<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
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 1-13177
INTEGRA, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3605119
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1060 First Avenue - Suite 410
King of Prussia, PA 19406
(Address of principal executive offices) (Zip Code)
(610) 992-2600
(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 .
As of November 4, 1999, Integra, Inc. had 10,138,552 shares of common stock,
$0.01 par value, outstanding.
Page 1 of 19
<PAGE> 2
INTEGRA, INC.
FORM 10-Q - QUARTER ENDED SEPTEMBER 30, 1999
INDEX
<TABLE>
<CAPTION>
FORM 10-Q FORM 10-Q FORM 10-Q
PART NO: ITEM NO. DESCRIPTION PAGE NO.
-------- -------- ----------- --------
<S> <C> <C> <C>
I. FINANCIAL INFORMATION
1. Financial Statements
- Consolidated Statements of
Operations for the Three Months
Ended September 30, 1999 and 1998 3
- Consolidated Statements of Operations
for the Nine Months Ended September 30,
1999 and 1998 4
- Consolidated Balance Sheets
as of September 30, 1999 and
December 31, 1998 5
- Consolidated Statements of
Cash Flows for the Nine Months
Ended September 30, 1999 and 1998 6
- Consolidated Statement of
Changes in Stockholders' Equity
for the Nine Months Ended
September 30, 1999 7
- Notes to Consolidated Financial
Statements 8
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
II. OTHER INFORMATION
1. Legal Proceedings 16
6. Exhibits and Reports on Form 8-K 17
Signatures 18
Index to Exhibits 19
</TABLE>
Page 2 of 19
<PAGE> 3
INTEGRA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------------
1999 1998
---- ----
<S> <C> <C>
Net revenues:
Patient service revenue $ 144
Premium revenue $ 6,521 3,499
------------ ------------
Total net revenues 6,521 3,643
------------ ------------
Cost of revenues:
Patient service costs 155
Premium service costs 4,085 1,971
------------ ------------
Total cost of revenues 4,085 2,126
------------ ------------
Gross profit 2,436 1,517
Selling and administrative expenses 1,526 902
Provision for doubtful accounts 12
Amortization of intangible assets and excess cost
over fair value of net assets acquired 123 123
------------ ------------
Income from operations 787 480
Interest income - net (7) (67)
------------ ------------
Income before income taxes 794 547
Provision for income taxes 75 30
------------ ------------
Net income $ 719 $ 517
============ ============
Net income per common share:
Basic $ 0.07 $ 0.05
============ ============
Diluted $ 0.07 $ 0.05
============ ============
Weighted average shares outstanding:
Basic 10,138,552 10,123,983
============ ============
Diluted 10,541,075 10,514,227
============ ============
</TABLE>
Page 3 of 19
<PAGE> 4
INTEGRA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1999 1998
---- ----
<S> <C> <C>
Net revenues:
Patient service revenue $ 19,201
Premium revenue $ 19,116 9,754
------------ ------------
Total net revenues 19,116 28,955
------------ ------------
Cost of revenues:
Patient service costs 15,580
Premium service costs 12,288 5,774
------------ ------------
Total cost of revenues 12,288 21,354
------------ ------------
Gross profit 6,828 7,601
Selling and administrative expenses 4,275 5,294
Provision for doubtful accounts 1,201
Restructuring and other charges (700)
Amortization of intangible assets and excess cost
over fair value of net assets acquired 365 825
------------ ------------
Income from operations 2,888 281
Interest expense - related parties 1,020
Interest expense - net 28 409
------------ ------------
Income (loss) before income taxes 2,860 (1,148)
Provision for income taxes 143 92
------------ ------------
Net income (loss) $ 2,717 $ (1,240)
============ ============
Net income (loss) per common share:
Basic $ 0.27 $ (0.12)
============ ============
Diluted $ 0.26 $ (0.12)
============ ============
Weighted average shares outstanding:
Basic 10,138,552 10,094,369
============ ============
Diluted 10,526,524 10,094,369
============ ============
</TABLE>
Page 4 of 19
<PAGE> 5
INTEGRA, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
September 30,
ASSETS 1999 December 31,
(Unaudited) 1998
----------- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,299 $ 2,452
Restricted cash 700
Accounts receivable, net of allowance for doubtful
accounts of $71 in 1999 and $73 in 1998 814 591
Other accounts receivable 198 531
Other current assets 345 442
-------- --------
Total current assets 4,356 4,016
Property and equipment, net of accumulated amortization of $1,374 in
1999 and $833 in 1998 1,977 1,683
Intangible assets and excess cost over fair value of net assets
acquired, net of accumulated amortization of $1,568 in 1999 and
$1,203 in 1998 10,130 10,320
Other assets, net 8 16
-------- --------
$ 16,471 $ 16,035
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 413
Accounts payable $ 145 594
Accrued expenses and other current liabilities 8,349 8,457
-------- --------
Total current liabilities 8,494 9,464
Long-term debt 1,250
Other long-term liabilities 3
Deferred income tax liability 293 356
-------- --------
Total liabilities 8,787 11,073
-------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 20,000,000 shares
authorized; issued 10,138,552 in 1999 and 1998 101 101
Capital in excess of par value 87,508 87,508
Accumulated deficit (79,925) (82,642)
Deferred compensation 0 (5)
-------- --------
Total stockholders' equity 7,684 4,962
======== ========
$ 16,471 $ 16,035
======== ========
</TABLE>
Page 5 of 19
<PAGE> 6
INTEGRA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,717 $ (1,240)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operations:
Depreciation and amortization 906 1,253
Provision for doubtful accounts 1,201
Non-cash portion of restructuring and other charges (700)
Issue of warrant for financing guarantee 880
Changes in assets and liabilities, net of effects of
businesses acquired:
(Increase) decrease in accounts receivable (223) 57
Increase in restricted cash (700)
Decrease in other current assets 35 28
Decrease in accounts payable (449) (1,840)
Increase (decrease) in accrued expenses and other
current liabilities 1,240 (2,781)
Increase in other assets and other liabilities (3) (21)
-------- --------
Net cash provided by (used in) operating
activities 2,823 (2,463)
-------- --------
Cash flows from investing activities:
Payments for acquisition of businesses, net of cash
acquired of $8 in 1998 (498)
Additional payments for businesses acquired in prior
