<PAGE>
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Form 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) November 1, 1999
----------------
Hooper Holmes, Inc.
(Exact Name of Registrant as Specified in its Charter)
New York
(State or Other Jurisdiction of Incorporation)
1-9972 22-1659359
(Commission File Number) (I.R.S. Employer Identification No.)
170 Mt. Airy Road Basking Ridge, NJ 07920
(Address of Principal Executive (Zip Code)
Offices)
(908) 766-5000
(Registrant's Telephone Number, Including Area Code)
None
(Former Name or Former Address, if Changed Since Last Report)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FORM 8-K/A
This Form 8-K/A amends the Current Report on Form 8-K of Hooper Holmes,
Inc., previously filed with the Securities and Exchange Commission on November
12, 1999, to update Item 2 to report certain escrow payments, and to file the
financial statements and pro forma financial information required by Item 7 of
Form 8-K.
Item 2. Acquisition or Disposition of Assets
As previously reported, as of November 1, 1999, pursuant to an Asset
Purchase Agreement dated as of August 30, 1999, as amended as of November 1,
1999, the Company purchased substantially all of the assets and assumed certain
of the liabilities of Paramedical Services of America, Inc. ("PSA") from
Pediatric Services of America, Inc. ("PSAI") and its wholly-owned subsidiary
PSA. At closing, the Company placed $10,187,500 of the $81 million purchase
price into escrow to be distributed as follows: (a) $3 million to the Company
if the Company did not receive audited financial statements of PSA and the
related audit report for PSA's 1998 and 1999 fiscal years by December 17, 1999;
(b) up to $5 million to the Company if PSA's audited net revenues for the year
ended September 30, 1999 were less than $80 million (or if the audited
financial statements and report referred to in clause (a) above were not
delivered to the Company by February 15, 2000); (c) $1.5 million to the Company
if the Company did not receive, by February 15, 2000, a consent of PSA's
auditors to use its opinion on the PSA audited financial statements in the
Company's SEC registration statements; and (d) up to $687,500 to certain
contract affiliates formerly affiliated with PSA that remain with the Company
through June 1, 2000.
PSA satisfied the conditions described in clauses (a) and (b) above, and, on
December 22, 1999, the escrow agent distributed $8 million, plus interest
earned thereon, to PSA. PSA also satisfied the condition in clause (c) above as
of January 13, 2000, so $1.5 million, plus interest earned thereon, will be
distributed to PSA from the escrow account. The remaining $687,500 (and related
interest thereon) will remain in escrow subject to the condition described in
clause (d) above.
In addition, because PSA's current accounts receivable (as defined in the
Asset Purchase Agreement, as amended) at closing was less than $12 million, PSA
paid $970,312 to the Company on December 22, 1999. Accordingly, the final
adjusted purchase price was approximately $80 million.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired
Filed herewith as a part of this report are the following financial
statements for PSA: (i) audited balance sheets as of September 30, 1999 and
1998; (ii) audited statements of operations for each of the three years in the
period ended September 30, 1999; and (iii) audited statements of cash flows for
each of the three years in the period ended September 30, 1999, and the report
of Ernst & Young LLP, independent auditors, thereon, together with the notes
thereto.
Also filed herewith as a part of this report is a statement of direct
revenues and direct operating expenses for the year ended December 31, 1997 of
PMI, a business acquired by PSA in December 1997 and the report of KPMG LLP,
independent certified public accountants, thereon, together with the notes
thereto.
(b) Pro forma financial information
The following unaudited pro forma condensed consolidated financial
statements are attached hereto:
. Unaudited pro forma condensed consolidated statements of income for the
nine-month period ended September 30, 1999 and the year ended December
31, 1998
. Notes to unaudited pro forma condensed consolidated statements of
operations
. Unaudited pro forma condensed consolidated balance sheet as of September
30, 1999 and notes thereto
(c) Exhibits
<TABLE>
<C> <S>
23.1 Consent of Ernst & Young LLP
23.2 Consent of KPMG LLP
</TABLE>
2
<PAGE>
PARAMEDICAL SERVICES OF AMERICA
Audited Financial Statements
Years ended September 30, 1999, 1998 and 1997
with Report of Independent Auditors
Contents
<TABLE>
<S> <C>
Report of Independent Auditors.............................................. 4
Audited Financial Statements
Balance Sheets.............................................................. 5
Statements of Operations.................................................... 6
Statements of Cash Flows.................................................... 7
Notes to Financial Statements............................................... 8
</TABLE>
3
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Paramedical Services of America
We have audited the accompanying balance sheets of Paramedical Services of
America (the "Company") as of September 30, 1999 and 1998 and the related
statements of operations and cash flows for each of the three years in the
period ended September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Paramedical Services of
America at September 30, 1999 and 1998 and the results of its operations and
its cash flows for each of the three years in the period ended September 30,
1999, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Atlanta, GA
December 10, 1999
4
<PAGE>
PARAMEDICAL SERVICES OF AMERICA
Balance Sheets
<TABLE>
<CAPTION>
September 30,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................... $ 361,769 $ 390,142
Accounts receivable, less allowance for doubtful
accounts of $3,598,000 and $1,987,000 at September
30, 1999 and 1998, respectively................... 12,726,449 20,884,107
Deferred income taxes.............................. 2,226,557 1,039,505
Other currents assets.............................. 815,353 2,173,923
----------- -----------
Total current assets................................. 16,130,128 24,487,677
Property and equipment, net.......................... 5,024,709 4,841,577
Goodwill, net of accumulated amortization of
$2,212,000 and $1,183,000 at September 30, 1999 and
1998, respectively.................................. 22,173,319 23,202,554
----------- -----------
Total assets......................................... $43,328,156 $52,531,808
