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FORM 10-Q SECURITIES
AND
EXCHANGE COMMISSION (Mark one) |
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended June 30, 2000 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 number
0-27750 |
Delaware | 8071 | 13-3459685 | |||
(State or other jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer | |||
incorporation or organization) | Classification Code Number) | Identification No.) |
521 West 57th Street
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 issuers classes of common stock, as of the latest practicable date. |
CLASS |
OUTSTANDING AT JUNE 30, 2000 | ||
---|---|---|---|
Common Stock, par value | 7,742,244 | ||
$.005 per share |
IndexIMPATH INC. and Subsidiaries |
PAGE NUMBER | |||||
---|---|---|---|---|---|
PART I. | Financial Information |
Item 1. | Consolidated Financial Statements (Unaudited): |
Consolidated Balance Sheets at June 30, 2000 and December 31, 1999 |
3 |
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2000 and June 30, 1999 |
4 |
Consolidated Statement of Stockholders Equity for the Six Months Ended June 30, 2000 |
5 |
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and June 30, 1999 |
6 |
Notes to Consolidated Financial Statements | 7-8 |
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
9-14 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 15 |
Signatures | 16 |
PART II. | OTHER INFORMATION |
Item 6. | Exhibits and Reports on Form 8-K | 17-19 |
Item 1. Consolidated Financial Statements (Unaudited) IMPATH INC. and SubsidiariesConsolidated Balance
Sheets |
June 30, 2000 |
December 31, 1999 | ||||
---|---|---|---|---|---|
ASSETS | |||||
Current assets: | |||||
Cash and cash equivalents | $ 8,330,955 | $ 5,321,916 | |||
Marketable securities, at market value | 18,208,049 | 23,716,022 | |||
Accounts receivable, net of allowance for doubtful accounts | 44,254,140 | 35,515,029 | |||
Prepaid expenses | 1,335,723 | 535,543 | |||
Deferred tax assets | 1,784,074 | 1,784,074 | |||
Other current assets | 7,700,587 | 4,851,273 | |||
Total current assets | 81,613,528 | 71,723,857 | |||
Fixed assets, less accumulated depreciation and amortization | 44,742,454 | 33,704,112 | |||
Deposits and other assets | 611,686 | 338,373 | |||
Investment in preferred stock | 5,000,000 | 5,000,000 | |||
Intangible assets, net of accumulated amortization | 37,751,548 | 39,011,001 | |||
Total assets | $169,719,216 | $149,777,343 | |||
LIABILITIES AND STOCKHOLDERS EQUITY | |||||
Current liabilities: | |||||
Current portion of capital lease obligations | $ 7,624,580 | $ 4,655,309 | |||
Current portion of notes payable | 863,126 | 1,064,587 | |||
Short term borrowings | 3,000,000 | 0 | |||
Accounts payable | 3,634,335 | 3,031,898 | |||
Deferred revenue | 1,878,603 | 1,988,146 | |||
Income taxes payable | 3,707,845 | 1,434,947 | |||
Accrued expenses & other current liabilities | 2,903,649 | 3,443,578 | |||
Total current liabilities | 23,612,138 | 15,618,465 | |||
Capital lease obligations, net of current portion | 17,896,192 | 10,378,142 | |||
Notes payable, net of current portion | 800,000 | 800,000 | |||
Deferred tax liabilities | 2,666,649 | 2,666,649 | |||
Stockholders equity: | |||||
Common stock | 44,234 | 43,475 | |||
Common stock to be issued | 645,000 | 1,735,000 | |||
Additional paid-in capital | 125,529,749 | 122,553,938 | |||
Retained earnings | 26,219,613 | 20,330,152 | |||
Accumulated other comprehensive (loss) | (630,125 | ) | (705,029 | ) | |
151,808,471 | 143,957,536 | ||||
Less: | |||||
Cost of 1,104,738 and 955,738 shares of common stock | |||||
held in treasury in 2000 and 1999, respectively | (26,750,281 | ) | (23,350,467 | ) | |
Deferred compensation | (313,953 | ) | (292,982 | ) | |
Total stockholders equity | 124,744,237 | 120,314,087 | |||
Total liabilities and stockholders equity | $169,719,216 | $149,777,343 | |||
See accompanying notes to consolidated financial statements. |
IMPATH INC. and SubsidiariesConsolidated Statements
of Operations |
Three Months Ended June 30 |
Six Months Ended June 30 |
||||||||
---|---|---|---|---|---|---|---|---|---|
2000 |
1999 |
2000 |
1999 | ||||||
Revenues: | |||||||||
Net diagnostic and prognostic services | $ 30,309,319 | $ 19,588,031 | $ 57,745,194 | $ 35,321,998 | |||||
