<PAGE>
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 September 30, 1996
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
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(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
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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 September 30, 1996
- ---------------------------- ------------------------------------
Common stock, $.04 per value 6,730,864
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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 September 30, 1996 and
December 31, 1995
Consolidated Statements of Operations 2
for the Quarter and Nine Months
Ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows 3
for the Nine Months Ended
September 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 6 - Exhibits and Reports on Form 8-K
Exhibit 27 -
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<TABLE>
<CAPTION>
Hooper Holmes, Inc.
Consolidated Balance Sheets
09/30/96 12/31/95
-------------------- -------------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 466,414 $ 1,065,464
Accounts receivable - trade 17,858,416 21,974,398
Accounts receivable - other 498,961 2,387,010
Escrow funds 13,619 15,000,000
Refundable income taxes 1,873,916 9,264,734
Other current assets 3,888,019 4,716,328
-------------------- -------------------
Total current assets 24,599,345 54,407,934
Property, plant and equipment:
Land and land improvements 571,314 570,116
Building 3,509,502 3,465,876
Furniture, fixtures and equipment 14,737,801 13,955,687
Leasehold improvements 285,426 278,676
-------------------- -------------------
Total property, plant and equipment 19,104,043 18,270,355
Less: Accumulated depreciation 9,139,022 7,423,190
-------------------- -------------------
Net property, plant and equipment 9,965,021 10,847,165
Cost in excess of net assets of acquired companies 16,416,852 16,601,785
Intangible assets 9,832,984 10,589,722
Other assets 787,268 1,550,489
-------------------- -------------------
Total assets $ 61,601,470 $ 93,997,095
==================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt $ 1,300,000 $ 8,800,000
Accounts payable 5,457,623 10,677,452
Accrued expenses:
Insurance benefits 2,103,051 994,820
Salaries, wages and fees 945,444 596,886
Payroll and other taxes 237,334 740,678
Discontinued operations 1,512,597 4,380,023
Other 2,540,451 3,431,764
-------------------- -------------------
Total current liabilities 14,096,500 29,621,623
Long term debt, less current maturities 7,450,000 26,250,000
Deferred income taxes 4,487,574 4,993,459
-------------------- -------------------
Total other liabilities 11,937,574 31,243,459
Common stock 269,777 269,777
Additional paid-in capital 24,015,190 24,080,988
Retained earnings 11,461,705 9,138,401
-------------------- -------------------
35,746,672 33,489,166
Less: Treasury stock 179,276 357,153
-------------------- -------------------
Total stockholders' equity 35,567,396 33,132,013
-------------------- -------------------
Total liabilities and stockholders' equity $ 61,601,470 $ 93,997,095
==================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
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Hooper Holmes, Inc.
Consolidated Statements Of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------------------- ------------------------------------
1996 1995 1996 1995
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues $ 37,907,218 $ 23,184,270 $ 116,332,041 $ 71,577,324
Cost of operations 28,631,068 17,897,069 87,962,047 54,334,181
----------------- ---------------- ----------------- -----------------
Gross profit 9,276,150 5,287,201 28,369,994 17,243,143
Selling, general and administrative expenses 6,917,970 4,199,022 22,537,552 14,046,312
----------------- ---------------- ----------------- -----------------
Operating income 2,358,180 1,088,179 5,832,442 3,196,831
Other income (expense)
Interest expense (293,643) (451,801) (1,396,882) (1,198,426)
Interest income 54,039 81,999 549,329 269,218
----------------- ---------------- ----------------- -----------------
(239,604) (369,802) (847,553) (929,208)
----------------- ---------------- ----------------- -----------------
Income before income taxes 2,118,576 718,377 4,984,889 2,267,623
Income taxes 1,018,000 324,000 2,393,000 1,021,161
----------------- ---------------- ----------------- -----------------
Income from continuing operations 1,100,576 394,377 2,591,889 1,246,462
----------------- ---------------- ----------------- -----------------
Discontinued operations:
Loss from operations, net of taxes 0 (720,000) 0 (4,051,864)
Loss on disposal, net of taxes 0 0 0 (10,326,068)
----------------- ---------------- ----------------- -----------------
Loss from discontinued operations 0 (720,000) 0 (14,377,932)
----------------- ---------------- ----------------- -----------------
