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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-20260
Commission File No. 1-11440
INTEGRAMED AMERICA, INC.
(Exact name of Registrant as specified in its charter)
Delaware 06-1150326
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
One Manhattanville Road 10577
Purchase, New York
(Address of principal executive offices) (Zip code)
(914) 253-8000
(Registrant's telephone number, including area code)
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 [ ]
The aggregate number of shares of the Registrant's Common Stock, $.01
par value, outstanding on July 31, 2001 was 2,993,486.
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INTEGRAMED AMERICA, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 2001 (unaudited)
and December 31, 2000....................................... 3
Consolidated Statements of Operations for the three and
six-month periods ended June 30, 2001 and 2000 (unaudited).. 4
Consolidated Statements of Cash Flows for the six-month
periods ended June 30, 2001 and 2000 (unaudited)............ 5
Notes to Consolidated Financial Statements (unaudited)...... 6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 9-12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................13
Item 2. Changes in Securities............................................13
Item 3. Defaults upon Senior Securities..................................13
Item 4. Submission of Matters to a Vote of Security Holders..............13
Item 5. Other Information................................................13
Item 6. Exhibits and Reports on Form 8-K.................................13
SIGNATURES ........................................................14
-2-
PART I -- FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
INTEGRAMED AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(all dollars in thousands, except per share amounts)
ASSETS
June 30 December 31,
------- ------------
2001 2000
------- ------------
(unaudited)
Current assets:
Cash and cash equivalents .................................................................. $ 5,145 $ 5,306
Patient accounts receivable, less allowance for doubtful accounts of $1,968 and $1,457
in 2001 and 2000, respectively ........................................................... 11,602 10,991
Business Service fees receivable ........................................................... -- 237
Prepaids and other current assets .......................................................... 1,041 1,283
-------- --------
Total current assets ................................................................... 17,788 17,817
Fixed assets, net .......................................................................... 5,840 5,337
Intangible assets, net ..................................................................... 17,571 17,774
Other assets ............................................................................... 469 367
-------- --------
Total assets ........................................................................... $ 41,668 $ 41,295
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................................... $ 1,776 $ 1,700
Accrued liabilities ........................................................................ 4,593 5,059
Due to Medical Practices ................................................................... 3,610 2,450
Current portion of long-term notes payable and other obligations ........................... 1,140 1,135
Patient deposits ........................................................................... 4,127 2,530
-------- --------
Total current liabilities .............................................................. 15,246 12,874
-------- --------
Long-term notes payable and other obligations ................................................ 1,862 2,434
-------- --------
Shareholders' equity:
Preferred Stock, $1.00 par value - 3,165,644 shares authorized in 2001 and
2000, 2,500,000 undesignated; 665,644 shares designated as Series A
Cumulative Convertible of which 165,644 shares were issued and outstanding
in 2001 and
2000, respectively ....................................................................... 166 166
Common Stock, $.01 par value - 50,000,000 shares authorized in 2001 and 2000;
and 5,473,571 and 5,413,571 shares issued in 2001 and 2000, respectively ................. 55 54
Capital in excess of par ................................................................... 54,085 54,149
Accumulated deficit ........................................................................ (22,548) (23,313)
Restricted Stock Grants ..................................................................... (100) --
Treasury Stock, at cost - 2,480,085 and 1,600,013 shares in 2001 and 2000, respectively .... (7,098) (5,069)
-------- --------
Total shareholders' equity ............................................................. 24,560 25,987
-------- --------
Total liabilities and shareholders' equity ............................................. $ 41,668 $ 41,295
======== ========
See accompanying notes to the consolidated financial statements.
