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For the fourth quarter, revenue increased 12.5 percent to $19.2 million,from $17.1 million for the same period in 2006. Gross profit during thequarter was $5.2 million, compared to $4.6 million during the year-ago period.
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Operating income totaled $0.40 million for the quarter compared to$0.61 million for the same period in 2006. Net earnings applicable to commonshareholders totaled $0.21 million versus $0.46 million in the prior-yearperiod. Net earnings per diluted share totaled to $0.01 for the quartercompared to net earnings per diluted share of $0.02 for the same period lastyear.
"The 2007 fourth quarter capped an important transition year for ourcompany and we are pleased with our progress. We witnessed solid revenueexpansion -- especially in our health management segment -- ongoing recoveryin sequential revenue levels in our fitness management segment, andsignificant growth in our new-business pipeline," said Gregg Lehman, Ph.D.,president and chief executive officer. "Health care costs are one of thelargest expenses facing employers today and we are committed to deliveringsolutions that help corporate America contain these costs through a 21stcentury health benefit design. To that end, we made additional strategicinvestments during the quarter in our infrastructure, our technology platformand our talent, which we believe are vital to capitalizing on this trend. Wecarry significant momentum into 2008 and are poised to expand revenue andmargin levels this year and beyond."
Operating expenses as a percent of revenue were 25.1 percent, versus23.3 percent for the same period last year. This increase is primarily due tohigher salary and other operating expenses related to workforce additions,which were planned investments the company made to better manage current andforecasted future business growth.
Fourth Quarter Commitments and RFPs
During the quarter, the company secured six new health managementcommitments and one new fitness management commitment compared to four healthmanagement and five fitness management commitments in the fourth quarter of2006. Additionally, during the quarter, the company received 24 new RFPs forhealth management services and six new RFPs for fitness management services,compared to 15 health management and nine fitness management RFPs during thefourth quarter of 2006. The potential annualized revenue that may be realizedfrom Q4 2007 health and fitness management commitments is $1.3 million and$0.2 million, respectively. This total of $1.5 million will be offset by apotential annualized revenue loss of $2.1 million from fitness and healthmanagement contract cancellations. Of this potential annualized revenue lossof $2.1 million, $1.8 million represents fitness management contracts and$0.3 million represents health management contracts.
2007 Full-Year Results
For the year ended December 31, 2007, revenue increased 10 percent to$70.0 million, from $63.6 million during 2006. Gross profit increased11 percent to $19.6 million from $17.6 million in 2006. Gross profit during2006 includes a $0.3 million benefit related to a refund of workers'compensation premiums for the 2005 plan year.
Operating income was $1.9 million during 2007, compared to $3.7 millionduring 2006, reflecting higher expense levels due to key growth investments.Net earnings applicable to common shareholders totaled $0.9 million comparedwith $1.4 million in 2006. Net earnings per diluted share totaled$0.04 compared to $0.03 for the same period last year.
For 2007, the company received a total of 40 customer commitments. Ofthis total,
