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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 March 31, 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
incorporation or organization) (I.R.S. employer identification no.)
One Manhattanville Road
Purchase, New York 10577
(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 April 16, 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 March 31, 2001 (unaudited) and
December 31, 2000............................................. 3
Consolidated Statements of Operations for the three-month periods
ended March 31, 2001 and 2000 (unaudited)..................... 4
Consolidated Statements of Cash Flows for the three-month periods
ended March 31, 2001 and 2000 (unaudited)..................... 5
Notes to Consolidated Financial Statements (unaudited)......... 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 8-10
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................11
Item 2. Changes in Securities............................................11
Item 3. Defaults upon Senior Securities..................................11
Item 4. Submission of Matters to a Vote of Security Holders..............11
Item 5. Other Information................................................11
Item 6. Exhibits and Reports on Form 8-K.................................11
SIGNATURES .......................................................12
-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
March 31 December 31,
-------- ------------
2001 2000
-------- ------------
(unaudited)
Current assets:
Cash and cash equivalents ............................................................. $ 3,265 $ 5,306
Patient accounts receivable, less allowance for doubtful accounts of $1,680 and $1,457
in 2001 and 2000, respectively ...................................................... 11,687 10,991
Business Service fees receivable ...................................................... -- 237
Prepaids and other current assets ..................................................... 1,267 1,283
-------- --------
Total current assets .............................................................. 16,219 17,817
Fixed assets, net ..................................................................... 5,734 5,337
Intangible assets, net ................................................................ 17,761 17,774
Other assets .......................................................................... 502 367
-------- --------
Total assets ...................................................................... $ 40,216 $ 41,295
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................................................................... $ 1,734 $ 1,700
Accrued liabilities ................................................................... 4,606 5,059
Due to Medical Practices .............................................................. 2,429 2,450
Current portion of long-term notes payable and other obligations ...................... 1,138 1,135
Patient deposits ...................................................................... 4,000 2,530
-------- --------
Total current liabilities ......................................................... 13,907 12,874
-------- --------
Long-term notes payable and other obligations ........................................... 2,149 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 .............................................................. 54,118 54,149
Accumulated deficit ................................................................... (22,954) (23,313)
Restricted Stock Grants ................................................................ (127) --
Treasury Stock, at cost - 2,480,085 and 1,600,013 shares in 2001 and 2000, respectively (7,098) (5,069)
-------- --------
Total shareholders' equity ........................................................ 24,160 25,987
-------- --------
Total liabilities and shareholders' equity ........................................ $ 40,216 $ 41,295
======== ========
See accompanying notes to the consolidated financial statements.
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INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in thousands, except per share amounts)
For the
three-month period
ended March 31,
-------------------
2001 2000
------ ------
(unaudited)
Revenues, net ........................................ $ 16,491 $ 13,608
Cost of services incurred:
Employee compensation and related expenses ........ 6,200 5,097
Direct materials .................................. 3,818 2,481
Occupancy costs ................................... 999 812
Depreciation ...................................... 274 334
Other expenses .................................... 2,853 2,914
-------- --------
Total cost of services incurred ................. 14,144 11,638
-------- --------
Contribution ......................................... 2,347 1,970
General and administrative expenses .................. 1,689 1,349
Amortization of intangible assets .................... 216 220
Interest income ...................................... (54) (50)
Interest expense ..................................... 86 116
-------- --------
Total other expenses .............................. 1,937 1,635
-------- --------
Income before income taxes ........................... 410 335
Provision for income taxes ........................... 51 45
-------- --------
Net income ........................................... $ 359 $ 290
Less: Dividends paid and/or accrued on Preferred Stock (33) (33)
-------- --------
Net income applicable to Common Stock ................ $ 326 $ 257
======== ========
Basic and diluted earnings per share of Common Stock . $ 0.10 $ 0.06
======== ========
Weighted average shares - basic ...................... 3,223 4,376
======== ========
Weighted average shares - diluted .................... 3,231 4,446
======== ========
See accompanying notes to the consolidated financial statements.
