-----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, R1DJ30tMyhF5dVDSZdkHZBT/2neBOdMnPFiExWsZ7Ai/TRddqvAV00TFB+WUPTiI dsMV1SatwvCuxAFj3MhkxQ== 0000950130-01-501701.txt : 20010516 0000950130-01-501701.hdr.sgml : 20010516 ACCESSION NUMBER: 0000950130-01-501701 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOOPER HOLMES INC CENTRAL INDEX KEY: 0000741815 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] 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: 1638708 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 d10q.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 March 31, 2001 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, 2001 - ------------------------------------- ----------------------------- Common stock, $.04 par value 64,883,210 HOOPER HOLMES, INC. AND SUBSIDIARIES INDEX Page No. -------- PART I - Financial Information ITEM 1 - Financial Statements Consolidated Balance Sheets 1 as of March 31, 2001 and December 31, 2000 Consolidated Statements of Income 2 for the Three Months Ended March 31, 2001 and 2000 Consolidated Statements of Cash Flows 3 for the Three Months Ended March 31, 2001 and 2000 Notes to Financial Statements 4,5 ITEM 2 - Management's Discussion and Analysis 6,7 of Financial Condition and Results of Operations Hooper Holmes, Inc. Consolidated Balance Sheets
03/31/01 12/31/00 ------------------- ------------------- (unaudited) ASSETS Current Assets: Cash and cash equivalents $ 38,660,618 $ 45,680,471 Marketable securities 30,337,050 29,188,309 Accounts receivable, net 32,935,157 28,870,624 Other current assets 4,799,740 4,539,330 -------------- -------------- Total current assets 106,732,565 108,278,734 Property, plant and equipment: Land and land improvements 618,972 618,972 Building 4,554,105 4,554,105 Furniture, fixtures and equipment 21,958,274 21,830,027 Leasehold improvements 402,058 379,376 -------------- -------------- Total property, plant and equipment 27,533,409 27,382,480 Less: Accumulated depreciation and amortization 18,663,175 18,058,073 -------------- -------------- Property, plant and equipment, net 8,870,234 9,324,407 Goodwill, net 78,188,139 78,815,845 Intangible assets, net 13,128,284 13,865,768 Other assets 5,781,058 751,128 -------------- -------------- Total assets $ 212,700,280 $ 211,035,882 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 196,836 $ 196,836 Accounts payable 8,501,948 7,402,862 Accrued expenses: Insurance benefits 269,054 291,408 Salaries, wages and fees 1,220,580 2,585,457 Payroll and other taxes 302,222 232,348 Income taxes payable 4,327,627 902,721 Other 3,235,411 3,362,025 -------------- -------------- Total current liabilities 18,053,678 14,973,657 Long term debt, less current maturities 3,410,836 3,195,295 Deferred income taxes 1,670,096 1,708,954 Minority interest 92,506 81,355 Stockholders' equity: Common stock, par value $.04 per share; authorized 240,000,000 2,699,963 2,698,167 shares, issued 67,499,074 in 2001 and 67,454,174 in 2000. Additional paid-in capital 135,595,465 135,419,195 Accumulated other comprehensive income 102,175 0 Retained earnings 75,198,901 71,009,995 -------------- -------------- 213,596,504 209,127,357 Less: Treasury stock at cost (2,615,864 and 1,993,564 shares) 24,123,340 18,050,736 -------------- -------------- Total stockholders' equity 189,473,164 191,076,621 -------------- -------------- Total liabilities and stockholders' equity $ 212,700,280 $ 211,035,882 ============== ==============
See accompanying notes to unaudited consolidated financial statements. - 1 - Hooper Holmes, Inc. Consolidated Statements Of Income (unaudited)
Three months ended March 31, ---------------------------------------- 2001 2000 ---------------- ---------------- Revenues $ 63,626,364 $ 85,772,679 Cost of operations 44,775,058 59,973,330 ---------------- ---------------- Gross profit 18,851,306 25,799,349 Selling, general and administrative expenses 11,680,190 11,627,736 ---------------- ---------------- Operating income 7,171,116 14,171,613 Other income (expense): Interest expense (64,488) (919,726) Interest income 1,004,889 642,583 Other Income (expense), net (54,344) (39,214) ---------------- ---------------- 886,057 (316,357) ---------------- ---------------- Income before income taxes 8,057,173 13,855,256 ---------------- ---------------- Income taxes 3,379,000 5,958,000 ---------------- ---------------- Net income $ 4,678,173 $ 7,897,256 ================ ================ Earnings per share: Basic 0.07 0.13 Diluted $ 0.07 $ 0.12 ================ ================ Weighted average number of shares: (1) Basic 65,205,040 60,944,892 Diluted 67,360,817 64,953,758 ================ ================
