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BASKING RIDGE, N.J., Oct 28, 2003 -- Hooper Holmes, Inc. (Amex: HH) today reported financial results for the third quarter and nine months ended September 30, 2003.
Total revenues for the quarter were within the range of the Company's updated revenue guidance, given on October 13, 2003, and increased by 23.5% to $73.6 million compared to $59.6 million in last year's third quarter, due to contributions from the Company's acquisitions of D&D Associates and Medicals Direct Group in the second-half of 2002.
Third quarter 2003 revenues for the Company's Health Information Business Unit ("HIBU"), which includes Portamedic, Infolink, Heritage Labs and the August 2002 acquisition of Medicals Direct Group, were $65.2 million, or 88.7% of total revenues. Revenues from Portamedic, Infolink and Heritage Labs were $59.1 million compared to $58.7 million in last year's third quarter primarily as a result of a 3% decrease in Portamedic's revenue due to continued softness in the life insurance market. Infolink and Heritage Labs increased their third quarter 2003 revenue by 16% and 41%, respectively, over the corresponding prior year quarter. On a consecutive quarter basis, Medicals Direct increased its third quarter 2003 revenues 20% to $6.1 million compared to $5.1 million in the second quarter of 2003. Revenues for the Company's Diversified Business Unit ("DBU"), comprised of D&D Associates, which was acquired by Hooper Holmes in October 2002, were $8.4 million, or 11.3% of revenues, compared to $8.6 million in the second quarter of 2003.
As previously disclosed, third quarter operations were adversely affected by a number of factors including: continued softness in the life insurance industry, higher than anticipated consolidation costs associated with the opening of the Infolink call center in Kansas City, and the negative impact of the Northeast blackout in August 2003 and Hurricane Isabel in September 2003. In addition, when compared to the corresponding quarter in 2002, operating margins were impacted by additional SG&A costs associated with the companies acquired in late 2002, and higher insurance, legal and administrative costs. However, operating income for the third quarter 2003, increased to $5.6 million from an operating loss of $0.3 million in the third quarter of 2002. The third quarter of 2002 included a pre-tax charge of $5.1 million related to the write-down of the then remaining carrying value of the Company's investment in e-Nable Corporation. Excluding this charge in 2002, operating income in the third quarter of 2003 improved 17% over the prior year period.
Consistent with updated earnings guidance, net income for the quarter was $3.3 million, or $0.05 per diluted share, compared to $0.1 million, in the third quarter of 2002. Reported net income for the 2002 third quarter included an after-tax charge of $3.1 million, or $0.05 per diluted share, related to the previously mentioned charge related to the e-Nable Corporation.
Jim McNamee, Chairman and Chief Executive Officer, stated, "Our results are consistent with the guidance we provided on October 13, 2003. Despite the challenging economic environment for the life insurance industry, our Portamedic business maintained its market share and our Infolink and Heritage Labs businesses performed strongly, growing third quarter 2003 revenues by 16%, and 41%, respectively. In addition, Medicals Direct increased third quarter 2003 revenues by 20% over the second quarter of 2003. Overall, our fundamentals remain solid and we continue to make progress with our business initiatives, utilizing technology to further enhance the level of service we provide to our HIBU customers and building our Independent Medical Examination ("IME") franchise in the DBU both organically and through small, selective acquisitions."
For the nine months ended September 30, 2003, revenues increased 16.9% to $224.6 million from $192.1 million in last year's comparable period. Net income was $13.1 million, or $0.20 per diluted share, compared to $9.9 million, or $0.15 per diluted share, in last year's nine month period. Reported net income for the nine months ended September 30, 2002 included the aforementioned previously disclosed after-tax charges totaling $4.1 million, or $0.06 per diluted share, related to the Company's write-down of its investment in e-Nable Corporation in the second and third quarters of 2002.
Mr. McNamee continued, "Given our third quarter performance and our expectations of slowness in the life insurance industry to continue through the fourth quarter, we have revised our full year 2003 revenue guidance and expect revenues to range between $295 million to $305 million and fully diluted earnings per share for the year to range between $0.24 to $0.26.
