FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996
Commission File No. 1-9972
Hooper Holmes, Inc.
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(Exact name of registrant as specified in
its charter)
New York 22-1659359
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
170 Mt. Airy Rd., Basking Ridge, NJ 07920
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (908) 766-5000
None
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at June 30, 1996
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Common stock, $.04 per value 6,712,114
HOOPER HOLMES, INC. AND SUBSIDIARIES
INDEX
Page No.
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PART I - Financial Information
ITEM 1 - Financial Statements
Consolidated Balance Sheets 1
as of June 30, 1996 and
December 31, 1995
Consolidated Statements of Operations 2
for the Quarter and Six Months Ended
June 30, 1996 and 1995
Consolidated Statements of Cash Flows 3
for the Six Months Ended
June 30, 1996 and 1995
Notes to Financial Statements 4
ITEM 2 - Management's Discussion and Analysis 5,6,7
of Financial Condition and Results
of Operations
PART II - Other Information
ITEM 1 - Legal Proceedings 8
ITEM 4 - Submission of Matters to a vote of
Security Holders 8
ITEM 6 - Exhibits and Reports on Form 8-K
Exhibit 27 -
Hooper Holmes, Inc.
Consolidated Balance Sheets
06/30/96 12/31/95
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(Unaudited) (Audited)
ASSETS
Current Assets:
Cash and cash equivalents $ 231,852 $ 1,065,464
Accounts receivable - trade 19,291,522 21,974,398
Accounts receivable - other 649,160 2,387,010
Escrow funds 1,046,719 15,000,000
Refundable income taxes 8,571,048 9,264,734
Other current assets 4,157,236 4,716,328
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Total current assets 33,947,537 54,407,934
Property, plant and equipment:
Land and land improvements 570,116 570,116
Building 3,493,708 3,465,876
Furniture, fixtures and equipment 14,451,001 13,955,687
Leasehold improvements 281,776 278,676
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Total property, plant and equipment 18,796,601 18,270,355
Less: Accumulated depreciation 8,593,066 7,423,190
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Net property, plant and equipment 10,203,535 10,847,165
Cost in excess of net assets of acquired companies 16,175,219 16,601,785
Intangible assets 10,267,275 10,589,722
Other assets 829,872 1,550,489
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Total assets $ 71,423,438 $ 93,997,095
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt $ 1,400,000 $ 8,800,000
Accounts payable 5,450,224 10,677,452
Accrued expenses:
Insurance benefits 254,250 127,215
Salaries, wages and fees 515,352 596,886
Payroll and other taxes 104,316 740,678
Discontinued operations 3,324,577 4,380,023
Other 3,297,607 4,299,369
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Total current liabilities 14,346,326 29,621,623
Long term debt, less current maturities 17,900,000 26,250,000
Deferred income taxes 4,656,202 4,993,459
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Total other liabilities 22,556,202 31,243,459
Common stock 269,777 269,777
Additional paid-in capital 24,083,393 24,080,988
Retained earnings 10,495,423 9,138,401
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34,848,593 33,489,166
Less: Treasury stock 327,683 357,153
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Total stockholders' equity 34,520,910 33,132,013
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Total liabilities and stockholders' equity $ 71,423,438 $ 93,997,095
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See accompanying notes to consolidated financial statements.
- 1 -
Hooper Holmes, Inc.
Consolidated Statements Of Operations
(Unaudited)
Three months ended June 30, Six months ended June 30,
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1996 1995 1996 1995
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Revenues $ 39,813,823 $ 24,395,611 $ 78,424,823 $ 48,393,054
Cost of operations 29,916,991 18,455,901 59,330,979 36,437,112
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Gross profit 9,896,832 5,939,710 19,093,844 11,955,942
Selling, general and administrative expenses 7,795,964 4,907,781 15,619,582 9,847,289
-------------- -------------- -------------- --------------
Operating income 2,100,868 1,031,929 3,474,262 2,108,653
Other income (expense)
Interest expense (476,224) (377,295) (1,103,238) (746,625)
Interest income 194,222 120,366 495,290 187,219
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(282,002) (256,929) (607,948) (559,406)
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Income before income taxes 1,818,866 775,000 2,866,314 1,549,247
Income taxes 873,000 328,971 1,375,000 697,161
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Income from continuing operations 945,866 446,029 1,491,314 852,086
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Discontinued operations:
Loss from operations, net of taxes 0 (2,984,258) 0 (3,331,864)
Loss on disposal, net of taxes 0 (10,326,068) 0 (10,326,068)
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Loss from discontinued operations 0 (13,310,326) 0 (13,657,932)
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Net income $ 945,866 $ (12,864,297) $ 1,491,314 $ (12,805,846)
============== ============== ============== ==============
Earnings (loss) per share:
Weighted average number of shares 6,712,114 6,707,052 6,712,114 6,704,790
Income from continuing operations 0.14 0.07 0.22 0.13
Loss from discontinued operations 0.00 (1.97) 0.00 (2.03)
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Net income $ 0.14 $ (1.90) $ 0.22 $ (1.90)
============== ============== ============== ==============
See accompanying notes to consolidated financial statements.