years (591) (4,775)
Net proceeds from disposition of businesses 24,129
Purchases of property and equipment (835) (355)
-------- --------
Net cash (used in) provided by investing activities (1,426) 18,501
-------- --------
Cash flows from financing activities:
Proceeds from borrowings 2,700
Principal payments on long-term obligations (1,550) (16,682)
-------- --------
Net cash used in financing activities (1,550) (13,982)
-------- --------
Net (decrease) increase in cash and cash equivalents (153) 2,056
Cash and cash equivalents at beginning of period 2,452 2,154
-------- --------
Cash and cash equivalents at end of period $ 2,299 $ 4,210
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 68 $ 813
======== ========
Income taxes paid $ 233 $ 142
======== ========
</TABLE>
Page 6 of 19
<PAGE> 7
INTEGRA, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON SHARES CAPITAL IN
-------------------- EXCESS OF ACCUMULATED DEFERRED
NUMBER PAR VALUE PAR VALUE DEFICIT COMPENSATION TOTAL
------ --------- --------- ----------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 10,139 $101 $87,508 $(82,642) $ (5) $4,962
Amortization of deferred
compensation 5 5
2,717 2,717
Net income ------ ---- ------- -------- ------ ------
Balance at September 30, 1999
(unaudited) 10,139 $101 $87,508 $(79,925) $ - $7,684
====== ==== ======= ======== ====== ======
</TABLE>
Page 7 of 19
<PAGE> 8
INTEGRA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Dollars in thousands, except share and per share data)
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements are unaudited. These
statements have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission and should be read in conjunction with
the Company's consolidated financial statements and notes thereto for the year
ended December 31, 1998 included in its Form 10-K filed with the Securities and
Exchange Commission on March 30, 1999. Certain information and note disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of Company management, the consolidated
financial statements for the unaudited interim periods presented include all
adjustments, consisting only of normal recurring adjustments, necessary to
present a fair statement of the results for such interim periods.
Certain prior period amounts have been reclassified to conform to the
current period presentation.
Operating results for the three and nine month periods ended September
30, 1999 are not necessarily indicative of the results that may be expected for
a full year or any portion thereof.
NOTE 2 - INCOME TAXES
The provision for income taxes is based on the Company's estimated
effective income tax rate for 1999. At December 31, 1998, the Company had net
operating loss carryforwards for federal income tax purposes of approximately
$38,000. The Company will only be able to use the net operating loss
carryforwards against future taxable earnings of the Company. In addition, as
specified in the Internal Revenue Code, the Company's ability to use certain of
the net operating loss carryforwards is limited as they were acquired by the
Company in a purchase of the stock of other companies. The carryforwards expire
in varying amounts through 2013. A valuation reserve has been established
against the potential future benefit of the net operating loss carryforwards and
other deferred tax assets.
Page 8 of 19
<PAGE> 9
INTEGRA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Dollars in thousands, except share and per share data)
(Unaudited)
NOTE 3 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Medical claims payable................................ $3,742 $1,359
Salaries and vacation................................. 723 614
Acquisition and sale related costs.................... 365 1,070
Restructuring costs................................... 478 1,421
Long-term care and provider billing reserves.......... 1,972 3,018
Other................................................. 1,069 975
------ ------
$8,349 $8,457
====== ======
</TABLE>
Medical claims payable primarily represents the liability for
healthcare services authorized or incurred and not yet paid by the Company's
managed behavioral healthcare business. Medical claims payable are estimated
based upon authorized healthcare services, past claim payment experience for
member groups, patient census data and other factors. Effective January 1, 1999,
the Company implemented coverage on a capitated contract in New York State which
covers over 375,000 members and is currently the Company's largest contract. The
Company estimates the medical claims payable for this contract in a manner
similar to it existing contracts, however, the Company has not yet fully
developed its own historical experience with this contract. As the Company
continues to provide coverage and pay claims for this contract, management will
make necessary revisions in the estimates used to determine medical claims
payable. While the Company believes its estimate of the liability for medical
claims payable is adequate, actual results could differ from such estimates.
NOTE 4 - RESTRUCTURING AND OTHER CHARGES
In prior years, the Company established reserves in connection with its
restructurings and the exit of long-term care and outpatient operations. As part
of its ongoing evaluation of these reserves, at June 30, 1999, the Company
determined, based on its assessment of all remaining open matters, that the
Company was over accrued for these matters by $700. This change in estimate is
separately reflected in the Statement of Operations under "Restructuring and
Other Charges." The Company believes the remaining reserves for these matters
are adequate at September 30, 1999, however, as the Company continues to pursue
resolution of open matters, actual results could differ from such estimates.
Page 9 of 19
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
OVERVIEW
The Company provides managed behavioral healthcare services through
full and shared risk arrangements with employers, health plans and managed care
organizations to perform behavioral health services on a capitated per member
per month basis. In addition, the Company provides an array of managed
behavioral health services including employee assistance programs, third party
clinical case management and claims administration. Integra's contract service
areas are principally concentrated in Connecticut, Delaware, Maryland, New
Jersey, New York, Pennsylvania, Rhode Island, Virginia and Tennessee.
