<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, 2000
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, 2000
- --------------------------------- --------------------------------
Common stock, $.04 par value 66,103,288
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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 March 31, 2000 and
December 31, 1999
Consolidated Statements of Income 2
for the Three Months Ended
March 31, 2000 and 1999
Consolidated Statements of Cash Flows 3
for the Three Months Ended
March 31, 2000 and 1999
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
<PAGE>
Hooper Holmes, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
03/31/00 12/31/99
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 84,409,516 $ 41,363,019
Accounts receivable 39,185,880 36,836,412
Other current assets 5,585,234 5,233,884
------------ ------------
Total current assets 129,180,631 83,433,315
Property, plant and equipment:
Land and land improvements 618,972 618,972
Building 4,504,324 4,502,638
Furniture, fixtures and equipment 21,364,196 21,020,009
Leasehold improvements 328,983 324,328
------------ ------------
Total property, plant and equipment 26,816,475 26,465,947
Less: Accumulated depreciation 16,682,616 16,075,132
------------ ------------
Net property, plant and equipment 10,133,859 10,390,815
Goodwill, net 72,481,980 73,276,965
Intangible assets, net 15,684,597 16,523,290
Other assets 640,145 846,943
------------ ------------
Total assets $228,121,212 $184,471,328
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt $ 101,784 $ 142,953
Accounts payable 11,838,423 11,543,665
Accrued expenses:
Insurance benefits 1,355,245 1,559,552
Salaries, wages and fees 414,526 3,209,031
Payroll and other taxes 492,325 357,029
Income taxes payable 4,587,425 5,033,946
Discontinued operations 289,011 293,736
Other 3,182,493 5,217,684
------------ ------------
Total current liabilities 22,261,232 27,357,596
Long term debt, less current maturities 15,307,047 65,307,047
Deferred income taxes 1,753,648 1,911,027
Minority interest 204,302 203,962
Stockholders' equity:
Common stock, par value $.04 per share; authorized 240,000,000 2,652,478 2,335,642
shares issued 66,311,952 in 2000, and 58,391,052 in 1999
Additional paid-in capital 127,482,843 36,357,092
Retained earnings 59,432,302 51,971,602
------------ ------------
189,567,623 90,664,336
Less: Treasury stock at cost, 208,664 shares in 2000 and 1999 972,640 972,640
------------ ------------
Total stockholders' equity 188,594,983 89,691,696
------------ ------------
Total liabilities and stockholders' equity $228,121,212 $184,471,328
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-1-
<PAGE>
Hooper Holmes, Inc.
Consolidated Statements Of Income
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 85,772,679 $ 52,939,420
Cost of operations 59,973,330 35,890,332
------------ ------------
Gross profit 25,799,349 17,049,088
Selling, general and administrative expenses 11,627,736 8,570,415
------------ ------------
Operating income 14,171,613 8,478,673
Other income (expense):
Interest expense (919,726) (9,528)
Interest income 642,583 205,477
Other Income, net (39,214) 3,186
------------ ------------
(316,357) 199,135
------------ ------------
Income before income taxes 13,855,256 8,677,808
Income taxes 5,958,000 3,927,000
------------ ------------
Net income $ 7,897,256 $ 4,750,808
============ ============
Earnings per share:
Basic 0.13 0.08
Diluted $ 0.12 $ 0.08
============ ============
Weighted average number of shares: (1)
Basic 60,944,892 56,783,466
Diluted 64,953,758 60,569,312
============ ============
</TABLE>
(1) Adjusted to reflect a two for one stock split effective April 26, 2000.
See accompanying notes to unaudited consolidated financial statements.
-2-
<PAGE>
Hooper Holmes, Inc.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,897,256 $ 4,750,808
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,251,561 1,074,967
Minority interest 0 (40,247)
Deferred tax benefit (157,378) (168,629)
Issuance of stock awards 153,750 64,050
Loss on sale of fixed assets 2,030 0
Change in assets and liabilities:
Accounts receivable (2,349,468) (6,420,205)
Other current assets (144,552) (275,114)
Accounts payable and accrued expenses (1,823,857) 2,289,041
------------ ------------
Net cash provided by operating activities 5,829,342 1,274,671
------------ ------------
Cash flows from investing activities:
Business acquisition, net of cash acquired 0 (177,792)
Capital expenditures (362,957) (597,958)
------------ ------------
Net cash used in investing activities (362,957) (775,750)
------------ ------------
Cash flows from financing activities:
Issuance of long term debt 0 100,000
Principal payments on long term debt (50,041,169) (100,000)
Proceeds from offering of common stock, net 86,964,126 0
Proceeds related to the exercise of stock options 1,093,711 865,323
Dividends paid (436,556) (353,927)
------------ ------------
Net cash provided by financing activities 37,580,112 511,396
------------ ------------
Net increase in cash and cash equivalents 43,046,497 1,010,317
Cash and cash equivalents at beginning of year 41,363,019 29,752,361
------------ ------------
Cash and cash equivalents at end of period $ 84,409,516 $ 30,762,678
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-3-
<PAGE>
HOOPER HOLMES, INC.
