SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 12, 2005
Health Fitness Corporation
(Exact name of Registrant as Specified in its Charter)
Minnesota
(State or Other Jurisdiction of Incorporation)
0-25064 41-1580506
(Commission File Number) (IRS Employer
Identification No.)
3600 American Boulevard W., Suite 560
Minneapolis, Minnesota 55431
(Address of Principal Executive Offices and Zip Code)
(952) 831-6830
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 7.01 REGULATION FD DISCLOSURE.
Health Fitness Corporation and its wholly owned subsidiaries (the
"Company") provide fitness and health management services and programs to
corporations, hospitals, communities and universities located in the United
States and Canada. Fitness and health management services include the
development, marketing and management of corporate, hospital, community and
university based fitness centers, injury prevention and work-injury management
consulting, on-site physical therapy and on-site employee health management
services. Programs include wellness and health programs for individual
customers, including health risk assessments, biometric screenings, nutrition
and weight loss programs, smoking cessation, massage therapy, back care and
ergonomic injury prevention.
As part of its investor relations efforts, the Company has met and
expects to continue meeting from time to time with existing or potential
investors to review and discuss publicly available information concerning the
Company's marketplace, business activities, and financial results. In connection
with these meetings, the Company also expects to discuss certain information
regarding future revenue and gross profit targets, which the Company has not
previously disclosed. These targets include a range of revenue growth targets,
as well as gross profit targets, in each case based upon two separate scenarios.
The first scenario shows the Company's targets based on internal, organic
growth. The second scenario shows the Company's targets based upon the
acquisition of complimentary businesses, or a significant internal investment,
to broaden and enhance the various health management programs and capabilities
that are owned and controlled by the Company. The targets have been set forth in
Exhibit 99.1 attached hereto, and are incorporated in this Current Report as if
fully set forth herein.
The targets pertaining to both scenarios are forward-looking
information within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Independent accountants have not reviewed the targets or the assumptions
underlying them; the targets are presented for illustrative purposes only. The
targets are derived from information relating to the Company's projected
operations, including its current objectives, business development plans and
management's views on the industry in which the Company operates. The targets
are based in large part on hypothetical assumptions and events over which the
Company has only partial or no control and which may not occur. While the
Company currently believes that assumptions underlying the targets are
reasonable, any of the assumptions could prove inaccurate and, therefore, there
can be no assurance whatsoever that the targets will materialize. The selection
of assumptions underlying such targets required the exercise of judgment, and
are subject to uncertainty due to numerous factors. Some assumptions on which
the projections are based inevitably will not materialize and unanticipated
events and circumstances will occur that affect the accuracy of the assumptions.
To the extent that assumed events do not materialize as anticipated, actual
results will vary substantially from the targets.
Although it is not possible to foresee all of the factors that may
cause actual results to differ from the targets, such factors include, among
others, the risk factors that follow. You should consider such risks, together
with all other information in the periodic reports we file with the Securities
and Exchange Commission, when making investment decisions. However, you should
not assume the below risks are the only ones the Company will face from time to
time, and should not place undue reliance on the targets, which speak only as of
the date on which they are made. We undertake no obligation to update any
forward-looking statements, including the targets.
RISK FACTORS
THE COMPANY'S GROWTH INITIATIVES WILL REQUIRE IT TO MAKE ACQUISITIONS
OR SIGNIFICANT INTERNAL INVESTMENTS THAT RESULT IN VIABLE, COMPLEMENTARY
PROGRAMS AND CAPABILITIES. Achieving the Company's growth and profit targets for
its health management business will require the Company to significantly broaden
and enhance the programs and capabilities the Company currently owns and
controls in-house, thereby reducing the need to team with third parties to
provide comprehensive customer solutions. To
achieve this goal, the Company will need to either acquire complementary
businesses, or make significant internal investments, to create new programs and
capabilities complementary to those the Company currently operates. The Company
cannot provide any assurance that such new programs and capabilities, whether
acquired or developed, will be satisfactory to the Company's customers or
cost-effective to maintain on a go-forward basis.
THERE CAN BE NO ASSURANCE THAT ACQUISITIONS WILL BE BENEFICIAL TO THE
COMPANY. Management's identification of suitable acquisition candidates involves
risks inherent in accurately assessing the value, strengths, weaknesses, overall
risks and profitability of acquisition candidates. In addition, the process of
integrating new businesses into the Company's operations poses numerous risks,
including difficulty assimilating acquired operations, information systems and
internal control systems and products, difficulties and uncertainties in
transitioning the business relationships from the acquired entity to the Company
an the loss of key employees of acquired companies. There can be no assurance
that the Company will be able to successfully manage and overcome any of these
risks and realize benefits of completed acquisitions.