-3-
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in thousands, except per share amounts)
For the For the
three-month period six-month period
ended June 30, ended June 30,
-------------------- -------------------
2001 2000 2001 2000
------- ------- ------- -------
(unaudited) (unaudited)
Revenues, net ...................................................... $ 18,287 $ 13,527 $ 34,778 $ 27,135
Cost of services incurred:
Employee compensation and related expenses ...................... 7,433 5,370 13,633 10,467
Direct materials ................................................ 3,958 2,680 7,776 5,161
Occupancy costs ................................................. 873 847 1,872 1,660
Depreciation .................................................... 300 345 574 679
Other expenses .................................................. 3,116 2,206 5,969 5,119
-------- -------- -------- --------
Total cost of services incurred ............................... 15,680 11,448 29,824 23,086
-------- -------- -------- --------
Contribution ....................................................... 2,607 2,079 4,954 4,049
General and administrative expenses ................................ 1,880 1,390 3,569 2,739
Amortization of intangible assets .................................. 225 214 441 434
Interest income .................................................... (44) (35) (98) (85)
Interest expense ................................................... 77 103 163 219
-------- -------- -------- --------
Total other expenses ............................................ 2,138 1,672 4,075 3,307
-------- -------- -------- --------
Income before income taxes ......................................... 469 407 879 742
Provision for income taxes ......................................... 63 39 114 84
-------- -------- -------- --------
Net income ......................................................... $ 406 $ 368 $ 765 $ 658
Less: Dividends paid and/or accrued on Preferred Stock ............. 33 33 66 66
-------- -------- -------- --------
Net income applicable to Common Stock .............................. $ 373 $ 335 $ 699 $ 592
======== ======== ======== ========
Basic and diluted earnings per share of Common Stock ............... $ 0.12 $ 0.08 $ 0.22 $ 0.14
======== ======== ======== ========
Weighted average shares - basic .................................... 2,993 4,163 3,109 4,270
======== ======== ======== ========
Weighted average shares - diluted .................................. 3,105 4,226 3,150 4,334
======== ======== ======== ========
See accompanying notes to the consolidated financial statements.
-4-
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(all amounts in thousands)
For the
six-month period
ended June 30,
----------------
2001 2000
------ ------
(unaudited)
Cash flows from operating activities:
Net income ............................................................................ $ 765 $ 658
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ......................................................... 1,229 1,349
Change in assets and liabilities -- Decrease (increase) in assets:
Patient accounts receivable ...................................................... (611) 1,030
Business Services fees receivable ................................................ 237 515
Other current assets ............................................................. 367 (22)
Other assets ..................................................................... 33 32
(Decrease) increase in liabilities:
Accounts payable ................................................................ 76 683
Accrued liabilities ............................................................. (826) 19
Due to Medical Practices ........................................................ 1,160 (37)
Patient deposits ................................................................ 1,597 (278)
------- -------
Net cash provided by operating activities ................................................ 4,027 3,949
------- -------
Cash flows used in investing activities:
Purchase of fixed assets and leasehold improvements ................................. (1,291) (588)
Payment for exclusive business service rights ....................................... (238) (476)
Proceeds from sale of fixed assets and leasehold improvements ....................... -- 10
------- -------
Net cash used in investing activities .................................................... (1,529) (1,054)
------- -------
Cash flows used in financing activities:
Principal repayments on debt ........................................................ (500) (1,060)
Principal repayments under capital lease obligations ................................ (67) (66)
Repurchase of Common Stock .......................................................... (2,029) (1,821)
Proceeds from exercise of Common Stock warrants ..................................... 3 --
Dividends paid on Convertible Preferred Stock ....................................... (66) (66)
------- -------
Net cash used in financing activities .................................................... (2,659) (3,013)
------- -------
Net decrease in cash ..................................................................... (161) (118)
Cash at beginning of period .............................................................. 5,306 3,650
------- -------
Cash at end of period .................................................................... $ 5,145 $ 3,532
======= =======
See accompanying notes to the consolidated financial statements.
-5-
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 -- INTERIM RESULTS:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, accordingly, do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the accompanying unaudited interim financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to present
fairly the financial position at June 30, 2001, and the results of operations
and cash flows for the interim period presented. Operating results for the
interim period are not necessarily indicative of results that may be expected
for the year ending December 31, 2001. These 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 for the year ended December 31, 2000.