=========== ===========
Liabilities and Parent Investment
Current liabilities:
Accounts payable................................... $ 1,093,474 $ 1,066,915
Accrued liabilities................................ 5,876,295 5,367,576
----------- -----------
Total current liabilities............................ 6,969,769 6,434,491
Due to Parent........................................ 36,066,945 42,976,441
Deferred income taxes................................ 774,178 471,017
----------- -----------
Total liabilities.................................... 43,810,892 49,881,949
Parent investment.................................... (482,736) 2,649,859
----------- -----------
Total liabilities and Parent investment.............. $43,328,156 $52,531,808
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
PARAMEDICAL SERVICES OF AMERICA
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended September 30,
-------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues............................ $83,029,936 $76,285,852 $26,043,565
Cost of net revenues.................... 61,887,204 55,949,059 21,698,154
----------- ----------- -----------
Gross profit.......................... 21,142,732 20,336,793 4,345,411
Selling, general and administrative
expenses............................... 22,469,264 18,273,586 2,675,991
Provision for doubtful accounts......... 1,610,352 1,713,471 172,026
----------- ----------- -----------
Operating income (loss)................. (2,936,884) 349,736 1,497,394
Other expense:
Interest expense...................... 2,094,348 919,610 --
----------- ----------- -----------
Income (loss) before income taxes....... (5,031,232) (569,874) 1,497,394
Income tax expense (benefit)............ (1,898,637) (200,608) 572,724
----------- ----------- -----------
Net income (loss)....................... (3,132,595) (369,266) 924,670
Parent investment at beginning of year.. 2,649,859 3,019,125 2,094,455
----------- ----------- -----------
Parent investment at end of year........ $ (482,736) $ 2,649,859 $ 3,019,125
=========== =========== ===========
</TABLE>
See accompanying notes.
6
<PAGE>
PARAMEDICAL SERVICES OF AMERICA
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended September 30,
----------------------------------
1999 1998 1997
----------- ----------- --------
<S> <C> <C> <C>
Operating activities
Net income (loss)......................... $(3,132,595) $ (369,266) $924,670
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Provision for doubtful accounts......... 1,610,352 1,713,471 172,026
Depreciation and amortization........... 1,994,148 967,950 238,041
Deferred taxes.......................... (883,891) (756,076) 113,447
Changes in operating assets and
liabilities, net of businesses
acquired:
Accounts receivable................... 6,547,306 (19,268,103) (963,459)
Other current assets.................. 1,358,570 (1,585,019) 7,312
Accounts payable...................... 26,559 162,207 98,363
Accrued liabilities................... 508,719 3,340,184 129,666
----------- ----------- --------
Net cash provided by (used in) operating
activities............................... 8,029,168 (15,794,652) 720,066
</TABLE>
<TABLE>
<S> <C> <C> <C>
Investing activities
Purchases of property and equipment.......... (1,148,045) (3,451,885) (196,512)
Acquisition of businesses.................... -- (22,932,110) --
---------- ----------- --------
Net cash used in investing activities........ (1,148,045) (26,383,995) (196,512)
</TABLE>
<TABLE>
<S> <C> <C> <C>
Financing activities
Net borrowings from (payments to) Parent..... (6,909,496) 42,567,539 (524,898)
---------- ---------- --------
Net cash provided by (used in) financing
activities.................................. (6,909,496) 42,567,539 (524,898)
---------- ---------- --------
Net increase (decrease) in cash and cash
equivalents................................. (28,373) 388,892 (1,344)
Cash and cash equivalents at beginning of
period...................................... 390,142 1,250 2,594
---------- ---------- --------
Cash and cash equivalents at end of period... $ 361,769 $ 390,142 $ 1,250
========== ========== ========
</TABLE>
See accompanying notes.
7
<PAGE>
PARAMEDICAL SERVICES OF AMERICA
Notes to Financial Statements
September 30, 1999
1. Summary of Significant Accounting Policies
Description of Business
Paramedical Services of America (the "Company") is a wholly-owned subsidiary
of Pediatric Services of America, Inc. (the "Parent"). The Company provides a
broad range of paramedical testing services, including taking personal health
histories, collecting blood and urine samples, administering physical
examinations and performing electrocardiogram examinations on insurance
applicants. Information gathered in these activities is used by insurance
underwriters to assess risks and make informed decisions.
The Securities and Exchange Commission, in Staff Accounting Bulletin Number
55 ("SAB 55"), requires that historical financial statements of a subsidiary
include certain expenses incurred by the Parent on its behalf. These expenses
include officer and employee salaries, rent or depreciation, accounting and
legal services, other selling, general and administrative expenses and other
such expenses. The financial statements of the Company include such
adjustments.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and such differences may be
material to the financial statements.
Cash and Cash Equivalents
The Company considers highly liquid investments with original maturities of
less than ninety days to be cash equivalents.
Accounts Receivable
Gross accounts receivable includes $9,365,000 and $17,190,000 for which
services have been rendered but the amounts were unbilled as of September 30,
1999 and 1998, respectively.
Property and Equipment
Property and equipment are stated at cost and are depreciated on the
straight-line method over the related asset's estimated useful life, generally
three to ten years. The cost of repairs and maintenance is charged to expense
as incurred.
Goodwill
Goodwill represents the excess of the purchase price of acquired businesses
over the fair value of net assets acquired and is being amortized using the
straight-line method over 20 years. The carrying value of goodwill is reviewed
on an ongoing basis to determine if the facts and circumstances suggest that it
may be impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the undiscounted cash flows of the entity
acquired over the remaining amortization period, the Company's carrying value
of the goodwill and related assets will be reduced to their fair value.
Revenues
Revenues from services rendered are recognized when services are performed.