(1) Adjusted to reflect a two for one stock split effective April 12, 2000. See accompanying notes to unaudited consolidated financial statements. - 2 - Hooper Holmes, Inc. Consolidated Statements of Cash Flows (unuadited)
Three months ended March 31, --------------------------------- 2001 2000 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,678,173 $ 7,897,256 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,303,159 2,251,561 Provision for bad debt expense 75,000 0 Deferred tax benefit (38,858) (157,378) Issuance of stock awards 5,689 153,750 Loss on sale of fixed assets 5,209 2,030 Change in assets and liabilities: Accounts receivable (4,139,533) (2,349,468) Other current assets (290,340) (144,552) Accounts payable and accrued expenses 3,378,172 (1,823,857) ------------- ------------- Net cash provided by operating activities 5,976,671 5,829,342 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities (8,475,005) 0 Redemptions of marketable securities 7,428,439 0 Business acquisition, net of cash acquired (311,974) 0 Investment in e-nable.com (5,000,000) 0 Capital expenditures (177,032) (362,957) ------------- ------------- Net cash used in investing activities (6,535,572) (362,957) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long term debt 250,000 0 Principal payments on long term debt (34,459) (50,041,169) Proceeds from issuance of common stock, net 0 86,964,126 Proceeds related to the exercise of stock options 391,664 1,093,711 Treasury stock acquired (6,578,891) 0 Dividends paid (489,266) (436,556) ------------- ------------- Net cash (used in) provided by financing activities (6,460,952) 37,580,112 ------------- ------------- Net increase in cash and cash equivalents (7,019,853) 43,046,497 Cash and cash equivalents at beginning of year 45,680,471 41,363,019 ------------- ------------- Cash and cash equivalents at end of period $ 38,660,618 $ 84,409,516 ============= ============= Supplemental disclosure of cash flow information Cash paid (received) during the quarter for: Interest $ 66,150 $ 1,630,851 ------------- ------------- Income taxes $ (260,093) $ 3,146,702 ------------- -------------
See accompanying notes to unaudited consolidated financial statements. - 3 - HOOPER HOLMES, INC. Notes to Unaudited Consolidated Financial Statements March 30, 2001 Note 1: Basis of Presentation The financial information included herein is unaudited however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation. 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, 2001 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 (2,155,777 and 4,008,866 for March 31, 2001 and 2000, 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 12, 2000 two for one stock split. Note 3: Comprehensive Income Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130") requires that items defined as other comprehensive income, such as unrealized investment gains and losses, be separately classified in the financial statements and that the accumulated balance of other comprehensive income be reported separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. Comprehensive income for the three months ended March 31, 2001, and March 31, 2000 were $4,780,348 and $7,897,256, respectively. - 4 - Note 4: Capital Stock The Company declared a two for one stock split effective April 12, 2000. The net tax benefit derived from the exercise of stock options was $.3 million for the three months ended March 30, 2001. Options exercised during the first quarter 2001 were 94,400 shares, of which 49,500 shares were issued from Treasury Stock. Additionally, 5000 shares of Treasury Stock were used for employee stock awards. On May 30, 2000, the Board of Directors authorized the repurchase of 2.5 million shares of the Company's common stock during calendar year 2001 for an aggregate purchase price not to exceed $ 25 million. For the three months ended March 31, 2001, the Company purchased 677,000 shares at a total cost of $ 6.6 million. Note 5: Investments On January 31, 2001, the Company entered into a marketing and equity investment agreement with e-Nable.com, at a total cost of $ 5.0 million. e-Nable.com provides an Internet-based business processing solutions that allow integration of data sources, underwriting intelligence, distribution channels and insurance products. The Company's investment is included in other assets on the accompanying consolidated balance sheet. Note 6: Legal Matters The Company is a party to a number of legal actions arising in the ordinary course of its business. The Company is a defendant in an action arising out of the Company's resale of a drug screening business it acquired and subsequently sold in 1995. The plaintiff claims to have suffered damages from the Company's alleged failure to comply with the terms of a non-competition agreement and a