Net income (loss) $ 1,100,576 $ (325,623) $ 2,591,889 $ (13,131,470)
================= ================ ================= =================
Earnings (loss) per share:
Weighted average number of shares 6,715,906 6,707,052 6,713,387 6,705,552
Income from continuing operations 0.16 0.06 0.39 0.19
Loss from discontinued operations 0.00 (0.11) 0.00 (2.14)
----------------- ---------------- ----------------- -----------------
Net income (loss) $ 0.16 $ (0.05) $ 0.39 $ (1.95)
================= ================ ================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
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Hooper Holmes, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
--------------------------------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 2,591,889 $ 1,246,462
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Depreciation and amortization 3,748,023 1,260,043
Provision for bad debt expense 285,000 97,650
Issuance of stock awards 31,875 41,344
Loss on sale of fixed assets 13,183 0
Change in assets and liabilities, net of effect from
acquisitions/dispositions of businesses:
Accounts receivable 5,719,031 217,029
Income tax receivable 7,390,817 (1,008,681)
Other current assets 999,718 (347,674)
Accounts payable and accrued expenses (6,098,582) 7,723,321
Accrued expenses -- discontinued operations (2,867,426) 0
------------------- --------------------
Net cash provided by operating activities of continuing operations 11,813,528 9,229,494
------------------- --------------------
Net cash provided by operating activities of discontinued operations 0 (693,448)
------------------- --------------------
Net cash provided by operating activities 11,813,528 8,536,046
------------------- --------------------
Cash flows from investing activities:
Net proceeds from dispositions 0 13,219,698
Escrow funds 14,986,381 0
Acquisition, net of cash acquired (30,000) 0
Capital expenditures, net of disposals (880,578) (595,435)
Net investing activities of discontinued operations 0 (796,441)
------------------- --------------------
Net cash used in investing activities 14,075,803 11,827,822
------------------- --------------------
Cash flows from financing activities:
Issuance of long term debt 12,500,000 7,000,000
Principal payments on long term debt (38,800,000) (26,860,000)
Proceeds from issuance of stock options 80,204 0
Dividends paid (268,585) (335,320)
------------------- --------------------
Net cash used in financing activities (26,488,381) (20,195,320)
------------------- --------------------
Net decrease in cash and cash equivalents (599,050) 168,548
Cash and cash equivalents at beginning of year 1,065,464 1,695,844
------------------- --------------------
Cash and cash equivalents at end of period $ 466,414 $ 1,864,392
=================== ====================
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
HOOPER HOLMES, INC.
Notes to Financial Statements
September 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 nine month period ended September 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.
-4-
<PAGE>
HOOPER HOLMES, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Results of Operation - Three months ended September 30, 1996 compared to
Three months ended September 30, 1995
Revenues for the third quarter of 1996 were $37.9 million compared to $23.2
million for the third quarter of 1995, an increase of 63.5%. Management
believes this growth results from a combination of acquired revenue from the ASB
Meditest (ASB) acquisition and its continued efforts to gain market share.
The Company's cost of operations for the third quarter of 1996 totaled $28.6
million compared to $17.9 million for the third quarter of 1995. This increase
in cost of sales results primarily from the added business of the ASB
acquisition in September 1995, and increased branch operating expenses due
primarily to the acquired branches in the acquisition. Cost of operations as a
percentage of revenues, decreased from 77.2% for the third quarter of 1995 to
75.5% for the third quarter of 1996. The decrease is the result of cost savings
and efficiencies realized from the integration of ASB.
Selling, general and administrative expenses totaled $6.9 million as compared to
$4.2 million for the third quarter of 1996 and 1995, respectively, and as a
percentage of revenue totaled 18.2% compared to 18.1%. The increase of $2.7
million is largely attributed to SG&A expenses related to ongoing corporate
functions added to handle the acquired business.
Accordingly, the Company's operating income improved to $2.4 million from $1.1
million and as a percentage of revenues, increased to 6.2% from 4.7% for the
third quarter of 1996 compared to the third quarter of 1995.
Interest expense decreased in the third quarter of 1996 to $.3 million compared
to $.5 million for the third quarter of 1995, due to lower amounts borrowed.
The Company reduced its revolver borrowings by $10 million during the quarter.