8
<PAGE>
PARAMEDICAL SERVICES OF AMERICA
NOTES TO FINANCIAL STATEMENTS -- (Continued)
1. Summary of Significant Accounting Policies -- (Continued)
Income Taxes
The Company has been included in the consolidated federal income tax return
of the Parent, as required in the applicable statutes, for the fiscal years
ended September 30, 1999, 1998 and 1997. The tax provision included in the
accompanying financial statements has been presented as if the Company filed a
separate tax return for all periods presented, and has been accounted for
under the provisions of SAB 55 and Statement of Financial Accounting Standards
No. 109 ("SFAS 109"), "Accounting for Income Taxes." SFAS 109 requires the
liability method to be used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes and are measured using
the enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
Concentration of Credit Risk
The Company's accounts receivable are due primarily from insurance
companies. No one customer accounts for more than 10% of revenues.
Fair Value of Financial Instruments
For all financial instruments, at September 30, 1999 and 1998, the carrying
value approximates fair value.
Impact of Recently Issued Accounting Standards
In the first quarter of fiscal year 1997, the Company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." The adoption
of this Statement did not have a material effect on the Company's financial
position or on results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
Statement, which is effective for the first quarter of the Company's fiscal
year ending September 30, 1999 establishes standards for the reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. The adoption of this Statement did not have a
material effect on the Company's financial position or results of operations.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed for Internal Use." The SOP, which was adopted
during fiscal year 1998, requires capitalization of certain costs incurred in
connection with developing or obtaining internal use software. In the prior
and current year, the Company capitalized such costs as incurred. Because the
Company had previously capitalized such costs consistent with the provisions
of SOP 98-1, the adoption of SOP 98-1 did not have a material effect on the
Company's financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is required to be adopted in years beginning
after June 15, 2000. Management does not anticipate that the adoption of this
Statement will have a significant effect on the financial position or results
of operations of the Company.
2. Acquisitions
On December 15, 1997, the Company purchased certain paramedical services
assets of ChoicePoint Services, Inc. ("ChoicePoint") for approximately $21.7
million. Approximately $10.0 million of the purchase price was paid through
the issuance of 495,050 shares of the Parent's common stock. On August 19,
1998, ChoicePoint tendered to the Parent all of its 495,050 shares of the
Parent's common stock for $10.0 million in cash in conjunction with a
contractual stock price protection agreement under the terms of the purchase
9
<PAGE>
PARAMEDICAL SERVICES OF AMERICA
NOTES TO FINANCIAL STATEMENTS -- (Continued)
2. Acquisitions -- (Continued)
agreement between ChoicePoint and the Parent. Goodwill of approximately $20.5
million was recorded by the Company in connection with this acquisition.
On November 11, 1997, the Company purchased the operations of American
Insurance Examiners, Inc. ("AIE") for cash of approximately $1.2 million. No
assets or liabilities of AIE were included in the purchase. Goodwill of
approximately $1.2 million was recorded by the Company in connection with this
acquisition.
The purchase method of accounting was used to record the acquisitions.
Accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based on the estimated fair values at the purchase date.
Operating results for the acquired companies have been included in the
Company's results of operations from the date of purchase. All amounts related
to the acquisitions were recorded on the Company's financial statements.
In conjunction with the Company's continual assessment of the estimated
useful life of goodwill, in April 1999, management reduced the estimated life
from 25-30 years to 20 years. The Company accounted for this change
prospectively.
3. Property and Equipment
Property and equipment consists of the following as of September 30, 1999
and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Computer software and equipment..................... $ 5,767,072 $4,822,449
Furniture and fixtures.............................. 666,066 466,902
Leasehold improvements.............................. 40,583 --
----------- ----------
6,473,721 5,289,351
Less: accumulated depreciation...................... (1,449,012) (447,774)
----------- ----------
Property and equipment, net......................... $ 5,024,709 $4,841,577
=========== ==========
</TABLE>
4. Lease Commitments
The Company leases office facilities and certain equipment. Rental expense
under these operating leases was approximately $2,873,000, $2,444,000 and
$157,000 for the years ended September 30, 1999, 1998 and 1997, respectively.
Future commitments under noncancelable operating leases outstanding as of
September 30, 1999, are as follows:
<TABLE>
<S> <C>
2000............................................................. $1,943,863
2001............................................................. 1,520,322
2002............................................................. 1,023,648
2003............................................................. 635,956
2004 and thereafter.............................................. 391,538
----------
Total minimum lease payments..................................... $5,515,327
==========
</TABLE>
5. Income Taxes
Income taxes are calculated on a separate return basis as if the Company had
not been included in a consolidated income tax return with the Parent. If the
Company were to calculate income taxes based on a tax sharing agreement between
the Company and the Parent, the resulting current and deferred income tax
amounts could be different than the amounts disclosed.