NOTE 2 -- EARNINGS PER SHARE:
The reconciliation of the numerators and denominators of the basic and
diluted EPS from continuing operations computations for the three and six-month
periods ended June 30, 2001 and 2000 is as follows (000's omitted, except for
per share amounts):
For the For the
three-month period six-month period
ended June 30, ended June 30,
------------------ --------------------
2001 2000 2001 2000
-------- ------- --------- ---------
(unaudited) (unaudited)
Numerator
---------
Net Income ..................................................... $ 406 $ 368 $ 765 $ 658
Less: Preferred Stock dividends paid ........................... (33) (33) (66) (66)
------- ------- ------- -------
Net income available to common stockholders .................... $ 373 $ 335 $ 699 $ 592
======= ======= ======= =======
Denominator
-----------
Weighted average shares basic .................................. 2,993 4,163 3,109 4,270
Effect of dilutive options and warrants ........................ 112 63 41 64
------- ------- ------- -------
Weighted average shares and dilutive potential
common shares .............................................. 3,105 4,226 3,150 4,334
======= ======= ======= =======
Basic EPS ...................................................... $ 0.12 $ 0.08 $ 0.22 $ 0.14
Diluted EPS .................................................... $ 0.12 $ 0.08 $ 0.22 $ 0.14
For the three and six-month period ended June 30, 2001, the effect of the
assumed exercise of options to purchase approximately 247,000 and 473,000 shares
of Common Stock, respectively, at exercise prices ranging from $4.50 to $5.38
and from $4.00 to $5.38, respectively, per share were excluded in computing the
diluted per share amount because the exercise prices of the options were greater
than the average market price of the shares of Common Stock, therefore causing
these options to be antidilutive. For the three and six-month period ended June
30, 2001, the effect of the assumed exercise of warrants to purchase
approximately 25,000 and 62,000 shares of Common Stock, respectively, at
exercise prices ranging from $5.13 to $7.24 and $4.12 to $7.24, respectively,
per share were excluded in computing the diluted per share amount because the
exercise prices of the warrants were greater than the average market price of
the shares of Common Stock, therefore causing these warrants to be antidilutive.
-6-
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For the three and six-month periods ended June 30, 2000, the effect of the
assumed exercise of options to purchase approximately 550,000 shares of Common
Stock at exercise prices ranging from $3.19 to $5.00 per share were excluded in
computing the diluted per share amount because the exercise prices of the
options were greater than the average market price of the shares of Common
Stock, therefore, causing these options to be antidilutive. For the three and
six-month periods ended June 30, 2000, the effect of the assumed exercise of
warrants to purchase approximately 103,000 shares of Common Stock at exercise
prices ranging from $4.12 to $8.54 per share were excluded in computing the
diluted per share amount because the exercise prices of the warrants were
greater than the average market price of the shares of Common Stock, therefore,
causing these warrants to be antidilutive.
For the three month and six month periods ended June 30, 2001 and 2000,
approximately 133,000 shares of Common Stock from the assumed conversion of
Preferred Stock were excluded in computing the diluted per share amount as they
were antidilutive.
NOTE 3 -- SEGMENT INFORMATION:
The Company is principally engaged in providing products and services to
the fertility market. For disclosure purposes, the Company recognizes Business
Services offered to its network of Reproductive Science Centers and its
pharmaceutical distribution operations as separate reporting segments as follows
(000's omitted):
Business Pharmaceutical
Corporate Services Distribution Consolidated
--------- -------- ------------ ------------
For the three months ended June 30, 2001
Revenues ........................................... $ -- $ 14,685 $ 3,602 $ 18,287
Cost of Services ................................... -- 12,245 3,435 15,680
Contribution ....................................... -- 2,440 167 2,607
-------- -------- -------- --------
General and administrative expenses ................ 1,880 -- -- 1,880
Amortization of intangibles ........................ 1 222 2 225
Interest, net ...................................... 42 (6) (3) 33
-------- -------- -------- --------
Income before income taxes ......................... (1,923) 2,224 168 469
Depreciation expense included above ................ 108 300 -- 408
Capital expenditures ............................... 104 410 -- 514
For the six months ended June 30, 2001
Revenues ........................................... $ -- $ 27,715 $ 7,063 $ 34,778
Cost of Services ................................... -- 23,066 6,758 29,824
Contribution ....................................... -- 4,649 305 4,954
