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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____ to _____
Commission File No. 0-20260
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)
Two Manhattanville Road
Purchase, New York 10577
(Address of principal executive offices) (Zip Code)
(914) 253-8000
(Registrant's telephone number, including area code)
____________________________
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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
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Indicate by check mark if disclosure of delinquent filer pursuant to Item
405 of Regulation S-K (17 CFR 229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes__ No X
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Aggregate market value of voting stock (Common Stock, $.01 par value) held
by non-affiliates of the Registrant was approximately $19.2 million on June 28,
2002 based on the closing sales price of the Common Stock on such date.
The aggregate number of shares of the Registrant's Common Stock, $.01 par
value, outstanding was approximately 3,360,000 on March, 14, 2003.
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DOCUMENTS INCORPORATED BY REFERENCE
See Part III hereof with respect to incorporation by reference from the
Registrant's definitive proxy statement for the fiscal year ended December
31, 2002 to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934 and the Exhibit Index hereto.
PART I
ITEM 1. Business
Company Overview
IntegraMed America, Inc. (the "Company") offers products and services to
patients, providers, and payers in the fertility industry. The IntegraMed
Network is comprised of twenty-two fertility centers in major markets across the
United States, pharmaceutical products and services, a financing subsidiary, the
Council of Physicians and Scientists, and a leading fertility portal
(www.integramed.com). Sixteen fertility centers purchase discrete service
packages provided by the Company and six fertility centers have access to the
entire portfolio of products and services under the comprehensive
FertilityPartners(TM) program. All twenty-two fertility centers have access to
the Company's consumer services, principally pharmaceutical products and patient
financing products. The Company was incorporated in Delaware on June 4, 1985.
Industry -- Reproductive Medicine
Reproductive medicine encompasses the medical discipline that focuses on
male and female reproductive systems and processes. There are many reasons why
couples have difficulty conceiving, and accurate identification of a specific
cause of infertility can be time consuming, expensive and requires access to
specialized diagnostic and treatment services. Many gynecologists do not have
the time or interest to perform a complete evaluation of the infertile couple
and therefore often bypass detailed diagnostic testing. Instead, they often
provide initial medical treatment of infertility, without extensive diagnosis,
by prescribing a drug called clomiphene citrate, which helps to correct
ovulatory problems. This treatment is fairly inexpensive and occasionally
resolves the problem if the only obstacle to pregnancy is in fact an ovulatory
problem. It is generally recommended that women receive this drug for no more
than three to six ovulatory cycles. If pregnancy has not occurred, referral
should be made to a fertility specialist who can offer more advanced treatments.
Fertility specialists are gynecologists who perform more sophisticated medical
and surgical fertility diagnosis and treatments. Reproductive endocrinology
refers to the diagnosis and treatment of all hormonal problems that lead to
abnormal reproductive function or have an effect on the reproductive organs.
Reproductive endocrinologists are physicians who have completed four years of
residency training in obstetrics and gynecology and have at least two years of
additional training in an approved subspecialty fellowship program.
Conventional fertility services include diagnostic tests performed on the
female, such as endometrial biopsy, laparoscopy/hysteroscopy examinations and
hormone screens, and diagnostic tests performed on the male, such as semen
analysis. Depending on the results of the diagnostic tests performed, treatment
options may include, among others, fertility drug therapy to stimulate regular
and predictable ovulation, artificial insemination and fertility surgeries to
correct anatomical problems. Procedures that require gametes (sperm and eggs) to
be handled in vitro (outside the body) are classified as assisted reproductive
technology ("ART") services. Current types of ART services include in vitro
fertilization ("IVF"), gamete intrafallopian transfer ("GIFT"), zygote
intrafallopian transfer ("ZIFT"), tubal embryo transfer, frozen embryo transfer
and donor egg programs. IVF represents the most frequently employed form of ART.
Current techniques used in connection with IVF services include intracytoplasmic
sperm injection("ICSI"), assisted hatching, cryopreservation of embryos and
blastocyst culture and transfer.
There are currently approximately 43,000 obstetricians/gynecologists in the
United States of which approximately 1,000 concentrate on providing fertility
services as reproductive endocrinologists. There are currently approximately 390
centers across the country that provide ART services. These centers are
predominantly staffed by reproductive endocrinologists. Approximately one-third
of the ART centers are hospital-based and two-thirds are physician-office based.
As ART has become more sophisticated, more predictable and less experimental,
there has been a clear shift of services out of hospitals and into physician
offices. Compared to other medical niches, the fertility services industry is
concentrated among relatively few providers and few manufacturers of medication
and devices.
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Infertility is generally defined as the inability to conceive after one or
more years of a couple having unprotected intercourse. According to The American
Society for Reproductive Medicine in its most recent published data, it is
estimated that in 1996 approximately 10% of couples, or 6.1 million couples, had
impaired fertility. According to the 1999-2000 Dorland Biomedical Healthcare
Marketplace Guide, the annual expenditures relating to fertility services are
approximately $2 billion. The Company believes that multiple factors over the
past several decades have affected fertility levels. A demographic shift in the
United States toward the deferral of marriage and first birth has increased the
age at which women are first having children. This, in turn, increases the
incidence of infertility, making conception more difficult, thereby increasing
the demand for ART services. Fortunately, technological advances in the
treatment of infertility, especially IVF, have enhanced treatment outcomes and
the prognoses for many couples.
According to the latest survey on the subject, the William M.
Mercer/Foster-Higgins' National Survey of Employer-sponsored Health Plans/1995,
approximately one quarter of all health plan sponsors with at least 10 employees
provide some coverage for the treatment of infertility. Because patients seeking
fertility treatment often have other gynecological symptoms, health plans may
cover diagnostic expenses even when infertility treatment itself, is not a
covered benefit. Currently, there are several states that mandate offering
benefits of varying degrees for fertility services, including ART services. In
some states, the mandate is limited to an obligation on the part of the payer to
offer the benefit to employers. In Massachusetts, Rhode Island, Maryland,
Arkansas, Illinois, Hawaii and New Jersey the mandate requires coverage of
conventional fertility services, as well as ART services. In addition to payer
driven initiatives to broaden coverage, several legislative initiatives are
emerging as a driving force behind making fertility services more readily
available. Legislation requiring all health plans to provide coverage for
diagnosis and treatment of infertility has been introduced in several states. In
fact, the legislative mandate for insurance coverage in New Jersey was just
enacted in 2002. Finally, the 1998 Supreme Court Ruling that reproduction is a
major life activity covered under the Americans with Disability Act (the "ADA")
led to an Equal Employment Opportunity Commission administrative ruling that a
New York company discriminated against one of its employees by not providing
insurance coverage for fertility services.
ART services are the most rapidly growing segment of the fertility market.
According to the Society of Assisted Reproductive Technology ("SART"),
approximately 10,000 ART procedures were performed in 1987. In 2000, the most
recent year for which data are available, approximately 93,000 ART procedures
were performed. There is reason to believe that the market will continue to grow
in the future for the following reasons: (i) the quality of ART treatments is
improving, making outcomes much more acceptable; (ii) improvements in embryo
culture media and implantation rates are leading to the capability of reducing
high order multiple pregnancies - one of the greatest risk factors of ART
services; (iii) with improving pregnancy rates, the cost of treatment is
decreasing thereby making high technology services more affordable; (iv) new ART
services that improve embryo quality and the likelihood of pregnancy, such as
blastocyst culture and transfer, continue to emerge fueling an expansion of the
industry; (v) the improving relationship between cost and quality is causing
physicians to substitute more effective ART treatments for less effective
conventional fertility services; (vi) public policy initiatives including
legislative mandates for insurance coverage and the definition of reproduction
as a major life activity covered by the ADA are producing a more favorable
reimbursement climate; and (vii) demand for ART services is increasing through
greater public awareness and acceptance of ART services.
The market conditions producing business opportunities for the Company
include: (i) the high level of specialized skills and technology required for
comprehensive patient treatment; (ii) the capital-intensive nature of acquiring
and maintaining state-of-the-art medical equipment, laboratory and clinical
facilities; (iii) the need to develop and maintain specialized management
information systems to meet the increasing demands of technological advances,
patient monitoring and third-party payers; (iv) the need for seven-days-a-week
service to respond to patient needs and to optimize the outcomes of patient
treatments; (v) the high cost of treatment with inadequate insurance benefits in
most markets; and (vi) the high cost of pharmaceutical products requiring
patient education and support.
Company Strategy
The Company's strategy is to align information, technology and finance for
the benefit of fertility patients, providers, and payers. The primary elements
of the Company's strategy include: (i) expanding the IntegraMed Provider Network
into new major markets; (ii) increasing the number and value of service packages
purchased by members of the IntegraMed Provider Network; (iii) entering into
additional FertilityPartners(TM) contracts; (iv) increasing revenues at
contracted FertilityPartners(TM) centers; (v) increasing the number of Shared
Risk Refund treatment packages (as defined below) sold to patients of the
IntegraMed Provider Network and managing the risk associated with the Shared
Risk Refund program; (vi) increasing sales of pharmaceutical products and
services; and (vii) developing Internet-based access to personalized health
information.
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Expand the IntegraMed Provider Network
The Company will seek to expand the IntegraMed Provider Network to cover
additional major market areas across the country. The Company will primarily
focus the IntegraMed Provider Network development activities on major markets
with populations in excess of one million because the demographics of consumers
who access fertility services are consistent with the demographics of most major
metropolitan markets. In addition, the relatively low incidence of infertility
requires a large population base to support a sophisticated fertility center.