10
<PAGE>
PARAMEDICAL SERVICES OF AMERICA
NOTES TO FINANCIAL STATEMENTS -- (Continued)
5. Income Taxes -- (Continued)
The income tax provision (benefit) for the years ended September 30, 1999,
1998 and 1997 are summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
----------- --------- --------
<S> <C> <C> <C>
Current:
Federal................................... $ (854,523) $ 467,762 $386,760
State..................................... (160,223) 87,706 72,517
----------- --------- --------
(1,014,746) 555,468 459,277
Deferred:
Federal................................... (744,329) (636,695) 95,534
State..................................... (139,562) (119,381) 17,913
----------- --------- --------
(883,891) (756,076) 113,447
----------- --------- --------
$(1,898,637) $(200,608) $572,724
=========== ========= ========
</TABLE>
A reconciliation of the income tax provision to the statutory federal income
tax rate is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- --------- --------
<S> <C> <C> <C>
Statutory rate of 34% applied to pre-tax
income.................................. $(1,710,618) $(193,758) $509,114
State income taxes, net of federal tax
benefit................................. (201,249) (22,795) 59,895
Other, net............................... 13,230 15,945 3,715
----------- --------- --------
$(1,898,637) $(200,608) $572,724
=========== ========= ========
</TABLE>
Deferred income taxes reflect the net effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
September 30,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss................................. $ 644,546 $ --
Accounts receivable................................ 1,376,811 616,115
Accrued liabilities................................ 205,200 417,690
Other.............................................. -- 5,700
---------- ----------
Total deferred tax assets............................ 2,226,557 1,039,505
Deferred tax liabilities:
Fixed assets....................................... (177,468) (100,956)
Intangible assets.................................. (596,710) (370,061)
---------- ----------
Total deferred tax liabilities....................... (774,178) (471,017)
---------- ----------
Net deferred taxes................................... $1,452,379 $ 568,488
========== ==========
</TABLE>
The Company has approximately $2,361,000 of net operating losses for income
tax purposes available to offset future taxable income. Such losses expire in
the year 2019.
11
<PAGE>
PARAMEDICAL SERVICES OF AMERICA
NOTES TO FINANCIAL STATEMENTS -- (Continued)
6. Transactions with Parent
The amounts payable to the Parent included in the balance sheets represent
net balances as the result of various transactions between the Company and its
Parent. There are no terms of settlement associated with the account balances.
The balances are primarily the result of the Company's participation in the
Parent's central cash management program, wherein substantially all the
Company's cash receipts are remitted to the Parent and substantially all cash
disbursements are funded by the Parent. Interest expense in the Statement of
Operations represents an allocation for the cash used to fund the Company's
acquisitions at the Parent's average borrowing rate in effect (10.75% and 7.66%
at September 30, 1999 and 1998, respectively).
The security agreement executed in connection with the Parent's revolving
credit agreement grants the lenders under the revolving credit agreement a
security interest in substantially all the assets of the Company.
An analysis of transactions in the intercompany account for each of three
years in the period ended September 30, 1999 follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ----------
<S> <C> <C> <C>
Balance at beginning of period........ $(42,976,441) $ (408,902) $ (933,800)
Net settlement to (from) Parent....... 9,450,409 (16,631,004) 1,608,941
Parent funding of acquisitions........ -- (22,932,110) --
Share of Parent's current federal
income tax receivable (liability).... 1,014,746 (555,468) (459,277)
Total expenses allocated by Parent.... (3,555,659) (2,448,957) (624,766)
------------ ------------ ----------
Balance at the end of period.......... $(36,066,945) $(42,976,441) $ (408,902)
============ ============ ==========
</TABLE>
The Parent provides various administrative services to the Company including
legal assistance, acquisition analysis, and marketing and advertising services.
It is the Parent's policy to charge these expenses and all other central
operating costs, first on the basis of direct usage when identifiable, with the
remainder allocated on the basis of the net revenues. In the opinion of
management, this method of allocation is reasonable.
7. Employee Savings Plan
The Company's employees participate in a Parent-sponsored contributory
savings plan which qualifies under Section 401(k) of the Internal Revenue Code,
covering all employees of the Company (except, among others, highly compensated
employees defined in the plan, certain employees designated as part-time
employees and employees deemed to be leased employees within the meaning of
certain provisions of the Code). The Parent, at its discretion, may match 33%
of employee contributions up to a maximum of 6% of employee earnings each plan
year. Parent contributions to the 401(k) plan were approximately $105,000,
$83,000 and $7,000 for the years ended September 30, 1999, 1998 and 1997,
respectively.
In October 1997, the Parent amended the 401(k) plan to remove certain
selected management or highly compensated employees earning more than $80,000
annually from being eligible to participate in the 401(k) plan. The Parent
adopted the Pediatric Services of America, Inc. Non-Qualified Deferred
Compensation Plan (the "Non-Qualified Plan") for those employees of the Company
and the Parent. Participants in the Non-Qualified Plan elect the amount of pay
they wish to defer up to a maximum percentage of compensation for the tier to
which the employee is a member. Maximum deferrals range from 10% to 100% of
compensation. The Parent may contribute to the Non-Qualified Plan an amount
equal to a percentage of the amount each participant contributes to the Plan.
Parent contributions to the Non-Qualified Plan were approximately $0 and $1,800
for the years ended September 30, 1999 and 1998, respectively. On March 19,
1999, the Parent terminated the Non-Qualified Plan and distributed the
contributions to those employees that participated in the Non-Qualified Plan.
12
<PAGE>
PARAMEDICAL SERVICES OF AMERICA
NOTES TO FINANCIAL STATEMENTS -- (Continued)
8. Commitments and Contingencies
As of September 30, 1999, the Parent's professional liability policy, which
covers the Company, is on a claims-made basis. Should this claims-made policy
not be renewed or replaced with equivalent insurance, claims based on
occurrences during its term but asserted subsequently would be uninsured.
The Company is subject to claims and suits arising in the ordinary course of
business. In the opinion of management, the ultimate resolution of such pending
legal proceedings will not have a material adverse effect on the Company's
financial position.
9. Year 2000 Date Conversion (Unaudited)
The Company recognizes the need to ensure its operations will not be
adversely impacted by year 2000 software failures. The Company has implemented
information systems that are expected to function properly with respect to
dates in the year 2000 and thereafter. The Company is also continuing to
monitor its Year 2000 plan to identify any areas of risk not previously
identified. The Company has completed formal communications with its
significant suppliers and large customers to determine the extent to which the
Company is vulnerable to those third parties' failure to remediate their own
Year 2000 Issues. There can be no assurance that the systems of other companies
on which the Company relies will be Year 2000 ready and would not have an
adverse effect on the Company. The cost of Year 2000 compliance was not
material to the Company's financial statements.