Interest expense 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 third quarter of 1996 were $1,101,000
or $.16 per share versus $394,000 or $.06 per share for the third quarter of
1995. Average shares for the respective periods were 6,715,906 and 6,707,052.
-5-
<PAGE>
Results of Operation - Nine months ended September 30, 1996 compared to
Nine months ended September 30, 1995
Revenues for the nine months ended September 30, 1996 were $116.3 million
compared to $71.6 million for the nine months ended September 30, 1995, an
increase of 62.5%. Management believes this growth results from a combination
of acquired revenue from the ASB Meditest (ASB) acquisition and its continued
efforts to gain marketshare.
The Company's cost of operations for the nine months ended September 30, 1996
totaled $88.0 million compared to $54.3 million for the nine months ended
September 30, 1995. This increase in cost of sales results primarily from the
added business of the ASB acquisition in September 1995, and higher branch
operating expenses due primarily to that acquisition. Cost of operations as a
percentage of revenues, decreased slightly from 75.9% for the nine months ended
September 30, 1995 to 75.6% for the nine months ended September 30, 1996. The
decrease results from the cost savings realized from the integration of ASB.
Selling, general and administrative expenses totaled $22.5 million as compared
to $14.0 million for the nine months ended September 30, 1996 and 1995,
respectively, and as a percentage of revenue totaled 19.4% compared to 19.6%.
This increase is largely attributed to SG&A expenses related to ongoing
corporate functions added to handle the acquired business.
Accordingly, the Company's operating income improved to $5.8 million from $3.2
million and as a percentage of revenues, increased to 5.0% for the third quarter
of 1996 from 4.5% for the third quarter of 1995.
Interest expense for the nine months ended September 30, 1996 was $1.4 million
compared to $1.2 million for the nine months ended September 30, 1995. 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 nine months ended September 30, 1996
were $2,592,000 or $.39 per share versus $1,246,000 or $.19 per share for the
nine months ended September 30, 1995. Average shares for the respective periods
were 6,713,387 and 6,705,552.
-6-
<PAGE>
Financial Condition
The Company's primary sources of cash are its bank credit facility and
internally generated funds.
Net cash provided by operations in the third quarter ended September 30, 1996
was $11.8 million. The primary source of this cash was $7.4 million from income
tax refunds and $5.7 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. The
revolver balance at September 30, 1996 was $6.2 million. This amount was
reduced as a result of the release of the escrowed funds, the tax refunds, and
the reduction of ongoing accounts receivables.
The balance of the escrow funds at the start of the year was $15.0 million and
at the close of the third quarter of 1996 was $14,000. These escrowed funds
were released to the Company and utilized to pay down our debt.
The Company's current ratio at the end of September 1996 stood at 1.7:1 as
compared to 1.8:1 at December 31, 1995. 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 and November 1996.
Management believes that the combination of cash and cash equivalents, other
working capital sources, borrowings under the Company's credit facility and
anticipated income tax refunds, along with the anticipated cash flows from
continuing operations, will provide sufficient capital resources for the
foreseeable future.
-7-
<PAGE>
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: November 12, 1996
BY: /s/ James M. McNamee
------------------------------
James M. McNamee
President and
Chief Executive Officer
BY: /s/ Fred Lash
------------------------------
Fred Lash
Senior Vice President
Chief Financial Officer &
Treasurer
-8-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF HOOPER HOLMES, INC. AND SUBSIDIARIES AS OF
SEPTEMBER 30, 1996 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME AND CASH
FLOWS FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 466,414
<SECURITIES> 0
<RECEIVABLES> 18,519,171
<ALLOWANCES> 660,755
<INVENTORY> 0
<CURRENT-ASSETS> 24,599,345
<PP&E> 19,104,043
<DEPRECIATION> 9,139,022
<TOTAL-ASSETS> 61,601,470
<CURRENT-LIABILITIES> 14,096,500
<BONDS> 8,750,000
0
0
<COMMON> 269,777
<OTHER-SE> 35,297,619
<TOTAL-LIABILITY-AND-EQUITY> 61,601,470
<SALES> 116,332,041
<TOTAL-REVENUES> 116,332,041
<CGS> 87,962,047
<TOTAL-COSTS> 87,962,047
<OTHER-EXPENSES> 22,537,552
<LOSS-PROVISION> 285,000
<INTEREST-EXPENSE> 1,396,882
<INCOME-PRETAX> 4,984,889
<INCOME-TAX> 2,393,000
<INCOME-CONTINUING> 2,591,889
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,591,889
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0
</TABLE>