Hooper Holmes will host a conference call today to discuss third quarter results at 9:30 a.m. Eastern Time. The call will be broadcast live over the Internet, and is accessible at the Company's website located at http://www.hooperholmes.com. In addition, an online archive of the broadcast will be available within two hours after the live call.
Hooper Holmes provides outsourced risk assessment services, including underwriting and claims information to the life, health, automobile, and workers' compensation insurance industries. The Company provides these health information services through over 275 locations nationwide and in the United Kingdom.
Certain information contained herein includes information that is forward- looking. The matters referred to in forward-looking statements may be affected by the risks and uncertainties involving the Company's business. These forward-looking statements are qualified in the entirety by cautionary statements contained in the Company's Securities and Exchange Commission filings. The Company disclaims any obligation to update these forward-looking statements.
HOOPER HOLMES INC.
2003 CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
Three Months ended Nine Months ended
September 30, September 30,
2003 2002 2003 2002
Revenues $73,552 $59,591 $224,573 $192,096
Cost of operations 52,940 43,727 158,879 136,662
Gross profit 20,612 15,864 65,694 55,434
Selling, general and
administrative
expenses 15,010 11,063 43,935 33,588
Loss on investment 0 5,120 0 6,750
Operating income
(loss) 5,602 (319) 21,759 15,096
Other income (expense):
Interest expense (95) (28) (270) (86)
Interest income 111 653 583 1,926
Other (expense)
income, net (162) (125) (676) (553)
(146) 500 (363) 1,287
Income before
income taxes 5,456 181 21,396 16,383
Income taxes 2,143 46 8,330 6,514
Net income $3,313 $135 $13,066 $9,869
Earnings per share:
Basic $0.05 $0.00 $0.20 $0.15
Diluted $0.05 $0.00 $0.20 $0.15
Weighted average
number of shares:
Basic 64,788,893 64,834,518 64,763,320 64,990,448
Diluted 66,917,196 66,820,460 66,611,408 67,544,152
HOOPER HOLMES INC.
CONSOLIDATED BALANCE SHEETS
09/30/03 12/31/02
(unaudited) (audited)
ASSETS
Current Assets:
Cash and cash equivalents $19,812,363 $23,298,151
Marketable securities 20,358,260 22,761,101
Accounts receivable, net 34,399,980 27,809,521
Other current assets 8,288,107 6,823,818
Total current assets 82,858,710 80,692,591
Property, plant and equipment: 32,692,987 30,620,147
Less: Accumulated depreciation
and amortization 23,245,873 21,924,363
Property, plant and
equipment, net 9,447,114 8,695,784
Goodwill, net 129,947,542 117,075,544
Intangible assets, net 29,366,213 28,474,439
Other assets 814,423 1,291,172
Total assets $252,434,002 $236,229,530
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of
long-term debt $1,000,000 $172,776
Accounts payable 11,477,718 10,436,388
Accrued expenses:
Insurance benefits 165,082 484,748
Salaries, wages and fees 1,713,949 1,816,791
Payroll and other taxes 563,656 449,093
Income taxes payable 2,097,467 2,703,713
Other 8,520,119 5,853,132
Total current liabilities 25,537,991 21,916,641
Long term debt, less
current maturities 2,039,240 3,313,983
Other long term liabilities 4,554,160 806,195
Deferred income taxes 3,279,489 3,483,114
Minority interest 336,166 902,650
Stockholders' equity:
Common stock, par value $.04
per share; authorized
240,000,000 shares, issued
67,499,074 in 2003 and 2002. 2,699,963 2,699,963
Additional paid-in capital 127,667,970 128,079,363
Accumulated other
comprehensive income 203,722 160,873
Retained earnings 106,644,558 96,009,551
237,216,213 226,949,750
Less: Treasury stock at cost
(2,708,351 and 2,754,151 shares) 20,529,257 21,142,803
Total stockholders' equity 216,686,956 205,806,947
Total liabilities and
stockholders' equity $252,434,002 $236,229,530
Contacts: Fred Lash, Chief Financial Officer
(908) 766-5000
Financial Dynamics
Tiernan Cavanna or Lanie Fladell, Investors
Sean Leous, Media
(212) 850-5600
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