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INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(all amounts in thousands)
For the
three-month period
ended March 31,
-------------------
2001 2000
------- --------
(unaudited)
Cash flows from operating activities:
Net income ...................................................................... $ 359 $ 290
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ................................................... 596 672
Change in assets and liabilities -- Decrease (increase) in assets:
Patient accounts receivable ................................................ (696) 326
Business Services fees receivable .......................................... 237 315
Other current assets ....................................................... 114 (78)
Other assets ............................................................... -- (17)
(Decrease) increase in liabilities:
Accounts payable .......................................................... 34 523
Accrued liabilities ....................................................... (813) (376)
Due to Medical Practices .................................................. (21) 195
Patient deposits .......................................................... 1,470 65
------- -------
Net cash provided by operating activities .......................................... 1,280 1,915
------- -------
Cash flows used in investing activities:
Purchase of fixed assets and leasehold improvements ........................... (777) (366)
Payment for exclusive business service rights ................................. (203) --
Proceeds from sale of fixed assets and leasehold improvements ................. -- 10
------- -------
Net cash used in investing activities .............................................. (980) (356)
------- -------
Cash flows used in financing activities:
Principal repayments on debt .................................................. (250) (36)
Principal repayments under capital lease obligations .......................... (32) (33)
Repurchase of Common Stock .................................................... (2,029) (1,176)
Proceeds from exercise of Common Stock warrants ............................... 3 --
Dividends paid on Convertible Preferred Stock ................................. (33) (33)
------- -------
Net cash used in financing activities .............................................. (2,341) (1,278)
------- -------
Net increase (decrease) in cash .................................................... $(2,041) $ 281
Cash at beginning of period ........................................................ 5,306 3,650
------- -------
Cash at end of period .............................................................. $ 3,265 $ 3,931
======= =======
See accompanying notes to the consolidated financial statements.
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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 March 31, 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-month periods
ended March 31, 2001 and 2000 is as follows (000's omitted, except for per share
amounts):
2001 2000
--------------------------------- ---------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator)(Denominator) Amount (Numerator)(Denominator) Amount
Net income........................... $359 $290
Less: Preferred stock
dividends paid or accrued......... (33) (33)
---- ----
Basic EPS
Net income available to
Common stockholders............. $326 3,223 $0.10 $257 4,376 $0.06
==== ===== ===== ==== ===== =====
Effect of Dilutive Securities
Options.............................. -- 8 -- 11
Warrants............................. -- -- -- 59
---- ----- ---- -----
Diluted EPS
Net income available to
Common stockholders............. $326 3,231 $0.10 $257 4,446 $0.06
==== ===== ===== ==== ===== =====
For the three-month period ended March 31, 2001, the effect of the assumed
exercise of options to purchase approximately 489,000 shares of Common Stock at
exercise prices ranging from $3.00 to $5.00 per share and 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 options and warrants were greater than the
average market price of the shares of Common Stock, therefore causing these
options and warrants to be antidilutive.
For the three-month periods ended March 31, 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.
-6-
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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 March 31, 2001
Revenues ........................... $ -- $13,030 $3,461 $16,491
Cost of Services ................... -- 10,821 3,323 14,144
------- ------- ------ -------
Contribution ....................... -- $ 2,209 $ 138 $ 2,347
Other costs ........................ 1,689 -- -- 1,689
Amortization of intangibles ........ 1 213 2 216
Interest, net ...................... 44 (11) (1) 32
------- ------- ------ -------
Income before income taxes ......... $(1,734) $ 2,007 $ 137 $ 410
======= ======= ====== =======
Depreciation expense included above $ 106 $ 274 $ -- $ 380
Capital expenditures ............... 57 720 -- 777
Total assets ....................... (868) 39,376 1,708 40,216
For the three months ended March 31, 2000
Revenues ........................... $ -- $11,738 $1,870 $13,608
Cost of Services ................... -- 9,833 1,805 11,638
------- ------- ------ -------
Contribution ....................... -- 1,905 65 1,970
Other costs ........................ 1,349 -- -- 1,349
Amortization of intangibles ........ 11 207 2 220
Interest, net ...................... 59 9 (2) 66
------- ------- ------ -------
Income before income taxes ......... $(1,419) $ 1,689 $ 65 $ 335
======= ======= ====== =======
Depreciation expense included above $ 119 $ 333 $ -- $ 452
Capital expenditures ............... 22 344 -- 366
Total assets at December 31, 2000... 3,335 36,688 1,272 41,295
-7-
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 to be incurred will be minor.