THE INTERNAL CREATION OF NEW PROGRAMS AND CAPABILITIES MIGHT TAKE
SIGNIFICANT TIME AND EXPENSE. Internally creating comprehensive new programs and
capabilities might subject to the Company to risks that arise in connection with
any new business endeavor. The risks include, but are not limited to, difficulty
in accurately predicting cash flow needs and requirements, maintaining
sufficient liquidity to continue operating its core business, an underdeveloped
marketing strategy and the ability to locate and retain additional qualified
personnel. To address these risks, the Company must, among other things,
leverage synergies between new business lines or technology and its existing
business lines, determine profitable pricing for new services that are
cost-effective in the marketplace, minimize disruptions to its existing
business, implement and successfully a revised marketing strategy, develop the
Company's brand in the new business lines, attract new customers and expand
relationships with existing customers, provide superior customer service and
attract, retain and motivate qualified personnel. The Company cannot assure you
that it will be successful in addressing such risks and the other risks that
will arise from time to time.
THE COMPANY MAY NOT BE ABLE TO OBTAIN SUFFICIENT FINANCING TO COMPLETE
ACQUISITIONS OR TO MAKE SIGNIFICANT INTERNAL INVESTMENTS REQUIRED TO ACHIEVE
GROWTH TARGETS. To achieve the Company's growth targets that assume the
acquisition of complimentary businesses or significant internal investments, the
Company will be required to obtain significant additional capital. The Company
does not have any commitments for any such additional capital, and there can be
no assurance that any future financing will be available on favorable terms, if
at all.
FUTURE ACQUISITIONS AND FINANCINGS BY THE COMPANY MAY BE DILUTIVE TO
SHAREHOLDERS AND EARNINGS PER SHARE. Future acquisitions and financings by the
Company may be dilutive to shareholders and the Company's earnings per share,
cause the Company to incur additional indebtedness and large one-time expenses
or create intangible assets that could result in significant charges. If the
Company spends significant funds or incurs additional debt for acquisitions or
internal expansion, the Company's ability to obtain necessary financing
thereafter may decline and it may be more vulnerable to economic downturns and
competitive pressures.
THE COMPANY MAY EXPERIENCE DIFFICULTY MANAGING GROWTH, INCLUDING
ATTRACTING QUALIFIED STAFF. The Company has experienced substantial growth
during the past few years, both organically and by acquisition. The Company's
ability to grow in the future will depend on a number of factors, including the
ability to obtain new customers, expand existing customer relationships, develop
additional fitness and health improvement programs and services and hire and
train qualified staff. The Company may experience difficulty in attracting and
retaining qualified staff in various markets to meet growth opportunities.
Further, in order to attract qualified staff, the Company may be required to pay
higher salaries and enhance benefits in more competitive markets, which may
result in a material adverse effect
on the Company's results of operation and financial condition. Sustaining growth
may require the Company to sell its services at lower prices to remain
competitive, which may result in a material adverse effect on the Company's
results of operation and financial condition. There can be no assurance that the
Company will be able to manage expanding operations effectively or that it will
be able to maintain or accelerate its growth, and any failure to do so may
result in a material adverse effect on the Company's results of operation and
financial condition.
THE TIMING OF NEW AND LOST MANAGEMENT SERVICE CONTRACTS MAY NOT BE
INDICATIVE OF TRENDS IN OUR BUSINESS OR OF FUTURE QUARTERLY FINANCIAL RESULTS.
The Company evaluates its business, in part, by reviewing trends in its
financial performance. Management believes an important indicator of the
Company's outlook is revenue to be derived from fitness and health management
service contracts the Company enters into with customers. Fitness and health
management service contracts are often long-term contracts (i.e., 3 - 5 years),
contain annual, automatic renewals and generally require 30 to 60 days notice to
terminate, or to avoid the automatic annual renewal feature. Revenue from new
contracts often is not recognized for a period of 90 to 180 days after proposal
acceptance due to lead times necessary to execute a contract and hire staff to
begin providing services. Since termination notice periods are considerably less
than the time it takes to begin servicing new contracts, the revenue lost in a
reporting period may significantly exceed the revenue gained from new contracts.
Because of these timing differences, management generally does not view
changes in quarterly revenue, whether sequential or comparable prior quarter
changes, to be indicative of its outlook or trends in the Company's business or
to be reflective of revenue expected in succeeding quarters. Rather, management
generally evaluates revenue trends in the Company's fitness and health
management services business based upon 12- to 18-month periods since it
believes this helps minimize the timing impact from new and terminated
contracts. Management cautions investors not to place undue reliance upon
fluctuations in quarterly revenue viewed in isolation from revenue information
over longer periods of time (e.g., comparative trailing 12-month information),
and to not view quarterly revenue as necessarily being indicative of the
Company's outlook or results to be expected in future quarters.
FAILURE TO RENEW EXISTING CUSTOMER CONTRACTS COULD HAVE A NEGATIVE
EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Company's
growth strategy depends in part upon continuous development and improvement of
attractive and effective health management programs and services. The Company's
failure to anticipate trends or to successfully develop, improve or implement
such programs or services may have a material adverse effect on the Company's
results of operation and financial condition. The Company currently contracts
with third party partners to provide a portion of such programs and services and
anticipates that this will continue to be the case. If any of such third party
partners no longer made these programs and services available to the Company,
there is no assurance that the Company would be able to replace such third-party
partner programs and services, and if the Company could not do so, the Company's
ability to pursue its growth strategies would be seriously compromised.
