<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 March 31, 1997
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
- ----------------------------------------------- -----------------------------
(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, 1997
- ------------------------------ ------------------------------------
Common stock, $.04 par value 6,829,056
<PAGE>
HOOPER HOLMES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I - Financial Information (1996 Audited)
ITEM 1 - Financial Statements
Consolidated Balance Sheets 1
as of March 31, 1997 and
December 31, 1996
Consolidated Statements of Income 2
for the Three Months Ended
March 31, 1997 and 1996
Consolidated Statements of Cash Flows 3
for the Three Months Ended
March 31, 1997 and 1996
Notes to Financial Statements 4
ITEM 2 - Management's Discussion and Analysis 5,6
of Financial Condition and Results
of Operations
PART II - Other Information
ITEM 6 - Exhibits and Reports on Form 8-K
Exhibit 27
</TABLE>
<PAGE>
Hooper Holmes, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
03/31/97 12/31/96
---------------------- ----------------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,415,696 $ 2,936,447
Accounts receivable - trade 19,972,405 17,035,255
Accounts receivable - other 165,915 1,095,772
Refundable taxes 1,178,535 1,230,198
Other current assets 3,763,234 3,474,226
--------------------- ---------------------
Total current assets 27,495,785 25,771,898
Property, plant and equipment:
Land and land improvements 571,314 571,314
Building 3,548,523 3,545,546
Furniture, fixtures and equipment 14,927,969 14,782,996
Leasehold improvements 296,157 296,157
--------------------- ---------------------
Total property, plant and equipment 19,343,963 19,196,013
Less: Accumulated depreciation 10,320,091 9,712,650
--------------------- ---------------------
Net property, plant and equipment 9,023,872 9,483,363
Cost in excess of net assets of acquired companies 15,733,250 15,948,735
Intangible assets 8,955,049 9,394,485
Other assets 566,100 697,185
--------------------- ---------------------
Total assets $ 61,774,056 $ 61,295,666
===================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt $ 1,950,000 $ 1,030,000
Accounts payable 5,838,279 6,168,864
Accrued expenses:
Insurance benefits 1,767,837 1,536,315
Salaries, wages and fees 1,459,548 1,264,739
Payroll and other taxes 218,820 167,013
Income taxes payable 1,873,263 334,879
Discontinued operations 973,156 1,287,700
Other 3,004,446 2,175,651
--------------------- ---------------------
Total current liabilities 17,085,349 13,965,161
Long term debt, less current maturities 1,000,000 5,250,000
Deferred income taxes 4,192,421 4,361,049
Common stock 273,120 271,658
Additional paid-in capital 25,033,119 24,645,945
Retained earnings 14,208,549 12,820,355
--------------------- ---------------------
39,514,788 37,737,958
Less: Treasury stock 18,502 18,502
--------------------- ---------------------
Total stockholders' equity 39,496,286 37,719,456
--------------------- ---------------------
Total liabilities and stockholders' equity $ 61,774,056 $ 61,295,666
===================== =====================
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
<PAGE>
Hooper Holmes, Inc.
Consolidated Statements Of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------------------------
1997 1996
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<S> <C> <C>
Revenues $ 40,713,867 $ 38,611,000
Cost of operations 29,647,270 29,413,988
-------------------- ---------------------
Gross profit 11,066,597 9,197,012
SG & A expenses 8,103,029 7,823,618
-------------------- ---------------------
Operating income 2,963,568 1,373,394
Other income (expense)
Interest expense (83,121) (578,817)
Interest income 29,532 181,433
Other 46,064 71,438
-------------------- ---------------------
(7,525) (325,946)
-------------------- ---------------------
Income before income taxes 2,956,043 1,047,448
Income taxes 1,432,000 502,000
-------------------- ---------------------
Net income $ 1,524,043 $ 545,448
==================== =====================
Earnings per share:
Weighted average number of shares 6,798,575 6,712,141
Net income $ 0.22 $ 0.08
==================== =====================
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
Hooper Holmes, Inc.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 1,524,043 $ 545,448
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,272,089 1,316,309
Provision for bad debt expense 120,000 95,000
Deferred tax (benefit) expense (168,628) 0
Issuance of stock awards 0 31,875
Loss on sale of fixed assets 1,262 0
Change in assets and liabilities, net of effect from
acquisitions / dispositions of businesses:
Accounts receivable (2,127,291) 2,777,274
Other current assets (157,923) (273,022)
Income tax receivable 51,663 350,000
Accounts payable and accrued expenses 2,200,189 (4,420,187)
---------------- --------------
Net cash provided by operating activities 2,715,404 422,697
---------------- --------------
Cash flows from investing activities:
Net proceeds from dispositions 0 9,794,043
Capital expenditures, net of disposals (158,941) (215,058)
---------------- --------------
Net cash (used in) provided by investing activities (158,941) 9,578,985
---------------- --------------
Cash flows from financing activities:
Issuance of long term debt 0 2,500,000
Principal payments on long term debt (3,330,000) (13,500,000)
Proceeds related to the exercise of stock options 388,635 0
Dividends paid (135,849) (67,146)
---------------- --------------
Net cash used in financing activities (3,077,214) (11,067,146)
---------------- --------------
Net decrease in cash and cash equivalents (520,751) (1,065,464)
Cash and cash equivalents at beginning of year 2,936,447 1,065,464
---------------- --------------
Cash and cash equivalents at end of period $ 2,415,696 $ 0
================ ==============
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
HOOPER HOLMES, INC.
