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HealthFitness Announces 2008 Second Quarter Results


- Total revenue increased 11 percent

- Health management segment revenue grew 28 percent

- Health management segment revenue represented 44 percent of total

revenue, compared to 38 percent of total revenue a year ago

- Gross margin rose to 29.4 percent from 28 percent

- Company completed share repurchase plan

MINNEAPOLIS, Aug. 4 /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 second quarter ended June 30, 2008.

For the second quarter, revenue increased 10.8 percent to $18.8 million, from $17.0 million for the same period in 2007. Gross profit during the quarter rose to $5.5 million, from $4.8 million during the prior-year period. Operating income totaled $0.64 million for the quarter compared to $0.38 million for the same period in 2007. Net earnings were $0.36 million, or $0.02 per diluted share, versus $0.17 million, or $0.01 per diluted share, in the prior-year period.

"For the third quarter in a row, we reported double-digit revenue gains. We are also pleased with the improvement in gross margins during the second quarter. While revenue from our fitness management segment was essentially flat, we were able to replace the revenue lost from contract cancellations that occurred during the first six months of 2007. Our health management segment continued to experience double-digit growth, with the second quarter resulting in new customer commitments and expansion of existing customers," said Gregg Lehman, Ph.D., president and chief executive officer. "At the same time, we have not been immune from the challenging economy, which has lengthened sales cycles and delayed some customer commitments."

Operating expenses as a percent of revenue were 26 perc0,

2008 2007 2008 2007

REVENUE $18,815,458 $16,979,167 $37,518,125 $33,569,200

COSTS OF REVENUE 13,278,965 12,223,734 26,639,367 24,003,873

GROSS PROFIT 5,536,493 4,755,433 10,878,758 9,565,327


Salaries 3,026,310 2,645,073 5,998,687 5,043,875

Other selling,

general and

administrative 1,832,102 1,691,109 3,595,767 3,173,634

Amortization of

acquired intangible

assets 42,770 42,770 85,540 85,540

Total operating

expenses 4,901,182 4,378,952 9,679,994 8,303,049

OPERATING INCOME 635,311 376,481 1,198,764 1,262,278


Interest expense (3,208) (4,591) (4,131) (6,690)

Other, net (1,211) 4,090 1,074 2,576


TAXES 630,892 375,980 1,195,707 1,258,164

INCOME TAX EXPENSE 268,192 202,976 508,295 573,493

NET EARNINGS $362,700 $173,004 $ 687,412 $ 684,671


Basic $0.02 $0.01 $ 0.03 $ 0.04

Diluted 0.02 0.01 0.03 0.03



Basic 19,727,954 19,702,693 19,906,247 19,508,107

Diluted 19,984,737 20,558,007 20,281,772 20,415,501

ent, essentially even with the same period last year. The company anticipates that operating expenses, as a percent of revenue, will decline as it achieves additional revenue growth and productivity enhancements.

Second Quarter Commitments and RFPs

During the quarter, the company secured two new health management commitments, up-sold health management services to two fitness management customers and expanded services for four fitness management customers, all of which may realize annualized revenue of $2.4 million. This total annualized revenue will be partially offset by a potential annualized revenue loss of $0.2 million from fitness management contract cancellations. Additionally, during the 2008 second quarter, the company received 25 new RFPs for health management services and three new RFPs for fitness management services.

Lehman added, "To counteract longer customer evaluation periods, we are refining our health management sales approach to focus on our unique value proposition and ability to reduce costs during the first year of a customer engagement. For the interim, I have taken a more direct managerial role within our sales organization to oversee this important work and to ensure that we are maximizing our sales opportunities. We believe that by focusing on lowering employers' direct and indirect health care costs, coupled with a solution-based sales approach, we can better cultivate existing and upcoming RFPs and grow the number of customer commitments."

2008 First-Half Results

For the six months ended June 30, 2008, revenue increased 12 percent to $37.5 million, from $33.6 million for the same period last year. Gross profit increased 13.7 percent to $10.9 million from $9.6 million for the prior-year period.

Operating income was $1.2 million for the six months ended June 30, 2008, compared to $1.3 million during the prior-year period, reflecting infrastructure investments the company has made to address future business growth. Net earnings applicable to common shareholders totaled $0.7 million, flat with the prior-year period. Net earnings per diluted share totaled $0.03 compared to $0.03 for the same period last year.

For the six months ended June 30, 2008, the company received a total of 11 health management commitments, up-sold health management services to two fitness management customers and expanded services for four fitness management customers, all of which may realize annualized revenue of $4.4 million. This total annualized revenue will be partially offset by a potential annualized revenue loss of $0.6 million from fitness management contract cancellations.

Lehman concluded, "For the first six months of 2008, we have received a total of 51 health management and 16 fitness management RFPs, which is comparable to the number we received halfway through 2007. Despite the challenging economy, a number of these RFPs have developed into an active sales pipeline that includes an above-average number of potential opportunities. As we enter the last half of 2008, we are confident in the strength of our service offerings, our ability to secure new customer commitments and the continued growth of our health management segment, which drives the opportunity to improve operating margins."

Balance Sheet

The company ended the second quarter of 2008 with $0.2 million in cash, compared to $1.9 million at the end of 2007, the decrease of which reflects the company's $2.3 million stock repurchase during the second quarter of 2008. Working capital at June 30, 2008 totaled $7.6 million, a decrease of approximately $0.9 million compared to December 31, 2007. At June 30, 2008, the company did not have any long-term debt and stockholders' equity totaled $25.5 million.

