<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, 1998
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, 1998
- ---------------------------- ----------------------------------
Common stock, $.04 par value 13,986,174
<PAGE>
HOOPER HOLMES, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I - Financial Information (1997 Audited)
ITEM 1 - Financial Statements
Consolidated Balance Sheets 1
as of March 31, 1998 and
December 31, 1997
Consolidated Statements of Income 2
for the Three Months Ended
March 31, 1998 and 1997
Consolidated Statements of Cash Flows 3
for the Three Months Ended
March 31, 1998 and 1997
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 4 - Submission of Matters to a vote 6
of Security Holders
ITEM 6 - Exhibits and Reports on Form 8-K
Exhibit 27
<PAGE>
Hooper Holmes, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
03/31/98 12/31/97
--------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 18,210,836 $ 13,159,431
Accounts receivable - trade 21,061,217 18,011,490
Accounts receivable - other 197,382 508,857
Refundable taxes 11,619 23,535
Other current assets 2,790,720 2,458,283
--------------- ----------------
Total current assets 42,271,774 34,161,596
Property, plant and equipment:
Land and land improvements 591,213 591,213
Building 3,936,178 3,931,574
Furniture, fixtures and equipment 15,979,647 15,675,217
Leasehold improvements 300,115 300,115
--------------- ----------------
Total property, plant and equipment 20,807,153 20,498,119
Less: Accumulated depreciation 12,611,582 12,050,903
--------------- ----------------
Net property, plant and equipment 8,195,571 8,447,216
Cost in excess of net assets of acquired companies, net 14,875,010 15,089,108
Intangible assets, net 7,218,933 7,647,711
Other assets 444,230 595,486
--------------- -----------------
Total assets $ 73,005,518 $ 65,941,117
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt $ 0 $ 0
Accounts payable 6,938,671 5,577,158
Accrued expenses:
Insurance benefits 1,815,206 1,969,403
Salaries, wages and fees 2,414,427 1,935,277
Payroll and other taxes 235,982 170,152
Income taxes payable 3,545,407 610,487
Discontinued operations 566,707 573,970
Other 2,213,087 2,944,248
--------------- ----------------
Total current liabilities 17,729,487 13,780,695
Long term debt, less current maturities 0 0
Deferred income taxes 3,472,422 3,641,051
Common stock 559,582 557,565
Additional paid-in capital 27,381,728 27,079,265
Retained earnings 23,880,801 20,901,043
--------------- ----------------
51,822,111 48,537,873
Less: Treasury stock 18,502 18,502
--------------- ----------------
Total stockholders' equity 51,803,609 48,519,371
--------------- ----------------
Total liabilities and stockholders' equity $ 73,005,518 $ 65,941,117
=============== ================
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
<PAGE>
Hooper Holmes, Inc.
Consolidated Statements Of Operations
(unaudited)
Three months ended
March 31,
-------------------------------
1998 1997
------------- -------------
Revenues $ 46,111,306 $ 40,713,867
Cost of operations 31,613,838 29,647,270
------------- -------------
Gross profit 14,497,468 11,066,597
SG & A expenses 8,578,592 8,103,029
------------- -------------
Operating income 5,918,876 2,963,568
Other income (expense)
Interest expense 0 (83,121)
Interest income 129,538 29,532
Other (38,353) 46,064
------------- -------------
91,185 (7,525)
------------- -------------
Income before income taxes 6,010,061 2,956,043
Income taxes 2,821,000 1,432,000
------------- -------------
Net income $ 3,189,061 $ 1,524,043
============= =============
Net income per common share:
Basic 0.23 0.11
Diluted $ 0.22 $ 0.11
============= =============
Weighted average number of shares: (1)
Basic 13,962,605 13,597,479
Diluted 14,742,485 13,913,594
============= =============
(1) Adjusted to reflect a two for one stock split effective August 22, 1997.
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,
---------------------------------------
1998 1997
------------------ ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,189,061 $ 1,524,043
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,237,268 1,272,089
Provision for bad debt expense 120,000 120,000
Deferred tax (benefit) expense (168,628) (168,628)
Loss on sale of fixed assets 3,016 1,262
Change in assets and liabilities:
Accounts receivable (2,858,251) (2,127,291)
Other current assets (181,181) (157,923)
Income tax receivable 11,915 51,663
Accounts payable and accrued expenses 3,948,792 2,200,189
------------------ ----------------
Net cash provided by operating activities 5,301,992 2,715,404
------------------ ----------------
Cash flows from investing activities:
Capital expenditures, net of disposals (345,764) (158,941)
------------------ ----------------
Cash flows from financing activities:
Principal payments on long term debt 0 (3,330,000)
Proceeds related to the exercise of stock options 304,480 388,635
Dividends paid (209,303) (135,849)
------------------ ----------------
Net cash provided by (used in) financing activities 95,177 (3,077,214)
------------------ ----------------
Net increase (decrease) in cash and cash equivalents 5,051,405 (520,751)
Cash and cash equivalents at beginning of year 13,159,431 2,936,447
------------------ ----------------
Cash and cash equivalents at end of period $ 18,210,836 $ 2,415,696
================== ================
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
HOOPER HOLMES, INC.