The Company believes they have taken the actions necessary to ensure that
its systems and applications will appropriately recognize and process
transactions in the year 2000 and beyond. The Company is not currently aware of
any Year 2000 compliance problems relating to its systems that would have a
material adverse effect on its results of operations or financial condition.
However, there can be no assurance that the Company will not discover Year 2000
compliance problems in its systems that will require substantial revision.
10. Subsequent Events
On November 1, 1999, the Parent completed the sale of the assets of the
Company to Hooper Holmes, Inc. pursuant to an asset purchase agreement. The
aggregate purchase price is $81 million, subject to an adjustment as set forth
in the asset purchase agreement. The purchase price was determined by arms-
length negotiations between the parties.
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
ChoicePoint Inc.:
We have audited the accompanying statement of direct revenues and direct
operating expenses of the paramedical exam business of ChoicePoint Inc. (PMI)
for the year ended December 31, 1997. This statement is the responsibility of
ChoicePoint Inc.'s management. Our responsibility is to express an opinion on
this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The operations covered by the statement referred to above were part of
ChoicePoint Inc. in 1997 and had no separate legal status or existence. The
accompanying financial statement has been prepared for the purpose of
substantially complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in filings by Hooper Holmes, Inc. as
described in Note 1 and are not intended to be a complete presentation of the
financial position, results of operations and cash flows of PMI. Further, PMI
was sold by ChoicePoint, Inc. to Pediatric Services of America, Inc. in
December 1997, effectively at the close of the operations presented in the
financial statement.
In our opinion, the statement referred to above presents fairly, in all
material respects, PMI's direct revenues and direct operating expenses for the
year ended December 31, 1997 pursuant to the basis of presentation described in
Note 1, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Short Hills, New Jersey
October 8, 1999
14
<PAGE>
PMI
Statement of Direct Revenues and Direct Operating Expenses
Year ended December 31, 1997
(Dollars in Thousands)
<TABLE>
<S> <C>
Direct revenues.................................................... $55,290
-------
Direct operating expenses:
Cost of operations............................................... 43,283
Selling, general and administrative expenses..................... 15,081
-------
Total direct operating expenses................................ 58,364
-------
Direct revenues less than direct operating expenses................ $(3,074)
=======
</TABLE>
See accompanying notes to the statement of direct revenues and direct operating
expenses.
15
<PAGE>
PMI
NOTES TO STATEMENT OF DIRECT REVENUES AND DIRECT OPERATING EXPENSES
December 31, 1997
(1) Basis of Presentation
On August 30, 1999, Hooper Holmes, Inc. (Hooper) entered into a definitive
agreement (the Acquisition) to purchase the assets of Paramedical Services of
America, Inc. (PSA), the Atlanta, Georgia based paramedical examination
subsidiary of Pediatric Services of America, Inc. (the Sellers). The Sellers
purchased the paramedical exam business of ChoicePoint Inc. (PMI or The
Company) in December 1997 and, therefore, for periods prior to that date, PMI
was not operated as part of the PSA business being acquired by Hooper. The
accompanying statement presents the direct revenues and direct operating
expenses of the PMI business as it was operated by ChoicePoint Inc. in 1997
(the sale to PSA occurred in mid December; however, the accompanying results of
operations are assumed to be for the full year 1997). The acquisition by Hooper
is expected to be consummated in November 1999.
The statement of direct revenue and direct operating expenses has been
prepared to substantially comply with the rules and regulations of the
Securities and Exchange Commission for business combinations accounted for as a
purchase and are not intended to be a complete presentation of the financial
position, results of operations, and cash flows as if the PMI business had
operated as a stand alone company. The accompanying statement, rather than full
audited financial statements, is presented because the PMI business was not
operated as a stand alone business by ChoicePoint Inc. or, with respect to the
Sellers, was not operated within the PSA business for periods prior to December
31, 1997.
On August 7, 1997, Equifax Inc. (Equifax) spun-off the business conducted
through its Insurance Services Group to Equifax shareholders (the Spinoff)
through the formation of ChoicePoint Inc., of which PMI was a part. The 1997
consolidated financial statements of ChoicePoint Inc. had been prepared on the
historical cost basis and presented the company's financial position, results
of operations and cash flows as derived from Equifax's historical financial
statements where applicable. The information included in the accompanying
statement has been obtained from ChoicePoint Inc.'s consolidated financial
records and is also presented utilizing Equifax's historical cost basis of
accounting.
ChoicePoint Inc. and Equifax (through certain transition services agreements
as a result of the Spinoff) provided various services to the PMI business
including, but not limited to, general management, facilities management, human
resources, data processing, payroll and employee benefits administration,
financial, legal, tax, insurance administration, telecommunications and other
miscellaneous services. Expenses related to these services have been allocated
to the PMI business in the accompanying statement of direct revenues and direct
operating expenses first on the basis of a direct usage when identifiable, with
the remainder allocated primarily on the basis of a percentage of revenue or
other systematic methodologies. In the opinion of management of ChoicePoint
Inc., these methods of allocating indirect costs are reasonable; however, they
do not necessarily equal the costs that the PMI business would have incurred on
a stand-alone basis. Therefore, the financial information included herein may
not necessarily reflect the results of operations of the PMI business on a
stand-along basis in the future. Interest elements and tax charges have not
been included in the statement as these amounts were not specifically
identifiable to PMI.
Cost of operations include allocated costs of approximately $10 million and
selling, general and administrative expense are primarily all allocations of
corporate overhead costs.