SALE AND DIVESTITURE OF PATIENT SERVICE AND PROVIDER SEGMENT
In December 1997, the Company announced its plans to sell and divest
its outpatient behavioral health group practice operations. The Company entered
into an agreement to sell substantially all of the assets of the outpatient
behavioral practice business (the "Sale"), except for practices located in the
Western region of the United States which the Company sold or shut down. The
Sale was completed effective May 18, 1998 and resulted in the divestiture by the
Company of substantially all the assets and business of the Company's outpatient
behavioral health practices. As of December 31, 1997, the outpatient behavioral
health practice business accounted for approximately eight-four percent (84%) of
the assets of the Company (before the impact of the write down of assets held
for sale and the impact of the restructuring charge); and for the year ended
December 31, 1997, approximately eighty-three percent (83%) of the Company's net
revenues. As a result of the Sale, the Company is significantly smaller in terms
of revenues and assets. Patient service revenues and patient service costs
pertained solely to the outpatient business and as a result of the exit of this
segment, the Company no longer performs direct patient service and hence has no
patient service revenues or patient service costs.
RESULTS OF OPERATIONS
PREMIUM REVENUE
Premium revenue pertains to the Company's managed behavioral healthcare
business which maintains a portfolio of agreements with managed care
organizations and corporations to provide inpatient and outpatient behavioral
health services. Revenues are primarily generated by capitated managed
behavioral healthcare and employee assistance programs. The fees are defined by
contract and are primarily calculated on a fixed per member per month fee.
Revenues under these contracts are recorded in the month for which the member is
entitled to services. Generally, these contracts are on a one to three year
basis subject to cancellation by either party without cause at any time with
thirty to ninety days written notice.
Premium revenue for the three and nine month periods ended September
30, 1999 increased from the corresponding periods of the prior year primarily
due to one new contract in New York State for which the Company implemented
coverage on a capitated basis effective January 1, 1999.
Page 10 of 19
<PAGE> 11
PREMIUM SERVICE COSTS
Premium service costs are primarily comprised of medical claims
and personnel costs associated with the Company's service delivery, support and
management of the its portfolio of behavioral healthcare contracts. The Company
estimates the medical claims cost of providing services under these agreements,
including a reserve for services incurred, but not reported, based upon
authorized healthcare services, past claim payment experience for member groups,
patient census data and other factors. The Company typically does not
subcapitate the risk of providing services under these contracts, but the
Company arranges discounted fee-for-service rates with independent inpatient and
outpatient behavioral health providers.
Under capitated contracts, the Company is responsible for ensuring
appropriate access to care and bears the risk for utilization levels and pricing
of the cost of services performed under these contracts. The Company believes
the future revenues under these contracts will exceed the costs of services it
will be required to provide under the terms of the contracts. An underestimation
in the utilization or price of services for these contracts could result in
material losses to the Company. Historically, Integra has managed these
capitated contracts profitably. The Company maintains no re-insurance against
the risk of loss under these contracts.
Premium service costs increased for the three and nine month periods
ended September 30, 1999 from the corresponding periods in the prior year. This
increase is primarily a result of the coverage implemented on new contracts.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses are primarily comprised of
corporate office, sales and administration. Selling and administrative expenses
increased to $1,526 for the three months ended September 30, 1999 from $902 for
the same period in 1998. The increase is essentially a result of increased
investment in sales and marketing and administrative personnel to support the
increase in revenue. Selling and administrative expenses for the nine month
period ended September 30, 1999 decreased to $4,275 from $5,294 for the same
period in 1998. This decrease is essentially the result of the impact of the
operations sold and the downsizing of the corporate office in connection with
the Sale.
PROVISION FOR DOUBTFUL ACCOUNTS
There was no provision for doubtful accounts for the three or nine
month periods ended September 30, 1999 as compared to $12 for the three months
ended September 30, 1998 and $1,201 for the nine months ended September 30,
1998. This decrease is a result of the Sale and exit of the outpatient provider
operations. The Company's managed behavioral healthcare business has
historically had minimal provision for doubtful accounts.
RESTRUCTURING AND OTHER CHARGES
In prior years, the Company established reserves in connection with its
restructurings and the exit of long-term care and outpatient operations. As part
of its ongoing evaluation of these reserves, the Company determined, based on
its assessment of all remaining open matters, that the Company was over accrued
for
Page 11 of 19
<PAGE> 12
these matters by $700. This change in estimate is separately reflected in the
Statement of Operations under "Restructuring and Other Charges" and was recorded
during the quarter ended June 30, 1999. The Company believes the remaining
reserves for these matters are adequate at September 30, 1999, however, as the
Company continues to pursue resolution of open matters, actual results could
differ from such estimates.
INTEREST EXPENSE - RELATED PARTIES
In 1998, as a contingency plan in the event the Sale had not been not
completed, the Company entered into an agreement with certain investment
partnerships (the "Investment Partnerships") which are significant stockholders
of the Company and are managed by Foster Management Company, an affiliated
party, to obtain their commitment to guarantee an additional $7,000 of
financing. This amount represented the Company's estimated additional cash needs
during 1998 for contingent payments, seller notes and for restructure related
activities. Under the terms of the agreement, the Investment Partnerships were
to receive the following: (i) a commitment fee of 2% of the guaranteed amount;
(ii) a draw down fee of 2% on borrowings in excess of $5,000; (iii) an unused
commitment fee of 1/2% per annum; and (iv) warrants to purchase 400,000 shares
of common stock of the Company at a price of $0.05 per share (the "Integra
Warrants") or, in the event the Sale was not consummated, a transaction fee of
$3,500 payable on April 30, 1999. With the Sale completed in 1998, the cost to
the Company of this guarantee was $140 in cash paid to the Investment
Partnerships and a non-cash charge of approximately $880 which represents the
difference between the exercise price of the Integra Warrants and the fair
market value of the underlying Company Common Stock on the closing date of the
Sale to PsychPartners. These charges, which are non-recurring in nature, have
been recorded in the Company's results of operations for the quarter ending June
30, 1998.
