-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OxO6pI/a8YF+XeEQHA5b7ufzrGMbhjGmiKJIOIh3jGj42l/nJ76UoGFEhUEAX3uY cwX34op8bjQ0dfXsfeJ+Jw== /in/edgar/work/20000814/0000950109-00-003443/0000950109-00-003443.txt : 20000921 0000950109-00-003443.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950109-00-003443 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOOPER HOLMES INC CENTRAL INDEX KEY: 0000741815 STANDARD INDUSTRIAL CLASSIFICATION: [8082 ] IRS NUMBER: 221659359 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09972 FILM NUMBER: 698109 BUSINESS ADDRESS: STREET 1: 170 MT AIRY RD CITY: BASKING RIDGE STATE: NJ ZIP: 07920 BUSINESS PHONE: 9087665000 MAIL ADDRESS: STREET 1: 170 MT AIRY ROAD CITY: BASKING RIDGE STATE: NJ ZIP: 07920 10-Q 1 0001.txt FORM 10-Q 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 June 30, 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 June 30, 2000 - -------------------------------- ------------------------------- Common stock, $.04 par value 66,493,810 HOOPER HOLMES, INC. AND SUBSIDIARIES INDEX Page No. -------- PART I - Financial Information ITEM 1 - Financial Statements Consolidated Balance Sheets 1 as of June 30, 2000 and December 31, 1999 Consolidated Statements of Income 2 for the Six Months Ended June 30, 2000 and 1999 Consolidated Statements of Cash Flows 3 for the Six Months Ended June 30, 2000 and 1999 Notes to Unaudited Consolidated Financial Statements 4 ITEM 2 - Management's Discussion and Analysis 5-8 of Financial Condition and Results of Operations PART II - Other Information Item 4 - Submission of Matters to a vote of Security Holders 9 ITEM 6 - Exhibits and Reports on Form 8-K Exhibit 27 Hooper Holmes, Inc. Consolidated Balance Sheets
06/30/00 12/31/99 ---------------- ---------------- (unaudited) (audited) ASSETS Current Assets: Cash and cash equivalents $ 79,800,904 $ 41,363,019 Accounts receivable 31,757,479 36,836,412 Other current assets 5,154,163 5,233,884 ---------------- -------------- Total current assets 116,712,546 83,433,315 Property, plant and equipment: Land and land improvements 618,972 618,972 Building 4,538,304 4,502,638 Furniture, fixtures and equipment 21,920,512 21,020,009 Leasehold improvements 365,433 324,328 ---------------- -------------- Total property, plant and equipment 27,443,221 26,465,947 Less: Accumulated depreciation 17,286,418 16,075,132 ---------------- -------------- Net property, plant and equipment 10,156,803 10,390,815 Goodwill, net 71,686,995 73,276,965 Intangible assets, net 14,845,904 16,523,290 Other assets 706,797 846,943 ---------------- -------------- Total assets $ 214,109,045 $ 184,471,328 ================ ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long term debt $ 152,676 $ 142,953 Accounts payable 8,196,727 11,543,665 Accrued expenses: Insurance benefits 341,430 1,559,552 Salaries, wages and fees 665,608 3,209,031 Payroll and other taxes 266,022 357,029 Income taxes payable 114,210 5,033,946 Discontinued operations 288,199 293,736 Other 3,878,679 5,217,684 ---------------- -------------- Total current liabilities 13,903,551 27,357,596 Long term debt, less current maturities 3,217,986 65,307,047 Deferred income taxes 1,596,270 1,911,027 Minority interest 181,410 203,962 Stockholders' equity: Common stock, par value $.04 per share; authorized 240,000,000 2,682,899 2,335,642 shares issued 67,072,474 in 2000 and 58,391,052 in 1999. Additional paid-in capital 133,450,488 36,357,092 Retained earnings 63,598,851 51,971,602 ---------------- -------------- 199,732,238 90,664,336 Less: Treasury stock at cost, 578,664 shares in 2000 and 208,664 in 1999 4,522,410 972,640 ---------------- -------------- Total stockholders' equity 195,209,828 89,691,696 ---------------- -------------- Total liabilities and stockholders' equity $ 214,109,045 $ 184,471,328 ================ ==============
See accompanying notes to unaudited consolidated financial statements. -1- Hooper Holmes, Inc. Consolidated Statements Of Income (unaudited)
Three months ended Six months ended June 30, June 30, ---------------------------------- ---------------------------------- 2000 1999 2000 1999 --------------- ---------------- --------------- --------------- Revenues $ 67,581,280 $ 54,471,840 $ 153,353,959 $ 107,411,260 Cost of operations 48,859,666 37,539,973 108,832,996 73,430,305 --------------- ---------------- --------------- --------------- Gross profit 18,721,614 16,931,867 44,520,963 33,980,955 Selling, general and administrative expenses 11,982,483 8,499,170 23,610,219 17,069,585 --------------- ---------------- --------------- --------------- Operating income 6,739,131 8,432,697 20,910,744 16,911,370 Other income (expense): Interest expense (233,022) (9,953) (1,152,749) (19,481) Interest