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, 1998
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, 1998
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Common stock, $.04 par value 14,120,041
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, 1998 and
December 31, 1997
Consolidated Statements of Operations 2
for the Three and Six Months Ended
June 30, 1998 and 1997
Consolidated Statements of Cash
Flows for the Six Months Ended 3
June 30, 1998 and 1997
Notes to Unaudited 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 4 - Submission of Matters to a vote of 8
Security Holders
ITEM 6 - Exhibits and Reports on Form 8-K
Exhibit 27 -
Hooper Holmes, Inc.
Consolidated Balance Sheets
06/30/98 12/31/97
------------------- -------------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 22,570,178 $ 13,159,431
Accounts receivable - trade 18,388,548 18,011,490
Accounts receivable - other 257,518 508,857
Refundable taxes 9,537 23,535
Other current assets 2,694,051 2,458,283
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Total current assets 43,919,832 34,161,596
Property, plant and equipment:
Land and land improvements 591,213 591,213
Building 3,957,074 3,931,574
Furniture, fixtures and equipment 16,217,963 15,675,217
Leasehold improvements 300,115 300,115
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Total property, plant and equipment 21,066,365 20,498,119
Less: Accumulated depreciation 13,191,244 12,050,903
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Net property, plant and equipment 7,875,121 8,447,216
Cost in excess of net assets of acquired companies, net 14,673,290 15,089,108
Intangible assets, net 6,790,154 7,647,711
Other assets 410,916 595,486
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Total assets $ 73,669,313 $ 65,941,117
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,051,261 $ 5,577,158
Accrued expenses:
Insurance benefits 2,074,314 1,969,403
Salaries, wages and fees 1,951,035 1,935,277
Payroll and other taxes 156,414 170,152
Income taxes payable 1,010,865 610,487
Discontinued operations 390,282 573,970
Other 1,935,265 2,944,248
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Total current liabilities 13,569,436 13,780,695
Deferred income taxes 3,303,794 3,641,051
Common stock 564,936 557,565
Additional paid-in capital 29,190,981 27,079,265
Retained earnings 27,058,668 20,901,043
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56,814,585 48,537,873
Less: Treasury stock 18,502 18,502
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Total stockholders' equity 56,796,083 48,519,371
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Total liabilities and stockholders' equity $ 73,669,313 $ 65,941,117
=================== ===================
See accompanying notes to unaudited consolidated financial statements.
- 1 -
Hooper Holmes, Inc.
Consolidated Statements Of Operations
(unaudited)
Three months ended Six months ended
June 30, June 30,
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1998 1997 1998 1997
------------------ ----------------- ------------------ ------------------
Revenues $ 45,568,682 $ 41,398,735 $ 91,679,989 $ 82,112,603
Cost of operations 31,818,737 29,732,528 63,432,575 59,379,799
------------------ ----------------- ------------------ ------------------
Gross profit 13,749,945 11,666,207 28,247,414 22,732,804
Selling, general and
administrative expenses 7,545,729 7,651,109 16,124,321 15,754,138
------------------ ----------------- ------------------ ------------------
Operating income 6,204,217 4,015,098 12,123,093 6,978,666
Other income (expense)
Interest expense 0 (37,616) 0 (120,737)
Interest income 186,851 39,727 316,389 69,259
Other (56,487) 49,962 (94,840) 96,026
------------------ ----------------- ------------------ ------------------
130,364 52,073 221,549 44,547
------------------ ----------------- ------------------ ------------------
Income before income taxes 6,334,581 4,067,171 12,344,642 7,023,213
Income taxes 2,945,000 1,952,000 5,766,000 3,384,000
------------------ ----------------- ------------------ ------------------
Net income $ 3,389,581 $ 2,115,171 $ 6,578,642 $ 3,639,213
================== ================= ================== ==================
Net income per common share:
Basic 0.24 0.15 0.47 0.27
Diluted $ 0.23 $ 0.15 $ 0.44 $ 0.26
================== ================= ================== ==================
Weighted average number of shares: (1)
Basic 14,081,228 13,728,678 14,022,244 13,663,441
Diluted 15,008,389 14,180,181 14,875,437 14,045,299
================== ================= ================== ===================
(1) Adjusted to reflect a two for one stock split effective August 22, 1997.