Biopharmaceutical/Genomics services | 2,047,004 | 300,178 | 3,992,013 | 552,232 | |||||
Tumor registry services | 1,007,695 | 957,529 | 2,189,643 | 1,941,660 | |||||
33,364,018 | 20,845,738 | 63,926,850 | 37,815,890 | ||||||
Operating expenses: | |||||||||
Salaries and related costs | 12,834,812 | 7,835,466 | 24,947,208 | 14,562,788 | |||||
Selling, general and administrative | 12,374,299 | 8,118,146 | 23,641,510 | 14,475,203 | |||||
Depreciation and amortization | 2,549,108 | 1,612,380 | 4,924,186 | 2,974,833 | |||||
Total operating expenses | 27,758,219 | 17,565,992 | 53,512,904 | 32,012,824 | |||||
Income from operations | 5,605,799 | 3,279,746 | 10,413,946 | 5,803,066 | |||||
Interest income | 480,215 | 792,097 | 954,334 | 1,462,994 | |||||
Interest expense | (702,454 | ) | (242,858 | ) | (1,083,651 | ) | (414,012 | ) | |
Other Income, Net | (222,239 | ) | 549,239 | (129,317 | ) | 1,048,982 | |||
Income before income tax expense | 5,383,560 | 3,828,985 | 10,284,629 | 6,852,048 | |||||
Income tax expense | (2,314,931 | ) | (1,531,594 | ) | (4,395,168 | ) | (2,764,594 | ) | |
Net income | $ 3,068,629 | $ 2,297,391 | $ 5,889,461 | $ 4,087,454 | |||||
Earnings per share: | |||||||||
Basic: | |||||||||
Net income per common share | $ 0.40 | $ 0.29 | $ 0.76 | $ 0.51 | |||||
7,733,000 | 7,949,000 | 7,711,000 | 7,995,000 | ||||||
Weighted average common shares outstanding | |||||||||
Diluted: | |||||||||
Net income per common share-assuming dilution | $ 0.38 | $ 0.28 | $ 0.74 | $ 0.50 | |||||
Weighted average common and common equivalent shares | |||||||||
outstanding-assuming dilution | 8,104,000 | 8,156,000 | 8,004,000 | 8,217,000 | |||||
See accompanying notes to consolidated financial statements. |
IMPATH INC. and
Subsidiaries |
Common Stock |
Common Stock to |
Additional Paid-in Capital |
Retained | Accumulated Other Comprehensive |
Treasury | Deferred | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares |
Amount |
be Issued |
(deficiency) |
Earnings |
(Loss) |
Stock |
compensation |
Total | |||||||||||
Balance at December 31,1999 | 8,695,181 | $43,475 | $1,735,000 | $122,553,938 | $20,330,152 | ($705,029 | ) | ($23,350,467 | ) | ($ 292,982 | ) | $120,314,087 | |||||||
Common shares issued upon exercise of stock options | 111,801 | 559 | 1,686,077 | 1,686,636 | |||||||||||||||
Compensation associated with issuance of options to non-employees | 199,934 | (199,934 | ) | | |||||||||||||||
Issuance of common shares | 40,000 | 200 | (1,090,000 | ) | 1,089,800 | | |||||||||||||
Repurchase of common shares | (3,399,814 | ) | (3,399,814 | ) | |||||||||||||||
Amortization of deferred compensation | 178,963 | 178,963 | |||||||||||||||||
Comprehensive income: | |||||||||||||||||||
Change in unrealized net depreciation of securities | 74,904 | 74,904 | |||||||||||||||||
Net income for the period ended June 30, 2000 | 5,889,461 | 5,889,461 | |||||||||||||||||
Total comprehensive income | 5,964,365 | ||||||||||||||||||
Balance at June 30, 2000 | 8,846,982 | $44,234 | $645,000 | $125,529,749 | $26,219,613 | ($630,125 | ) | ($26,750,281 | ) | ($313,953 | ) | $124,744,237 | |||||||
See accompanying notes to consolidated financial statements |
IMPATH INC. and SubsidiariesConsolidated Statements
of Cash Flows |
Six Months Ended June 30, |
|||||||
---|---|---|---|---|---|---|---|
2000 |
1999 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ 5,889,461 | $ 4,087,454 | |||||
Adjustments to reconcile net income to | |||||||
net cash provided by (used in) | |||||||
operating activities: | |||||||
Depreciation and amortization | 4,924,186 | 2,974,833 | |||||
Provision for uncollectible accounts receivable | 8,684,792 | 4,093,415 | |||||
Non-cash compensation | 178,963 | 109,642 | |||||
Changes in assets and liabilities: | |||||||
(Increase) in accounts receivable | (17,423,903 | ) | (13,122,159 | ) | |||
(Increase) in prepaid expenses and current assets | (3,649,494 | ) | (1,884,292 | ) | |||
(Increase) in deposits and other assets | (273,313 | ) | (42,154 | ) | |||
(Increase) decrease in accounts payable and accrued expenses | 62,508 | (354,372 | ) | ||||
Increase in income taxes payable | 2,272,898 | 1,979,810 | |||||