income 1,206,801 233,258 1,849,384 438,735 Other Income, net 419,767 23,054 380,554 26,240 --------------- ---------------- --------------- --------------- 1,393,546 246,359 1,077,189 445,494 --------------- ---------------- --------------- --------------- Income before income taxes 8,132,677 8,679,056 21,987,933 17,356,864 --------------- ---------------- --------------- --------------- Income taxes 3,468,000 3,858,000 9,426,000 7,785,000 --------------- ---------------- --------------- --------------- Net income $ 4,664,677 $ 4,821,056 $ 12,561,933 $ 9,571,864 =============== ================ =============== =============== Earnings per share: Basic 0.07 0.08 0.20 0.17 Diluted $ 0.07 $ 0.08 $ 0.19 $ 0.16 =============== ================ =============== =============== Weighted average number of shares: (1) Basic 66,497,164 57,490,132 63,721,028 57,138,750 Diluted 70,325,995 61,480,354 67,639,877 61,024,832 =============== ================ =============== ===============
(1) Adjusted to reflect a two for one stock split effective April 26, 2000. See accompanying notes to unaudited consolidated financial statements. -2- Hooper Holmes, Inc. Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30, ---------------------------------- 2000 1999 ---------------- ------------- Cash flows from operating activities: Net income $ 12,561,933 $ 9,571,864 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,512,233 2,169,226 Minority interest 0 (114,686) Deferred tax benefit (314,757) (337,256) Issuance of stock awards 153,750 64,050 Loss on sale of fixed assets 17,278 0 Change in assets and liabilities: Accounts receivable 5,078,933 (5,218,332) Other current assets 219,867 (467,694) Accounts payable and accrued expenses (6,847,321) (658,128) ---------------- ------------- Net cash provided by operating activities 15,381,916 5,009,044 ---------------- ------------- Cash flows from investing activities: Business acquisition, net of cash acquired 0 (273,307) Capital expenditures (1,028,142) (960,040) ---------------- ------------- Net cash used in investing activities (1,028,142) (1,233,347) ---------------- ------------- Cash flows from financing activities: Issuance of long term debt 0 100,000 Principal payments on long term debt (62,079,338) (100,000) Proceeds from offering of common stock, net 86,963,634 0 Proceeds from employee stock purchase plan 680,738 551,718 Proceeds related to the exercise of stock options 3,003,531 1,511,311 Treasury stock acquired (3,549,770) 0 Dividends paid (934,684) (714,085) ---------------- ------------- Net cash provided by financing activities 24,084,111 1,348,944 ---------------- ------------- Net increase in cash and cash equivalents 38,437,885 5,124,641 Cash and cash equivalents at beginning of year 41,363,019 29,752,361 ---------------- ------------- Cash and cash equivalents at end of period $ 79,800,904 $ 34,877,002 ================ =============
See accompanying notes to unaudited consolidated financial statements. -3- HOOPER HOLMES, INC Notes to Unaudited Consolidated Financial Statements June 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 and six month period ended June 30, 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: Net Income Per Common Share Basic net income per common share equals net income divided by weighted average common shares outstanding during the period. Diluted net income 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 (3,828,831 and 3,990,222 for the three months ended and 3,918,849 and 3,886,082 for the six months ended June 30, 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 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 $6.6 million for the six months ended June 30, 2000. Options exercised for the six months ended June 30, 2000 were 1,207,300 shares. On May 30, 2000, the Board of Directors authorized the repurchase of 2.5 million shares of the Company's common stock during this calendar year for an aggregate purchase price not to exceed $25 million. For the period ended June 30, 2000, the Company purchased 370,000 shares for a total cost of $3.5 million. -4- Item 2 HOOPER HOLMES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operation Results of Operation - Three months ended June 30, 2000 compared to Three months ended June 30, 1999 Revenues for the second quarter of 2000 increased 24% to $67.6 million from $54.5 million for the second quarter of 1999. This growth resulted from a 23.0% increase in the number of paramedical examinations performed to 829,000 from 674,000, and is the result of the acquisition of Paramedical Services of America, Inc. (PSA) on November 1, 1999, an increase in services performed per examination, an increase in the number of Infolink