See accompanying notes to unaudited consolidated financial statements.
- 2 -
Hooper Holmes, Inc.
Consolidated Statements of Cash Flows
(unaudited)
Six months ended June 30,
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1998 1997
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Cash flows from operating activities:
Net income $ 6,578,642 $ 3,639,213
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,492,566 2,547,538
Provision for bad debt expense 240,000 240,000
Deferred tax benefit (337,257) (337,257)
Issuance of stock awards 38,250 0
Loss on sale of fixed assets 38,096 24,964
Change in assets and liabilities:
Accounts receivable (365,718) (697,686)
Other current assets (51,198) 206,104
Income tax receivable 13,998 52,152
Accounts payable and accrued expenses 656,741 1,780,831
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Net cash provided by operating activities 9,304,120 7,455,859
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Cash flows from investing activities:
Capital expenditures (685,193) (355,027)
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Cash flows from financing activities:
Principal payments on long term debt 0 (4,450,000)
Proceeds from employee stock purchase plan 324,248 300,244
Proceeds related to the exercise of stock options 888,589 762,667
Dividends paid (421,017) (273,370)
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Net cash provided by (used in) financing activities 791,820 (3,660,459)
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Net increase in cash and cash equivalents 9,410,747 3,440,373
Cash and cash equivalents at beginning of year 13,159,431 2,936,447
--------------------- -------------------
Cash and cash equivalents at end of period $ 22,570,178 $ 6,376,820
===================== ===================
See accompanying notes to unaudited consolidated financial statements.
- 3 -
HOOPER HOLMES, INC.
Notes to Unaudited Financial Statements
June 30, 1998
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, 1998 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
"Basic" earnings per common share equals net income divided by weighted average
common shares outstanding during the period. "Diluted" earnings per common share
equals net income divided by the sum of weighted average common shares
outstanding during the period plus common stock equivalents. Common stock
equivalents are shares assumed to be issued if outstanding stock options were
exercised.
- 4 -
HOOPER HOLMES, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Results of Operation - Three months ended June 30, 1998 compared to
Three months ended June 30, 1997
Revenues for the second quarter of 1998 were $45.6 million compared to $41.4
million for the second quarter of 1997, an increase of 10%. This growth is the
result of a 7% increase in the number of paramedical exams performed, and
increases in revenues per unit of service.
The Company's cost of operations for the second quarter of 1998 totaled $31.8
million compared to $29.7 million for the second quarter of 1997. Cost of
operations as a percentage of revenues, decreased from 71.8% for the second
quarter of 1997 to 69.8% for the second quarter of 1998. This decrease is due to
ongoing efforts to control branch operating expenses.
Selling, general and administrative expenses totaled $7.5 million and $7.7
million for the second quarters of 1998 and 1997, respectively, and as a
percentage of revenue totaled 16.6% compared to 18.5%. As a percentage of
revenues, the decrease is due to management's ongoing efforts to control
corporate level expenses.
Accordingly, the Company's operating income improved to $6.2 million from $4.0
million and as a percentage of revenues, increased to 13.6% from 9.7% for the
second quarter of 1998 compared to the second quarter of 1997.
The Company had no revolver borrowings as of June 30, 1998. Interest income
increased to $.2 million due to higher levels of invested funds.
Net income and earnings per share for the second quarter of 1998 were $3.4
million or $.23 per share on a diluted basis versus $2.1 million or $0.15 per
share for the second quarter of 1997. Weighted average diluted shares for the
respective periods were 15,008,389 and 14,180,181.