INTEREST EXPENSE - NET
Interest expense, net, decreased for the three and nine month periods
ended September 30, 1999 from the corresponding periods in the prior year. This
decrease is primarily due to the pay down of bank debt in May 1998 with proceeds
from the Sale to PsychPartners.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was $2,823 for the nine months ended
September 30, 1999, compared to net cash used in operations of ($2,463) for the
same period in the prior year. Unrestricted cash and cash equivalents decreased
to $2,299 at September 30, 1999 from $2,452 at December 31, 1998. At September
30, 1999, the Company also had $700 in cash which is contractually restricted as
a reserve for medical claims payable.
At September 30, 1999, the Company had a working capital deficit of
$4,138. The deficit is primarily attributable to accrued liabilities of $2,815
which pertain to the exit of the outpatient provider behavioral group practice
business and reserves established for long-term care and other provider billing
matters. Although these amounts are classified as current due to their nature,
the Company does not expect that all of these amounts will require payment in
the next year. The remainder of the Company's accrued liabilities are operating
in nature.
The Company has established a Credit Facility with PNC Bank which
allows for up to $10,000 of available borrowings. The Company currently has no
borrowings outstanding under this Facility. At September 30, 1999, the Company
was in default of a financial covenant contained in the Credit Facility. The
Company is currently negotiating with the Bank for a waiver of this covenant.
The Credit Facility is secured by substantially all of the assets of the
Company.
Page 12 of 19
<PAGE> 13
The Company believes that the cash flow generated by the Company's
operations together with its existing cash and availability of additional
borrowings under its Credit Facility will be sufficient to meet the Company's
cash requirements in 1999.
The Company's current ratio, working capital and debt to equity ratio
are set forth below for the dates indicated:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Current Ratio............................... .51:1 .42:1
Working Capital Deficit..................... $(4,138) $(5,448)
Debt to Equity.............................. - .34:1
</TABLE>
INFLATION
A significant portion of the Company's operating expenses have been
subject to inflationary increases, including clinical and administrative
salaries and rent expense. Based on management's assessment, the Company has
historically been unable to substantially offset inflationary increases through
price increases. The Company believes it has somewhat mitigated the effect of
inflation by expanding services and increasing operating efficiencies. There can
be no assurance that the Company will be able to offset future inflationary
increases in expenses, if any, which would result in a dilutive impact on the
Company's future earnings.
NEW CONTRACT
Effective January 1, 1999, the Company implemented coverage of a
behavioral health carve-out contract with a health plan covering over 375,000
members. The Company expects that this contract will generate over $12,500 in
annual revenues and it is currently the Company's largest contract.
Profitability under this capitated contract will depend upon the Company's
ability to manage the utilization of services within the premiums received. An
underestimation in the expected utilization of services for this contract could
result in a material loss to the Company.
POTENTIAL IMPACT OF YEAR 2000 COMPUTER ISSUES
The Year 2000 problem is primarily the result of two potential
malfunctions that could have an impact on the Company's systems and equipment.
The first problem arises due to computers being programmed to use two rather
than four digits to define the applicable year. The second problem arises in
embedded chips where microchips and microcontrollers have been designed using
two rather than four digits to define the applicable year. Certain of the
Company's computers, programs, and building infrastructure components (e.g.
alarm systems and HVAC systems) are date sensitive and may recognize a date
using "00" as the Year 1900 rather than the Year 2000.
The Company relies on information technology ("IT") systems and other
systems and facilities such as telephones, building access control systems and
heating and ventilation equipment ("Embedded Systems") to conduct its business.
These systems are potentially vulnerable to Year 2000 problems due to their use
of date
Page 13 of 19
<PAGE> 14
information. The Company also has business relationships with customers and
healthcare providers and other critical vendors who are themselves reliant on IT
and Embedded Systems to conduct their businesses.
State of Readiness
The Company's internal IT systems are largely centralized and consist
primarily of purchased software. The Company's IT hardware infrastructure is
built mainly around IBM PC compatible servers and desktop systems. The Company's
IT software primarily utilizes Microsoft systems including SQL Server, Windows
NT, Internet Information Server, Exchange and Office. The Company believes these
systems are either compliant or, with soon to be released "service packs" from
Microsoft, will be compliant by December 31, 1999. The Company's clinical and
claims administration software has been certified by the vendor as being Year
2000 compliant. Year 2000 remediation costs incurred in 1998 were approximately
$100 and are estimated at under $250 in 1999.
External Relationship
The Company also faces the risk that one or more of its critical
suppliers or customers ("External Relationships") will not be able to interact
with the Company due to the third party's inability to resolve its own Year 2000
issues, including those associated with its own External Relationships. The
Company has been assessing its External Relationships and risk rating each
External Relationship based upon the potential business impact, available
alternatives and cost of substitution. The Company is attempting to determine
the overall Year 2000 readiness of its External Relationships. In the case of
significant customers and mission critical suppliers such as banks,
telecommunications providers and other utilities and IT vendors, the Company is
engaged in discussions with the third parties and is attempting to obtain
detailed information as to those parties' Year 2000 plans and state of
readiness. The Company, however, does not have sufficient information at the
current time to predict whether its External Relationships will be Year 2000
ready.
