in contract revenue to be indicative of future
results, or a trend in the business. New contracts the Company secures
may take 90 to 180 days to generate full revenue. At the same time,
many of the Company's contracts can be terminated with a 30 day notice.
Because this timing difference can temporarily affect revenue results,
the Company generally evaluates prospective revenue trends over a 12 to
18 month period.
-- Fitness Management Program Services are fee-for-service revenues we
earn at managed fitness centers for services such as personal training,
massage therapy, weight loss programs and specialty fitness classes.
The increase for the third quarter and year-to-date is attributed to
higher utilization of these services by fitness center members.
-- The growth of Health Management Staffing Services revenue for the third
quarter and year-to-date is due primarily to new contracts to manage
corporate wellness programs and growth of existing programs.
-- Health Management Program Services include revenue derived from
providing employee health risk assessments, biometric screening
services, health data collection and management and electronic health
education platform. The increase for the third quarter and year-to-
date is attributed to higher utilization of these services by existing
customers as well as new customers.
-- Gross profit as a percent of revenue increased to 26.0% for the third
quarter, from 25.4% for the same period last year. This increase is
due primarily to a $225,000 refund of 2004 worker's compensation
insurance premiums, which is due to favorable 2004 claims activity.
Offsetting this increase were decreases in gross profit associated with
contract terminations that had higher margins and higher employee
medical costs. Year to date gross profit as a percent of revenue
increased to 25.6%, from 25.4% for the same period last year. This
increase is due primarily to the refund of 2004 worker's compensation
insurance premiums. Offsetting this increase were decreases in gross
profit associated with contract terminations that had higher margins
and higher costs for employee medical benefits.
-- Interest expense decreased $122,137 and $356,484 for the third quarter
and nine months ended September 30, 2005. This decrease is primarily
due to the repayment of our 12%, $2 million Senior Subordinated Note in
December 2004.
-- Long-Term Obligations decreased to $0 for the quarter ended September
30, 2005, from $22,774 for the quarter ended June 30, 2005.
$10.2 million Equity Financing
The Company announced that it had completed a $10.2 million private
placement of equity securities with institutional investors. The new equity
financing resulted in the original issuance of 1,000 shares of Series B
Convertible Preferred Stock, with a 5% per annum dividend, payable in cash,
based upon the $10.2 million gross proceeds received by the Company. The
Series B Convertible Preferred Stock will automatically convert into
approximately 5.1 million shares of Common Stock effective on the date the
Securities and Exchange Commission declares effective a registration statement
to be filed by the Company with respect to the 5.1 million shares of Common
Stock issued to the new investors. The registration statement is expected to
become effective no later than March 15, 2006. The Company also issued the
investors 5-year warrants to purchase approximately 1.5 million shares of
Common Stock for $2.40 per share, subject to customary weighted-average anti-
dilution adjustments. Noyce commented, "We are excited about the confidence
shown by the new investors with respect to our industry, and our business and
growth plans. We believe that the financing will help us achieve our stated
initiatives and growth plans."
The Company anticipates using approximately $5.1 million of the proceeds
from the financing to redeem all of its outstanding shares of Series A
Convertible Preferred Stock, currently convertible into approximately
2.2 million shares of Common Stock, together with warrants to purchase
approximately 916,000 shares of Common Stock that were issued in connection
with the Series A Stock. The remaining proceeds are expected to be used for
working capital and to finance growth of the Company's business. Banner
Capital Markets and Greene, Holcomb & Fischer LLC, acted as placement agents
for the Company.
About The Company
Health Fitness Corporation is a leading provider of results-oriented
health improvement management services to corporations, hospitals,
universities and communities. Serving clients since 1975, the Company
provides fitness and health improvement services at more than 400 sites 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 Company's 2005 revenue growth rate
will likely be between 4% and 4.5%, 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 meet the growing employee health management
demands of major corporations and other factors disclosed from time to time in
our filings with the U.S. Securities and Exchange Commission. 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 Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
REVENUE $13,464,278 $13,154,340 $40,607,994 $38,950,429
COSTS OF REVENUE 9,965,464 9,807,257 30,216,762 29,074,051
GROSS PROFIT 3,498,814 3,347,083 10,391,232 9,876,378
OPERATING EXPENSES
Salaries 1,449,297 1,408,482 4,243,782 4,180,760
Other selling,
general and
administrative 945,540 784,560 2,625,037 2,438,170
Amortization of
acquired intangible
assets 220,095 219,583 659,432 658,750
Total operating
expenses 2,614,932 2,412,625 7,528,251 7,277,680
OPERATING INCOME 883,882 934,458 2,862,981 2,598,698
OTHER INCOME (EXPENSE)
Interest expense 4,035 (118,102) (24,214) (380,698)
Other, net (2,404) 908 (4,394) 2,298
EARNINGS BEFORE INCOME
TAXES 885,513 817,264 2,834,373 2,220,298
INCOME TAX EXPENSE 354,206 330,500 1,133,749 882,873
NET EARNINGS 531,307 486,764 1,700,624 1,337,425
Dividend to preferred
shareholders 24,819 21,600 68,019 64,800
NET EARNINGS APPLICABLE
TO COMMON
SHAREHOLDERS $506,488 $465,164 $1,632,605 $1,272,625
NET EARNINGS PER SHARE:
Basic $0.04 $0.04 $0.13 $0.10
Diluted 0.03 0.03 0.10 0.08
WEIGHTED AVERAGE
COMMON SHARES:
Basic 12,836,971 12,550,679 12,704,035 12,482,060
Diluted 16,662,753 16,122,175 16,633,799 16,078,873
HEALTH FITNESS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2005 2004
ASSETS
CURRENT ASSETS
Cash $38,031 $241,302
Trade and other accounts receivable, less
allowances of $199,400 and $210,700 8,428,337 8,147,430
Prepaid expenses and other 840,576 213,954
Deferred tax assets 483,100 1,660,100
Total current assets 9,790,044 10,262,786
PROPERTY AND EQUIPMENT, net 190,581 150,308
OTHER ASSETS
Goodwill 9,022,501 9,022,501
Customer contracts, less accumulated
amortization of $1,481,900 and $875,700 248,056 854,306
Trademark, less accumulated amortization of
$129,000 and $75,800 228,068 274,167
Other intangible assets, less accumulated
amortization of $86,300 and $81,300 11,767 61,493
Deferred tax assets 352,000 221,400
Other 55,953 87,015
$19,898,970 $20,933,976
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $799,167 $840,155
Accrued salaries, wages, and payroll taxes 1,885,032 2,768,734
Other accrued liabilities 378,568 495,770
Accrued self funded insurance 184,592 225,500
Deferred revenue 1,814,137 1,977,093
Total current liabilities 5,061,496 6,307,252
LONG-TERM OBLIGATIONS - 1,612,759
COMMITMENTS AND CONTINGENCIES - -
CUMULATIVE CONVERTIBLE PREFERRED STOCK,
10,000,000 shares authorized, 1,111,105 and
1,063,945 issued and outstanding 1,567,715 1,530,232
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 50,000,000
shares authorized; 12,907,023 and
12,582,170 shares issued and outstanding 129,070 125,822
Additional paid-in capital 17,982,591 17,836,675
Accumulated comprehensive income 6,717 2,459
Accumulated deficit (4,848,619) (6,481,223)
13,269,759 11,483,733
$19,898,970 $20,933,976
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, wwinnekins@hfit.com , or Dennis B.
McGrath of McGrath Buckley Communications Counseling,
+1-651-646-4115, dennis@mcgrath-buckley.com
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