The Company believes high quality fertility centers are capable of drawing
consumers from approximately a one hundred mile radius or more if alternatives
are unavailable. It is the Company's belief that these market dynamics would
allow the Company to cover a large percentage of the national population by
expanding the IntegraMed Provider Network to the fifty largest metropolitan
markets across the country.
The entry point for fertility centers participating in the IntegraMed
Provider Network is the FertilityDirect program. The FertilityDirect program
provides contracted fertility centers with exclusive market access to the
Company's products and services that support patient recruitment. Included in
this program are (i) Shared Risk Refund treatment packages (as described below),
(ii) treatment financing and (iii) Internet marketing. The Company licenses
these programs exclusively to one leading fertility center in each major market
targeted.
Increase the Number and Value of Service Packages sold to Participating
Fertility Centers
The Company has a portfolio of discrete service packages that are sold to
fertility centers participating in the IntegraMed Provider Network. The
Company's service offerings include:
FertilityWeb(TM) - a Web Site development, hosting and marketing service
that helps contracted fertility centers develop and maintain a modern,
transaction oriented Web Site. Web Sites for contracted fertility centers are
built with a technology known as Dynamic Site Rendering Engine ("DSRE"). DSRE
also contains a web editing tool that permits anyone with a common web browser
to maintain the Web Site to ensure it is up to date. Contracted fertility
centers also gain access to additional web site visitors by virtue of their
placement on www.integramed.com, the Company's industry leading web site.
FertilityPurchase(TM) - a group purchasing program exclusively available to
fertility centers participating in the IntegraMed Provider Network. The focus of
the FertilityPurchase program is on high cost disposable supplies, laboratory
reagents and capital equipment used by fertility centers in diagnosing and
treating infertility. The Company intends to extend this program to include
other products and services that fertility centers commonly purchase in the
ordinary course of business, including malpractice insurance, computers and
medical supplies.
FertilityMarKit(TM) - a package of award-winning marketing and sales
programs that have helped contracted fertility centers to grow at three times
the average rate for the industry. This service includes access to the Company's
proprietary marketing collateral material library of ads, brochures, fliers and
announcements. In addition, the Company conducts quarterly sales and marketing
training seminars, offers a media buying service and produces radio and
television ads and educational videos.
ARTWorks(R) Clinical Information System - a proprietary clinical
information system focused exclusively on the unique requirements of providing
clinical care to patients seeking fertility treatment. Owned and maintained by
the Company, ARTWorks Clinical Information System is distributed on an
application services provider ("ASP") model. Under this model, the Company
maintains the application in its dedicated data center in New York. Contracted
fertility centers only need to gain access to the application with an
appropriate telecommunication link and maintain their own local area network to
utilize the application. The benefit of the ASP model is that the Company's
customers do not need to invest in expensive hardware or licensing fees to gain
access to the application. The Company has also optimized the application by
developing and maintaining an interface with commonly used laboratory equipment
and the Company's chosen practice management and financial information systems.
ARTWorks Practice Management Information System - based on the Misys Vision
system, is an information system that enables contracted fertility centers to
have a sophisticated scheduling, billing and accounts receivable system. The
Misys system is also offered on an ASP model, which permits contracted fertility
centers to gain access to a powerful practice management system at a fraction of
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the cost of traditional installation. This system has been customized to the
unique requirements of fertility centers and has helped contracted fertility
centers to maintain excellent performance on managing accounts receivable.
FertilityPartners(TM) - fertility centers that contract for this program,
receive a comprehensive, turnkey fertility center operation, may use the
"Reproductive Science Center" designation and have access to the Company's
entire portfolio of services including: (i) administrative services, including
accounting and finance, human resource functions, and purchasing of supplies and
equipment; (ii) access to capital and servicing and financing patient accounts
receivable; (iii) marketing and sales; (iv) integrated information systems; and
(v) assistance in identifying best clinical practices.
Entering in to FertilityPartners(TM) Contracts
Fertility centers participating in the FertilityPartners program are
entitled to the Company's full service support. The Company will primarily focus
its FertilityPartners contracting efforts on fertility centers participating in
the IntegraMed Provider Network. These are fertility centers that have
contracted with the Company for more limited, discrete service packages and have
developed a good working relationship with the Company. This good working
relationship mitigates risk associated with capital investments that are part of
the FertilityPartners program. The Company believes that a number of factors
will contribute to the successful transition of certain participating providers
in the IntegraMed Provider Network to the FertilityPartners program. These
factors include: (i) the high quality reputation of the Company in providing
services in the areas of fertility and ART services; (ii) the Company's
expertise in assisting its customers in increasing revenues and maintaining cost
efficient operations; (iii) the Company's success in improving patient outcomes
by providing laboratory support services to the FertilityPartners program; and
(iv) the capital intensive nature of operating modern, sophisticated fertility
centers and the difficulty most physician groups have in accessing sufficient
capital.
Increasing Revenues from FertilityPartners(TM) Contracts
The Company expects to increase revenues derived under its
FertilityPartners contracts by: (i) sponsoring mergers with smaller fertility
physician group practices; (ii) making available expanded laboratory and ART
services at the fertility centers, thereby increasing revenues per patient;
(iii) making available increased marketing and sales support to fertility
centers; and (iv) increasing the opportunity for participation by the fertility
centers in clinical trials of new drugs, medical devices and diagnostic
technologies under development.
Increasing the Number of Shared Risk Refund Treatment Packages Sold
and Managing the Associated Risk
The Company will seek to increase the number of Shared Risk Refund
treatment packages sold directly to consumers. The Shared Risk Refund program
was established at Shady Grove Fertility Reproductive Science Center ("Shady
Grove") - the leading fertility center in the metropolitan Washington, DC area,
a FertilityPartner and a member of the IntegraMed Provider Network. Based on the
experience at Shady Grove, the Company developed an actuarial model that allows
pricing a treatment package to consumers. The Shared Risk Refund program
consists of a package that includes up to three cycles of in vitro fertilization
for one fixed price with a significant refund if the patient does not deliver a
baby. Under this innovative financial program, the Company receives payment
directly from consumers who qualify for the program and pays contracted
fertility centers a defined reimbursement for each treatment cycle performed.
To manage the risk associated with the Shared Risk Refund program, the
Company has developed a pre-authorization and a case management program. The
pre-authorization is a structured process of collecting pre-treatment diagnostic
information on each patient seeking enrollment in the Shared Risk Refund
program. By evaluating clinical information the Company can assess the
likelihood of any individual achieving pregnancy. In addition, each patient
enrolled in the Shared Risk Refund program is evaluated as part of a case
management program to continually assess response to treatment. Both the
pre-authorization program and the case management program help to manage the
risk fundamental to the Shared Risk Refund program.
Increasing Sales of Pharmaceutical Products and Services
The Company will continue its efforts to expand the pharmaceutical products
and services line by: (i) providing Education Matters(TM) - a comprehensive
patient educational support program; (ii) packaging products in the Cycle
Kit(TM)- a unique packaging system that provides patients with all supplies and
instructions for proper utilization of medication; (iii) minimizing cost to
patients and payers by implementing Cycle Track(TM) - a fertility pharmaceutical
case management system that dispenses only the required amount of medication for
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patients to complete their treatment; (iv) implementing an aggressive marketing
and sales program in cooperation with ivpcare, inc. (the supplier of
pharmaceuticals to IntegraMed Pharmaceutical Services, Inc., a wholly-owned
subsidiary of the Company ("IPSI")); and (v) expanding the offering beyond the
six FertilityPartners centers to the entire IntegraMed Provider Network.
Developing Internet-Based Access to Personalized Health Information
The Company will continue to develop www.integramed.com as a leading
fertility portal. The web site has provided a direct marketing infrastructure
that allows the Company to offer efficient transaction processing capability for
consumers and affiliated fertility centers. Currently consumers can participate
in an on-line tutorial, subscribe to a bi-weekly newsletter, apply for an
appointment, apply for treatment financing, apply for the Shared Risk Refund
program and apply to become an egg donor. All transactions are logged to an
Oracle database housed in the Company's data center. In addition, contracted
fertility centers receive patient inquiries and referrals as appropriate.
Core Competencies
The Company's service packages are constructed from core competencies. In
particular, the Company's core competencies include: (i) administrative
services, including accounting and finance, human resource functions, and
purchasing of supplies and equipment; (ii) access to capital and servicing and
financing patient accounts receivable; (iii) marketing and sales; (iv)
integrated information systems; and (v) assistance in identifying best clinical
practices.
By providing fertility centers with access to these resources, the Company
enables contracted fertility centers to achieve improved efficiencies and
business outcomes.
Administrative Services
The Company provides administrative services to fertility centers,
including: (i) accounting and finance services, such as billing and collections,
accounts payable, payroll, and financial reporting and planning; (ii)
recruiting, hiring, training and supervising all non-medical personnel; and
(iii) purchasing of supplies, pharmaceuticals, equipment, services and
insurance.
Access to Capital
The Company provides fertility centers with a significant competitive
advantage through immediate access to capital for expansion and growth. The
Company also offers physician providers in its network rapid access to the
latest technologies and facilities in order for them to provide a full spectrum
of services and compete effectively for patients in the marketplace. For
example, the Company has built a new facility that includes an embryology
laboratory for certain fertility centers, thereby enabling them to expand their
service offerings to include a number of services (including laboratory and ART
services) which had previously been outsourced. The Company believes that access
to these facilities and new technologies has improved the ability of the
fertility centers to offer comprehensive high quality services, expand the
revenue base per patient, and compete effectively.