Under ChoicePoint Inc.'s centralized cash management system, cash
requirements of PMI were generally provided directly by ChoicePoint Inc., and
cash generated by PMI was generally remitted directly to ChoicePoint Inc.
Transaction systems (e.g., payroll, employee benefits, accounts receivable,
accounts payable) used to record and account for cash transactions are provided
by centralized ChoicePoint Inc. organizations outside the defined scope of PMI.
Most of the corporate systems are not designed to track asset/liabilities and
receipt/payments on a product specific basis. Given these constraints a
statement of cash flows could not be prepared.
16
<PAGE>
PMI
NOTES TO STATEMENT OF DIRECT REVENUES AND DIRECT OPERATING EXPENSES --
(Continued)
(2) Summary of Significant Accounting Policies
Revenue Recognition
Revenue from services rendered are recognized when services are performed.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
these estimates.
(3) Allocated Costs
As mentioned in note 1, PMI was a component of ChoicePoint Inc. As such,
certain common costs have been allocated among different business units of
ChoicePoint Inc. Cost of operations includes approximately $10 million of
allocated costs, primarily representing the costs of maintaining various branch
offices throughout the U.S. which support both the PMI business and the other
life and health insurance services businesses of ChoicePoint Inc. The PMI
business represents approximately 38% of the ChoicePoint life and health
insurance services business total revenue. Allocations are based upon
proportionate sales volume and headcount figures of the life and health
businesses. Selling, general and administrative expenses are primarily all
allocated costs. The costs include allocations of corporate information system
charges, salaries and other overhead costs of the corporate office of
ChoicePoint Inc. and are determined primarily based upon proportionate sales
volume and headcount figures of PMI compared to the remainder of all of
ChoicePoint's other business units. These costs also include certain costs
charged to ChoicePoint Inc. by Equifax after the spinoff for transition
services.
In addition, PMI purchases prefabricated blood/urine test kits from another
division of ChoicePoint Inc. The kits are charged to PMI at actual cost plus a
15% mark up. In 1997, the total cost of such kits amounted to approximately
$3.2 million, which is included in cost of operations on the accompanying
statement of direct revenues and direct operating expenses.
17
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following presents certain unaudited pro forma condensed consolidated
financial information of Hooper Holmes for the periods as indicated. The
unaudited pro forma condensed consolidated financial information gives effect
to the PSA acquisition which occurred on November 1, 1999 and the related bank
debt financing, as if such transactions had occurred on January 1, 1998 for
purposes of the pro forma statements of income for the year ended December 31,
1998 and the nine-month period ended September 30, 1999, and on September 30,
1999 for purposes of the pro forma balance sheet as of September 30, 1999. The
pro forma financial information was prepared using the assumptions described
below and in the related notes thereto.
The unaudited pro forma condensed consolidated financial information
reflects pro forma adjustments that are based upon available information and
certain assumptions that we believe are reasonable. The pro forma financial
information does not purport to represent our results of operations or
financial position that would have resulted had the transactions to which pro
forma effect is given been consummated as of the dates or for the periods
indicated. In preparing the pro forma financial information, we believe we have
utilized reasonable methods to conform the basis of presentation. The pro forma
financial statements have not been adjusted for certain cost savings that we
may realize in connection with the integration of PSA.
For purposes of the unaudited pro forma condensed consolidated statements of
income, our historical statement of income for the year ended December 31, 1998
was combined with PSA's historical statement of operations for the fiscal year
ended September 30, 1998. In addition, our historical statement of income for
the nine-month period ended September 30, 1999 was combined with PSA's
historical statement of operations for the same period.
The unaudited pro forma financial statements and accompanying notes should
be read in conjunction with the historical financial statements of Hooper
Holmes as reported in its annual report on Form 10-K for the fiscal year ended
December 31, 1998 and its quarterly report on Form 10-Q for the nine months
ended September 30, 1999, and the historical financial statements of PSA
included herein.
Overview of Acquisition and Financing
We acquired the assets of PSA as of November 1, 1999. We accounted for this
acquisition using the purchase method of accounting. Accordingly, the excess of
the purchase price over the fair value of identifiable net tangible and
intangible assets acquired, representing goodwill, is included as an intangible
asset. The consideration and allocation of the purchase price are summarized
below (dollars in thousands):
<TABLE>
<CAPTION>
Purchase Price Consideration:
<S> <C>
Proceeds from term loan.......................................... $65,000
Cash............................................................. 15,030
Liability assumed (vacation accrual)............................. 529
Accrued expenses, including certain PSA facility exit costs and
certain legal, accounting and other acquisition costs........... 3,834
-------
$84,393
=======
<CAPTION>
Allocation of Purchase Price:
<S> <C>
Accounts receivable.............................................. $12,726
Other assets..................................................... 546
Property, plant and equipment (1)................................ 1,496
Intangible assets (2)............................................ 11,600
Goodwill ........................................................ 58,025
-------
$84,393
=======
</TABLE>
- --------
(1) Property, plant and equipment excludes the historical net asset value
of certain capitalized software which is not going to be utilized by
Hooper Holmes to conduct on-going operations of the business.
18
<PAGE>
(2) Intangible assets include the following components (dollars in
thousands):
<TABLE>
<S> <C>
Customer base....................................................... $ 4,600
Contract affiliate network.......................................... 3,200
Covenant not to compete............................................. 2,600
Assembled workforce................................................. 1,200
-------
$11,600
=======
</TABLE>
On October 29, 1999, we entered into a $100 million Amended and Restated
Revolving Credit and Term Loan Agreement with a group of bank lenders. This
senior credit facility consists of a $65 million, six-year term loan, and a $35
million, three-year revolving loan. We used the $65 million term loan solely in
connection with the purchase of the assets. The term loan requires interest
payments only during the first 18 months, five principal payments of $10
million each on April 30, 2001 through 2005 and a final payment of $15 million
on January 31, 2006. We have not borrowed under the $35 million revolving loan.
