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 March 31, 1995
Commission File No. 1-9972
HOOPER HOLMES, INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 22-1659359
------------------------------ ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
170 Mt. Airy Rd., Basking Ridge, NJ 07920
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (908) 766-5000
None
-------------------------------------------------------
(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
--- ---
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 March 31, 1995
- ---------------------------- -----------------------------
Common stock, $.04 per value 6,702,560
HOOPER HOLMES, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I - Financial Information (1994 Audited)
ITEM 1 - Financial Statements
Consolidated Balance Sheets 1,2
as of March 31, 1995 and
December 31, 1994
Consolidated Statements of Income 3
for the Three Months Ended
March 31, 1995 and 1994
Consolidated Statements of Cash Flows 4
for the Three Months Ended
March 31, 1995 and 1994
Notes to Financial Statements 5
ITEM 2 - Management's Discussion and Analysis 6,7
of Financial Condition and Results
of Operations
PART II - Other Information
ITEM 6 - Exhibits and Reports on Form 8-K 8
PART I - Financial Information (1994 Audited)
HOOPER HOLMES, INC.
CONSOLIDATED BALANCE SHEETS
03/31/95 12/31/94
------------ ------------
ASSETS
Current Assets
Cash & Cash Equivalents ..................... $ -- $ 1,695,844
Accounts Receivable ......................... 66,648,791 66,476,298
Prepaid Expenses ............................ 2,658,916 3,407,813
------------ ------------
Total Current Assets ...................... 69,307,707 71,579,955
------------ ------------
Property, Plant and Equipment
Land and Land Improvements .................. 567,947 567,947
Building .................................... 3,434,743 3,432,655
Furniture, Fixtures & Equipment ............. 11,774,391 11,172,750
Leasehold Improvements ...................... 317,398 307,579
------------ ------------
Total Property, Plant & Equipment ........... 16,094,479 15,480,931
Less Accumulated Depreciation ............... 7,626,927 7,266,408
------------ ------------
Net Property, Plant & Equipment ............. 8,467,552 8,214,523
Costs in Excess of Net Assets
of Acquired Companies.......................... 22,669,405 23,137,237
Intangible Assets ................................ 2,394,475 2,470,947
Other Assets ..................................... 2,322,946 2,893,254
------------ ------------
Total Assets ..................................... $105,162,085 $108,295,916
============ ============
-1-
HOOPER HOLMES, INC.
CONSOLIDATED BALANCE SHEETS
03/31/95 12/31/94
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Long Term Debt .... $ 2,500,000 $ 2,150,000
Accounts Payable ........................ 5,661,562 6,386,762
Accrued Expenses:
Insurance Benefits ................. 170,056 279,158
Salaries, Wages and Fees ........... 1,785,534 2,100,127
Payroll and Other Taxes ............ 2,262,097 1,962,525
Income Taxes Payable ............... 179,506 450,518
Other .............................. 4,766,658 2,137,476
------------ ------------
Total Current Liabilities ............... 17,325,413 15,466,566
Long Term Debt, Less Current Maturities ...... 41,476,942 46,326,942
Stockholders' Equity:
Common Stock ............................ 269,777 269,777
Additional Paid in Capital .............. 24,114,410 24,114,410
Retained Earnings ....................... 22,446,692 22,589,370
------------ ------------
46,830,879 46,973,557
Less: Treasury Stock ................... 471,149 471,149
------------ ------------
Total Stockholders' Equity .............. 46,359,730 46,502,408
------------ ------------
Total Liabilities & Stockholders' Equity ..... $105,162,085 $108,295,916
============ ============
-2-
HOOPER HOLMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months
Ended March 31
---------------------------------
1995 1994
------------ ------------
Revenues ............................... $ 64,250,978 $ 61,915,041
Cost of Operations ..................... 52,361,131 50,580,986
------------ ------------
Gross Profit ........................... 11,889,847 11,334,055
------------ ------------
Selling, General and Administrative .... 10,942,854 8,896,987
------------ ------------
Operating Profit ....................... 946,993 2,437,068
------------ ------------
Other Income (Expense)
Interest Expense ..................... (989,580) (386,124)
Interest Income ...................... 154,038 54,713
------------ ------------
(835,542) (331,411)
------------ ------------
Income before Taxes .................... 111,451 2,105,657
Income Taxes ........................... 53,000 916,500
------------ ------------
Net Income ............................. $ 58,451 $ 1,189,157
============ ============
Earnings per Share:
Weighted Average Number of Shares .. 6,702,560 6,708,585
Net Income ......................... $ 0.01 $ 0.18
============ ============
-3-
HOOPER HOLMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months
Ended March 31
------------------------
1995 1994
---------- ----------
Cash flows from operating activities:
Net Income ..................................... $ 58,451 $1,189,157
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................ 924,235 855,242
Provision for bad debt expense ............... 415,293 224,357
Change in assets and liabilities:
Accounts receivable .......................... (587,786) (7,997,801)
Prepaid expenses and other assets ............ 1,319,205 (208,613)
Accounts payable and accrued expenses ........ 1,508,846 1,660,904
---------- ----------
Net cash provided by (used in) operating
activities ................................... 3,638,244 (4,276,754)
---------- ----------
Cash flows from investing activities:
Capital expenditures, net of disposals ......... (632,959) (320,832)
---------- ----------
Net cash used in financing activities .......... (632,959) (320,832)
---------- ----------
Cash flows from financing activities:
Issuance of long term debt ..................... 2,500,000 3,500,000
Principal Payments of long term debt ........... (7,000,000) 0
Proceeds from exercise of stock options ........ 0 15,472
Dividends paid ................................. (201,129) (503,085)
---------- ----------
Net cash (used in) provided by
financing activities ......................... (4,701,129) 3,012,387
---------- ----------
Net decrease in cash and cash equivalents ........ (1,695,844) (1,585,199)
Cash and cash equivalents at beginning of year ... 1,695,844 1,585,199
---------- ----------
Cash and cash equivalents at end of period ....... $ 0 $ 0
========== ==========
-4-
HOOPER HOLMES, INC.