Marketing and Sales
The Company's marketing and sales department specializes in the development
of sophisticated marketing and sales programs giving fertility centers access to
business-building techniques to facilitate growth and development. In today's
highly competitive health care environment, marketing and sales are essential
for the growth and success of fertility centers. However, these marketing and
sales efforts are often too expensive for many physician practice groups.
Affiliation with the IntegraMed Provider Network provides physicians access to
significantly greater marketing and sales capabilities than would otherwise be
available. The Company's marketing services focus on revenue and referral
enhancement, relationships with local physicians, media and public relations and
managed care contracting.
The Company believes that participation in its network will assist
fertility centers in establishing contracts with managed care organizations. The
Company believes that by integrating fertility physicians with ART facilities,
and thereby developing full service fertility centers, practices within the
IntegraMed Provider Network will be permitted to compete more effectively for
managed care contracts.
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Integrated Information System
The Company is using its established base of fertility centers to
continuously develop a nationwide, integrated information system, called
ARTWorks(TM), to collect and analyze clinical, patient, financial and marketing
data. The Company believes it is able to use this data to control expenses,
measure patient outcomes, improve patient care, develop and manage utilization
rates and maximize reimbursements. The Company also believes this integrated
information system allows the fertility centers to more effectively compete for
and price managed care contracts, in large part because an information network
can provide these managed care organizations with access to patient outcomes and
cost data.
Assistance in Identifying Best Clinical Practices
The Company assists fertility centers in identifying best clinical
practices and implementing quality assurance and risk management programs in
order to improve patient care and clinical outcomes. For example, the Company
has instituted the Council of Physicians and Scientists, who review the
principal elements necessary to achieve successful treatment outcomes and assist
physicians in optimizing such outcomes. The Company's structured Clinical
Quality Improvement Program under the auspices of the Council of Physicians and
Scientists produces a distinctive competitive advantage in the marketplace for
the Company's network of fertility centers.
FertilityPartners Contracts
The Company has a FertilityPartners contract with six fertility centers,
which in turn employ and/or contract with the physicians.
Current FertilityPartners Contracts
The Company currently has contracts with six fertility centers consisting
of 25 locations in nine states and the District of Columbia. There are 48
physicians and Ph.D. scientists, including physicians and Ph.D. scientists
employed and/or contracted by the fertility centers, as well as physicians who
have arrangements to utilize the Company's facilities. The following table
describes in detail each fertility center:
Number of Initial
Number of Physicians and Business Services
Fertility Centers State Locations Ph.D. Scientists Contract Date
----------------- ----- --------- ---------------- -------------
Reproductive Science Center of Boston........ MA, NH & RI 5 10 July 1988
Reproductive Science Associates.............. NY 2 5 June 1990
Reproductive Science Center of the Bay Area
Fertility and Gynecology Medical Group.... CA 3 6 January 1997
Fertility Centers of Illinois................ IL 7 12 August 1997
Shady Grove Fertility Reproductive
Science Centers........................... MD, VA & DC 5 10 March 1998
IVF Florida 2002............................. FL 3 5 April 2002
Establishing FertilityPartners Contracts
In establishing a FertilityPartners contract, the Company typically: (i)
acquires certain assets of a fertility center; (ii) enters into a long-term
services agreement with the fertility center under which the Company provides
comprehensive services; and (iii) assumes the principal administrative and
financial functions of the fertility center. In addition, the Company typically
requires (a) that the fertility center enter into long-term employment
agreements containing non-compete provisions with the affiliated physicians and
(b) that each of the physician shareholders of the fertility center enter into a
personal responsibility agreement with the Company. Typically, the fertility
center's related medical practice contracting with the Company is a professional
corporation in which certain of, or all of, the physicians are the shareholders.
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Typically, the FertilityPartners contracts obligate the Company to pay a
fixed sum for the exclusive right to service the fertility center, a portion or
all of which is paid at the contract signing with any balance to be paid in
future annual installments. The agreements are typically for terms of 10 to 25
years and are generally subject to termination due to insolvency, bankruptcy or
material breach of contract. Generally, no shareholder of the fertility center
may assign his interest in the fertility center without the Company's prior
written consent.
The FertilityPartners contract provides that all patient medical care at a
contracted fertility center is to be provided by the physicians of the fertility
center and that the Company generally is responsible for providing defined
services to the fertility center. The Company provides the equipment, facilities
and support necessary to operate the fertility center and employs substantially
all such other non-physician personnel as are necessary to provide technical,
consultative and administrative support for the patient services at the
fertility center. Under certain agreements, the Company is committed to provide
a clinical laboratory. Under the agreements, the Company may also advance funds
to the fertility center for providing new services, utilize new technologies,
fund projects, purchase the net accounts receivable, provide working capital or
fund mergers with other physicians or physician groups.
Under five FertilityPartners agreements, the Company receives as
compensation for its services a three-part fee comprised of: (i) a variable
percentage of net revenues generally up to 6%; (ii) reimbursed costs of services
(costs incurred in providing services to a fertility center and any costs paid
on behalf of the fertility center); and (iii) a fixed percentage of earnings
after the initial service fees which currently ranges from 10% to 19%.
As compensation for providing services under the sixth agreement, the
Company receives a fixed fee, plus reimbursed costs of services.
On November 25, 2002, the Company announced the ending of its
FertilityPartners agreement with Reproductive Science Associates of New York
("RSA of New York"). The agreement is to end on November 15, 2003. RSA of New
York serves the Long Island market and revenues for the four quarterly periods
ending prior to the announcement were $9.1 million. The program had a
contribution of $750,000 for the same period. At the time of the announcement,
the Company evaluated its exclusive business rights asset associated with RSA of
New York and reduced that asset to its realizable value by adjusting the asset
downward by $350,000.
The Company reports all fees as "Revenues, net." Direct costs incurred by
the Company in performing its services and costs incurred on behalf of the
fertility centers are recorded in "cost of services incurred". The physicians
receive as compensation all remaining earnings after payment of the Company's
compensation.
Physician Employment Agreements
Employment agreements between the fertility centers and physicians
generally provide for an initial term ranging from three to five years. The term
may be automatically renewed at successive intervals unless the physician or the
fertility center elects not to renew or such agreement is otherwise terminated
for cause or the death or disability of a physician. The physicians are paid
based upon either the number of procedures performed or other negotiated
formulas agreed upon between the physicians and the fertility center, and the
fertility centers provide the physicians with health, death and disability
insurance and other benefits. The fertility centers are obligated to obtain and
maintain professional liability insurance coverage, procured on behalf of the
physicians. Pursuant to the employment agreements, the physicians agree not to
compete with the fertility center with which they have contracted during the
term of the agreement and for a certain period following the termination of such
employment agreement. In addition, the agreements contain customary
confidentiality provisions.
Affiliate Care/Satellite Service Agreements
Fertility centers may also have affiliate care agreements and satellite
service agreements with physicians who are not employed by the fertility center.
Under an affiliate care agreement, the fertility center contracts with a
physician to provide certain services for the fertility center's patients, such
as endocrine/ultrasound monitoring, or ART services.
Pharmaceutical Subsidiary
IPSI markets fertility-related pharmaceutical products to certain
participating providers in the IntegraMed Provider Network. IPSI contracts with
ivpcare, inc., a licensed pharmacy specializing in dispensing pharmaceutical
products, which provides certain business services to IPSI.
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Financing Subsidiary
IntegraMed Financial Services, Inc. ("IFS"), a wholly owned subsidiary of
the Company, arranges financing to qualified patients of the IntegraMed Provider
Network at rates significantly lower than credit cards and other finance
companies. IFS is administered by AmeriFee LLC, a third party vendor, which
provides administrative management services to IFS. The loans are made to
qualified patients by a third party bank. The patient makes payment directly to
the medical practice. The bank pays a placement fee to the Company. Such revenue
is recorded when the Company receives the cash at the time of closing the
transaction.
Council of Physicians and Scientists
The Company's Council of Physicians and Scientists (the "Council"),
comprised mostly of representatives from the IntegraMed Provider Network, was
established in 1996 to bring together leaders in reproductive medicine and
embryology to promote a high quality clinical environment in the IntegraMed
Provider Network. The Council meets twice each year and conducts monthly
teleconferences on topics related to improving infertility treatment and
diagnosis. The Council publishes its recommendations and the Company's staff
follows up on implementing Council recommendations. The Council reviews and
recommends accepting or denying additional physicians who want to join the
IntegraMed Provider Network based on objective clinical credentialing criteria.
Reliance on Third-Party Vendors
IPSI, as well as all medical providers who deliver services requiring
fertility medication, are dependent on three third-party vendors that produce
such medications (including but not limited to: Lupron, Follistim, Repronex,
GonalF and Pregnyl) that are vital to treating infertility and ART services.
Should any of these vendors experience a supply shortage, it may have an adverse
impact on the operations of the IntegraMed Provider Network. To date, the
IntegraMed Provider Network has not experienced any such adverse impacts.
Competition
The business of providing health care services is intensely competitive and
providers strive to find the most cost-effective method of providing quality
health care. Although the Company focuses on medical groups that provide
fertility and ART services, it competes for contracts with other health care
services and management companies, as well as hospitals and hospital-sponsored
management services organizations. If federal or state governments enact laws
that attract other health care providers to the managed care market, the Company
may encounter increased competition from other institutions seeking to increase
their presence in the managed care market and which have substantially greater
resources than the Company. There can be no assurance that the Company will be
able to compete effectively with its current competitors. Nor can there be
assurance that additional competitors will not enter the market, or that such
competition will not make it more difficult to acquire the assets and service
rights of fertility centers on terms beneficial to the Company.