-2-
Hooper Holmes, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended June 30,
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1996 1995
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Cash flows from operating activities:
Income from continuing operations $ 1,491,314 $ 852,086
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Depreciation and amortization 2,512,620 922,767
Provision for bad debt expense 190,000 47,500
Issuance of stock awards 31,875 41,344
Loss on sale of fixed assets 11,749
Change in assets and liabilities, net of effect from
acquisitions/dispositions of businesses:
Accounts receivable 4,230,726 (561,959)
Escrow funds 13,953,281 0
Income tax receivable 350,000 (9,215,575)
Other current assets 698,770 216,827
Accounts payable and accrued expenses (6,813,422) (208,393)
Accrued expenses-discontinued operations (1,055,446) 8,957,941
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Net cash provided by operating activities of continuing operations 15,601,467 1,052,538
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Net cash provided by operating activities of discontinued operations 0 921,121
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Net cash provided by operating activities 15,601,467 1,973,659
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Cash flows from investing activities:
Capital expenditures, net of disposals (550,787) (550,127)
Net investing activities of discontinued operations 0 (301,152)
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Net cash used in investing activities (550,787) (851,279)
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Cash flows from financing activities:
Issuance of long term debt 7,500,000 6,000,000
Principal payments on long term debt (23,250,000) (8,550,000)
Dividends paid (134,292) (268,224)
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Net cash used in financing activities (15,884,292) (2,818,224)
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Net decrease in cash and cash equivalents (833,612) (1,695,844)
Cash and cash equivalents at beginning of year 1,065,464 1,695,844
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Cash and cash equivalents at end of period $ 231,852 $ 0
=============== ===============
See accompanying notes to consolidated financial statements.
-3-
HOOPER HOLMES, INC.
Notes to Financial Statements
June 30, 1996
Note 1: Basis of Presentation
The financial information included herein is unaudited unless otherwise
indicated; however, such information reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods.
The interim financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's annual report
on Form 10-K.
The results of operations for the six month period ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full year. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for additional information.
Note 2: Earnings Per Share
Earnings per share are computed by dividing net earnings by the weighted average
number of shares of common stock outstanding during the respective periods as
outlined in Part I.
Note 3: Discontinued Operations
The 1995 consolidated financial statements exclude amounts for discontinued
operations from captions applicable to continuing operations and have been
restated to conform with the 1996 presentation.
- 4 -
HOOPER HOLMES, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Results of Operation - Three months ended June 30, 1996 compared to
Three months ended June 30, 1995
Revenues for the second quarter of 1996 were $39.8 million compared to $24.4
million for the second quarter of 1995, an increase of 63.2%. Management
believes this growth results from a combination of approximately $13.5 million
of acquired revenue from the ASB Meditest acquisition and its continued efforts
to gain market share.
The Company's cost of operations for the second quarter of 1996 totaled $29.9
million compared to $18.5 million for the second quarter of 1995. This increase
in cost of sales results primarily from the added business of the ASB Meditest
acquisition in September 1995, and increased branch operating expenses due
largely to the acquired branches in the acquisition. Cost of operations as a
percentage of revenues, decreased from 75.7% for the second quarter of 1995 to
75.1% for the second quarter of 1996. The decrease is the result of cost
savings and efficiencies realized from the integration of ASB Meditest.
Selling, general and administrative expenses totaled $7.8 million as compared to
$4.9 million for the second quarter of 1996 and 1995, respectively, and as a
percentage of revenue totaled 19.6% compared to 20.1%. The increase of $2.9
million is largely attributed to SG&A expenses related to ongoing corporate
functions added to handle the increased acquired business.
Accordingly, the Company's operating income improved to $2.1 million from $1.0
million and as a percentage of revenues, increased to 5.3% from 4.2% for the
second quarter of 1996 compared to the second quarter of 1995.
Interest expense increased in the second quarter of 1996 to $.5 million compared
to $.4 million for the second quarter of 1995, due to higher amounts borrowed.
This increase was offset by certain other income items, primarily interest
earned on the escrowed funds that were part of the Nurse's House Call (NHC)
transaction in September 1995.
Net income and earnings per share for the second quarter of 1996 were $946,000
or $.14 per share versus $446,000 or $.07 per share for the second quarter of
1995. Average shares for the respective periods were 6,712,114 and 6,707,502.
- 5 -
Results of Operation - Six months ended June 30, 1996 compared to
Six months ended June 30, 1995
Revenues for the six months ended June 30, 1996 were $78.4 million compared to
$48.4 million for the six months ended June 30, 1995, an increase of 62.1%.
Management believes this growth results from a combination of approximately
$26.5 million of acquired revenue from the ASB Meditest acquisition and its
continued efforts to gain market share.
The Company's cost of operations for the six months ended June 30, 1996 totaled
$59.3 million compared to $36.4 million for the six months ended June 30, 1995.
