EXHIBIT 99.1
FROM: Health Fitness Corporation
3600 American Boulevard West, Suite 560 - Minneapolis, Minnesota 55431
CONTACT: Wes Winnekins, CFO
952.897.5275 - wes.winnekins@hfit.com
Dennis B. McGrath, McGrath Buckley Communications Counseling
651.646.4115 - dennis@mcgrath-buckley.com
HEALTH FITNESS CORPORATION ANNOUNCES THIRD QUARTER 2003
FINANCIAL RESULTS
MINNEAPOLIS, MN -- NOVEMBER 11, 2003 -- Health Fitness Corporation (OTC BB:
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 www.hfit.com.
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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.
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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
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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 3,600,307 4,036,888
of $94,000 and $88,900
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 123,510 122,977
12,297,661 shares issued and outstanding
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
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