The fertility industry is highly competitive and characterized by
technological improvements. New ART services and techniques may be developed
that may render obsolete the ART services and techniques currently employed at
the fertility centers. Competition in the areas of fertility and ART services is
largely based on pregnancy and other patient outcomes. Accordingly, the ability
of a fertility center to compete is largely dependent on its ability to achieve
adequate pregnancy rates and patient satisfaction levels.
Government Regulation
As a participant in the health care industry, the Company's operations and
its relationships with the FertilityPartners centers and the IntegraMed Provider
Network are subject to extensive and increasing regulation by various
governmental entities at the federal, state and local levels. These include, but
are not limited to, Federal and State Anti-Kickback Laws, Federal and State
Self-Referral Laws, False Claim Laws, Federal and State Controlled Substances
laws and regulations and Anti-Trust Laws. The Company believes its operations
and those of the FertilityPartners centers are in material compliance with
applicable health care laws. Nevertheless, the laws and regulations in this area
are extremely complex and subject to changing interpretation and many aspects of
the Company's business and business opportunities have not been the subject of
federal or state regulatory review or interpretation. Accordingly, there is no
assurance that the Company's operations have been in compliance at all times
with all such laws and regulations. In addition, there is no assurance that a
court or regulatory authority will not determine that the Company's past,
current or future operations violate applicable laws or regulations. If the
Company's interpretation of the relevant laws and regulations is inaccurate,
there could be a material adverse effect on the Company's business, financial
-9-
condition and operating results. There can be no assurance that such laws will
be interpreted in a manner consistent with the Company's practices. There can be
no assurance that a review of the Company or the fertility centers by courts or
regulatory authorities will not result in a determination that would require the
Company or the fertility centers to change their practices. There also can be no
assurance that the health care regulatory environment will not change so as to
restrict the Company's or the fertility centers' existing operations or their
expansion. Any significant restructuring or restriction could have a material
adverse effect on the Company's business, financial condition and operating
results.
Corporate Medical Practice Laws. The Company's operations may be subject to
state laws relating to corporations practicing medicine. State laws may prohibit
corporations other than medical professional corporations or associations from
practicing medicine or exercising control over physicians, and may prohibit
physicians from practicing medicine in partnership with, or as employees of, any
person not licensed to practice medicine. Furthermore, operations in New York,
California, Maryland and Illinois may be subject to fee-splitting prohibitions.
State law may also prohibit a corporation other than professional corporations
or associations (or, in some states, limited liability companies) from acquiring
the goodwill of a medical practice. The Company believes its operations are in
material compliance with applicable state laws relating to the corporate
practice of medicine. The Company performs only non-medical administrative
services, and in certain circumstances, clinical laboratory services. The
Company does not represent to the public that it offers medical services. In
each state, the fertility center is the sole employer of the physicians, and the
fertility center retains the full authority to direct the medical, professional
and ethical aspects of its medical practice. However, although the Company
believes its operations are in material compliance with applicable state
corporate practice of medicine laws, the laws and their interpretations vary
from state to state, and are enforced by regulatory authorities who have broad
discretionary authority. There can be no assurance that these laws will be
interpreted in a manner consistent with the Company's practices or that other
laws or regulations will not be enacted in the future that could have a material
adverse effect on the Company's business, financial condition and operating
results.
Health Insurance Portability and Accountability Act. Recently, the
healthcare industry began to focus on the impact that the Health Insurance
Portability and Accountability Act ("HIPAA") regulations and implementation
might have on their operations and information systems. HIPAA was designed to
reduce the amount of administrative waste in healthcare today and to further
protect the privacy of any patient's medical information. HIPAA regulations
identify certain standards for both manual processes and automated processes and
systems handling patient medical information. The HIPAA regulations related to
privacy of medical information are scheduled to be implemented on April 14,
2003. HIPAA regulations related to standard data formats and data sets for
electronic transaction processing require implementation by October 2003.
Additional HIPAA regulations for security are scheduled to be implemented in
April 2005. The HIPAA regulations may impose the need for additional required
enhancements of the Company's internal systems. While the Company will incur
costs to become compliant with the HIPAA regulations, management believes the
regulations will not have a significant overall impact on the Company's results
of operations. The Company is currently assisting its FertlityPartners in
implementing the privacy and data format and sets standards.
Liability and Insurance
Providing health care services entails a substantial risk of potential
medical malpractice and similar claims. The Company does not itself engage in
the practice of medicine or assume responsibility for compliance with regulatory
requirements directly applicable to physicians, and therefore requires
associated fertility centers to maintain medical malpractice insurance. In
general, the Company has established a program that provides the fertility
centers with such required insurance. However, in the event that services
provided at the fertility centers or any affiliated medical practice are alleged
to have resulted in injury or other adverse effects, the Company is likely to be
named as a party in a legal proceeding.
Although the Company currently maintains liability insurance that it
believes is adequate in risk and amount, successful malpractice claims could
exceed the limits of the Company's insurance and could have a material adverse
effect on the Company's business. Moreover, there is no assurance that the
Company will be able to obtain such insurance on commercially reasonable terms
in the future or that any such insurance will provide adequate coverage against
potential claims. In addition, a malpractice claim asserted against the Company
could be costly to defend, could consume management resources and could
adversely affect the Company's reputation and business, regardless of the merit
or eventual outcome of such claim. In addition, in connection with the asset
acquisition of certain fertility centers, the Company may assume some of the
fertility center's stated liabilities. Therefore, an entity may assert claims
against the Company for events related to the fertility center prior to its
becoming a FertilityPartner. The Company maintains insurance coverage related to
those risks that it believes is adequate as to the risks and amounts, although
there is no assurance that any successful claims will not exceed applicable
policy limits.
-10-
There are inherent risks specific to the provision of ART services.
Currently, fertility medication is critical to most ART services and a ban by
the United States Food and Drug Administration or any limitation on its use
would have a material adverse effect on the Company. Furthermore, ART services
increase the likelihood of multiple births, which are often premature and may
result in increased costs and complications.
Employees
As of March 14, 2003, the Company had 660 employees. Of these, 625 are
employed at the FertilityPartners contracted fertility centers and 35 are
employed at the Company's headquarters, including 7 who are executive
management. Of the Company's employees, 138 persons at the FertilityPartners
contracted fertility centers and none at the Company's headquarters are employed
on a part-time basis. The Company is not a party to any collective bargaining
agreement and believes its employee relationships are good.
Segment Information
The Company is principally engaged in providing products and services to
the fertility market. For disclosure purposes, the Company recognizes services
offered to its network of fertility centers and its pharmaceutical distribution
operations as separate reporting segments. The services segment includes revenue
and costs categorized as FertilityPartners Service Fees and Other Revenue, as
follows (000's omitted): Pharmaceutical Corporate Services Distribution
Consolidated
Pharmaceutical
Corporate Services Distribution Consolidated
--------- -------- ------------ ------------
For the Year ended December 31, 2002
Percentage of total revenues........... (0.4)% 78.0% 22.4% 100.0%
Revenues............................... $ (322) $68,813 $19,709 $88,200
Cost of Services....................... -- 59,953 18,396 78,349
------ ------- ------- -------
Contribution........................... (322) 8,860 1,313 9,851
General and administrative costs....... 8,097
Interest, net.......................... 52
-------
Income before income taxes............. 1,702
-------
Depreciation expense included above.... 2,162
Capital expenditures................... 238 1,792 -- 2,030
Total assets........................... 10,214 35,403 1,827 47,444
For the Year ended December 31, 2001
Percentage of total revenues........... 0% 79.6% 20.4% 100.0%
Revenues............................... $ -- $58,791 $15,107 $73,898
Cost of Services....................... -- 49,510 14,503 64,013
------ ------- ------- -------
Contribution........................... -- 9,281 604 9,885
General and administrative costs....... 7,827
Interest, net.......................... 102
-------
Income before income taxes............. $ 1,956
=======
Depreciation expense included above.... $ 1,652
Capital expenditures................... $ 161 $ 1,504 $ -- $ 1,665
Total assets........................... $11,325 $31,138 $ 2,158 $44,621
-11-
Pharmaceutical
Corporate Services Distribution Consolidated
--------- -------- ------------ ------------
For the Year ended December 31, 2000
Percentage of total revenues........... --% 83.0% 17.0% 100.0%
Revenues............................... $ -- $47,317 $ 9,682 $56,999
Cost of Services....................... -- 39,447 9,358 48,805
------ ------- ------- -------
Contribution........................... -- $ 7,870 $ 324 $ 8,194
General and administrative costs....... 5,880
Interest, net.......................... 210
-------
Income before income taxes............. $ 2,104
=======
Depreciation expense included above.... $ 1,697
Capital expenditures................... $ 199 $ 1,153 $ -- $ 1,352
Total assets........................... $3,335 $34,238 $ 1,272 $38,845
Significant Service Contracts
For the years ended December 31, 2002, 2001, and 2000 the following
fertility centers each individually provided greater than 10% of the Company's
Revenues, net and/or contribution as follows:
Percent of Company Percent of
Revenues, net Contribution
------------------------- -------------------------
2002 2001 2000 2002 2001 2000
---- ---- ---- ---- ---- ----
Boston......................... 10.8 10.9 13.9 14.2 12.6 18.7
Long Island.................... 10.0 10.8 10.4 5.2 6.9 6.9
New Jersey..................... -- 1.9 5.1 -- 12.0 18.6
Illinois....................... 27.7 29.3 26.9 31.0 29.5 26.7
Shady Grove.................... 17.7 17.3 17.6 26.3 21.2 17.7
Bay Area....................... 7.4 8.4 8.2 10.9 10.6 9.1
ITEM 2. Properties
The Company's headquarters and executive offices are in Purchase, New York,
where it occupies approximately, 18,600 square feet under a lease expiring in
2012 at a monthly rental ranging from $29,500 to $51,100.