reports to 96,000 from 91,000 and a modest price increase. The increase in Infolink reports resulted from management reemphasizing branch generation of Infolink reports. The Company believes that "Triple X", the one time regulatory amendment affecting the insurance industry, appears to have resulted in a revenue shift from the second quarter of 2000 into the first quarter of 2000. The Company's cost of operations for the second quarter of 2000 totaled $48.9 million compared to $37.5 million for the second quarter of 1999. Cost of operations as a percentage of revenues increased to 72.3% for the second quarter of 2000 from 68.9% for the second quarter of 1999. This percentage increase is primarily due to higher direct costs associated with contractor affiliate revenue acquired as a result of the PSA acquisition, higher branch operating expenses incurred to meet the volume increase experienced in the first quarter of 2000, and our efforts to bring PSA's cost structure in line with Hooper Holmes' is taking longer than previously anticipated. Selling, general and administrative expenses totaled $ 12.0 million for the second quarter of 2000 compared to $ 8.5 million for the second quarter of 1999, and as a percentage of revenue totaled 17.7% compared to 15.6%, respectively. This dollar increase is attributable to certain charges associated with the acquisition of PSA, (largely amortization of goodwill and intangibles), and additional corporate resources needed to handle the increased business as a result of the PSA acquisition. Accordingly, the Company's operating income decreased to $6.7 million from $8.4 million and as a percentage of revenues, decreased to 10.0% from 15.5% for the second quarter of 2000 compared to the second quarter of 1999. The effective tax rate was 43% and 45% for the quarters ended June 30, 2000 and 1999, respectively. The decrease is the result of increased profitability which lessened the impact of non-tax deductible goodwill amortization from a 1995 acquisition. Interest expense increased to $.2 million for the second quarter of 2000, as a result of the borrowings against the Company's term loan, used to finance the acquisition of PSA. Interest income increased to $1.2 million, due to higher levels of invested funds. Other income, net, includes a one-time pre-tax gain realized from the sale of securities owned by the Company in the amount of $.4 million. -5- Net income and net income per share for the second quarter of 2000 were $4.7 million or $.07 per diluted share versus $4.8 million or $.08 per diluted share for the second quarter of 1999. Average diluted shares for the respective periods were 70,325,995 and 61,480,354. -6- HOOPER HOLMES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operation Results of Operation - Six months ended June 30, 2000 compared to Six months ended June 30, 1999 Revenues for the six months ended June 30, 2000 increased 42.8% to $153.4 million from $107.4 million for the six months ended June 30, 1999. This growth resulted from a 40.4% increase in the number of paramedical examinations performed to 1,883,000 from 1,342,000 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 as "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, and has resulted in a revenue shift from the second quarter of 2000 into the first quarter of 2000 an increase in services performed per examination, an increase in the number of Infolink reports to 205,000 from 172,000 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 six month's ended June 30, 2000 totaled $108.8 million compared to $73.4 million for the six months ended June 30, 1999. Cost of operations as a percentage of revenues, increased to 71.0% for the six months ended June 30, 2000 from 68.4% for the six months ended June 30, 1999. This percentage increase is primarily due to higher direct costs associated with contractor affiliate revenue acquired as a result of the PSA acquisition, and higher branch operating expenses incurred in the first quarter of 2000, to meet the increased volume associated with the "Triple X" phenomenon. Selling, general and administrative expenses totaled $23.6 million for the six months ended June 30, 2000 compared to $ 17.1 million for the six months ended June 30, 1999, and as a percentage of revenue totaled 15.4% compared to 15.9%, respectively. This dollar increase is attributable to certain charges associated with the acquisition of PSA, (largely amortization of goodwill and intangibles), and additional corporate resources needed to handle the increased business as a result of the PSA acquisition. Accordingly, the Company's operating income improved to $20.9 million from $16.9 million and as a percentage of revenues, decreased to 