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 change in strategy to become more of a marketing-oriented rather than a
service-based company, costs of implementation may be incurred prior to
achieving the related revenues. As a result of these two issues, future income
levels may be reduced and the Company may not achieve the earnings level
experienced in 2000 or first quarter of 2001.
-8-
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
three-month period
ended March 31,
------------------
2001 2000
------- --------
(unaudited)
Revenues, net............................................ 100% 100%
Costs of services incurred:
Employee compensation and related expenses.......... 37.6% 37.5%
Direct materials.................................... 23.1% 18.1%
Occupancy costs..................................... 6.1% 6.0%
Depreciation........................................ 1.7% 2.5%
Other expenses...................................... 17.3% 21.4%
----- -----
Total costs of services............................. 85.8% 85.5%
Contribution............................................. 14.2% 14.5%
General and administrative expenses...................... 10.2% 9.9%
Amortization of intangible assets........................ 1.3% 1.6%
Interest income.......................................... (0.3%) (0.4%)
Interest expense......................................... 0.5% 0.9%
----- -----
Total other expenses................................ 11.7% 12.0%
----- -----
Income before income taxes............................... 2.5% 2.5%
Provision for income taxes............................... 0.3% 0.3%
----- -----
Net income............................................... 2.2% 2.2%
===== =====
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000
Revenues for the three months ended March 31, 2001 (the first quarter of
2001) were approximately $16.5 million as compared to approximately $13.6
million for the three months ended March 31, 2000, an increase of 21.3%.
Approximately 45% of the increase in revenues is attributable to same market
growth in reimbursed costs and business service fees in the Reproductive Science
Centers. Approximately 55% 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 first
quarter of 2001, compared to 85.5% in the first quarter of 2000. 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 due to a large group of assets having
reached fully depreciated status during 2000. 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 $2.3 million in the first quarter of 2001 as
compared to $2.0 million in the first quarter of 2000, an increase of
approximately 15.0%. This increase is the result of (i) increased volume at
various Reproductive Science Centers, primarily the result of planned
infrastructure improvements, (ii) improving margins in the pharmaceutical
distribution division, and (iii) elimination of operating losses at the Kansas
City based Reproductive Science Center which was closed during the first quarter
2000.
-9-
General and administrative expenses for the first quarter of 2001 were
approximately $1.7 million as compared to approximately $1.3 million in the
first quarter of 2000, an increase of 30.1%. The increase was largely due to
increases in staffing and compensation attributable to implementation of
initiatives related to the Company's web development strategy. As a percentage
of revenues, general and administrative expenses increased to approximately
10.2% in the first quarter of 2001 from approximately 9.9% in the first quarter
of 2000.
Amortization of intangible assets was $216,000 in the first quarter of 2001
as compared to $220,000 in the first quarter of 2000, a decrease of 1.8%. This
decrease was attributable to completion of amortization of certain intangibles
related to the company's trademark.
Interest income for the first quarter of 2001 increased to $54,000 from
$50,000 for the first quarter of 2000, due to a higher cash balance and
financing proceeds from Reproductive Science Center build-outs. Interest expense
for the first quarter of 2001 decreased to $86,000 from $116,000 in the first
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 $51,000 in the first quarter of 2001
from $45,000 in the first quarter of 2000 in line with increased earnings at
network site locations.
Net income was $359,000 in the first quarter of 2001 as compared to
$290,000 in the first quarter of 2000, an increase of 24%. 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
cash flow, sales of equity securities and bank financings. As of March 31, 2001,
the Company had working capital of approximately $2.3 million, approximately
$3.3 million of which consisted of cash and cash equivalents, compared to
working capital of approximately $4.9 million at December 31, 2000,
approximately $5.3 million of which consisted of cash and cash equivalents. The
net decrease in working capital at March 31, 2001 was principally due to the
repurchase of 880,072 shares of the Company's Common Stock for an aggregate
purchase price of $2.0 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.
-10-
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
None; no material developments in previously reported
matters.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
None.
-11-
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: May 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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