The Company leases, subleases, and/or occupies, pursuant to its
FertilityPartners agreements, each fertility center location from third-party
landlords. Costs associated with these agreements are included in "Cost of
services rendered" and are reimbursed to the Company as part of its fee;
reimbursed costs are included in "Revenues, net".
The Company believes its executive offices and the space occupied by the
fertility centers are adequate.
ITEM 3. Legal Proceedings
In June 2002, the Company was served with a complaint, captioned
WINFertility, Inc. vs. IntegraMed America, Inc., in which the plaintiff filed an
action in the Supreme Court of New York, Westchester County, alleging breach of
contract and seeking damages in excess of $5 million. The Company has served and
filed an answer denying all material allegations of the complaint and asserting
affirmative defenses. The Company has also filed a counterclaim against the
plaintiff demanding an accounting and return of certain fees paid to plaintiff
by the Company. The Company believes it has meritorious defenses to the claims,
and based on opinion of counsel, believes that the likelihood of the suit having
a material adverse effect on the financial position, results of operations or
the cash flow of the Company is remote.
-12-
There are other minor legal proceedings to which the Company is a party. In
the Company's opinion, the claims asserted and the outcome of such proceedings
will not have a material adverse effect on the financial position, results of
operations or the cash flow of the Company.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
-13-
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock has been traded on The NASDAQ National Market
under the symbol "INMD" since the Company's formal name change in June 1996 and
prior to the name change under the symbol "IVFA" since May 21, 1993. Prior
thereto, the Company's Common Stock had been trading on the NASDAQ Small Cap
Market since October 8, 1992. The following table sets forth the high and low
closing sales price for the Common Stock, as reported on The NASDAQ National
Market.
Common Stock
-----------------
High Low
-----------------
2001
First Quarter..................... $3.00 $1.88
Second Quarter.................... 6.00 2.50
Third Quarter..................... 7.31 2.60
Fourth Quarter.................... 6.75 3.23
2002
First Quarter..................... 6.28 4.04
Second Quarter.................... 8.89 5.65
Third Quarter..................... 8.05 5.00
Fourth Quarter.................... 6.93 4.02
On March 14, 2003, there were approximately 87 holders of record of the
Common Stock and approximately 1,205 beneficial owners of shares registered in
nominee or street name.
The Company has not paid dividends on its Common Stock during the last two
fiscal years. The Company currently anticipates that it will retain all
available funds for use in the operation and expansion of its business, and
therefore, does not anticipate paying any cash dividends on its Common Stock for
the foreseeable future.
The Company has two stock option plans all of which have been approved by
the Company's shareholders. The following table sets forth certain information
relative to our stock option plans.
Number of securities
Number of Securities remaining available for
to be issued upon Weighted-average future issuance under
exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
Plan Category warrants and rights warrants and rights reflected in column (a)
------------- ------------------- ------------------- -----------------------
(a) (b) (c)
Equity compensation
plans approved by
security holders........ 852,640 $4.29 1,458
Equity compensation
plans not approved
by security holders..... 0 0 0
Total................ 852,640 $4.29 1,458
On October 15, 2002, the Company completed its redemption of the
outstanding 165,644 shares of the Series A Cumulative Convertible Preferred
Stock (the "Preferred Stock") for $10.30 per share in accordance with the
Certificate of Designation for the Preferred Stock.
Unregistered shares of Common Stock and warrants to purchase shares of
Common Stock were issued during 2002, as described in the following paragraphs
in reliance of Section 4(2) of the Securities Act of 1933.
-14-
In 2002, the Company issued an aggregate of 37,640 shares of restricted
Common Stock to members of the Company's Board of Directors and officers of the
Company. These shares had a market value on the date of issuance of $249,000.
In 2002, the Company issued an aggregate of 7,089 shares of restricted
Common Stock to the physician partners of the Northwest Center for Fertility and
Reproductive Endocrinology, in connection with the FertilityPartners agreement.
These shares had a market value of $45,000 on the date of issuance.
During 2002, the Company took advantage of market conditions and engaged in
a private placement of its Common Stock and issued 220,000 shares of Common
Stock and 88,000 warrants to purchase Common Stock with a net market value of
$1,375,000. The warrants became exercisable on January 31, 2003 and expire on
January 31, 2006. The Company filed a registration statement to cover the resale
of the Common Stock and the resale of the Common Stock underlying the warrants.
The additional equity raised is intended for general corporate purposes. In
addition, 17,600 warrants were issued to the underwriter of the private
placement, which become exercisable July 30, 2002 and expire July 30, 2007.
ITEM 6. Selected Financial Data
The following selected financial data (for the years ended December 31,
2002, 2001 and 2000) are derived from the Company's consolidated financial
statements and should be read in conjunction with the financial statements,
related notes, and other financial information included elsewhere in this Annual
Report on Form 10-K.
Statement of Operations Data (1), (4):
December 31,
----------------------------------------------------
2002 2001 2000 1999 1998
------ -------- ------- ------- -------
(in thousands, except per share amounts)
Revenues, net ........................ $ 88,200 $ 73,898 $ 56,999 $ 43,545 $ 37,628
Costs of services incurred ........... 78,349 64,013 48,805 36,556 29,778
-------- -------- -------- -------- --------
Contribution ......................... 9,851 9,885 8,194 6,989 7,850
General and administrative expenses .. 8,097 7,827 5,880 6,084 5,316
Total other expenses, net ............ 52 102 210 347 341
Restructuring and other charges (2) .. -- -- -- -- 2,084
-------- -------- -------- -------- --------
Income from continuing operations .... 1,702 1,956 2,104 558 109
Loss from operation and disposal of
AWM Division (3) .................. -- -- -- -- 4,501
-------- -------- -------- -------- --------
Income (loss) before taxes ........... 1,702 1,956 2,104 558 (4,392)
Provision (benefit) for income taxes . 562 (4,557) 187 240 340
-------- -------- -------- -------- --------
Net income (loss) .................... 1,140 6,513 1,917 318 (4,732)
Less: Dividends paid and/or accrued on
Preferred Stock ................... 69 133 133 133 133
-------- -------- -------- -------- --------
Net income (loss) applicable to Common
Stock ............................. $ 1,071 $ 6,380 $ 1,784 $ 185 $ (4,865)
======== ======== ======== ======== ========
Basic earnings per share
Continuing operations ............. $ 0.33 $ 2.07 $ 0.43 $ 0.04 $ (0.07)
Discontinued operations ........... -- -- -- -- (0.87)
-------- -------- -------- -------- --------
Basic EPS ............................ $ 0.33 $ 2.07 $ 0.43 $ 0.04 $ (0.94)
======== ======== ======== ======== ========
Diluted earnings per share
Continuing operations ............. $ 0.31 $ 2.01 $ 0.43 $ 0.04 $ (0.07)
Discontinued operations ........... -- -- -- -- (0.87)
-------- -------- -------- -------- --------
Diluted EPS .......................... $ 0.31 $ 2.01 $ 0.43 $ 0.04 $ (0.94)
======== ======== ======== ======== ========
Weighted average shares - basic ...... 3,195 3,081 4,110 4,874 5,202
======== ======== ======== ======== ========
Weighted average shares - diluted ... 3,468 3,175 4,172 4,951 5,202
======== ======== ======== ======== ========
-15-
Balance Sheet Data:
December 31,
------------------------------------------------------------
2002 2001 2000 1999 1998
------ ------- -------- -------- --------
(in thousands)
Working capital ............................. $2,939 $ 4,208 $ 4,943 $ 5,705 $ 7,661
Total assets ................................ 47,444 44,621 38,845 39,047 41,816
Total indebtedness........................... 1,410 2,691 3,569 5,410 7,381
Accumulated deficit.......................... (15,660) (16,800) (23,313) (25,230) (25,548)
Shareholders' equity......................... 31,557 30,615 25,987 26,639 27,383
(1) Earnings (loss) per share and weighted average share amounts for each year
reflect the Company's 1-for-4 reverse stock split effective November 17,
1998.
(2) The Company recorded approximately $2.1 million in restructuring and other
charges in the year ended December 31, 1998. Such charges included
approximately $1.4 million associated with the termination of its agreement
with the Reproductive Science Center of Greater Philadelphia, a single
physician fertility center, effective July 1, 1998, which primarily
consisted of exclusive services right impairment and other asset
write-offs. Such charges also included approximately $700,000 for exclusive
services right impairment losses related to two other single physician
fertility science Centers. The latter impairment losses were recorded based
upon the Company's determination that the intangible asset balance was
larger than the respective fertility center's estimated future cash flow.