Notes to Financial Statements
March 31, 1997
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 three month period ended March 31, 1997 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.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("EPS"), which is
effective as of December 31, 1997. This standard changes the way companies
compute EPS to require all companies to show "basic" and "dilutive" EPS and is
to be retroactively applied, including each 1997 interim quarter. The statement
is not expected to have a material effect on the calculation of EPS as, under
current accounting standards, the dilutive EPS calculation is not more than 3%
different than the basic calculation.
- 4 -
<PAGE>
HOOPER HOLMES, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Results of Operation - Three months ended March 31, 1997 compared to
Three months ended March 31, 1996
Revenues for the first quarter of 1997 were $40.7 million compared to $38.6
million for the first quarter of 1996, an increase of 5.4%. This growth
results primarily from increases in revenues per unit of service performed.
Certain revenue sources reviewed and discontinued in 1996 contributed
approximately $1.0 million in revenue in the first quarter 1996 that were not
sources in 1997.
The Company's cost of operations for the first quarter of 1997 totaled $29.6
million compared to $29.4 million for the first quarter of 1996. Cost of
operations as a percentage of revenues, decreased from 76.2% for the first
quarter of 1996 to 72.8% for the first quarter of 1997. As a percentage of
revenues, the decrease is due to ongoing efforts to reach the optimum number of
branches, control branch operating expenses, and the efficiencies realized from
the integration of ASB Meditest.
Selling, general and administrative expenses totaled $8.1 million as compared to
$7.8 million for the first quarters of 1997 and 1996, respectively, and as a
percentage of revenue totaled 19.9% compared to 20.3%. As a percentage of
revenues, the decrease is due to ongoing efforts to control corporate level
expenses and in 1997 includes no residual ASB corporate costs that were in 1996.
Accordingly, the Company's operating income improved to $3.0 million from $1.4
million and as a percentage of revenues, increased to 7.3% from 3.6% for the
first quarter of 1997 compared to the first quarter of 1996.
Interest expenses decreased in the first quarter of 1997 to $.1 million compared
to $.6 million for the first quarter of 1996, due to lower amounts borrowed.
Long term debt at March 31, 1997 was $1.0 million compared to $22.7 million as
of March 31, 1996. The remaining $1.0 million was paid down in April.
Net income and earnings per share for the first quarter of 1997 were $1,524,000
or $.22 per share versus $545,000 or $.08 per share for the first quarter of
1996. Average shares for the respective periods were 6,798,575 and 6,712,141.
- 5 -
<PAGE>
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 first quarter of 1997 was $2.7
million compared to $.4 million for the first quarter of 1996. The significant
sources were income from continuing operations of $1.5 million, $1.3 million of
depreciation and amortization, $2.2 million of accounts payable and accrued
expenses and was partially offset by a $2.1 million increase in accounts
receivable returning to a more traditional level.
Our revolver credit facility was $1.0 million at March 31, 1997, compared to
$20.8 million at March 31, 1996. As of March 31, 1997, a total credit line of
$19.0 million is available under the revolver.
The Company's current ratio at the end of March 1997 stood at 1.6:1 as compared
to 1.8:1 at December 31, 1996. Also, inflation has not, nor is it expected to
have a material impact on the Company's financial results in 1997 and there have
been no material commitments for capital expenditures.
Dividends declared in January 1997 were declared at $.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 continuing operations, will provide
sufficient capital resources for the foreseeable future.
- 6 -
<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: May 9, 1997
BY:
------------------------------------
James M. McNamee
President and
Chief Executive Officer
BY:
------------------------------------
Fred Lash
Senior Vice President
Chief Financial Officer &
Treasurer
<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 March
31, 1997 and the related consolidated statements of income and cash flows for
the period ended March 31, 1997 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,415,696
<SECURITIES> 0
<RECEIVABLES> 20,810,805
<ALLOWANCES> 838,400
<INVENTORY> 0
<CURRENT-ASSETS> 27,495,785
<PP&E> 19,343,963
<DEPRECIATION> 10,320,091
<TOTAL-ASSETS> 61,774,056
<CURRENT-LIABILITIES> 17,085,349
<BONDS> 1,000,000
0
0
<COMMON> 273,120
<OTHER-SE> 39,223,166
<TOTAL-LIABILITY-AND-EQUITY> 61,774,056
<SALES> 40,713,867
<TOTAL-REVENUES> 40,713,867
<CGS> 29,647,270
<TOTAL-COSTS> 29,647,270
<OTHER-EXPENSES> 8,103,029
<LOSS-PROVISION> 120,000
<INTEREST-EXPENSE> 83,121
<INCOME-PRETAX> 2,956,043
<INCOME-TAX> 1,432,000
<INCOME-CONTINUING> 1,524,043
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,524,043
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0
</TABLE>