Notes to Financial Statements
March 31, 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 three month period ended March 31, 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 Common 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 -
<PAGE>
HOOPER HOLMES, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Results of Operation - Three months ended March 31, 1998 compared to
Three months ended March 31, 1997
Revenues for the first quarter of 1998 were $46.1 million compared to $40.7
million for the first quarter of 1997, an increase of 13.3%. This growth
results primarily from a 12% increase in the number of examinations performed
and increases in revenues per unit of service.
The Company's cost of operations for the first quarter of 1998 totaled $31.6
million compared to $29.6 million for the first quarter of 1997. Cost of
operations as a percentage of revenues, decreased from 72.8% for the first
quarter of 1997 to 68.6% for the first quarter of 1998. This percentage
decrease is due to ongoing efforts to limit branch operating expense increases,
and the efficiencies realized from continued branch automation initiatives.
Selling, general and administrative expenses totaled $8.6 million as compared to
$8.1 million for the first quarters of 1998 and 1997, respectively, and as a
percentage of revenue totaled 18.6% compared to 19.9%. As a percentage of
revenues, the decrease is due to ongoing efforts to control corporate level
expenses.
Accordingly, the Company's operating income improved to $5.9 million from $3.0
million and as a percentage of revenues, increased to 12.8% from 7.3% for the
first quarter of 1998 compared to the first quarter of 1997.
The Company has no long term debt, and therefore, no interest expense. Interest
income increased to $.1 million, due to higher levels of invested funds.
Net income and earnings per share for the first quarter of 1998 were $3.2
million or $.22 per diluted share versus $1.5 million or $.11 per diluted share
for the first quarter of 1997. Average diluted shares for the respective
periods were 14,742,485 and 13,913,594.
- 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 1998 was $5.3
million compared to $2.7 million for the first quarter of 1997. The significant
sources were net income of $3.2 million, $1.3 million of depreciation and
amortization, $3.9 million increase in accounts payable and accrued expenses,
and was offset by a $2.9 million increase in accounts receivable. The increase
in accounts payable and accrued expenses was partly due to an increase of $2.7
million in income taxes payable which was partially liquidated in April 1998.
The Company had no borrowings against its revolver credit facility at March 31,
1998, compared to $1.0 million at March 31, 1997. As of March 31, 1998, a total
credit line of $18.3 million is available under the revolver.
The Company's current ratio at the end of March 1998 stood at 2.4:1 as compared
to 2.5:1 at December 31, 1997. Inflation has not, nor is it expected to have a
material impact on the Company's financial results in 1998 and there have been
no material commitments for capital expenditures. Year 2000 costs are not
considered material.
Dividends declared in January 1998 were declared at $.015 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.
PART II
ITEM 4 - Submission of Matters to a vote of Security Holders
At a Special Meeting of Shareholders on February 24, 1998, the Shareholders
approved a proposal to amend the Company's Certificate of Incorporation to
increase the amount of authorized Common Stock, par value $.04 per share, from
20,000,000 shares to 80,000,000 shares. The number of votes cast FOR was
8,267,289, AGAINST was 4,375,998 and the number of ABSTENTIONS was 73,616.
- 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 12, 1998
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
<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, 1998 and the related consolidated statements of income and cash flows for
the period ended March 31, 1998 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 18,210,836
<SECURITIES> 0
<RECEIVABLES> 22,158,499
<ALLOWANCES> 1,097,282
<INVENTORY> 0
<CURRENT-ASSETS> 42,271,774
<PP&E> 20,807,153
<DEPRECIATION> 12,611,582
<TOTAL-ASSETS> 73,005,518
<CURRENT-LIABILITIES> 17,729,487
<BONDS> 0
0
0
<COMMON> 559,582
<OTHER-SE> 51,244,027
<TOTAL-LIABILITY-AND-EQUITY> 73,005,518
<SALES> 46,111,306
<TOTAL-REVENUES> 46,111,306
<CGS> 31,613,837
<TOTAL-COSTS> 31,613,837
<OTHER-EXPENSES> 8,578,592
<LOSS-PROVISION> 120,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,010,061
<INCOME-TAX> 2,821,000
<INCOME-CONTINUING> 3,189,061
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,189,061
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.22
</TABLE>
<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>
<RESTATED>
<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> 0.11<F1>
<EPS-DILUTED> 0.11<F1>
<FN>
<F1>Adjusted to reflect a two-for-one stock split effective August 22, 1997, and the
adoption of Statement of Financial Accounting Standards No. 128, "Earnings per
share", which became effective in 1997.
</FN>
</TABLE>