(3) The AWM Division operations were sold effective September 1, 1998. In June
1998, the Company committed itself to a formal plan to dispose of the AWM
Division operations. On September 1, 1998 the Company disposed of the AWM
Division operations through a sale of certain of its fixed assets to a
third party and the third party's assumption of the employees, building
lease, research contracts, and medical records. During the year ended
December 31, 1998, the Company reported a loss from the disposal of the AWM
Division of approximately $3.6 million, which principally represented
approximately $3.3 million related to the write-off of goodwill and
$243,000 for estimated operating losses during the phase-out period. During
the eight-month period ended August 31, 1998, the AWM Division recorded
revenues of approximately $1.0 million.
(4) Certain amounts for the years ended December 31, 2001 and prior, have been
reclassified to conform with the presentation adopted for the year ended
December 31, 2002.
-16-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the three years ended December 31, 2002. It should
be read in conjunction with the Company's Consolidated Financial Statements, the
related notes thereto and other financial and operating information included in
this Form 10-K.
Overview
The Company offers products and services to patients, providers, and payers
in the fertility industry. The IntegraMed Network is comprised of twenty-two
fertility centers in major markets across the United States, a pharmaceutical
subsidiary, a financing subsidiary, the Council of Physicians and Scientists and
a leading fertility portal (www.integramed.com). Sixteen fertility centers have
access to the Company's FertilityDirect program. Six of the fertility centers
are designated as "FertilityPartners" and as such, have access to the Company's
FertilityDirect program in addition to being provided with a full range of
services including: (i) administrative services, including accounting and
finance, human resource functions, and purchasing of supplies and equipment;
(ii) access to capital and servicing and financing patient accounts receivable;
(iii) marketing and sales; (iv) integrated information systems; and (v)
assistance in identifying best clinical practices.
The Company's strategy is to align information, technology and finance for
the benefit of fertility patients, providers, and payers. The primary elements
of the Company's strategy include: (i) expanding the IntegraMed Provider Network
into new major markets; (ii) increasing the number and value of service packages
purchased by fertility centers that are members of the IntegraMed Provider
Network; (iii) entering in to additional FertilityPartners(TM) contracts; (iv)
increasing revenues at FertilityPartners centers; (v) increasing the number of
Shared Risk Refund treatment packages sold to patients of contracted fertility
centers and managing the risk associated with the Shared Risk Refund program;
(vi) increasing sales of pharmaceutical products and services; and (vii)
developing Internet-based access to personalized health information.
In September 1998, the Company obtained from Fleet Bank, N.A. a $13.0
million credit facility to fund acquisitions to provide working capital and to
refinance its existing bank debt. In September 2001, the Company elected not to
renew a portion of this credit facility related to potential acquisitions, as
management believes that internal sources of funds will be sufficient to finance
any future acquisitions. The Company renewed the working capital and term loan
components of this facility, which totaled approximately $9.8 million.
In December 2000, the Company's agreement with the St. Barnabas Medical
Center based fertility center was terminated early. The Company received $1.44
million in liquidated damages pursuant to an early termination agreement. These
funds were recorded as revenue by the Company during 2001 as compensation for
certain performance obligations contained in the termination agreement.
During 2001, the Company negotiated revised fee structures for all five of
its then existing major FertilityPartners contracts. On four of these contracts
in which service fees are comprised of (a) a tiered percentage of revenue, (b) a
fixed percentage of fertility center earnings and (c) reimbursed cost of
services. The Company negotiated lower percentages on the revenue and fertility
center earnings components. These lower fees are to be phased in over an
approximate five-year period. The Company believes that this revised fee
structure will be more than offset by growth in the underlying fertility
centers, and will in turn result in growth in the Company's aggregate revenues.
On the remaining FertilityPartners contract, the Company negotiated higher
service fees, which are assessed at a fixed amount each month independent of the
fertility center's underlying revenue or earnings.
On April 26, 2002, the Company signed a FertilityPartners agreement with
the Margate, Florida based Northwest Center for Infertility and Reproductive
Endocrinology ("NCIRE"). Under the terms of the 15-year agreement, the Company's
service fees are comprised of reimbursed costs of services, a tiered percentage
of revenues, and an additional fixed percentage of NCIRE earnings. The Company
has budgeted up to $2 million to fund the development and equipping of a new
state-of-the-art facility to house the clinical practice and embryology
laboratory for NCIRE and its patients.
On July 30, 2002, the Company completed a private placement of 220,000
shares of its Common Stock at $6.25 per share and warrants to purchase 88,000
shares of Common Stock at an exercise price of $9.00 per share, resulting in
gross proceeds of $1,375,000. The warrants become exercisable commencing January
31, 2003 and will expire on January 31, 2006. Additionally, warrants to purchase
17,600 shares of Common Stock at an exercise price of $6.25 per share were
issued to the underwriter in connection with the private placement. These
warrants become exercisable July 30, 2002 and will expire on July 30, 2007.
-17-
On November 25, 2002, the Company announced the ending of its
FertilityPartners agreement with RSA of New York. The agreement is to end on
November 15, 2003. RSA of New York serves the Long Island market and revenues
for the four quarterly periods ending prior to the announcement were $9.1
million. The program had a contribution of $750,000 for the same period. At the
time of the announcement, the Company evaluated its exclusive business rights
asset associated with RSA of New York and reduced that asset to its realizable
value by adjusting the asset downward by $350,000.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most
"critical accounting policies" in MD&A. The SEC indicated that a "critical
accounting policy" is one which is both important to the portrayal of the
company's financial condition and results and requires management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. We
believe that the following accounting policies fit this definition:
Basis of consolidation --
The consolidated financial statements comprise the accounts of IntegraMed
America, Inc. and its wholly owned subsidiaries. All significant inter-company
transactions have been eliminated. The Company principally derives its revenues
from FertilityPartners contracts and the sale of pharmaceutical products. The
Company does not have a controlling financial interest in any of the medical
practices and as such does not consolidate their results.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions in certain circumstances that affect amounts reported
in the accompanying consolidated financial statements and related footnotes. In
preparing these financial statements, management has made its best estimates and
judgments of certain amounts included in the financial statements, giving due
consideration to materiality. The Company does not believe there is a great
likelihood that materially different amounts would be reported related to the
accounting policies described below. However, application of these accounting
policies involves the exercise of judgment and use of assumptions as to future
uncertainties and, as a result, actual results could differ from these
estimates.
Revenue and cost recognition --
FertilityPartners service fees
As of December 31, 2002, the Company provided comprehensive services to
fertility centers under six FertilityPartners contracts. Under five of the
current agreements, the Company receives as compensation for its services a
three-part fee comprised of: (i) a tiered percentage of net revenues, (ii)
reimbursed costs of services (costs incurred in servicing a fertility center and
any costs paid on behalf of the fertility center) and (iii) a fixed percentage
of earnings after services fees. Under the sixth agreement, as compensation for
its services, the Company receives a fixed fee plus reimbursed costs of
services.
All revenues from FertilityPartners service fees are recorded in the period
services are rendered. Direct costs incurred by the Company in performing its
services and costs incurred on behalf of the medical practices are reported as
costs of services. Revenue and costs are recognized in the same period in which
the related services have been performed.
Pharmaceutical Sales
The Company distributes fertility related pharmaceutical products through
IPSI. The Company has a servicing arrangement with ivpcare, inc., to fulfill the
purchase and distribution of pharmaceuticals. IPSI accepts patient orders,
verifies patient insurance coverage where applicable and ships
prescription-based pharmaceuticals directly to patients of certain affiliated
-18-
fertility centers. Revenue is derived from the sales of these pharmaceuticals
and is recorded, along with the related costs including the fee due ivpcare,
when shipments are made. The cost of pharmaceutical products purchased is
recorded as a cost of sales and is not offset against revenues.
Pharmaceutical sales accounts receivable represent receivables held by IPSI
for medications sold directly to patients. Risk of loss in connection with
uncollectibility of these accounts receivable is borne by the Company.
Shared Risk Refund Program
The Shared Risk Refund program was established at Shady Grove, the leading
fertility center in the metropolitan Washington, DC area and a member of the
IntegraMed Provider Network. Based on the experience at Shady Grove, the Company
developed an actuarial model that allows pricing a treatment package to
consumers. The Shared Risk Refund program consists of a package that includes up
to three cycles of in vitro fertilization for one fixed price with a significant
refund if the patient does not deliver a baby. Under this innovative financial
program, the Company receives payment directly from consumers who qualify for
the program and pays contracted fertility centers a defined reimbursement for
each treatment cycle performed. Expenses related to the program are recorded as
incurred. Potentially refundable revenues are deferred until the pregnancy
outcome is determined. The Company manages the risk associated with the Shared
Risk Refund program through a case management program. This case management
program authorizes patient care and provides information to be used in
recognizing revenue. A reserve for estimated refunds due to pregnancy loss is
maintained and based on historical averages of pregnancy losses applied to the
revenues recorded within the applicable periods. Actual results relating to the
recording of revenue, expenses and refunds to date have not varied materially
from the estimates used in the actuarial model.
Due from Medical Practices --
Due from Medical Practices represents the net amounts owed to us by the
medical practices for our share of the medical providers' earnings, our
FertilityPartners service fees and reimbursement of practice expenses, net of
the Company's advances to the medical practices for the financing of their
patient accounts receivable. Due from Medical Practices excludes amounts owed by
the Company to medical practices for acquired exclusive services rights since
the Financial Accounting Standards Board Interpretation 39 conditions for offset
are not met for these obligations. Such acquired rights are reported as
intangible assets.