Both the term loan and the revolving loan bear interest at either the prime
rate minus 1/2% to plus 1/4% or LIBOR plus 3/4% to 1 3/4%, depending on the
ratio of our consolidated funded debt (as defined in the senior credit
facility) to our earnings before interest, taxes, depreciation and
amortization. Interest is payable on the term loan at an effective annual
interest rate of 7.535% for the period from November 4, 1999 through February
4, 2000. We can prepay either loan without penalty at any time.
Prior to completing the PSA acquisition, we expected to close and
consolidate a number of branch offices and terminate a number of PSA's contract
affiliates. We were also aware that some of PSA's contract affiliates had
either terminated their relationship with PSA or planned not to continue as our
contract affiliate after the acquisition was completed. Through December 31,
1999, our branch office closings and consolidations, and contract affiliate
terminations were completed at a level consistent with our expectations.
Assuming the acquisition, branch office closings and consolidations, and
contract affiliate terminations had been completed on October 1, 1998, we
believe approximately $21 million of PSA's reported $83 million in revenue for
fiscal year 1999 would not have been achieved.
Immediately upon closing, we began implementing a detailed integration plan,
which, in addition to the branch closings and consolidations, and contract
affiliate terminations described above, includes the following key tasks
relating to the PSA business:
. consolidating and relocating branch office personnel;
. reducing selling, general and administrative expenses, including
terminating PSA sales personnel;
. updating system hardware and software;
. transferring billing and collection systems; and
. implementing our quality assurance program.
We believe that our integration efforts will improve the operating margin of
the PSA business, which has historically been significantly less than ours. No
adjustments for either the revenue decrease described above or the results of
these tasks have been reflected in these pro forma statements of income.
19
<PAGE>
HOOPER HOLMES, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Income
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
1999
---------------------------------------------
Historical
-----------------
Hooper Pro Forma Pro Forma
Holmes PSA Adjustments Consolidated
-------- ------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues........................ $161,241 $62,272 $ -- $223,513
Cost of operations.............. 111,183 46,415 -- 157,598
-------- ------- ------- --------
Gross profit.................. 50,058 15,857 -- 65,915
-------- ------- ------- --------
Selling, general and administra-
tive expenses.................. 24,822 18,060 3,007 (1) 43,814
(675)(2)
(1,400)(3)
-------- ------- ------- --------
Operating income (loss)....... 25,236 (2,203) (932) 22,101
-------- ------- ------- --------
Other income (expense)
Interest expense.............. (30) (1,571) (3,673)(4) (3,703)
1,571 (5)
Interest income............... 749 -- (451)(4) 298
Other income, net............. 145 -- -- 145
-------- ------- ------- --------
864 (1,571) (2,553) (3,260)
-------- ------- ------- --------
Income (loss) before income
taxes........................ 26,100 (3,774) (3,485) 18,841
Income taxes (benefit).......... 11,539 (1,424) (1,825)(6) 8,290
-------- ------- ------- --------
Income (loss) from continuing
operations................... $ 14,561 $(2,350) $(1,660) $ 10,551
======== ======= ======= ========
Income per share from continuing
operations:
Basic......................... $ .51 $ .37
Diluted....................... $ .48 $ .34
======== ========
Weighted average number of
shares:
Basic......................... 28,678 28,678
Diluted....................... 30,642 30,642
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income.
20
<PAGE>
HOOPER HOLMES, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Income
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
---------------------------------------------
Historical
-----------------
Hooper Pro Forma Pro Forma
Holmes PSA (a) Adjustments Consolidated
-------- ------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues........................ $185,210 $90,109 $ -- $275,319
Cost of operations.............. 129,261 66,770 -- 196,031
-------- ------- ------- --------
Gross profit.................. 55,949 23,339 -- 79,288
-------- ------- ------- --------
Selling, general and
administrative expenses........ 30,357 24,007 4,009 (1) 56,523
(375)(2)
(1,475)(3)
-------- ------- ------- --------
Operating income (loss)....... 25,592 (668) (2,159) 22,765
-------- ------- ------- --------
Other income (expense)
Interest expense.............. (3) (1,226) (4,898)(4) (4,901)
1,226 (5)
Interest income............... 768 -- (601)(4) 167
Other income, net............. (88) -- -- (88)
-------- ------- ------- --------
677 (1,226) (4,273) (4,822)
-------- ------- ------- --------
Income (loss) before income
taxes........................ 26,269 (1,894) (6,432) 17,943
Income taxes (benefit).......... 12,084 (667) (3,163)(6) 8,254
-------- ------- ------- --------
Income (loss) from continuing
operations................... $ 14,185 $(1,227) $(3,269) $ 9,689
======== ======= ======= ========
Income per share from continuing
operations:
Basic......................... $ .50 $ .34
Diluted....................... $ .48 $ .32
======== ========
Weighted average number of
shares:
Basic......................... 28,121 28,121
Diluted....................... 29,860 29,860
</TABLE>
- --------
(a) The audited historical statement of operations data for the year ended
September 30, 1998 has been adjusted to reflect an estimate of the results
of operations of the PMI business, acquired by PSA through a "purchase" in
December 1997, for the three-month period ended December 1997. Also
included was an adjustment for additional goodwill amortization of $250
and interest expense of $302.
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income.
