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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, 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 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 (Zip code)
(Address of principal executive offices)
(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 27, 2000 was 4,162,347.
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<PAGE>
INTEGRAMED AMERICA, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2000 (unaudited) and
December 31, 1999........................................... 3
Consolidated Statements of Operations for the three-month
periods ended March 31, 2000 and 1999 (unaudited)........... 4
Consolidated Statements of Cash Flows for the three-month
periods ended March 31, 2000 and 1999 (unaudited)........... 5
Notes to Consolidated Financial Statements (unaudited)......... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 7-9
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................10
Item 2. Changes in Securities.............................................10
Item 3. Defaults upon Senior Securities...................................10
Item 4. Submission of Matters to a Vote of Security Holders...............10
Item 5. Other Information.................................................10
Item 6. Exhibits and Reports on Form 8-K..................................10
SIGNATURES ...................................................................11
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(all dollars in thousands, except per share amounts)
ASSETS
<CAPTION>
March 31 December 31,
2000 1999
---------- -----------
(unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents .................................................................... $ 3,931 $ 3,650
Patient accounts receivable, less allowance for doubtful accounts of $1,086 and $851
in 2000 and 1999, respectively.............................................................. 10,134 10,460
Business Service fees receivable, less allowance for doubtful accounts of $150 and $0
in 2000 and 1999, respectively.............................................................. 575 890
Other current assets ......................................................................... 1,240 1,162
------- -------
Total current assets...................................................................... 15,880 16,162
Fixed assets, net ............................................................................ 5,868 5,965
Intangible assets, net........................................................................ 17,944 18,163
Other assets.................................................................................. 542 525
------- -------
Total assets.............................................................................. $40,234 $40,815
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................................. $ 1,603 $ 1,080
Accrued liabilities........................................................................... 2,571 2,948
Due to Medical Practices...................................................................... 1,963 1,768
Current portion of long-term notes payable and other obligations.............................. 1,655 1,691
Patient deposits.............................................................................. 3,035 2,970
------- -------
Total current liabilities................................................................. 10,827 10,457
------- -------
Long-term notes payable and other obligations................................................... 3,686 3,719
------- -------
Shareholders' equity:
Preferred Stock, $1.00 par value - 3,165,644 shares authorized in 2000 and
1999, 2,500,000 undesignated; 665,644 shares designated as Series A
Cumulative Convertible of which 165,644 shares were issued and outstanding
in 2000 and
1999, respectively.......................................................................... 166 166
Common Stock, $.01 par value - 50,000,000 shares authorized in 2000 and 1999;
and 5,368,960 shares issued in 2000 and 1999............................................... 54 54
Capital in excess of par ..................................................................... 54,107 54,140
Accumulated deficit .......................................................................... (24,939) (25,230)
Treasury Stock, at cost - 1,106,613 and 746,863 shares in 2000 and 1999, respectively......... (3,667) (2,491)
------- -------
Total shareholders' equity ............................................................... 25,721 26,639
------- -------
Total liabilities and shareholders' equity................................................ $40,234 $40,815
======= =======
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in thousands, except per share amounts)
For the
three-month period
ended March 31,
-------------------
2000 1999
------- -------
(unaudited)
Revenues, net ........................................ $13,608 $10,532
Cost of services incurred:
Employee compensation and related expenses......... 5,097 4,068
Direct materials................................... 2,481 1,095
Occupancy costs.................................... 812 675
Depreciation....................................... 334 309
Other expenses..................................... 2,914 2,051
-------- --------
Total cost of services rendered.................. 11,638 8,198
-------- --------
Contribution.......................................... 1,970 2,334
General and administrative expenses................... 1,349 1,380
Amortization of intangible assets..................... 220 244
Interest income....................................... (50) (23)
Interest expense...................................... 116 135
-------- --------
Total other expenses............................... 1,635 1,736
-------- --------
Income before income taxes............................ 335 598
Provision for income taxes............................ 45 80
-------- --------
Net income............................................ $ 290 $ 518
Less: Dividends paid and/or accrued on Preferred Stock (33) (33)
-------- --------
Net income applicable to Common Stock................. $ 257 $ 485
======== ========
Basic and diluted earnings per share of Common Stock.. $ 0.06 $ 0.10
======== ========
Weighted average shares - basic....................... 4,376 4,976
======== ========
Weighted average shares - diluted..................... 4,446 5,077
======== ========
See accompanying notes to the consolidated financial statements.