Notes to Financial Statements
(Unaudited)
March 31, 1995
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 results of operations for the three month period ended March 31, 1995 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.
-5-
HOOPER HOLMES, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Results of Operation--Three months ended March 31, 1995 compared to
Three months ended March 31, 1994
Revenues for the first quarter of 1995 were $64,251,000 compared to $61,915,000
for the first quarter of 1994, an increase of 3.8%. This revenue increase
evolves from both of our business segments and is as follows:
1st Qtr. 1st Qtr.
(000's) 1995 1994 Increase
------- -------- --------- --------
Healthcare Svcs. $40,254 $39,253 2.6%
Health Information Svcs. 23,997 22,662 5.9%
The first quarter 1995 increase in healthcare services revenue is attributed to
our certified healthcare area. In Portamedic, the health information services
division, revenue grew 5.9% for the first quarter 1995 versus 1994. With the
continued objective of enhancing or maintaining margins, revenue sources with
less than expected margins are being reviewed. This, to some extent, is
temporary limiting the overall growth in revenues.
The Company's direct cost of operations, as a percentage of revenues, was 81.5%
during the first quarter of 1995 compared to 81.7% during the first quarter of
1994 or from $50.6 million in 1994 to $52.4 million in 1995. Increased Medicare
stepdown of home office costs helped stabilize this percentage relationship. As
healthcare services revenue continues to constitute an increased percentage of
our total revenue, this cost of operations percentage will increase. Pricing
pressures on both sides of our business continue to contribute to this level of
revenue growth. Selling, general and administrative (SG&A) expenses, as a
percentage of revenues, were 17.0% during the first quarter of 1995 versus 14.4%
during the first quarter of 1994. This percentage increase results from a $2.1
million increase in first quarter 1995 SG&A over first quarter 1994. This
increase in healthcare SG&A resulted from additional selling, legal, regulatory
and billing and collection personnel to service the increased healthcare
business resulting from the Norrell acquisition. The lesser increase in health
information SG&A is primarily from allocated home office SG&A expenses.
Operating profit for the first quarter 1995 decrease 61% to $947,000 as a result
of the above increase in SG&A. The operating profit for the first quarter 1995
from health information services was approximately $2 million versus an
approximate loss from healthcare of $1.0 million. Interest expense for the first
quarter 1995 versus the first quarter 1994 was up over $.6 million due to higher
net borrowings and higher interest rates. Other income was up $100,000 for the
same period due to interest income and deferred gain recognized on the payment
of the note receivables that resulted from the sale of our Direct Marketing
business in 1992. This resulted in net Income for the first quarter of 1995
being $58,000 as compared to $1,189,000 for the first quarter of 1994.
Earnings per share for the first quarter of 1995 was $.01 per share versus $.18
in first quarter 1994. Average shares for the respective periods were 6,702,560
and 6,708,585.
- 6 -
Financial Condition
The Company's primary sources of cash are the Company's bank credit facility and
internally generated funds. As of March 31, 1995 we reduced our total debt by
$4.5 million compared to December 31, 1994. Days sales outstanding (DSO), a
measure of accounts receivable efficiency, improved 14 days and 3 days
respectively for healthcare and health information. Overall healthcare
receivables decreased over $2 million in the first quarter 1995. That decrease
is approximately equally split between our Medicare/Medicaid receivables and all
other receivables. The Company renegotiated its revolving credit facility and
increased it from $25 to $30 million, amended certain financial covenants and
changed to base rate less 1/4% pricing. As of March 31, 1995, there was $21.3
borrowed of this facility.
The Company's current ratio at the end of the first three months of 1995 was 4.0
to 1 compared to 3.1 to 1 at 3/31/94 and 4.6 to 1 at 12/31/94. The Company
closed the first quarter with over $51.9 million of working capital available.
Inflation has not nor is it expected to have a material impact on the company's
results in 1995 nor have there been any material commitments for capital
expenditures.
Dividends per share were decreased from $0.75 per share for the first quarter
1994 to $.03 for the first quarter 1995 and $.01 for the second quarter 1995.
Management believes that the combination of existing working capital available
under the Company's credit facility and anticipated cash flows from operations
will provide sufficient capital resources in the short term. Due to our
increase in accounts receivable, management has initiated several steps to
maximize the generation of cash in the short term, and will explore other
financing options. The Company has recently retained Bear Stearns Inc. to
assist the Company in evaluating and pursuing various alternatives with respect
to the Nurse's House Call division, including the possible sale of the division.
- 7 -
Part II - Other Information
ITEM 6: Exhibits and Reports on Form 8-K
Page No.
--------
Exhibit 27 10
-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: May 15, 1995
BY: JAMES M. McNAMEE
--------------------------
President and
Chief Executive Officer
BY: FRED LASH
--------------------------
Senior Vice President
Chief Financial Officer &
Treasurer
-9-