Risks and Contingency/Recovery Planning
If the Company's Year 2000 issues were unresolved, it is possible the
Company would not have the ability to accurately and timely authorize and
process benefits and claims, accurately bill customers, assess claims exposure,
determine liquidity requirements, report accurate data to management,
stockholders, customers, regulators and others, and would be subject to business
interruptions or shutdowns, financial losses, reputational harm, loss of
significant customers, increased scrutiny by regulators and litigation related
to Year 2000 issues. The Company is attempting to limit the potential impact of
the Year 2000 by monitoring the progress of its own Year 2000 project and those
of its critical External Relationships and by developing contingency/recovery
plans. The Company cannot guarantee that it will be able to resolve all of its
Year 2000 issues. Any critical unresolved Year 2000 issues of the Company or its
External Relationships could have a material adverse effect on the Company's
results of operations, liquidity or financial condition.
The Company is developing contingency/recovery plans aimed at
maintaining the continuity of critical business functions before and after
December 31, 1999. As part of that process, the Company is developing manual
work alternatives to automated processes which will be designed to maintain
business continuity. These manual alternatives presume, however, that basic
infrastructure such as electrical power and telephone service,
Page 14 of 19
<PAGE> 15
as well as purchased systems which are advertised to be Year 2000 compliant by
their manufacturers (primarily IT hardware and software) will remain unaffected
by the Year 2000 problem.
CAUTIONARY STATEMENT
Matters discussed above contained forward-looking statements that are
based on the Company's estimates, assumptions and projections. Major factors
which could cause results to differ materially from those expected by management
include the timing and nature of reimbursement changes, the nature of changes in
laws and regulations that govern various aspects of the Company's business, new
criteria adopted to determine medical necessity for behavioral health services,
the outcome of post-payment reviews of the Company's billings to Medicare
patients in long-term care facilities, Year 2000 issues, pricing of managed care
and other third party contracts, the utilization and cost of services under the
Company's capitated contracts, the direction and success of competitors,
management and customer retention and unanticipated market changes.
Page 15 of 19
<PAGE> 16
INTEGRA, INC.
FORM 10-Q - QUARTER ENDED SEPTEMBER 30, 1999
PART II
ITEM 1 - LEGAL PROCEEDINGS
From time to time, the Company is a party to certain claims, suits and
complaints which arise in the course of business.
In March 1998, the Company received notification that the Medicare
Intermediary in California completed a post payment medical review of billings
previously submitted and paid between 1990 and 1994. Based on the results of
their review, the Intermediary has requested a refund of approximately
$1,200,000. Services were denied primarily on the basis of medical necessity and
incomplete documentation. The Company has requested an administrative hearing.
As of December 31, 1997, the Company had fully reserved for the above amount.
In April 1998, the Company received notice that the Office of the
Attorney General of New York State ("the State") was conducting an audit of the
New York Medicaid billings of one of the outpatient provider operations with
which it had an Administrative Services Agreement. The State was investigating
whether the Company had any liability arising from the operation of, and its
relationship with, that provider. In October 1998, the Company terminated its
agreements with that provider. In May 1999, the Company reached a settlement
agreement with the State which resolves all claims against the Company relating
to this matter. Terms of the settlement include a total payment of $382,000 plus
$18,000 of interest. These amounts were fully accrued.
During the first half of 1999, the Company received notification of
potential Medicaid program billing issues in Nevada in connection with services
performed at the Company's former Nevada outpatient group practice subsidiaries
which were sold by the Company at the end of 1997. Upon further review of the
Company's former Nevada Medicaid billings, the Company has determined that
certain Nevada Medicaid billings of these former outpatient practices were not
in accordance with Medicaid program regulations. In accordance with the
Company's disclosure policy, the Company disclosed this matter to the Nevada
Medicaid program and is cooperating with the State of Nevada in its review of
this matter. The Company believes this matter will result in the Company having
to repay approximately $400,000 including penalties and interest, to the Nevada
Medicaid program. This amount is fully reserved for at September 30, 1999 as
part of the Company's long term care and provider billing reserves.
Although management believes that established reserves for the above
matters are sufficient, it is possible that the final resolution of these
matters may exceed the established reserves by an amount which could be material
to the Company's results of operations. Due to the nature of these matters, the
Company cannot predict when these matters will be resolved. The Company does not
believe the ultimate outcome of these matters will have a material adverse
effect on the Company's overall financial condition, liquidity or operations.
Currently, there are no other such claims, suits or complaints that, in
the opinion of management, would have a material adverse effect on the Company's
financial position, results of operations or liquidity.
Page 16 of 19
<PAGE> 17
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) The exhibits required to be filed as part of this Quarterly Report
on Form 10-Q are contained in the attached Index to Exhibits.
b) Current Reports on Form 8-K: None
Page 17 of 19
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
INTEGRA, INC.
-----------------------------------
(registrant)
November 10, 1999 /s/Mark D. Gibson
- ----------------- -----------------------------------
(Date) Mark D. Gibson
Chief Financial Officer
Page 18 of 19
<PAGE> 19
INDEX TO EXHIBITS
10(r) Severance Agreement dated August 27, 1999 by and between the Company
and Mark D. Gibson.
10(s) Severance Agreement dated August 27, 1999 by and between the Company
and Lawrence M. Davies.
27 Financial Data Schedule, which is submitted electronically to the
Securities and Exchange Commission for information only and not filed.
Page 19 of 19
<PAGE> 1
EXHIBIT 10(r)
INTEGRA, INC
1060 First Avenue
Suite 410
King of Prussia, Pennsylvania 19406
August 27, 1999
Mr. Mark D. Gibson
12 Fox Hill Road
Doylestown, Pennsylvania 18901
Re: Severance Arrangements
Dear Mark:
Effective as of the Effective Date, Integra, Inc., a Delaware
corporation and you (the "Employee"), hereby agree as set forth below in this
agreement (this "Agreement").