4
<PAGE>
<TABLE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(all amounts in thousands)
<CAPTION>
For the
three-month period
ended March 31,
--------------------
2000 1999
------ ------
(unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net income ............................................................................ $ 290 $ 518
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization..................................................... 672 618
Change in assets and liabilities--
Decrease (increase) in assets:
Patient accounts receivable....................................................... 326 643
Business Services fees receivable................................................. 315 (150)
Other current assets.............................................................. (78) 745
Other assets...................................................................... (17) (2)
(Decrease) increase in liabilities:
Accounts payable................................................................. 523 (455)
Accrued liabilities.............................................................. (376) (546)
Due to Medical Practices......................................................... 195 191
Patient deposits................................................................. 65 (695)
------ -------
Net cash provided by operating activities................................................. 1,915 867
------ -------
Cash flows used in investing activities:
Purchase of fixed assets and leasehold improvements.................................. (366) (1,295)
Proceeds from sale of fixed assets and leasehold improvements........................ 10 --
------ -------
Net cash used in investing activities..................................................... (356) (1,295)
------ -------
Cash flows used in financing activities:
Principal repayments on debt......................................................... (36) (990)
Principal repayments under capital lease obligations................................. (33) (1)
Repurchase of Common Stock........................................................... (1,176) (509)
Dividends paid on Convertible Preferred Stock........................................ (33) (33)
------ -------
Net cash used in financing activities..................................................... (1,278) (1,533)
------ -------
Net increase (decrease) in cash........................................................... $ 281 $(1,961)
Cash at beginning of period............................................................... 3,650 4,241
------ -------
Cash at end of period..................................................................... $3,931 $ 2,280
====== =======
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
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, 2000, 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, 2000. 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, 1999.
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, 2000 and 1999 is as follows (000's omitted, except for per share
amounts):
<TABLE>
<CAPTION>
2000 1999
----------------------------------- ---------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator)(Denominator) Amount
----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income.............................. $290 $518
Less: Preferred stock
dividends paid or accrued............ (33) (33)
----- ----
Basic EPS
Net income available to
Common stockholders................ $257 4,376 $0.06 $485 4,976 $0.10
==== ===== ===== ==== ===== =====
Effect of Dilutive Securities
Options................................. 11 37
Warrants................................ 59 64
----- -----
Diluted EPS
Net income available to
Common stockholders................ $257 4,446 $0.06 $485 5,077 $0.10
==== ===== ===== ==== ===== =====
</TABLE>
For the three-month period ended March 31, 2000, the effect of the assumed
exercise of options to purchase approximately 367,000 shares of Common Stock at
exercise prices ranging from $4.12 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, 2000 and 1999, 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
<PAGE>
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, 1999.
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,
-------------------
2000 1999
------- -------
(unaudited)
Revenues, net............................................. 100% 100%
Costs of services incurred:
Employee compensation and related expenses........... 37.5% 38.6%
Direct materials..................................... 18.1% 10.4%
Occupancy costs...................................... 6.0% 6.4%
Depreciation......................................... 2.5% 2.9%
Other expenses....................................... 21.4% 19.5%
----- -----
Total costs of services.............................. 85.5% 77.8%
Contribution.............................................. 14.5% 22.2%
General and administrative expenses....................... 9.9% 13.1%
Amortization of intangible assets......................... 1.6% 2.3%
Interest income........................................... (0.4%) (0.2%)
Interest expense.......................................... 0.9% 1.3%
------ ------
Total other expenses................................. 12.0% 16.5%
----- -----
Income before income taxes................................ 2.5% 5.7%
Provision for income taxes................................ 0.3% 0.8%
------ ------
Net income................................................ 2.2% 4.9%
====== ======
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Revenues for the three months ended March 31, 2000 (the first quarter of
2000) were approximately $13.6 million as compared to approximately $10.5
million for the three months ended March 31, 1999, an increase of 29.2%.
Approximately 39% of the increase is attributable to same market growth in
reimbursed costs and business service fees in the Reproductive Science Centers,
offset by the elimination of terminated Business Services contracts.
Approximately 61% of the increase is attributable to new businesses and
agreements entered into subsequent to the first quarter of 1999. Same market
growth in revenues was principally attributable to increases in patient volume.
The new business and new business service increase in revenues was comprised of
the following: (i) an approximate $1.8 million increase in reimbursed costs of
services, offset by a decrease of $600,000 in the Company's Business Services
fees derived from the Reproductive Science Centers' net revenue and/or earnings;
and (ii) $1.9 million from pharmaceutical sales.
7
<PAGE>
Total costs of services as a percentage of revenues were 85.5% in the first
quarter of 2000, compared to 77.8% in the first quarter of 1999. Direct
materials increased as a percentage of revenues, primarily due to the cost of
products sold at IntegraMed Pharmaceutical Services. Other expenses increased as
a percentage of revenue, due to administrative costs at IntegraMed
Pharmaceutical Services, as well as increases in bad debt provisions at various
Reproductive Science Centers.