Other costs ........................................ 3,569 -- -- 3,569
Amortization of intangibles ........................ 2 435 4 441
Interest, net ...................................... 86 (17) (4) 65
-------- -------- -------- --------
Income before income taxes ......................... (3,657) 4,231 305 879
Depreciation expense included above ................ 214 574 -- 788
Capital expenditures ............................... 161 1,130 -- 1,291
-7-
Business Pharmaceutical
Corporate Services Distribution Consolidated
--------- -------- ------------ ------------
For the three months ended June 30, 2000
Revenues ............................................ $ -- $11,524 $ 2,003 $13,527
Cost of Services .................................... -- 9,500 1,948 11,448
------- ------- ------- -------
Contribution ........................................ -- 2,024 55 2,079
General and administrative expenses ................. 1,390 -- -- 1,390
Amortization of intangibles ......................... 1 211 2 214
Interest, net ....................................... 71 1 (4) 68
------- ------- ------- -------
Income before income taxes .......................... (1,462) 1,812 57 407
Depreciation expense included above ................. 118 345 -- 463
Capital expenditures ................................ 29 193 -- 222
For the six months ended June 30, 2000
Revenues ............................................ -- 23,262 3,873 27,135
Cost of Services .................................... -- 19,333 3,753 23,086
------- ------- ------- -------
Contribution ........................................ -- 3,929 120 4,049
Other costs ......................................... 2,739 -- -- 2,739
Amortization of intangibles ......................... 12 418 4 434
Interest, net ....................................... 130 10 (6) 134
------- ------- ------- -------
Income before income taxes .......................... (2,881) 3,501 122 742
Depreciation expense included above ................. 236 679 -- 915
Capital expenditures ................................ 51 537 -- 588
NOTE 4 -- NEW ACCOUNTING PRONOUNCEMENTS:
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations ("FAS 141") and
No. 142, Goodwill and Other Intangible Assets ("FAS 142"). FAS141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method. Under FAS 142, goodwill and intangible assets with
indefinite lives are no longer amortized but are reviewed annually (or more
frequently if impairment indicators arise) for impairment. Separable intangible
assets that are not deemed to have indefinite lives will continue to be
amortized over their useful lives (but with no maximum life). The amortization
provisions of FAS 142 apply to goodwill and intangible assets acquired after
June 30, 2001. With respect to goodwill and intangible assets acquired prior to
July 1, 2001, the Company is required to adopt FAS 142 effective January 1, 2002
and is currently evaluating the effect that adoption of the provisions of FAS
142 will have on its results of operations and financial position.
-8-
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto included in this
quarterly report and with the Company's Annual Report on Form 10-K for the year
ended December 31, 2000.
IntegraMed America, Inc. (the "Company") offers products and services to
patients, providers, payors and pharmaceutical manufacturers in the fertility
industry. The IntegraMed Network is comprised of twenty-two fertility centers in
major markets across the United States, a pharmaceutical distribution
subsidiary, a financing subsidiary, the Council of Physicians and Scientists,
and a leading fertility portal (www.integramed.com). Seventeen of these
fertility centers have access to the Company's FertilityDirect Program. Five of
the fertility centers are designated as "Reproductive Science Centers(R)" and as
such, have access to the Company's FertilityDirect Program in addition to being
provided with a full range of services including: (i) administrative services,
including accounting and finance, human resource functions, and purchasing of
supplies and equipment; (ii) access to capital; (iii) marketing and sales; (iv)
integrated information systems; (v) assistance in identifying best clinical
practices; and (vi) laboratory services (collectively, "Business Services").
The Company's strategy is to align information, technology and finance for
the benefit of fertility patients, providers, payors and pharmaceutical
manufacturers. The primary elements of the Company's strategy include: (i)
selling additional FertilityDirect contracts to leading fertility centers in
major markets; (ii) selling Shared Risk Refund Treatment Packages to patients of
contracted fertility centers and managing the risk associated with the programs;
(iii) selling additional Reproductive Science Center Business Service contracts;
(iv) increasing revenues at Reproductive Science Centers; (v) increasing sales
of pharmaceutical products and services; (vi) expanding clinical research
opportunities; and (vii) establishing Internet-based access to patient-specific
information on treatment process and outcomes.