THE COMPANY IS DEPENDENT ON MAINTAINING ITS CORPORATE RELATIONSHIPS.
The majority of the Company's contracts are with large corporations regarding
the management of on-site fitness centers. While the specific terms of such
agreements vary, some contracts are subject to early termination by the
corporate customer without cause. Although the Company has a history of
consistent contract renewals, there can be no assurance that future renewals
will be secured. The early termination or non-renewal of corporate contracts may
have a material adverse effect on the Company's results of operation and
financial condition.
THE COMPANY'S CUSTOMERS ARE PRIMARILY CORPORATIONS AND THEREFORE ITS
FINANCIAL RESULTS ARE SUBJECT TO GENERAL ECONOMIC CONDITIONS. The Company's
revenue, expenses and net income are subject to general economic conditions. A
significant portion of the Company's revenue is derived from companies who
historically have reduced their expenditures for on-site fitness management
services
during economic downturns. Should the economy weaken, or experience more
significant recessionary pressures, corporate customers may reduce or eliminate
their expenditures for on-site fitness center management services, and
prospective customers may not commit resources to such services. Also, should
the size of a customer's workforce be reduced, the Company may have to reduce
the number of staff assigned to manage a customer's fitness center.
Additionally, the Company's operations in Canada are subject to foreign currency
risk, although these operations currently represent less than 5% of the
Company's overall revenues. These factors may have a material adverse effect on
the Company's results of operation and financial condition.
THE COMPANY IS DEPENDENT ON ITS KEY EMPLOYEES. THE LOSS OF ANY OF THESE
EMPLOYEES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR PERFORMANCE AND RESULTS OF
OPERATIONS. The success of the Company is highly dependent on the efforts,
abilities and continued services of its executive officers and other key
employees. The loss of any of the executive officers or key employees may have a
material adverse effect on the Company results of operation and financial
condition. The Company believes that its future success will depend on its
ability to attract, motivate and retain highly-skilled corporate, divisional,
regional and site-based personnel. Although historically the Company has been
successful in retaining the services of its senior management, there can be no
assurance that the Company will be able to do so in the future.
THE COMPANY OPERATES WITHIN A HIGHLY COMPETITIVE MARKET AGAINST
FORMIDABLE COMPANIES. The Company competes for new and existing corporate
customers in a highly fragmented and competitive market. Management believes
that the Company's ability to compete successfully depends on a number of
factors, including quality and depth of service, locational convenience and
cost. The market for on-site fitness center management services is
price-sensitive. From time to time, the Company may be at a price disadvantage
with respect to the competition, as such competition may propose a substantially
lower price than the Company. There can be no assurance that the Company will be
able to compete successfully against current and future competitors, or that
competitive pressures faced by the Company will not have a material adverse
effect on the Company's results of operation and financial condition.
THE COMPANY'S RESULTS OF OPERATIONS COULD BE ADVERSELY IMPACTED BY
LITIGATION. Because of the nature of its business, the Company expects that it
may be subject to claims and litigation alleging negligence or other grounds for
liability arising from injuries or other harm to the customers it serves. The
Company has occasionally been named a defendant in claims relating to accidents
that occurred in the fitness centers it manages. There can be no assurance that
additional claims will not be filed, and that the Company's insurance will be
adequate to cover liabilities resulting from any claim.
THE COMPANY HAS IMPLEMENTED, ON A LIMITED BASIS, A BUSINESS MODEL FOR
MANAGING CORPORATE FITNESS CENTERS ON A COST-NEUTRAL OR FOR-PROFIT BASIS. The
Company has, on a limited basis, implemented a model of managing corporate
fitness centers on a cost-neutral or for-profit basis without receiving a
management fee from the corporate owner of such centers. Corporate-owned centers
are resistant to significant membership fees and fee increases, and the Company
may not be successful in sufficiently managing costs and/or in raising service
levels and associated revenues, as required to achieve profit objectives.
The information in this Current Report, including Exhibit 99.1 attached
hereto and incorporated herein, shall not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liabilities of that section, and shall not automatically be
incorporated by reference into any registration statement pursuant to the
Securities Act of 1933, as amended.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements: None.
(b) Pro forma financial information: None.
(c) Exhibits:
99.1 Certain Growth Targets
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HEALTH FITNESS CORPORATION
By /s/ Wesley Winnekins
------------------------------
Date: September 12, 2005 Wesley Winnekins
Chief Financial Officer
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
HEALTH FITNESS CORPORATION
EXHIBIT INDEX TO FORM 8-K
Date of Report: Commission File No.:
September 12, 2005 0-25064
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HEALTH FITNESS CORPORATION
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Exhibit Number Description
99.1 Certain Growth Targets