first right of refusal, as well as incomplete disclosure about the transaction. The Company believes that the plaintiff suffered no damages and will vigorously defend this action in court. In the opinion of management, the Company has substantial legal defenses and/or insurance coverage with respect to all of its pending legal actions; accordingly, none of these actions is expected to have a material adverse effect on the Company, its consolidated results of operations or its consolidated financial position. -5- 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, 2001 compared to Three months ended March 31, 2000 Revenues for the first quarter 2001 decreased 26% to $63.6 million from $85.8 million for the first quarter 2000. The number of paramedical examinations performed decreased to 782,000 from 1,054,000, and the number of Infolink reports decreased to 106,000 from 110,000. This decrease is the result of a one time positive impact in the first quarter 2000, 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. The Company's cost of operations for the first quarter of 2001 totaled $44.8 million compared to $60.0 million for the first quarter of 2000. Cost of operations as a percentage of revenues, increased to 70.4% for the first quarter of 2001 from 69.9% for the first quarter of 2000. The dollar decrease is due to less direct costs incurred because of reduced revenue levels attributable to the Triple X phenomenon in the first quarter of 2000. While branch operating expense are down in dollars for the first quarter of 2001 compared to the first quarter of 2000, they remain slightly higher as a percentage of revenue, thus contributing to the slight percentage increase in cost of sales. Selling, general and administrative expenses totaled $11.7 million for the first quarter of 2001 compared to $ 11.6 million for the first quarter of 2000, and as a percentage of revenues totaled 18.4% compared to 13.6%, respectively. The increase, as a percentage of revenues, is due to lower revenue levels in the first quarter 2001, as a result of the "Triple X" phenomenon. Accordingly, the Company's operating income decreased to $7.2 million from $14.2 million and as a percentage of revenues, decreased to 11.3% from 16.5% for the first quarter of 2001 compared to the first quarter of 2000. Interest expense decreased to $ .1 million for the first quarter of 2001 from $ .9 million for the first quarter 2000, due to lower debt levels. Interest income increased to $1.0 million from $ .6 million, due to higher levels of invested funds. The effective tax rate was 42% and 43% for the quarters ended March 31, 2001 and 2000, respectively. Net income and earnings per share for the first quarter of 2001 were $4.7 million or $.07 per diluted share versus $7.9 million or $.12 per diluted share for the first quarter of 2000. Average diluted shares for the respective periods were 67,360,817 and 64,953,758. - 6 - 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 January 31, 2001, the Company entered into a marketing and equity investment agreement with e-Nable.com, at a total cost of $ 5.0 million. e-Nable.com provides an Internet-based business processing solutions that allow integration of data sources, underwriting intelligence, distribution channels and insurance products. The Company's investment is included in other assets on the accompanying consolidated balance sheet. Net cash provided by operating activities for the first quarter of 2001 was $6.0 million compared to $ 5.8 million for the first quarter of 2000. In the first quarter of 2001, the significant sources were net income of $4.7 million, $2.3 million of depreciation and amortization and a $ 3.4 million increase in accounts payable and accrued expense, and was partially offset by a $4.1 million increase in accounts receivable. Accounts receivable increased $4.1 million during the first quarter 2001, compared to year end 2000, and is primarily due to revenue growth of $3.2 million during the first quarter 2001 over the fourth quarter 2000. Days Sales Outstanding (DSO) for the quarter ended March 31, 2001 was 48.9 days, compared to 38.5 days for the quarter ended December 31, 2000. As of March 31, 2001, 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 March 2001 stood at 5.9:1 as compared to 7.2:1 at December 31, 2000. Inflation has not, nor is it expected to have a material impact on the Company's financial results in 2001 and there have been no material commitments for capital expenditures. Dividends declared in January 2001 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. -7- 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 15, 2001 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 -----END PRIVACY-ENHANCED MESSAGE-----