MINNEAPOLIS — For the quarter ended June 30, 2003, revenue for Health Fitness Corp. was $7.7 million, up more than $1 million or 15.6 percent over revenue of $6.7 million for the same quarter last year according to the company. Earnings before income taxes for the quarter were $356,039, an increase of $113,323 or 46.7 percent. Net earnings for the quarter were $217,333, down $553,855 or 71.8 percent from $771,188 for the same quarter last year. The company said that the decline in net earnings was primarily due to the second quarter of 2002 including a $625,300 deferred tax benefit related to the reversal of a deferred tax asset valuation allowance.

For the six months ended June 30, 2003, revenue increased $1.9 million, or 14 percent, to $15.2 million compared to $13.4 million for the same period in 2002. Earnings before income taxes were $806,049, up $267,640 or 49.7 percent from $538,409 for the same period last year. Net earnings decreased 69 percent to $485,313 compared to $1.6 million for the same period in 2002.

The company again said that the decline in net earnings for the first half of the year were primarily due to the first six months of 2002 including a $1.2 million deferred tax benefit related to the reversal of a deferred tax asset valuation allowance.

CEO and President Jerry Noyce said the revenue growth over last year is primarily the result of new management contracts obtained during 2002 and 2003.

He also stated the company is beginning to see ancillary revenue growth from its branded Health Enhancement Programs, which promotes personal training, massage therapy, weight management and other health and wellness programs and services. The company began marketing its suite of Health Enhancement Program services to existing customers at the beginning of 2003.

“Contract gross profit as a percent of revenue fell about 1.3 percent for the quarter and 0.7 percent year to date compared to the same periods last year,” Noyce said. “This decrease is primarily due to start-up costs for two new corporate fitness centers where we agreed to assume full profit and loss responsibility. As membership revenues increase at these centers, we will experience a positive change in this profit measurement. Operating expenses, which increased on a dollar basis as a result of strategic head-count additions to improve our sales and marketing capabilities, are decreasing as a percent of revenue. This trend is expected to continue as we leverage the cost of our management infrastructure over additional contracts.”