2008 Second Quarter Business Segment Information

Revenue and gross profit information by segment:

Health Management

(in thousands)

REVENUE Q2 2008 Q2 2007

Staffing Services $4,569 $3,921

Program and Consulting Services 3,760 2,609

Total Health Mgt $8,329 $6,530

GROSS PROFIT Q2 2008 Q2 2007

Staffing Services $1,238 $1,010

Program and Consulting Services 1,713 1,522

Total Health Mgt $2,951 $2,532

During the 2008 second quarter, health management segment revenue grew 27.5 percent compared to the same period in 2007. Within the segment, staffing services revenue increased 16.5 percent, which is attributable to new customers and the expansion of services to existing customers. Program and consulting services revenue grew 44.1 percent compared to the 2007 second quarter. This increase is driven by new and existing customers and the resulting increase in biometric screening and health coaching and advising services.

Gross margin for the health management segment was 35.4 percent for the quarter, compared to 38.8 percent for the prior-year period. This decrease is due in part to lower pricing for new business won in 2007, and the cost of additional screening and health coaching staff hired in late 2007 to meet forecasted future demand for these services.

Fitness Management

(in thousands)

REVENUE Q2 2008 Q2 2007

Staffing Services $9,837 $9,821

Program and Consulting Services 650 628

Total Fitness Mgt $ 10,487 $ 10,449

GROSS PROFIT Q2 2008 Q2 2007

Staffing Services $2,350 $2,002

Program and Consulting Services 236 221

Total Fitness Mgt $2,586 $2,223

During the 2008 second quarter, fitness management segment revenue was essentially flat with the same period last year, which reflects the company's success in replacing revenue lost from 2007 contract cancellations.

Gross margin for the fitness management segment increased to 24.7 percent, from 21.3 percent during the prior-year period, which is primarily due to higher margins on new staffing services business and improved margins for personal training services.

Share Repurchase Plan

On May 27, 2008, the company completed its share repurchase plan. Under this plan, the company repurchased 1.14 million shares of its common stock on the open market in accordance with Securities and Exchange Commission Rule 10b-18 and other pertinent rules and regulations. Share repurchases were funded by the company's available working capital.

Conference Call

Health Fitness Corporation will host a conference call today, August 4, 2008, at 4 p.m. Central (2 p.m. Pacific; 5 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 57406618. A replay of the call will be available until Monday, August 18, 2008, 11 p.m. EST. To access the replay from the U.S., dial 1-800-642-1687 and enter ID number 57406618, from outside the U.S., dial 1-706-645-9291 and enter ID number 57406618. The call will also be broadcast live over the Internet and accessible through the Investor Relations section of the company's Web site at, where the call will be archived for 30 days.

About HealthFitness

HealthFitness is a leading provider of employee health improvement services to Fortune 500 companies, the health care industry and individual consumers. Serving clients for more than 30 years, HealthFitness partners with employers to effectively manage their health care and productivity costs by improving individual health and well-being. HealthFitness serves more than 300 clients globally via on-site management and remotely via Web and telephonic services. HealthFitness 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. HealthFitness 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 HealthFitness, visit

Forward Looking Statements

Certain statements in this release, including, without limitation, management's belief that operating expenses, as a percent of revenue, will decline as the company focuses on revenue growth and productivity enhancements; management's belief that by focusing on lowering employer's direct and indirect health care costs, coupled with a solution-based sales approach, the company can better cultivate existing and upcoming RFPs and grow the number of customer commitments; management's belief that economic conditions are causing some companies to lengthen their evaluation periods; and management's belief that the company, despite a challenging economy, is confident in the strength of its service offerings, its ability to secure new customer commitments and its opportunity to improve operating margins, 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. Furthermore, there can be no assurance that any RFPs we receive will develop into customer commitments. 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, our ability to limit and manage expenses, 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 ...



JUNE 30, 2008 AND DECEMBER 31, 2007

June 30, December 31,

2008 2007



Cash $201,722 $1,946,028

Trade and other accounts receivable,

less allowances of $242,800

and $243,300 13,570,650 14,686,879

Inventory 589,784 569,458

Prepaid expenses and other 473,885 226,891

Deferred tax assets 406,367 406,367

Total current assets 15,242,408 17,835,623

PROPERTY AND EQUIPMENT, net 1,313,692 1,400,570


Goodwill 14,546,250 14,546,250

Software, less accumulated amortization

of $1,033,100 and $795,100 1,805,649 1,734,920

Trademark, less accumulated amortization

of $395,100 and $345,500 97,936 147,561

Other intangible assets, less accumulated

amortization of $277,700 and $241,700 251,417 287,334

Other 1,401 9,807

$33,258,753 $35,962,065



Trade accounts payable $ 1,012,088 $ 2,121,154

Accrued salaries, wages, and payroll

taxes 3,876,816 4,011,580

Other accrued liabilities 521,904 1,187,045

Accrued self funded insurance 289,357 333,724

Line of credit 640,068 -

Deferred revenue 1,299,483 1,722,254

Total current liabilities 7,639,716 9,375,757





Common stock, $0.01 par value; 50,000,000

shares authorized; 19,221,576 and

19,928,590 shares issued and outstanding

at June 30, 2008 and December 31, 2007,

respectively 192,216 199,285

Additional paid-in capital 27,703,966 29,350,211

Accumulated comprehensive loss from

foreign currency translation (57,782) (56,413)

Accumulated deficit (2,327,986) (3,015,398)

25,510,414 26,477,685

$33,258,753 $35,962,065



Three Months Ended Six Months Ended

June 30, June 3

SOURCE Health Fitness Corporation
Copyright©2008 PR Newswire.
All rights reserved

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