Notes to Unaudited Consolidated Financial Statements
March 30, 2000
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, 2000 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" net income 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 (4,008,866 and 3,785,846 for March 31, 2000 and 1999, respectively)
are shares assumed to be issued if outstanding stock options were exercised. All
appropriate share and per share amounts have been restated for the April 26,
2000 two for one stock split.
Note 3: Capital Stock
On February 29, 2000 the Company successfully completed a 3,675,000 share
offering of common stock, at an offering price of $ 25.125 per share and
provided net proceeds of approximately $ 87 million to the Company. In
conjunction with this offering, the Company repaid $50 million of the $65
million borrowed against the term loan used to finance the acquisition of PSA.
The Company declared a two for one stock split effective April 26, 2000.
The net tax benefit derived from the exercise of stock options was $3.2 million,
for the three months ended March 30, 2000. Options exercised during the first
quarter 2000 were 560,900 shares.
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<PAGE>
Item 2
HOOPER HOLMES, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Results of Operation - Three months ended March 31, 2000 compared to
Three months ended March 31, 1999
Revenues for the first quarter 2000 increased 62% to $85.8 million from $52.9
million for the first quarter 1999. This growth resulted in a 58.0% increase in
the number of paramedical examinations performed to 1,054,000 from 667,000, and
is the result of the acquisition of Paramedical Services of America, Inc. (PSA)
on November 1, 1999, a one time positive impact from revenue generated due to a
life insurance regulatory phenomenon referred to a "Triple X," which appears to
have caused a rush to buy certain policies before a rate increase or change in
premium structure went into effect, an increase in services performed per
examination, an increase in the number of Infolink reports to 110,000 from
82,000 and a modest price increase. The increase in Infolink reports resulted
from management reemphasizing branch generation of Infolink reports
The Company's cost of operations for the first quarter of 2000 totaled $60.0
million compared to $35.9 million for the first quarter of 1999. Cost of
operations as a percentage of revenues, increased to 69.9% for the first quarter
of 2000 from 67.8% for the first quarter of 1999. This percentage increase is
primarily due to slightly higher direct costs associated with contractor
affiliate revenue acquired as a result of the PSA acquisition.
Selling, general and administrative expenses totaled $11.6 million for the first
quarter of 2000 compared to $ 8.6 million for the first quarter of 1999, and as
a percentage of revenue totaled 13.6% compared to 16.2%, respectively. This
dollar increase is attributable to costs associated with the acquisition of PSA,
largely, amortization of goodwill and intangibles, and additional corporate
resources needed to handle the PSA acquisition.
Accordingly, the Company's operating income improved to $14.2 million from $8.5
million and as a percentage of revenues, increased to 16.5% from 16.0% for the
first quarter of 2000 compared to the first quarter of 1999.
The effective tax rate was 43% and 45% for the quarters ended March 31, 2000 and
1999, respectively. The decrease is the result of increased profitability which
lessened the impact of non-tax deductible goodwill amortization.
Interest expense increased to $.9 million for the first quarter 2000, as a
result of the borrowings against the Company's term loan, used to finance the
acquisition of PSA. Interest income increased to $.6 million, due to higher
levels of invested funds.
Net income and earnings per share for the first quarter of 2000 were $7.9
million or $.12 per diluted share versus $4.8 million or $.08 per diluted share
for the first quarter of 1999. Average diluted shares for the respective periods
were 64,953,758 and 60,569,312.
-5-
<PAGE>
Liquidity and Financial Resources
The Company's primary sources of cash are internally generated funds and cash
and cash equivalents, as well as the company's bank credit facility.