(Decrease) increase in deferred revenues | (109,543 | ) | 129,306 | ||||
Total adjustments | (5,332,906 | ) | (6,115,971 | ) | |||
Net cash provided by (used in) operating activities | 556,555 | (2,028,517 | ) | ||||
Cash flows from investing activities: | |||||||
Purchases of marketable securities | (1,656,697 | ) | (33,481,800 | ) | |||
Sales/maturities of marketable securities | 7,239,574 | 28,887,488 | |||||
Acquisitions of businesses, net of cash acquired | (316,375 | ) | | ||||
Capital expenditures | (2,552,826 | ) | (4,256,742 | ) | |||
Net cash provided by (used in) investing activities | 2,713,676 | (8,851,054 | ) | ||||
Cash flows from financing activities: | |||||||
Issuance of common stock from exercise of shares and warrants | 1,686,636 | 252,056 | |||||
Repurchase of common stock | (3,399,814 | ) | (8,630,161 | ) | |||
Payments of capital lease obligations | (2,999,787 | ) | (1,186,045 | ) | |||
Proceeds from capital leases | 1,653,234 | | |||||
Proceeds (repayment) of bank loans | 3,000,000 | (8,000,000 | ) | ||||
Payments of notes payable | (201,461 | ) | (824,608 | ) | |||
Net cash used in financing activities | (261,192 | ) | (18,388,758 | ) | |||
Net increase (decrease) in cash and cash equivalents | 3,009,039 | (29,268,329 | ) | ||||
Cash and cash equivalents at beginning of period | 5,321,916 | 45,556,005 | |||||
Cash and cash equivalents at end of period | $ 8,330,955 | $ 16,287,676 | |||||
See accompanying notes to consolidated financial statements. |
June 30, 2000 |
December 31, 1999 | ||||
---|---|---|---|---|---|
Gross accounts receivable | $ 81,893,917 | $ 63,510,465 | |||
Allowance for doubtful accounts | (10,110,232 | ) | (7,783,663 | ) | |
Contractual allowance reserve | (27,529,545 | ) | (20,211,773 | ) | |
$ 44,254,140 | $ 35,515,029 | ||||
Net income for the three months ended June 30, 2000 and 1999 was $3.1 million and $2.3 million, respectively, representing an increase of $0.8 million, or 34.8%, in 2000. As a percentage of total revenues, net income decreased to 9.3% in 2000 from 11.1% in 1999. This decrease was primarily due to lower interest income, increased interest expense associated with capital lease obligations, as well as a higher tax rate. |
The tax provision for the first six months of June 30, 2000 of approximately $4.4 million reflects federal, state and local income tax expense. The Company has estimated its annual effective tax rate for 2000 to be approximately 43%, as compared to 40% in 1999. The 43% effective tax rate resulted from an increase in the Companys state and local tax provision due to lower tax-exempt interest income, as well as increased taxable income. Net income for the first six months of June 30, 2000 and 1999 was $5.9 million and $4.1 million, respectively, representing an increase of $1.8 million, or 43.9%, in 2000. As a percentage of total revenues, net income decreased to 9.2% in 2000 from 10.8% in 1999. This decrease was due to lower interest income, increased interest expense associated with capital lease obligations as well as a higher tax rate. |
Liquidity and Capital ResourcesSince inception, the Company has raised approximately $103.9 million of capital through the public offerings of its common stock and $6.6 million from private placements of preferred stock, all of which was converted into common stock at the closing of the Companys initial public offering in February 1996. The Companys working capital and capital expenditure needs have increased and are expected to continue to increase as the Company expands its existing facilities and pursues its growth strategy. The Companys cash and cash equivalent balances at June 30, 2000 and December 31, 1999 were $8.3 million and $5.3 million, respectively, representing an increase of $3.0 million in 2000. The Company also had approximately $18.2 million in marketable securities at June 30, 2000, representing a $5.5 million decrease from the $23.7 million at December 31, 1999. The net decrease in cash and cash equivalents and marketable securities was primarily due to the repurchase of 149,000 shares of common stock for approximately $3.4 million associated with the Companys treasury stock buyback program. For the six months ended June 30, 2000, net cash provided