In December 2000, the Company's agreement with the medical center based
Reproductive Science Center was terminated early. The Company received $1.44
million in liquidated damages pursuant to an early termination agreement. The
amount received was recorded as deferred revenue at December 31, 2000, as the
Company has certain transition obligations through December 2001, and
accordingly is being amortized ratably into income in 2001. It is anticipated
that the cost of the transition obligations incurred to date, and those expected
to be incurred during the remainder of the transition period, will be
immaterial.
The Company is under pressure to reduce the fees it charges to the
Reproductive Science Centers for Business Services and may be forced to reduce
such fees. Cost containment measures which the Company may implement may not be
enough to offset these fee reductions. In addition, as the Company implements
its strategy to become a marketing-oriented in addition to a service-based
company, costs of implementation may be incurred prior to achieving the related
revenues. As a result of these issues, near term income levels may be reduced
and the Company may not achieve the earnings level experienced in the first two
quarters of 2001.
-9-
Results of Operations
The following table shows the percentage of revenues represented by various
expense and other income items reflected in the Company's Consolidated Statement
of Operations.
For the For the
three-month period six-month period
ended June 30, ended June 30,
------------------- -----------------
2001 2000 2001 2000
------ ------ ------- -------
(unaudited) (unaudited)
Revenues, net............................................ 100.0% 100.0% 100.0% 100.0%
Cost of services incurred:
Employee compensation and related expenses.......... 40.7 39.7 39.2 38.6
Direct materials.................................... 21.6 19.8 22.4 19.0
Occupancy costs..................................... 4.8 6.3 5.4 6.1
Depreciation........................................ 1.7 2.5 1.7 2.5
Other expenses...................................... 17.0 16.3 17.1 18.9
----- ------ ----- -----
Total cost of services incurred..................... 85.8 84.6 85.8 85.1
Contribution............................................. 14.2 15.4 14.2 4.9
----- ------ ----- -----
General and administrative expenses...................... 10.3 10.3 10.2 10.1
Amortization of intangible assets........................ 1.2 1.6 1.3 1.6
Interest income.......................................... (0.2) (0.3) (0.3) (0.3)
Interest expense......................................... 0.4 0.8 0.5 0.8
------ ------ ------ ------
Total other expenses................................ 11.7 12.4 11.7 12.2
Income before income taxes............................... 2.5 3.0 2.5 2.7
Provision for income taxes............................... 0.3 0.3 0.3 0.3
------ ------ ------ ------
Net income............................................... 2.2% 2.7% 2.2% 2.4%
====== ====== ====== ======
Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000
Revenues for the three months ended June 30, 2001 (the second quarter of
2001) were approximately $18.3 million as compared to approximately $13.5
million for the three months ended June 30, 2000, an increase of 35.2%.
Approximately 66% of the increase in revenues is attributable to same market
growth in reimbursed costs and business service fees in the Reproductive Science
Centers. Approximately 34% of the increase in revenues is attributable to sales
increases in the Company's pharmaceutical distribution division.
Total costs of services as a percentage of revenues were 85.8% in the
second quarter of 2001, compared to 84.6% in the second quarter of 2000.
Employee compensation increased as a percentage of revenues due to expansion of
services provided and increases in patient volume at the Company's Network
locations. Direct materials increased as a percentage of revenues, primarily due
to the cost of products sold at the pharmaceutical distribution division.
Depreciation expense decreased as a percentage of revenues as the existing asset
base is sufficient to service the growing patient volume. Other expenses
increased as a percentage of revenues due to higher support costs, and higher
volume generated administrative costs related to the Company's pharmaceutical
distribution division.
Contribution was approximately $2.6 million in the second quarter of 2001
as compared to $2.1 million in the second quarter of 2000, an increase of
approximately 25.4%. This increase is the result of (i) improving margins at
various Reproductive Science Centers, a result of economies of scale attained by
increased volume, and (ii) improving volume and margins in the pharmaceutical
distribution division.
-10-
General and administrative expenses for the second quarter of 2001 were
approximately $1.9 million as compared to approximately $1.4 million in the
second quarter of 2000, an increase of 35.3%. The increase was largely due to
increases in staffing and compensation attributable to implementation of
initiatives related to the Company's internet marketing strategy, as well as
higher information systems support costs.