On February 29, 2000 the Company successfully completed a 3,675,000 share
offering of common stock, at an offering price of $ 25.125 per share and
provided net proceeds of approximately $ 87 million to the Company. In
conjunction with this offering, the Company repaid $50 million of the $65
million borrowed against the term loan used to finance the acquisition of PSA.
Net cash provided by operating activities for the first quarter of 2000 was $5.8
million compared to $1.3 million for the first quarter of 1999. In the first
quarter of 2000, the significant sources were net income of $7.9 million, $2.3
million of depreciation and amortization and was partially offset by a $2.3
million increase in accounts receivable, and a $1.8 million decrease in accounts
payable and accrued expenses.
Accounts Receivable increased $2.3 million during the first quarter 2000,
compared to year end 1999, and is primarily due to revenue growth of $9.9
million during the first quarter 2000, compared to the fourth quarter 1999. Days
Sales Outstanding (DSO) for the quarter ended March 31, 2000 was 41.3 days,
compared to 43.7 days for the quarter ended December 31, 1999.
As of March 31, 2000, the Company has outstanding borrowings against the term
loan in the amount of $ 15 million, and has no borrowings against the $ 35
million revolving loan.
The Company's current ratio at the end of March 2000 stood at 5.6:1 as compared
to 3.0:1 at December 31, 1999. Inflation has not, nor is it expected to have a
material impact on the Company's financial results in 2000 and there have been
no material commitments for capital expenditures.
Dividends declared in January 2000 were declared at $.0075 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 operations, will provide sufficient
capital resources for the foreseeable future.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued statement of
Financial Accounting Standards (SFAS) No. 133. Accounting for Derivative
Instruments and Hedging Activities, which, as amended, becomes effective for our
financial statements beginning January 1, 2001. SFAS No. 133 requires a company
to recognize all derivative instruments as assets or liabilities in its balance
sheet and measure them at fair value. The Company does not expect the adoption
of this Statement to have a material impact on its consolidated financial
statements.
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<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, 2000
BY: /s/ James M. McNamee
----------------------------------
James M. McNamee
Chairman, President and
Chief Executive Officer
BY: /s/ Fred Lash
----------------------------------
Fred Lash
Senior Vice President
Chief Financial Officer &
Treasurer
-7-
<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, 2000 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR
THE PERIOD ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 84,409,516
<SECURITIES> 0
<RECEIVABLES> 40,195,875
<ALLOWANCES> 1,009,995
<INVENTORY> 0
<CURRENT-ASSETS> 129,180,631
<PP&E> 26,816,475
<DEPRECIATION> 16,682,616
<TOTAL-ASSETS> 228,121,212
<CURRENT-LIABILITIES> 22,261,232
<BONDS> 0
2,652,478
0
<COMMON> 0
<OTHER-SE> 185,942,505
<TOTAL-LIABILITY-AND-EQUITY> 228,121,212
<SALES> 85,772,679
<TOTAL-REVENUES> 85,772,679
<CGS> 59,973,330
<TOTAL-COSTS> 59,973,330
<OTHER-EXPENSES> 11,627,736
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 919,727
<INCOME-PRETAX> 13,855,256
<INCOME-TAX> 5,958,000
<INCOME-CONTINUING> 7,897,256
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,897,256
<EPS-BASIC> .13
<EPS-DILUTED> .12
</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, 1999 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR
THE PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 30,762,678
<SECURITIES> 0
<RECEIVABLES> 23,477,345
<ALLOWANCES> 1,088,716
<INVENTORY> 0
<CURRENT-ASSETS> 60,898,237
<PP&E> 23,095,563
<DEPRECIATION> 14,621,821
<TOTAL-ASSETS> 92,422,803
<CURRENT-LIABILITIES> 20,645,546
<BONDS> 0
2,292,530
0
<COMMON> 0
<OTHER-SE> 66,789,675
<TOTAL-LIABILITY-AND-EQUITY> 92,422,803
<SALES> 52,939,420
<TOTAL-REVENUES> 52,939,420
<CGS> 35,890,332
<TOTAL-COSTS> 35,890,332
<OTHER-EXPENSES> 8,570,415
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,528
<INCOME-PRETAX> 8,677,808
<INCOME-TAX> 3,927,000
<INCOME-CONTINUING> 4,750,808
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,750,808
<EPS-BASIC> .08<F1>
<EPS-DILUTED> .08<F1>
<FN>
<F1>Adjusted to reflect a two for one stock split effective April 26, 2000.
</FN>
</TABLE>