Income taxes --
The Company accounts for income taxes utilizing the asset and liability
approach in accordance with Financial Accounting Standards No. 109, "Accounting
For Income Taxes" (FAS 109). The income tax (benefit) provision is determined
under the asset and liability approach. Deferred tax assets and liabilities are
recognized on differences between the book and tax basis of assets and
liabilities using presently enacted tax rates. The income tax (benefit)
provision is the sum of the amount of income tax paid or payable for the year as
determined by applying the provisions of enacted tax laws to the taxable income
for that year and the net change during the year in the Company's deferred tax
assets and liabilities.
Exclusive Service Rights --
Exclusive service rights represent costs incurred by the Company for the
right to service certain fertility centers and are valued at cost less
accumulated amortization, which is provided on a straight-line basis over the
length of the contract, usually ten to twenty-five years. The Company
periodically reviews exclusive business service rights to assess recoverability;
any impairment would be recognized in the consolidated statement of operations
if a permanent impairment was determined to have occurred. Recoverability is
determined based on undiscounted expected earnings from the related business
over the remaining amortization period.
-19-
Results of Operations
The following table shows the percentage of net revenue represented by
various expenses and other income items reflected in the Company's Consolidated
Statement of Operations for the years ended December 31, 2002, 2001 and 2000:
2002 2001 2000
---- ---- ----
Revenues, net (see Note 2):
FertilityPartners service fees ........ 75.8% 79.1% 83.0%
Pharmaceutical Sales .................. 22.3% 20.4% 17.0%
Other ................................. 1.9% 0.5% 0.0%
---- ---- ----
Total revenues ...................... 100% 100% 100%
Costs of services incurred:
FertilityPartners service fees ........ 66.0% 66.1% 69.2%
Pharmaceutical Sales .................. 21.5% 19.6% 16.4%
Other ................................. 1.3% 0.9% 0.0%
---- ---- ----
Total costs of services incurred .... 88.8% 86.6% 85.6%
Contribution:
FertilityPartners sevice fees ......... 9.8% 12.9 13.8%
Pharmaceutical Sales .................. 0.9% 0.8% 0.6%
Other ................................. 0.5% (0.3)% 0.0%
---- ---- ----
Total contribution .................. 11.2% 13.4% 14.4%
General and administrative expenses ...... 9.2% 10.6% 10.3%
Interest income .......................... (0.1)% (0.2)% (0.3)%
Interest expense ......................... 0.2% 0.4% 0.7%
---- ---- ----
Total other expenses ................ 9.3% 10.8% 10.7%
Income from operations before income taxes 1.9% 2.6% 3.7%
Income tax (benefit) provision ........... 0.6% (6.2)% 0.3%
Net income (a) ........................... 1.3% 8.8% 3.4%
(a) Excluding the effect of the adjustment related to reducing the valuation
allowance on deferred tax assets, net income as a percentage of net revenues
would have been 2.3% for the year ended December 31, 2001 (See Note 10 to the
Consolidated Financial Statements).
Calendar Year 2002 Compared to Calendar Year 2001
Revenues for the year ended December 31, 2002 increased by $14.3 million,
or 19.4%, from the year ended 2001. The main factors contributing to this
increase were:
(i) Medical billings increased at the core FertilityPartners centers as a
result of increased patient volume. Same center growth was 17.1% over the
prior year. The volume increase was the result of intensified marketing
initiatives, improved pregnancy rates for infertility treatment, and, in
some cases, the addition of new physicians to the practice. In addition,
the FertilityPartners agreement signed with NCIRE in April 2002,
contributed approximately $2.5 million of revenue for the year ended
December 31, 2002.
(ii) The Company's pharmaceutical division experienced a 30.5% increase in
revenue. This increase was driven by increases in patient volume at the
IntegraMed Provider Network, as well as increased participation and
penetration of the pharmaceutical product line among the IntegraMed
Provider Network.
(iii)Other revenues, comprised primarily of the Company's Shared Risk Refund
program, increased from $397,000 for the year ended December 31, 2001 to
$1,654,000 for 2002. The Company anticipates that continued growth of this
program, driven in part by focused marketing efforts, to become a
significant component of its direct to consumer orientation.
-20-
Contribution of $9.9 million in 2002 remained unchanged from 2001. As a
percentage of revenue, the contribution margin decreased to 11.2% in 2002 from
13.4% in 2001. The following factors contributed to the lack of change in
contribution:
(i) As previously disclosed, the Company's revised fee structure with five of
its FertilityPartners contracts provides for reduced fees and margins on
the incremental earnings of those Centers. During 2002, while continued
growth of the FertilityPartners contracts resulted in greater aggregate
revenues for the Company, several components of this revenue stream were at
the lower contractual incremental margins.
(ii) The Company's pharmaceutical sales, which grew by $4.6 million, or 30.5%,
during the year ended December 31, 2002, have a margin of approximately 4%,
which is substantially below the margin of the Company's other revenue
components. As the Company's pharmaceutical segment continues to expand
faster than the Company's other product lines, the weighted impact will be
an anticipated reduction in the Company's margins.
(iii)During 2002, the Company adopted EITF 01-9, Accounting for Consideration
Given by a Vendor to a Customer or a Reseller of the Vendor's Products,
which required the Company to report its revenue net of the amortization of
its services rights. While revenue for all years presented has been
restated to reflect this change, results for 2002 include a $350,000
write-down of service rights related to the mutual termination of the
Company's New York based FertilityPartners agreement.
(iv) As previously discussed, the Company's agreement with the medical center
based fertility center generated a payment for damages that was recorded in
2001. This approximately $1.4 million payment had minor costs associated
with it and the $1.4 million resulted in gross contribution dollars in
2001. There was no similar payment in 2002.
General and Administrative expenses increased by $0.3 million, to $8.1
million in 2002 from $7.8 million in 2001. This increase was mainly attributable
to increasing costs associated with the Company's efforts to expand the base of
fertility centers participating in its FertilityDirect program and to support
the growth of its Shared Risk Refund product line.
Interest expense declined from $281,000 for the year ended December 31,
2001 to $155,000 for 2002 as a result of scheduled debt reductions as well as
declining interest rates as the Company's debt carries interest at rates that
use LIBOR as a base. Interest income declined from $179,000 for the year ended
December 31, 2001 to $103,000 in 2002 as a result of falling interest rates.
Income Tax provisions (benefits) were approximately $0.6 million and ($4.6)
million for the years ended December 31, 2002 and December 31, 2001,
respectively. The 2001 benefit was a result of reducing the valuation allowance
for deferred tax assets due to sustained profitability over an extended period
and the increased likelihood of realization of the deferred tax assets. There
have been no current Federal income tax payments due to the utilization of the
net operating loss carry forwards. The Company's effective tax rate for 2002 was
approximately 33% and reflects credits for the reversal of state taxes provided
in prior periods. The 2001 effective tax rate was approximately 12%, excluding
the effects of the change in the valuation allowance, and reflects credits for
the utilization of net operating loss carry forwards not previously provided.
Calendar Year 2001 Compared to Calendar Year 2000
Revenues for 2001 increased by $16.9 million, or 29.6%, between the years
ended 2001 and 2000. The main factors contributing to this increase were:
(i) Revenues derived from the Company's FertilityPartners agreements increased
$11.1 million, or 23.4%, as a result of increased market growth at all
network facilities, including in-market mergers at the Company's sites in
the Bay Area and Shady Grove. Same market growth was achieved through new
service offerings, the expansion of ancillary services and increases in
patient volume.
(ii) Revenues at the Company's pharmaceutical division increased by $5.4
million, or 56.0%. This increase is attributable to expanded penetration of
this product line within the Company's FertilityPartners centers.
-21-
Contribution increased by $1.7 million, or 20.6%, for the year ended
December 31, 2001 from the year ended December 31, 2000. As a percentage of
revenue, the contribution margin decreased to 13.4% in 2001 from 14.4% in 2000.
The following factors contributed to this change in contribution:
(i) Contribution at the Company's FertilityPartners centers increased by $1.7
million, or 21.1%, with margins remaining relatively constant at 16.3% in
2001 versus 16.6% in 2000. The growth in contribution was in line with
revenue growth and site expansion activities discussed earlier.
(ii) Pharmaceutical contribution increased 86.4% from $0.3 million in 2000 to
$0.6 million in 2001. This increase is primarily due to increased shipments
to patients at the various fertility centers. These sales have a lower
margin than the principal line of the Company's business and impact the
contribution margin percentage negatively.
(iii)Contribution in 2001 included ($0.2) million of costs associated with the
Company's start up investment in its Shared Risk Refund product line.
General and administrative expenses increased 33.1%, or $1.9 million, in
2001 from 2000. This increase was primarily due to increases in staffing,
compensation, legal expenses, and expenses related to periodic infrastructure
upgrades in management information systems. As a percentage of revenues, general
and administrative expenses increased to 10.6% in 2001, up from 10.3% in 2000 as
a result of the above stated reasons.
Interest expense declined from $421,000 for the year ended December 31,
2000 to $281,000 for 2001 as a result of scheduled debt reductions as well as
declining interest rates as the Company's debt carries interest at rates that
use LIBOR as a base. Interest income declined from $211,000 for the year ended
December 31, 2000 to $179,000 in 2001 as a result of falling interest rates
offset by higher amounts of funds available for overnight investment.
Income taxes reflected a reduction of the Company`s deferred tax asset
valuation allowance in 2001, as the Company has sustained profitability over an
extended period and due to the likelihood of the realization of these tax
assets. Primarily as a result of this reduction in the valuation allowance, a
deferred federal tax benefit of approximately $4.8 million was recorded, which
offset the state tax provision of $0.2 million. During the year ended December
31, 2000, no federal deferred tax benefit was recognized and the tax provision
of $188,000 was comprised entirely of state income taxes.