1. Section 1 - Definitions. As used herein, the following words and
phrases shall have the following respective meanings unless the context clearly
indicates otherwise.
1.1. Base Salary. The annual amount the Employee receives as
wages or salary from the Company.
1.2 Board. The Board of Directors of the Company.
1.3. Change in Control. A "Change in Control" shall be deemed
to occur:
(a) on the effective date of any merger or consolidation which
results in the holders of the outstanding voting securities of the Company
(determined immediately prior to such merger or consolidation) owning less than
a majority of the outstanding voting securities of the surviving corporation
(determined immediately following such merger or consolidation), or any sale or
transfer by the Company of all or substantially all its assets; or
(b) on the date of closing of any tender offer or exchange
offer for or the acquisition, directly or indirectly, by any person or group of,
all or a majority of the then outstanding voting securities of the Company; or
(c) if at any time John H. Foster is no longer Chairman of the
Board of the Company for any reason whatsoever.
<PAGE> 2
Notwithstanding the foregoing, a Change in Control with respect to
Sections 1.3(a) and 1.3(b) shall not be deemed to occur if the Company either
merges or consolidates with or into another company or sells or disposes of all
or substantially all of its assets to another company, if such merger,
consolidation, sale or disposition is in connection with a corporate
restructuring wherein the stockholders of the Company immediately before such
merger, consolidation, sale or disposition own, directly or indirectly,
immediately following such merger, consolidation, sale or disposition at least a
majority of the combined voting power of all outstanding classes of securities
of the Company resulting from such merger or consolidation, or to which the
Company sells or disposes of its assets, in substantially the same proportion as
their ownership in the Company immediately before such merger, consolidation,
sale or disposition.
1.4. Company. The Company is Integra, Inc., a Delaware
corporation.
1.5. Effective Date. August 27, 1999.
1.6. Permanent Disability. The Employee shall be deemed to
have become permanently disabled for purposes of this Agreement if the entire
Board finds, upon the basis of medical evidence received from a physician
reasonably satisfactory to the Board and the Employee, that the Employee is
disabled, whether due to physical or mental condition, so as to be prevented
from performing the Employee's normal duties for the Company with or without
reasonable accommodation.
1.7 Severance Benefit. The benefit payable in accordance with
Section 3 of this Agreement.
2. Section 2 - Duration and Eligibility.
2.1 This Agreement shall be effective as of the Effective
Date.
2.2 Eligibility. The Employee shall not be entitled to the
Severance Benefit if the Employee ceases to be an employee at any time prior to
a Change in Control; provided, however, that if the Employee ceases to be an
employee during the period commencing ninety (90) days prior to a Change in
Control by reason of termination by the Company then the Employee shall be
entitled to a Severance Benefit under the terms of this Agreement.
3. Section 3 - Severance Benefits.
3.1. Right to Severance Benefit.
The Employee shall be entitled to receive from the Company a Severance
Benefit in the amount provided in Section 3.2 if (i) a Change in Control has
occurred and (ii) the Employee's employment with the Company terminates for any
reason, including termination by the Employee for any reason.
<PAGE> 3
3.2. Amount of Severance Benefit. If the Employee's employment
is terminated in circumstances entitling the Employee to a Severance Benefit as
provided in Section 3.1, the Employee shall be entitled to the following
benefits:
(a) the Company shall pay to the Employee, as severance pay
and in lieu of any further salary or bonus for periods subsequent to the
Termination Date, the amount of $60,000 which is equal to six months' Base
Salary for the Employee;
(b) for a period of six (6) months subsequent to the
Employee's termination of employment, the Company shall at its expense continue
on behalf of the Employee and his dependents and beneficiaries, the medical and
dental benefits, life insurance, short term disability insurance and long-term
disability insurance which were being provided to the Employee at the time of
termination of employment, including reimbursement of up to $10,000 of any
outplacement costs the Employee incurs after the termination of his employment
for any reason. The benefits provided in this Subsection 3.2(b) shall be no less
favorable to the Employee, in terms of amounts and deductibles and costs to the
Employee, than the coverage provided the Employee under the plans providing such
benefits at the time Notice of Termination is given. The Company's obligation
hereunder to provide the foregoing benefits shall terminate if the Employee
obtains coverage under a subsequent employer's medical and dental, life
insurance, short-term disability insurance and or long-term disability insurance
benefit plans;
(c) the amounts provided for in Section 3.2(a) shall be paid
in a single lump sum payment within fifteen (15) days after the Employee's
Termination Date.
4. Section 4 - Termination of Employment.
4.1. Written Notice Required. Any purported termination of
employment, either by the Company or by the Employee, shall be communicated by
written Notice of Termination to the other.
4.2. Termination Date. In the case of the Employee's death,
the Employee's Termination Date shall be the Employee's date of death. In all
other cases, the Employee's Termination Date shall be the date specified in the
Notice of Termination subject to the following: (a) if the Employee's employment
is terminated by the Company due to Permanent Disability, the date specified in
the Notice of Termination shall be at least thirty (30) days from the date the
Notice of Termination is given to the Employee, provided that the Employee shall
not have returned to the full-time performance of the Employee's duties during
such period of at least thirty (30) days; and (b) if the Employee terminates the
Employee's employment, the date specified in the Notice of Termination shall not
be more than thirty (30) days from the date the Notice of Termination is given
to the Company.