Contribution was approximately $2.0 million in the first quarter of 2000 as
compared to $2.3 million in the first quarter of 1999, a decrease of
approximately 15.6%. This decrease is the result of (i) the reduced contribution
from the hospital based Reproductive Science Center in New Jersey, which has
exhibited declining revenues due to the physician turnover, (ii) increased
expenses at the Boston based Reproductive Science Center, primarily the result
of planned infrastructure improvements, and (iii) reduced operating levels at
the Kansas City based Reproductive Science Center which was closed at the end of
the first quarter. In addition, the contribution margin percentage has been
negatively impacted by pharmaceutical sales, which have a significantly lower
margin than the Reproductive Science Centers.
General and administrative expenses for the first quarter of 2000 were
approximately $1.3 million as compared to approximately $1.4 million in the
first quarter of 1999, a decrease of 2.2%. The decrease was largely due to
decreases in staffing and compensation attributable to the near-complete
implementation of the Company's proprietary ArtWorks suite of fertility care
information systems. As a percentage of revenues, general and administrative
expenses decreased to approximately 9.9% in the first quarter of 2000 from
approximately 13.1% in the first quarter of 1999.
Amortization of intangible assets was $220,000 in the first quarter of 2000
as compared to $244,000 in the first quarter of 1999, a decrease of 9.8%. This
decrease was attributable to the accelerated amortization of business service
rights recorded in the fourth quarter of 1999, related to single physician
practices.
Interest income for the first quarter of 2000 increased to $50,000 from
$23,000 for the first quarter of 1999, due to a higher cash balance and
financing proceeds from Reproductive Science Center build-outs. Interest expense
for the first quarter of 2000 decreased to $116,000 from $135,000 in the first
quarter of 1999, due to an decrease in notes payable to Medical Providers for
exclusive business service rights.
The provision for income taxes primarily related to state taxes. The
provision for income taxes decreased to $45,000 in the first quarter of 2000
from $80,000 in the first quarter of 1999 due to the decrease in Network
contribution at existing sites, and additional tax planning considerations.
Net income was $290,000 in the first quarter of 2000 as compared to
$518,000 in the first quarter of 1999, a decrease of 44%. The decrease was
primarily due to (i) decreasing revenues related to physician turnover at the
Company's hospital based Reproductive Science Center, (ii) increased
infrastructure costs at the Boston Reproductive Science Center, and (iii) the
wind down of the Kansas City Reproductive Science Center operations.
Liquidity and Capital Resources
Historically, the Company has financed its operations primarily through
sales of equity securities. More recently, the Company has commenced using bank
financing for working capital and acquisition purposes. The Company anticipates
that its acquisition strategy will continue to require substantial capital
investment. Capital is needed not only for additional acquisitions, but also for
the effective integration, operation and expansion of the Company's existing
Reproductive Science Centers. The Medical Practices may require capital for
renovation and expansion and for the addition of medical equipment and
technology.
At March 31, 2000, the Company had working capital of approximately $5.1
million, approximately $3.9 million of which consisted of cash and cash
equivalents, compared to working capital of approximately $5.7 million at
December 31, 1999, approximately $3.7 million of which consisted of cash and
cash equivalents. The net decrease in working capital at March 31, 2000 was
principally due to the repurchase of 359,750 shares of the Company's Common
Stock for an aggregate purchase price of $1.2 million.
The Company expects its cash flows from operating activities to be
sufficient to fund its needs for asset acquisition, debt repayments and Common
Stock repurchase program for the next year.
8
<PAGE>
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.
9
<PAGE>
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.
10
<PAGE>
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 10, 2000 By: /s/John W. Hlywak, Jr.
-------------------------------
John W. Hlywak, Jr.
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<CASH> 3,931
<SECURITIES> 0
<RECEIVABLES> 11,945
<ALLOWANCES> 1,236
<INVENTORY> 0
<CURRENT-ASSETS> 15,880
<PP&E> 5,868 <F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 40,234
<CURRENT-LIABILITIES> 10,827
<BONDS> 0
0
166
<COMMON> 54
<OTHER-SE> 25,501
<TOTAL-LIABILITY-AND-EQUITY> 40,234
<SALES> 13,608
<TOTAL-REVENUES> 13,608
<CGS> 11,638
<TOTAL-COSTS> 11,638
<OTHER-EXPENSES> 1,519
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116
<INCOME-PRETAX> 335
<INCOME-TAX> 45
<INCOME-CONTINUING> 290
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 290
<EPS-BASIC> .06
<EPS-DILUTED> .06
<FN>
<F1>
PP&E is net of depreciation.
</FN>
</TABLE>