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HOOPER HOLMES, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Results of Operation - Six months ended June 30, 1998 compared to
Six months ended June 30, 1997
Revenues for the six months ended June 30, 1998 were $91.7 million compared to
$82.1 million for the six months ended June 30, 1997, an increase of 11.7%. This
growth results from a 9% increase in the number of paramedical exams performed,
and an increase in revenues per unit of service.
The Company's cost of operations for the six months ended June 30, 1998 totaled
$63.4 million compared to $59.4 million for the six months ended June 30, 1997.
Cost of operations as a percentage of revenues, decreased from 72.3% for the six
months ended June 30, 1997 to 69.2% for the six months ended June 30, 1998. The
decrease is due to ongoing efforts to control branch operating expenses.
Selling, general and administrative expenses totaled $16.1 million as compared
to $15.8 million for the six months ended June 30, 1998 and 1997, respectively,
and as a percentage of revenue totaled 17.6% compared to 19.2%. As a percentage
of revenue, the decrease is due to ongoing efforts to closely monitor and
control corporate level expenses.
Accordingly, the Company's operating income improved to $12.1 million from $7.0
million and as a percentage of revenues, increased to 13.2% from 8.5% for the
six months ended June 30, 1998, and 1997, respectively.
The Company had no revolver borrowing as of June 30, 1998. Interest income
increased to $.3 million due to higher levels of invested funds.
Net income and earnings per share for the six months ended June 30, 1998 were
$6.6 million or $.44 per share, on a diluted basis, versus $3.6 million or $.26
per share for the six months ended June 30, 1997. Weighted average diluted
shares for the respective periods were 14,875,437 and 14,045,299.
- 6 -
Financial Condition
The Company's primary sources of cash are internally generated funds and the
Company's bank credit facility.
Net cash provided by operating activities for the six months ended June 30, 1998
was $9.3 million compared to $7.5 million for the six months ended July 30,
1997. The significant sources were net income of $6.6 million and $2.5 million
of depreciation and amortization.
The Company has no borrowings against its $20 million revolver facility at June
30, 1998 and as of June 30, 1998, a total amount of $18.4 million is available
under the revolver, $1.6 million committed to outstanding letters of credit.
The Company's current ratio at the end of June 1998 was 3.2:1, compared to 2.5:1
at December 31, 1997. Also, inflation has not, nor is it expected to have a
material impact on the Company's financial results in 1998. There are no
material commitments for capital expenditures. Year 2000 costs are not
considered material.
Dividends declared in January and May 1998 were declared at $.015 per share. At
its board meeting of July 28, 1998, the Company increased its quarterly dividend
to $.02 per share.
Management believes that the combination of cash and cash equivalents, other
working capital sources, and borrowings under the Company's credit facility,
along with the anticipated cash flows from operations, will provide sufficient
capital resources for the foreseeable future.
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PART II - Other Information
Item 4: Submission of Matters to a vote of Security Holders
At the Company's Annual Meeting of Shareholders on May 19, 1998, the
shareholders elected James M. McNamee, Kenneth R. Rossano and G. Earle Wight to
serve as directors until the 2001 Annual Meeting, and ratified the selection of
KPMG Peat Marwick LLP to serve as the Company's auditors for 1998.
The chart below names each director nominated for election by the shareholders
at the 1998 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
- ------- --------------------------------- --------
James M. McNamee 12,806,009 - 13,260 0
Kenneth R. Rossano 12,803,051 - 16,218 0
G. Earle Wight 12,805,717 - 13,552 0
The name of each director whose term of office as a director continued after the
annual meeting is as follows:
John E. Nolan
Elaine L. Rigolosi
Quentin J. Kennedy
Benjamin A. Currier
With respect to the ratification of KPMG Peat Marwick LLP as auditors, the
number of votes cast was 12,797,455 For, 5,210 Against, 16,603 Abstained and 0
Broker Nonvotes.
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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 11, 1998
BY: /s/ James M. McNamee
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James M. McNamee
Chairman, President and
Chief Executive Officer
BY: /s/ Fred Lash
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Fred Lash
Senior Vice President
Chief Financial Officer &
Treasurer