21
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, 1999 December 31, 1998
------------------ -----------------
debit (credit)
(in thousands)
<S> <C> <C>
(1) Adjustments to amortization expense
for the excess cost over fair value
of net assets acquired and other
intangible assets. Excess costs over
fair value of net assets acquired
(goodwill) and other intangible
assets are being amortized on a
straight-line basis over their
estimated useful lives which is 25
years for goodwill, and 5 to 9 years
for other intangible assets......... $ 3,007 $ 4,009
(2) Adjustments to eliminate certain
cost allocations included in the PSA
historical financial results from
its parent company for services that
will be provided directly by Hooper
Holmes current personnel (primarily
parent company corporate salary
expense and certain information
system consulting costs for a system
that will not be utilized by us). As
such, allocations are not reasonable
to be included in pro forma combined
results............................. $ (675) $ (375)
(3) Adjustments to exclude depreciation
and amortization expense recorded
for PSA for property, plant and
equipment and goodwill not acquired
by us............................... $(1,400) $(1,475)
(4) Adjustments to eliminate certain
historical interest income on cash
balances used to fund the
acquisition (4% investment rate
assumed) and to reflect pro forma
interest expense on the term loan at
an interest rate of 7.535%,
consistent with the interest rate
currently in effect. A .125%
increase or decrease in LIBOR would
have resulted in a $61 and $81
adjustment to interest expense for
the nine-month period ended
September 30, 1999 and the year
ended December 31, 1998,
respectively. ......................
Reduced interest income................ $ 451 $ 601
Additional interest expense............ $ 3,673 $ 4,898
(5) Adjustment to eliminate interest
expense allocated to PSA in its
historical audited financial
statements from its parent on cash
utilized by PSA on a 1997
acquisition......................... $(1,571) $(1,226)
(6) Represents the income tax effect on
increased interest expense,
additional amortization and other
adjustments, as well as combining
the historical results of PSA with
Hooper Holmes. The combined
effective income tax rates of
approximately 44% and 46%, for the
nine-month period ended September
30, 1999 and the year ended December
31, 1998, are consistent with our
historical rate as the amortization
of goodwill and other pro forma
adjustments will be deductible for
income tax purposes................. $(1,825) $(3,163)
</TABLE>
22
<PAGE>
HOOPER HOLMES, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
September 30, 1999
-------------------------------------------------------------
Historical Pro Forma Adjustments
---------------- ----------------------------
Hooper Purchase Pro Forma
Holmes PSA Eliminations (1) Adjustments Consolidated
-------- ------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 40,547 $ 362 $ (362) $(15,030)(2) $ 25,517
Accounts receivable.... 23,719 12,726 -- -- 36,445
Other current assets... 6,627 3,042 (2,495) -- 7,174
-------- ------- -------- -------- --------
Total current
assets.............. 70,893 16,130 (2,857) (15,030) 69,136
Net property, plant and
equipment.............. 8,195 5,025 -- (3,529)(3) 9,691
Goodwill, net........... 15,913 22,173 (22,173) 58,025 (4) 73,938
Intangible assets, net.. 5,621 -- -- 11,600 (5) 17,221
Other assets............ 944 -- -- -- 944
-------- ------- -------- -------- --------
Total assets......... $101,566 $43,328 $(25,030) $ 51,066 $170,930
======== ======= ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Note payable........... $ 450 $ -- $ -- $ -- $ 450
Accounts payable....... 7,242 1,094 (1,094) -- 7,242
Accrued expenses....... 8,026 5,876 (5,346) 3,834 (6) 12,390
-------- ------- -------- -------- --------
Total current
liabilities......... 15,718 6,970 (6,440) 3,834 20,082
Deferred income taxes... 2,013 774 (774) -- 2,013
Minority interest....... 203 -- -- -- 203
Long-term debt, less
current maturities..... -- -- -- 65,000 (2) 65,000
-------- ------- -------- -------- --------
Total liabilities.... 17,934 7,744 (7,214) 68,834 87,298
Total stockholders'
equity................. 83,632 35,584 (17,816) (17,768)(7) 83,632
-------- ------- -------- -------- --------
Total liabilities and
stockholders'
equity.............. $101,566 $43,328 $(25,030) $ 51,066 $170,930
======== ======= ======== ======== ========
</TABLE>
- --------
(1) To eliminate all assets and liabilities of PSA not purchased by Hooper
Holmes.
(2) To record cash paid of $15,030 and debt incurred of $65,000 to fund the
acquisition of PSA. Deferred financing costs relating to such borrowings
were immaterial.
(3) To adjust property, plant and equipment to fair market value.
(4) To record acquired goodwill.
(5) To record acquired intangible assets. These adjustments are based on the
results of third-party appraisals already completed and the results of
other analyses. We do not expect changes to these estimates based on our
final analysis to be material.
(6) To accrue certain PSA facility exit costs and certain other legal,
accounting, and other acquisition costs.
(7) To eliminate historical PSA equity.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to the report to be signed on its
behalf by the undersigned hereunto duly authorized.
Hooper Holmes, Inc.
/s/ Fred Lash
By: _________________________________
Fred Lash
Senior Vice President, Chief
Financial Officer & Treasurer
Date: January 14, 2000
24
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
23.1 Consent of Ernst & Young LLP
23.2 Consent of KPMG LLP
</TABLE>
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the use of our report dated December 10, 1999, with respect to
the financial statements of Paramedical Services of America included in the
Current Report on Form 8-K/A of Hooper Holmes, Inc. dated January 14, 2000.
/s/ Ernst & Young LLP
Atlanta, GA
January 13, 2000
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Hooper Holmes, Inc.
We consent to the inclusion of our report dated October 8, 1999, with
respect to the statement of direct revenue and direct operating expenses of the
paramedical exam business of ChoicePoint Inc. (PMI) for the year ended December
31, 1997, which report appears in the Form 8-K/A of Hooper Holmes, Inc. dated
January 14, 2000.
/s/ KPMG LLP
Short Hills, New Jersey
January 14, 2000