13.6% from 15.7% for the six months ended June 30, 2000 compared to the six months ended June 30, 1999. The effective tax rate was 43% and 45% for the six months ended June 30, 2000 and 1999, respectively. The decrease is the result of increased profitability which lessened the impact of non-tax deductible goodwill amortization from a 1995 acquisition. Interest expense increased to $1.2 million for the six months ended June 30, 2000, as a result of the borrowings against the Company's term loan, used to finance the acquisition of PSA. Interest income increased to $1.8 million, due to higher levels of invested funds. Other income, net, includes a one time pre-tax gain realized from the sale of securities owned by the Company of $.4 million. -7- Net income and net income per share for the six months ended June 30, 2000 were $12.6 million or $.19 per diluted share versus $9.6 million or $.16 per diluted share for six months ended June 30, 1999. Average diluted shares for the respective periods were 67,639,877 and 61,024,832. 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. Net cash provided by operating activities for the six months ended June 30, 2000 was $15.4 million compared to $5.0 million for the six month's ended June 30, 1999. The significant sources were net income of $12.6 million, $4.5 million of depreciation and amortization, a $5.1 million decrease in accounts receivable, and was offset by a $6.8 million decrease in accounts payable and accrued expenses. Days Sales Outstanding (DSO) for the six months ended June 30, 2000 was 42.3 days, compared to 54.5 days for the year ended December 31, 1999. As of June 30, 2000, the Company has outstanding borrowings against the term loan in the amount of $3 million, and has no borrowings against the $35 million revolving loan. The Company's current ratio at the end of June 2000 stood at 8.4:1 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. On May 30, 2000, the Board of Directors authorized the repurchase of 2.5 million shares of the Company's common stock during this calendar year for an aggregate purchase price not to exceed $25 million. For the period ended June 30, 2000, the Company purchased 370,000 shares for a total cost of $3.5 million. Dividends declared in January and April 2000 were declared at $.0075 per share. At its board meeting of July 25, 2000, the company declared a quarterly dividend of $.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. -8- PART II - Other Information Item 4: Submission of Matters to a vote of Security Holders At the Company's Annual Meeting of Shareholders on May 23, 2000, the shareholders elected John E. Nolan and Quentin J. Kennedy to serve as directors until the 2003 Annual Meeting, and ratified the selection of KPMG LLP to serve as the Company's independent auditors for 2000. The chart below names each director nominated for election by the shareholders at the 2000 Annual Meeting, the number of votes cast for, against or withheld and the number of broker nonvotes with respect to each such person: Votes Cast Broker Nominee For Against Withheld Nonvotes - ------- ------------------------------------ -------- John E. Nolan 26,915,446 - 1,637,788 0 Quentin J. Kennedy 27,928,498 - 624,736 0 The name of each director whose term of office as a director continued after the annual meeting is as follows: James M. McNamee Kenneth R. Rossano Benjamin A. Currier Elaine L. Rigolosi G. Earle Wight With respect to the ratification of KPMG LLP as independent auditors, the number of votes cast was 28,259,887 For, 272,965 Against, 20,382 Abstained and 0 Broker Nonvotes. -9- 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: August 14, 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 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF HOOPER HOLMES, INC. AND SUBSIDIARIES AS OF JUNE 30, 2000 AND AS OF JUNE 30, 1999 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE PERIOD ENDED JUNE 30, 2000 AND FOR THE PERIOD ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS 6-MOS DEC-31-2000 DEC-31-1999 JAN-01-2000 JAN-01-1999 JUN-30-2000 JUN-30-1999 79,800,904 34,877,002 0 0 32,763,272 24,444,339 1,005,793 1,080,151 0 0 116,712,546 64,050,439 27,443,220 23,430,938 17,286,418 15,056,705 214,109,045 94,891,173 13,903,551 16,428,378 0 0 0 0 0 0 2,682,899 1,157,349 192,526,929 74,853,461 214,109,045 94,891,173 153,353,959 107,411,260 153,353,959 107,411,260 108,832,996 73,430,305 108,832,996 73,430,305 23,610,219 17,069,585 0 0 1,152,749 19,481 21,987,933 17,356,864 9,426,000 7,785,000 12,561,933 9,571,864 0 0 0 0 0 0 12,561,933 9,571,864 .20 .17 .19 .16 Adjusted to reflect a two-for-one stock split effective April 26, 2000.
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