5. Section 5 - Successors to Company.
Successors. This Agreement shall bind any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, in the same
manner and to the same extent that the Company would be obligated under this
Agreement if no succession had taken place. In the case of any transaction in
which a successor would not by the foregoing provision or by operation of
<PAGE> 4
law be bound by this Agreement, the Company shall require such successor
expressly and unconditionally to assume and agree to perform the Company's
obligations under this Agreement, in the same manner and to the same extent that
the Company would be required to perform if no such succession had taken place.
6. Section 6 - Amendment and Termination.
6.1. Amendment and Termination. This Agreement may be
terminated or amended in any respect by resolution adopted by the entire Board;
provided, however, that no such amendment or termination of this Agreement may
be made if such amendment or termination would adversely affect any benefit of
the Employee set forth herein and provided further, that this Agreement shall no
longer be subject to amendment, change, substitution, deletion, revocation or
termination in any respect whatsoever following a Change in Control.
6.2. Form of Amendment. The form of any amendment or
termination of this Agreement shall be a written instrument signed by a duly
authorized officer or officers of the Company, certifying that the amendment or
termination has been approved by the Board.
7. Section 7 - Miscellaneous.
7.1. Indemnification. If, after a Change in Control, the
Employee institutes any legal action in seeking to obtain or enforce, or is
required to defend in any legal action the validity or enforceability of, any
right or benefit provided by this Agreement, the Company will pay for all actual
legal fees and expenses incurred by such Employee so long as the Employee is
successful on the merits in whole or in substantial part.
7.2. Employment Status. This Agreement does not constitute a
contract of employment or impose on the Company any obligation to retain the
Employee, to change the status of the Employee's employment, or to change any
employment policies of the Company.
7.3. Validity and Severability. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect, and any prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
7.4. Governing Law; Choice of Forum. The validity,
interpretation, construction and performance of this Agreement shall in all
respects be governed by the laws of the Commonwealth of Pennsylvania. The
Employee shall be entitled to enforce the provisions of this Agreement in any
state or federal court located in the Commonwealth of Pennsylvania, in addition
to any other appropriate forum.
* * *
<PAGE> 5
By signing this letter, you agree to by bound by all of the terms and
conditions set forth herein.
Very truly yours,
INTEGRA, INC.
By: /s/ Lawrence M. Davies
Name: Lawrence M. Davies
Title: Chief Executive Officer
Accepted and Agreed To:
By: /s/ Mark D. Gibson
Mark D. Gibson
<PAGE> 1
EXHIBIT 10(s)
INTEGRA, INC
1060 First Avenue
Suite 410
King of Prussia, Pennsylvania 19406
August 27, 1999
Mr. Lawrence M. Davies
131 Howson Lane
Glenmoore, Pennsylvania 19343
Re: Severance Arrangements
Dear Larry:
Effective as of the Effective Date, Integra, Inc., a Delaware
corporation and you (the "Employee"), hereby agree as set forth below in this
agreement (this "Agreement").
1. Section 1 - Definitions. As used herein, the following words and
phrases shall have the following respective meanings unless the context clearly
indicates otherwise.
1.1. Base Salary. The annual amount the Employee receives as
wages or salary from the Company.
1.2 Board. The Board of Directors of the Company.
1.3. Change in Control. A "Change in Control" shall be deemed
to occur:
(a) on the effective date of any merger or consolidation which
results in the holders of the outstanding voting securities of the Company
(determined immediately prior to such merger or consolidation) owning less than
a majority of the outstanding voting securities of the surviving corporation
(determined immediately following such merger or consolidation), or any sale or
transfer by the Company of all or substantially all its assets; or
(b) on the date of closing of any tender offer or exchange
offer for or the acquisition, directly or indirectly, by any person or group of,
all or a majority of the then outstanding voting securities of the Company; or
<PAGE> 2
(c) if at any time John H. Foster is no longer Chairman of the
Board of the Company for any reason whatsoever.
Notwithstanding the foregoing, a Change in Control with respect to
Sections 1.3(a) and 1.3 (b) shall not be deemed to occur if the Company either
merges or consolidates with or into another company or sells or disposes of all
or substantially all of its assets to another company, if such merger,
consolidation, sale or disposition is in connection with a corporate
restructuring wherein the stockholders of the Company immediately before such
merger, consolidation, sale or disposition own, directly or indirectly,
immediately following such merger, consolidation, sale or disposition at least a
majority of the combined voting power of all outstanding classes of securities
of the Company resulting from such merger or consolidation, or to which the
Company sells or disposes of its assets, in substantially the same proportion as
their ownership in the Company immediately before such merger, consolidation,
sale or disposition.
1.4. Company. The Company is Integra, Inc., a Delaware
corporation.
1.5. Effective Date. August 27, 1999, the date this Agreement
was approved by the Compensation Committee of the Board.
1.6. Permanent Disability. The Employee shall be deemed to
have become permanently disabled for purposes of this Agreement if the entire
Board finds, upon the basis of medical evidence received from a physician
reasonably satisfactory to the Board and the Employee, that the Employee is
disabled, whether due to physical or mental condition, so as to be prevented
from performing the Employee's normal duties for the Company with or without
reasonable accommodation.
1.7 Severance Benefit. The benefit payable in accordance with
Section 3 of this Agreement.
2. Section 2 - Duration and Eligibility.
2.1 This Agreement shall be effective as of the Effective
Date.
2.2 Eligibility. The Employee shall not be entitled to the
Severance Benefit if the Employee ceases to be an employee at any time prior to
a Change in Control; provided, however, that if the Employee ceases to be an
employee during the period commencing ninety (90) days prior to a Change in
Control by reason of termination by the Company then the Employee shall be
entitled to a Severance Benefit under the terms of this Agreement.