Amortization of intangible assets was $225,000 in the second quarter of
2001 as compared to $214,000 in the second quarter of 2000, a increase of 5.1%.
This increase was attributable to the purchase of additional business service
rights to physician practices affiliated with one of the Company's Network
locations.
Interest income for the second quarter of 2001 increased to $44,000 from
$35,000 for the second quarter of 2000, due to higher available cash balances.
Interest expense for the second quarter of 2001 decreased to $77,000 from
$103,000 in the second quarter of 2000, due to scheduled payments of debt on the
Company's line of credit.
The provision for income taxes primarily related to state taxes. The
provision for income taxes increased to $63,000 in the second quarter of 2001
from $39,000 in the second quarter of 2000 in line with increased earnings at
network site locations.
Net income was $406,000 in the second quarter of 2001 as compared to
$368,000 in the second quarter of 2000, an increase of 10.3%. The increase was
primarily due to (i) improving margins at the Reproductive Science Centers and
the Company's pharmaceutical distribution division, offset by increases in
general and administrative expenses at the Company's headquarters, and (ii)
decreases in interest expense related to the pay-down of debt.
Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000
Revenues for the six months ended June 30, 2001 were approximately $34.8
million as compared to approximately $27.1 million for the six months ended June
30, 2000, an increase of 28.2%. Approximately 58% of the increase in revenues is
attributable to same market growth in reimbursed costs and business service fees
in the Reproductive Science Centers. Approximately 42% of the increase in
revenues is attributable to sales increases in the Company's pharmaceutical
distribution division.
Total costs of services as a percentage of revenues were 85.8% for the
first six months of 2001, compared to 85.1% during the first six months of 2000.
Direct materials increased as a percentage of revenues, due to increased patient
volumes at the network sites and higher volume of products sold at the
pharmaceutical distribution division. Depreciation expense decreased as a
percentage of revenues as the existing asset base is sufficient to service the
growing patient volume. Other expenses decreased as a percentage of revenue, due
to decreases in contract termination costs and non-payroll marketing and
consulting expenses.
Contribution was approximately $5.0 million for the first six months of
2001 as compared to $4.0 million for the first six months of 2000, an increase
of approximately 22.4%. This increase is the result of (i) increased asset
leverage as a result of patient volume increases at various Reproductive Science
Centers, (ii) improving margins in the pharmaceutical distribution division, the
result of increased sales to patients at the various Network Sites, and (iii)
elimination of operating losses at the Kansas City based Reproductive Science
Center which was closed during the first quarter of 2000.
General and administrative expenses for the first six months of 2001 were
approximately $3.6 million as compared to approximately $2.7 million for the
first six months of 2000, an increase of 30.3%. The increase was largely due to
increases in staffing and compensation attributable to implementation of
initiatives related to the Company's internet marketing strategy. As a
percentage of revenues, general and administrative expenses increased to
approximately 10.2% in the first six months of 2001 from approximately 10.1%
during the same period in 2000.
Amortization of intangible assets was $441,000 during the first six months
of 2001 as compared to $434,000 for the same period in 2000, an increase of
1.6%. This increase was attributable to the purchase of additional management
rights to physician practices affiliated with two of the Company's Network
locations.
-11-
Interest income for the first six months of 2001 increased to $98,000 from
$85,000 for the first six months of 2000, due to higher available cash balances.
Interest expense for the first six months of 2001 decreased to $163,000 from
$219,000 for the first six months of 2000, due to scheduled payments of debt on
the Company's line of credit.
The provision for income taxes primarily related to state taxes. The
provision for income taxes increased to $114,000 during the first six months of
2001 from $84,000 in the same period in 2000 in line with increased earnings at
network site locations.
Net income was $765,000 for the first six months of 2001 as compared to
$658,000 for the same period in 2000, an increase of 16.3%. The increase was
primarily due to (i) improving margins at the Reproductive Science Centers and
the Company's pharmaceutical distribution division, offset by increases in
general and administrative expenses at the Company's headquarters, (ii)
decreases in interest expense related to the pay-down of debt, and (iii) the
elimination of operational expenses related to the wind down of the Kansas City
Reproductive Science Center operations.