by operating activities was approximately $557,000. This was driven by earnings before interest, taxes, depreciation, and amortization (EBITDA) of approximately $15.3 million, partially offset by increases in accounts receivable, net of allowance for bad debt of $8.7 million. The increase in net accounts receivable was due primarily to rapid sales growth, as well as the claims filing delays associated with the Companys new billing system implemented in 1999. The continuing product mix shift towards lymphoma/leukemia cases, which carry a higher revenue realization per case, also contributed to the increase. In addition, due to rapid case volume growth, supplies inventory increased approximately $2.2 million. This increase was offset by an increase in income taxes payable of $2.3 million. The Company incurred approximately $2.6 million in capital expenditures associated with the expansion of its laboratory and office facilities. The Company also received $3.0 million from short term line of credit bank borrowings and approximately $1.7 million through the issuance of common stock upon the exercise of Company stock options and warrants. The Company has a line of credit for an aggregate principal amount of $15.0 million with Fleet Bank. Borrowing under the line bears interest at LIBOR plus 2.0%. As of June 30, 2000, the Company had $3.0 million outstanding under this line. The Company has lines of credit for financing equipment, leasehold improvements and computer hardware and software. In July 1999, the Company established a $6.0 million credit line with Newcourt Financial (currently CIT Group) with lease terms that are based on 48 monthly payments at a rate equal to .35% above the yield on four-year treasury notes. As of June 30, 2000, the Company had fully drawn against the line. In September 1999, the Company established a $6.0 million credit line with Fleet Bank with lease terms based on 48 monthly payments at a rate equal to .20% above the yield on four-year treasury notes. As of June 30, 2000, approximately $1 million was drawn against the line. In December 1999, the Company established a $6.2 million credit line with First American Bankcorp, Inc. with lease terms of 48 months and a rate equal to the yield on four-year treasury notes. The line of credit was subsequently increased to $15.0 million in March 2000, under the same lease terms. As of June 30, 2000, approximately $11.9 million was drawn against this line. In April 2000, the Company established an $875,000 credit line with Dynamics Commercial Funding Corp. with lease terms of 36 months and a rate equal to the yield on three-year treasury notes. As of June 30, 2000, the Company had fully drawn against the line. In June 2000, the Company established an additional $4.0 million credit line with Dynamics Commercial Funding Corp. with lease terms of 48 months and a rate equal to the yield on four-year treasury notes. As of June 30, 2000, approximately $716,000 was drawn against this line. The Companys growth strategy is anticipated to be financed through its current cash resources and existing third-party credit facilities. The Company believes the combination of these sources will be sufficient to fund its operations and satisfy the companys cash requirements for the next 12 months and the foreseeable future. There may be circumstances, however, that would accelerate the Companys use of cash resources. If this occurs, the Company may, from time to time, incur additional indebtedness or issue, in public or private transactions, equity or debt securities. However, there can be no assurance that suitable debt or equity financing will be available to the Company. |
SIGNATURESPursuant 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. |
Dated: August 14, 2000 | IMPATH INC. |
||||
(Registrant) |
Dated: August 14, 2000 | By / s / ANU D. SAAD |
||||
Anu D. Saad, Ph.D. | |||||
President and Chief | |||||
Executive Officer |
Dated: August 14, 2000 | By / s / DAVID J. CAMMARATA |
||||
David J. Cammarata Executive Vice President, Chief Financial Officer, and Principal Accounting Officer |
INDEX TO EXHIBITS |
Exhibit Number |
Description |
Page Number | |||
---|---|---|---|---|---|
27 | Financial Data Schedule | 16 |
|