This increase in cost of sales results primarily from the added business of the
ASB Meditest acquisition in September 1995, and higher branch operating expenses
due largely to that acquisition. Cost of operations as a percentage of
revenues, increased from 75.3% for the six months ended June 30, 1995 to 75.7%
for the six months ended June 30, 1996. The increase resulted from the
additional costs related to the ASB acquisition.
Selling, general and administrative expenses totaled $15.6 million as compared
to $9.8 million for the six months ended June 30, 1996 and 1995, respectively,
and as a percentage of revenue totaled 19.9% compared to 20.4%. The increase of
$6.1 million is largely attributed to SG&A expenses related to ongoing corporate
functions added to handle the increased acquired business.
Accordingly, the Company's operating income improved to $3.5 million from $2.1
million and as a percentage of revenues, remained at 4.4% for the six months
ended June 30, 1996, and 1995.
Interest expense increased for the six months ended June 30, 1996 to $1.1
million compared to $.7 million for the six months ended June 30, 1995, due to
higher amounts borrowed. This increase was offset by certain other income
items, primarily interest earned on the escrowed accounts receivable sold as
part of the NHC transaction in September 1995.
Net income and earnings per share for the six months ended June 30, 1996 were
$1,491,000 or $.22 per share versus $852,000 or $.13 per share for the six
months ended June 30, 1995. Average shares for the respective periods were
6,712,114 and 6,704,790.
- 6 -
Financial Condition
The Company has three primary sources of cash, it's bank credit facility,
internally generated funds and the escrowed cash from the Olsten/ASB Meditest
deal that closed in September 1995.
Net cash provided by operations in the second quarter ended June 30, 1996 was
$15.6 million. The primary source of this cash was $14.0 million from the escrow
cash and $4.2 million from the reduction of ongoing accounts receivables,
offset partly by a decrease in operating payables and accrued expenses due to
temporarily higher levels at December 31, 1995 as a result of the NHC
transaction.
Our revolver credit facility stood at $31.5 million at December 31, 1995 and was
reduced $10.7 million during the second quarter. The revolver balance at June
30, 1996 was $16.2 million.
The balance of the escrow funds at the start of the year was $15.0 million and
at the close of the second quarter of 1996 was just over $1 million dollars.
The Company's current ratio at the end of June 1996 stood at 2.4:1 as compared
to 1.8:1 at December 31, 1995. Also, inflation has not, nor is it expected to
have a material impact on the Company's financial results in 1996 and there have
been no material commitments for capital expenditures.
Dividends declared in February and May 1996 were declared at $.01 per share and
at $.02 per share for August 1996.
Management believes that the combination of cash and cash equivalents, other
working capital sources, borrowings under the Company's credit facility, the
escrow cash and anticipated income tax refund, along with the anticipated cash
flows from continuing operations, will provide sufficient capital resources for
the foreseeable future.
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PART II - Other Information
Item 1: Legal Proceedings
On April 4, 1995, the Company was served with a Civil Investigative Demand
("CID") by the United States Department of Justice ("DOJ"), relating to an
investigation by the DOJ of allegations the Hooper Holmes, Inc.'s Nurse's House
Call Division, and specifically its Columbus, Ohio office, falsified records and
submitted false claims for reimbursement under Medicare and/or Medicaid. The
CID required the Company to provide documents and answers to interrogatories to
the DOJ. The Company sold its Nurse's House Call division in 1995. Early in the
third quarter of this year, the Company received notification from the DOJ that
it no longer has obligations under the CID. The Company considers the matter
closed.
Item 4: Submission of Matters to a vote of Security Holders
At the Company's Annual Meeting of Shareholders on May 22, 1996, the
shareholders (1) elected Frederick D. King, Anne King Sullivan and Benjamin A.
Currier to serve as directors until the 1999 Annual Meeting, and (2) ratified
the selection of KPMG Peat Marwick LLP to serve as the Company's auditors for
1996.
The chart below names each director nominated for election by the shareholders
at the 1996 Annual Meeting, the number of votes cast for, against or withheld
and the number of broker nonvotes with respect to each such person:
Votes Cast Broker
Nominee For Against Withheld Nonvotes
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Frederick D. King 5,504,186 - 41,407 0
Anne King Sullivan 5,511,586 - 34,007 0
Benjamin A. Currier 5,506,540 - 39,053 0
The name of each director whose term of office as a director continued after the
annual meeting is as follows:
James M. McNamee
Kenneth R. Rossano
Quentin Kennedy, Sr.
John Nolan
Elaine La Monica
G. Earle Wight
With respect to the ratification of KPMG Peat Marwick LLP as auditors, the
number of votes cast for was 5,515,613 against 20,807 and the number of
abstentions was 9,172 and the number of broker nonvotes was 0.
- 8 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Hooper Holmes, Inc.
Dated: August 8, 1996
BY: /s/ James M. McNamee
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James M. McNamee
President and
Chief Executive Officer
BY: /s/ Fred Lash
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Fred Lash
Senior Vice President
Chief Financial Officer &
Treasurer