3. Section 3 - Severance Benefits.
3.1. Right to Severance Benefit.
The Employee shall be entitled to receive from the Company a Severance
Benefit in the amount provided in Section 3.2 if (i) a Change in Control has
occurred and (ii) the Employee's employment with the Company terminates for any
reason, including termination by the Employee for any reason.
<PAGE> 3
3.2. Amount of Severance Benefit. If the Employee's employment
is terminated in circumstances entitling the Employee to a Severance Benefit as
provided in Section 3.1, the Employee shall be entitled to the following
benefits:
(a) the Company shall pay to the Employee, as severance pay
and in lieu of any further salary or bonus for periods subsequent to the
Termination Date, the amount of $175,000 which is equal to one year's Base
Salary for the Employee;
(b) for a period of one (1) year subsequent to the Employee's
termination of employment, the Company shall at its expense continue on behalf
of the Employee and his dependents and beneficiaries, the medical and dental
benefits, life insurance, short term disability insurance and long-term
disability insurance which were being provided to the Employee at the time of
termination of employment. The benefits provided in this Subsection 3.2(b) shall
be no less favorable to the Employee, in terms of amounts and deductibles and
costs to the Employee, than the coverage provided the Employee under the plans
providing such benefits at the time Notice of Termination is given. The
Company's obligation hereunder to provide the foregoing benefits shall terminate
if the Employee obtains coverage under a subsequent employer's medical and
dental, life insurance, short-term disability insurance and or long-term
disability insurance benefit plans;
(c) the amounts provided for in Section 3.2(a) shall be paid
in a single lump sum payment within fifteen (15) days after the Employee's
Termination Date.
4. Section 4 - Termination of Employment.
4.1. Written Notice Required. Any purported termination of
employment, either by the Company or by the Employee, shall be communicated by
written Notice of Termination to the other.
4.2. Termination Date. In the case of the Employee's death,
the Employee's Termination Date shall be the Employee's date of death. In all
other cases, the Employee's Termination Date shall be the date specified in the
Notice of Termination subject to the following: (a) if the Employee's employment
is terminated by the Company due to Permanent Disability, the date specified in
the Notice of Termination shall be at least thirty (30) days from the date the
Notice of Termination is given to the Employee, provided that the Employee shall
not have returned to the full-time performance of the Employee's duties during
such period of at least thirty (30) days; and (b) if the Employee terminates the
Employee's employment, the date specified in the Notice of Termination shall not
be more than thirty (30) days from the date the Notice of Termination is given
to the Company.
5. Section 5 - Successors to Company.
Successors. This Agreement shall bind any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, in the same
manner and to the same extent that the Company would be obligated under this
Agreement if no succession had taken place. In the case of any transaction in
which a successor would not by the foregoing provision or by operation of law be
bound by this Agreement, the Company shall require such successor expressly and
<PAGE> 4
unconditionally to assume and agree to perform the Company's obligations under
this Agreement, in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place.
6. Section 6 - Amendment and Termination.
6.1. Amendment and Termination. This Agreement may be
terminated or amended in any respect by resolution adopted by the entire Board;
provided, however, that no such amendment or termination of this Agreement may
be made if such amendment or termination would adversely affect any benefit of
the Employee set forth herein and provided further, that this Agreement shall no
longer be subject to amendment, change, substitution, deletion, revocation or
termination in any respect whatsoever following a Change in Control.
6.2. Form of Amendment. The form of any amendment or
termination of this Agreement shall be a written instrument signed by a duly
authorized officer or officers of the Company, certifying that the amendment or
termination has been approved by the Board.
7. Section 7 - Miscellaneous.
7.1. Indemnification. If, after a Change in Control, the
Employee institutes any legal action in seeking to obtain or enforce, or is
required to defend in any legal action the validity or enforceability of, any
right or benefit provided by this Agreement, the Company will pay for all actual
legal fees and expenses incurred by such Employee so long as the Employee is
successful on the merits in whole or in substantial part.
7.2. Employment Status. This Agreement does not constitute a
contract of employment or impose on the Company any obligation to retain the
Employee, to change the status of the Employee's employment, or to change any
employment policies of the Company.
7.3. Validity and Severability. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect, and any prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
7.4. Governing Law; Choice of Forum. The validity,
interpretation, construction and performance of this Agreement shall in all
respects be governed by the laws of the Commonwealth of Pennsylvania. The
Employee shall be entitled to enforce the provisions of this Agreement in any
state or federal court located in the Commonwealth of Pennsylvania, in addition
to any other appropriate forum.
* * *
<PAGE> 5
By signing this letter, you agree to by bound by all of the terms and
conditions set forth herein.
Very truly yours,
INTEGRA, INC.
By: /s/ John H. Foster
Name: John H. Foster
Title: Chairman of the Board
Accepted and Agreed To:
By: /s/ Lawrence M. Davies
Lawrence M. Davies
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1999 AND THE STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,299
<SECURITIES> 0
<RECEIVABLES> 885
<ALLOWANCES> 71
<INVENTORY> 0
<CURRENT-ASSETS> 4,356
<PP&E> 3,351
<DEPRECIATION> 1,374
<TOTAL-ASSETS> 16,471
<CURRENT-LIABILITIES> 8,494
<BONDS> 0
0
0
<COMMON> 101
<OTHER-SE> 7,583
<TOTAL-LIABILITY-AND-EQUITY> 16,471
<SALES> 0
<TOTAL-REVENUES> 6,521
<CGS> 0
<TOTAL-COSTS> 4,085
<OTHER-EXPENSES> 1,526
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7)
<INCOME-PRETAX> 794
<INCOME-TAX> 75
<INCOME-CONTINUING> 719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 719
<EPS-BASIC> 0.07
<EPS-DILUTED> 0.07
</TABLE>
