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BASKING RIDGE, N.J., Oct 27, 2004 -- Hooper Holmes, Inc. today reported financial results for the third quarter and nine months ended September 30, 2004.
Total revenues for the quarter increased 12.1% to $82.4 million from $73.6 million in the third quarter of 2003, reflecting strong performance of Medicals Direct Group, InfoLink and Heritage Labs as well as $7.5 million in revenues from the Company's acquisitions of Allegiance Health, Medimax, Michigan Evaluation Group (MEG) and Mid-America Agency Services, Inc. (MAAS), all of which were acquired subsequent to September 2003.
Cost cutting initiatives implemented in the 2004 second quarter benefited third quarter operating profitability. However, those benefits were offset by continued revenue softness in the Company's core paramedical business and pre-tax costs of approximately $1.75 million associated with the Company's previously announced independent audit committee investigation ($1.3 million) and compliance with the internal control provisions of the Sarbanes-Oxley Act ($0.45 million). For the 2004 third quarter, operating profit was $4.0 million compared to $5.6 million in last year's third quarter. Reported net income, which includes the aforementioned costs of approximately $1.0 million, after-tax, was $2.4 million, or $0.04 per diluted share. The Company reported net income of $3.3 million, or $0.05 per diluted share in the third quarter of 2003.
Revenues for the Company's Health Information Business Unit ("HIBU"), grew 8.6% to $70.9 million compared to $65.3 million in last year's third quarter.
The HIBU's third quarter performance was attributable to:
-- Medicals Direct, which continued to exceed expectations, grew its
revenues 72.1% to $10.5 million from $6.1 million a year earlier, as a
result of continuing favorable trends in the U.K. life insurance and
claims management market;
-- Infolink, which generated 27.6% revenue growth and is now just above
break-even on a profitability basis;
-- Heritage Labs, which generated 6.1% revenue growth reflecting increased
market share; and
-- Portamedic, which reported third quarter revenues of $46.0 million,
compared to $49.8 million in the third quarter of 2003, due to ongoing
industry softness and pricing pressure.
Revenues for the Company's Diversified Business Unit ("DBU") increased approximately 37% to $11.5 million from $8.4 million in the third quarter of 2003 as a result of business improvements from D&D associates and new revenue contributions of $3.9 million from the acquisitions of Allegiance Health, Medimax, and MEG.
Jim McNamee, Chairman, President and Chief Executive Officer of Hooper Holmes, stated, "Our third quarter results demonstrate the success of our cost cutting initiatives, in that we have maintained margins on lower revenues in the core paramedical business and improved margins dramatically on a sequential basis in the DBU. As such, I am particularly pleased with the tangible results of these initiatives, that, I expect will fuel strong net income improvements in the fourth quarter and in subsequent quarters."
For the nine months ended September 30, 2004, revenues increased 9.2% to $245.3 million from $224.6 million in last year's comparable period. Net income was $8.8 million, or $0.13 per diluted share, including the aforementioned costs associated with the Company's special investigation, compared to $13.1 million, or $0.20 per diluted share, in last year's nine month period.
Looking ahead, Mr. McNamee commented, "For the full year of 2004, we expect to generate revenues in the range of $325 million to $335 million. We also expect our full year diluted earnings per share to be between $0.18 to $0.21, reflecting continued success with cost cutting initiatives aimed at realigning our operating expenses with our current revenue levels."
Separately, the Company announced a reorganization of its underwriting services units, which brings the largest providers of outsourced underwriting in the United States and United Kingdom together under a single structure. As part of its strategy to develop its U.S. and international outsourced underwriting business, Mid-America Agency Services (MAAS), which provides risk assessment services to the insurance underwriting industry, will now report directly to Medicals Direct, Hooper Holmes's UK-based subsidiary. MAAS was acquired by Hooper Holmes in May 2004.
Mr. McNamee, commented, "The integration of MAAS as part of the Hooper Holmes family of businesses has been highly successful. Medicals Direct is the largest provider of outsourced underwriting in the UK, and MAAS is the largest provider in the U.S. I believe that the logical step of having the two market-leading providers together under a single umbrella will strengthen both businesses and increase Hooper Holmes's ability to make the most of the opportunities in this expanding sector."
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 of the live call until the next quarterly conference 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.
2004 CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
Three Months ended Nine Months ended
September 30, September 30,
2004 2003 2004 2003
Revenues $82,446 $73,552 $245,281 $224,573
Cost of operations 59,161 52,940 176,079 158,879
Gross profit 23,285 20,612 69,202 65,694
Selling, general
and administrative
expenses 19,260 15,010 54,405 43,935
Operating income 4,025 5,602 14,797 21,759
Other income (expense):
Interest expense (216) (95) (560) (270)
Interest income 94 111 251 583
Other expense, net (65) (162) (265) (676)
(187) (146) (574) (363)
Income before
income taxes 3,838 5,456 14,223 21,396
Income taxes 1,488 2,143 5,423 8,330
Net income $2,350 $3,313 $8,800 $13,066
Earnings per share:
Basic $0.04 $0.05 $0.14 $0.20
Diluted $0.04 $0.05 $0.13 $0.20
Weighted average
number of shares:
Basic 65,032,457 64,788,893 64,965,666 64,763,320
Diluted 66,287,393 66,917,196 66,550,831 66,611,408
HOOPER HOLMES INC.
CONSOLIDATED BALANCE SHEETS
9/30/04 12/31/03
ASSETS
Current Assets:
Cash and cash equivalents $15,920,581 $28,291,019
Marketable securities 2,226,466 10,603,332
Accounts receivable, net 42,342,559 34,663,082
Other current assets 6,662,416 6,569,707
Total current assets 67,152,022 80,127,140
Property, plant and equipment: 36,171,515 33,004,834
Less: Accumulated depreciation
and amortization 24,935,212 23,393,981
Property, plant and equipment, net 11,236,303 9,610,853
Costs in excess of net assets
of acquired companies 149,347,965 135,130,744
Intangible assets 36,480,235 29,617,156
Other assets 519,037 810,358
Total assets $264,735,562 $255,296,251
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $1,079,911 $1,028,363
Accounts payable 14,083,046 12,106,987
Accrued expenses:
Salaries, wages and fees 1,274,311 1,478,189
Income taxes payable 3,792,221 3,116,446
Other 12,406,361 9,416,252
Total current liabilities 32,635,850 27,146,237
Long term debt, less current maturities 1,000,000 2,000,000
Other long term liabilities 3,083,674 4,554,160
Deferred income taxes 1,558,433 1,758,879
Minority interest 268,897 358,705
Stockholders' equity:
Common stock, par value $.04 per share;
authorized 240,000,000 shares,
issued 67,499,074 in 2004 and 2003. 2,699,963 2,699,963
Additional paid-in capital 126,890,769 127,487,718
Accumulated other comprehensive income 799,171 855,719
Retained earnings 114,494,795 108,613,932
244,884,698 239,657,332
Less: Treasury stock at cost
(2,466,495 and 2,662,151 shares) 18,695,990 20,179,062
Total stockholders' equity 226,188,708 219,478,270
Total liabilities and
stockholders' equity $264,735,562 $255,296,251
Contact:
Hooper Holmes, Inc.
Fred Lash, Chief Financial Officer
+1-908-766-5000
Investors, Jonathan Birt or Lanie Marcus
Media, Sean Leous all of Financial Dynamics
+1-212-850-5600
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