Liquidity and Capital Resources
Historically, the Company has financed its operations primarily through
operating cash flow, sales of equity securities and bank financings. As of June
30, 2001, the Company had working capital of approximately $2.5 million and cash
and cash equivalents of approximately $5.1 million, compared to working capital
of approximately $4.9 million and cash and cash equivalents of $5.3 million at
December 31, 2000. The net decrease in working capital at June 30, 2001 was
principally due to (i) the repurchase of 880,072 shares of the Company's Common
Stock for an aggregate purchase price of $2.0 million, repayments of debt of
$0.5 million and acquisition of fixed assets of $1.3 million and (ii) an
increase in amounts due to physician practices for income earned at the Network
Sites of $1.2 million and an increase in patient deposits of $1.6 million.
The Company expects its cash flows from operating activities and bank
financing capacity to be sufficient to fund its needs for asset acquisition,
debt repayments, the Common Stock repurchase program and new service initiatives
for the next year.
Forward Looking Statements
This Form 10-Q and discussions and/or announcements made by or on behalf of
the Company, contain certain forward-looking statements regarding events and/or
anticipated results within the meaning of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, the attainment of which
involve various risks and uncertainties. Forward-looking statements may be
identified by the use of forward-looking terminology such as, may, will, expect,
believe, estimate, anticipate, continue, or similar terms, variations of those
terms or the negative of those terms. The Company's actual results may differ
materially from those described in these forward-looking statements due to the
following factors: the Company's ability to acquire additional business service
agreements, including the Company's ability to raise additional debt and/or
equity capital to finance future growth, the loss of significant business
service agreement(s), the profitability or lack thereof at Reproductive Science
Centers serviced by the Company, increases in overhead due to expansion, the
exclusion of infertility and ART services from insurance coverage, government
laws and regulations regarding health care, changes in managed care contracting,
the timely development of and acceptance of new infertility, ART and/or genetic
technologies and techniques.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
In July 1999, an action was filed in Middlesex Superior
Court in Massachusetts, against the Company, the Reproductive
Science Center of Boston (the "Center"), an independent
genetic testing laboratory, and certain of their respective
employees. The Complaint was served on the Company in March
2000. The action, filed by two former patients of the Center,
arose out of Plaintiffs' participation during 1966 in an
experimental program of pre-implantation genetic testing. The
Plaintiffs had alleged professional negligence and breach of
contract/warranties resulting in the birth of their child who
suffers with cystic fibrosis. Plaintiffs sought damages of an
undisclosed amount. The Company's insurance carrier appointed
Massachusetts counsel to represent the Company in the matter
that was settled in July 2001 with a payment by the carrier to
Plaintiffs without any impact to the Company's financial
position, results of operations or cash flows.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Security Holders.
At an annual shareholders' meeting held on May 22, 2001,
the following matter was approved:
1) election of six directors
The respective vote tabulations are detailed below:
Withhold
Proposal 1 - Directors For Authority
---------------------- --- ---------
Gerardo Canet 2,438,131 7,545
Michael J. Levy, M.D. 2,438,131 7,545
Sarason D. Liebler 2,438,131 7,545
Aaron S. Lifchez, M.D. 2,438,131 7,545
Lawrence Stuesser 2,438,131 7,545
Elizabeth E. Tallett 2,438,131 7,545
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
See Index to Exhibits on Page 15.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTEGRAMED AMERICA, INC.
(Registrant)
Date: August 14, 2001 By: /s/ John W. Hlywak, Jr.
--------------------------
John W. Hlywak, Jr.
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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Exhibit
Number Exhibit
------- -------
10.88(d) -- Amendment to Management Agreement between IntegraMed America,
Inc. and MPD Medical Associates (MA) P.C. dated May 25, 2001.
99.4 -- Registrant's Press Release dated May 2, 2001 (1)
99.5 -- Registrant's Press Release dated August 1, 2001 (2)
--------------------------------------------------------
(1) Filed as exhibit with identical exhibit number to Registrant's Report on
Form 8-K dated May 2, 2001
(2) Filed as exhibit with identical exhibit number to Registrant's Report on
Form 8-K dated August 1, 2001
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