Liquidity and Capital Resources
The Company's working capital position was impacted by its investment of
$3.6 million in additional service rights as well as its $1.7 million repurchase
and retirement of all of its outstanding Preferred Stock. These two outflows
were partially offset by the $1,375,000 raised in the July 2002 private
placement mentioned above. The Company's working capital decreased during 2002
to $2.9 million as of December 31, 2002, from $4.2 million as of December 31,
2001. Working capital and specifically, cash and cash equivalents remain at
adequate levels to fund the Company's operations.
In September 2001, the Company amended its existing credit facility with
Fleet Bank, N.A. The amended facility is comprised of a $7.0 million three-year
working capital revolver, and a continuance of the Company's existing $4.0
million 5.5 year term loan, of which approximately $2.8 million remained
outstanding with a remaining term of approximately 2.5 years as of the date of
the amendment. Availability of borrowings under the working capital revolver are
based on eligible accounts receivable, as defined therein. In addition, the
credit agreement contains restricted covenants. Due to the continued expansion
of the FertilityPartners centers, the Company exceeded the capital spending
threshold as defined in one restrictive covenant during 2002, and obtained the
required waiver effective December 31, 2002. As of December 31, 2002, under the
working capital revolver, there were no amounts outstanding and the full amount
of $7.0 million was available. The credit facility is collateralized by all of
the Company's assets. The Company is also continuously reviewing its credit
agreements and may renew, revise or enter into new agreements from time to time
as deemed necessary.
As of December 31, 2002, the Company did not have any significant
commitments for the acquisition of fixed assets, however it has budgeted
upcoming capital expenditures of approximately $9.3 million. These expenditures
are primarily related to expansion of the existing FertilityPartners centers.
The Company believes that the cash flows from its existing operations, plus its
existing credit facility will be sufficient to provide for its future liquidity
needs.
-22-
Significant Contractual Obligations and Other Commercial Commitments:
The following summarizes the Company's contractual obligations and other
commercial commitments at December 31, 2002, and the effect such obligations are
expected to have on its liquidity and cash flows in future periods.
Payments Due by Period
Total Less than 1 year 1 - 3 years 4 - 5 years After 5 years
----------- ---------------- ----------- ----------- -------------
Notes Payable................. $ 1,372,000 $1,061,000 $ 311,000 $ -- $ --
Capital lease obligations..... 38,000 38,000 -- -- --
Operating leases.............. 21,099,000 2,813,000 5,730,000 5,323,000 7,233,000
Total contractual cash
obligations............... $22,509,000 $3,912,000 $6,041,000 $5,323,000 $7,233,000
Amount of Commitment Expiration Per Period
Total Less than 1 year 1 - 3 years 4 - 5 years After 5 years
----------- ---------------- ----------- ----------- -------------
Lines of credit............... $ 7,000,000 $ -- $7,000,000 $ -- $ --
Total commercial
commitments............... $ 7,000,000 $ -- $7,000,000 $ -- $ --
The Company also has commitments to provide accounts receivable financing
under its FertilityPartners agreements. The Company's financing of this
receivable occurs on the 15th of each month. The medical practice's repayment
priority consists of the following:
(i) Reimbursement of expenses that the Company has incurred on their
behalf;
(ii) Payment of the fixed or, if applicable, the variable portion of the
Service Fee which relates to the FertilityPartners revenues; and
(iii) Payment of the variable portion of the Service Fee.
The Company is responsible for the collection of receivables, which are
financed with full recourse. The Company has continuously funded these needs
from cash flow from operations and the collection of the prior month's
receivables. If delays in repayment are incurred, which have not as yet been
encountered, the Company could draw on its existing working capital line of
credit. The Company makes payments on behalf of the FertilityPartners for which
it is reimbursed in the short-term. Other than these payments, as a general
course, the Company does not make other advances to the medical practice. The
Company has no other funding commitments to the FertilityPartners.
New Accounting Standards
Financial Accounting Standards 145 --
Financial Accounting Standard 145 (FAS 145) rescinds the Financial
Accounting Standards Board Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that statement, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. FAS 145
also rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor
Carriers. FAS 145 amends FASB Statement No. 13, Accounting for Leases, to
eliminate any inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. FAS 145
also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under
changed conditions. The Company does not believe the adoption of FAS 145 will
have an impact on its financial statements.
-23-
Financial Accounting Standard 146 --
Financial Accounting Standard 146 (FAS 146) addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The Company
does not believe the adoption of FAS 146 will have an impact on its financial
statements.
Financial Accounting Standard 147 --
FASB Statement No. 72, Accounting for Certain Acquisitions of Banking or
Thrift Institutions (FAS 72), and FASB Interpretation No. 9, Applying APB
Opinions No. 16 and 17 When a Savings and Loan Association or a Similar
Institution Is Acquired in a Business Combination Accounted for by the Purchase
Method (Interpretation 9), provided interpretive guidance on the application of
the purchase method to acquisitions of financial institutions. Except for
transactions between two or more mutual enterprises, Financial Accounting
Standard 147 (FAS 147) removes acquisitions of financial institutions from the
scope of both FAS 72 and Interpretation 9 and requires that those transactions
be accounted for in accordance with FAS 141, Business Combinations, and FAS 142,
Goodwill and Other Intangible Assets. Thus, the requirement in paragraph 5 of
FAS 72 to recognize (and subsequently amortize) any excess of the fair value of
liabilities assumed over the fair value of tangible and identifiable intangible
assets acquired as an unidentifiable intangible asset no longer applies to
acquisitions within the scope of this Statement. In addition, FAS 147 amends FAS
144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include
in its scope long-term customer-relationship intangible assets of financial
institutions such as depositor- and borrower-relationship intangible assets and
credit cardholder intangible assets. Consequently, those intangible assets are
subject to the same undiscounted cash flow recoverability test and impairment
loss recognition and measurement provisions that FAS 144 requires for other
long-lived assets that are held and used. The Company does not believe FAS 147
will have an impact on its financial statements.
Financial Accounting Standard 148 --
On December 31, 2002, the Financial Accounting Standards Board issued
Financial Accounting Standard 148, Accounting for Stock-Based Compensation --
Transition and Disclosure -- an amendment of FAS 123, Accounting for Stock Based
Compensation (FAS 148). As the title of FAS 148 implies, it is fairly limited in
its scope, however it will have implications for all entities that issue
stock-based compensation to their employees.
FAS 148 provides additional transition guidance for those entities that
elect to voluntarily adopt the accounting provisions of FAS 123, Accounting for
Stock-Based Compensation. FAS 148 does not change the provisions of FAS 123 that
permit entities to continue to apply the intrinsic value method of APB 25,
Accounting for Stock Issued to Employees (APB 25).
FAS 148 is intended to encourage the adoption of the accounting provisions
of FAS 123. Under the provisions of FAS 148, companies that choose to adopt the
accounting provisions of FAS 123 will be permitted to select from three
transition methods:
a. Prospective method. Apply the recognition provisions to all employee
awards granted, modified, or settled after the beginning of the fiscal
year in which the recognition provisions are first applied. The
prospective method, however, may no longer be applied for adoptions of
the accounting provisions of FAS 123 for periods beginning after December
15, 2003.
b. Modified prospective method. Recognize stock-based employee compensation
cost from the beginning of the fiscal year in which the recognition
provisions are first applied as if the fair value based accounting method
had been used to account for all employee awards granted, modified, or
settled in fiscal years beginning after December 15, 1994.
c. Retroactive restatement method. Restate all periods presented to reflect
stock-based employee compensation cost under the fair value based
accounting method for all employee awards granted, modified, or settled
in fiscal years beginning after December 15, 1994.
-24-
The following information about stock-based employee compensation costs, is
to be disclosed prominently and in tabular form for all periods presented
pursuant to the provisions of FAS 148, if awards of stock-based employee
compensation were outstanding and accounted for under the intrinsic value method
of Opinion 25 for any period for which an income statement is presented:
(1) Net income and basic and diluted earnings per share as reported
(2) The stock-based employee compensation cost, net of related tax effects,
included in the determination of net income as reported
(3) The stock-based employee compensation cost, net of related tax effects,
that would have been included in the determination of net income if the
fair value based method had been applied to all awards*
(4) Pro forma net income as if the fair value based method had been applied
to all awards
(5) Pro forma basic and diluted earnings per share as if the fair value based
method had been applied to all awards.
The Company is currently evaluating the adoption of FAS 148 and is in the
process of determining the impact of this statement on its financial statements.
The Company does not believe the application of FAS 148 will materially affect
its results of operations in 2003.
Emerging Issues Taskforce statement 01-9 --
During 2002, the Company adopted Emerging Issues Task Force statement 01-9
(EITF 01-9), Accounting for Consideration Given by a Vendor to a Customer or a
Reseller of the Vendor's Products. Adoption of this EITF 01-9 required the
Company to report revenues from its FertilityPartners agreements net of the
amortization of the costs of the related Service Rights. As a result of adopting
EITF 01-9 in 2002, the Company offset the amortization expense against revenues
versus the prior year presentation of reporting amortization expense below the
contribution line item. Amortization expense was $1,435,000, $945,000 and
$865,000 for the years ended December 31, 2002, 2001 and 2000, respectively. All
years presented have been reclassified to conform to the presentation used in
2002.
Financial Accounting Standards Board Interpretation 45 --
In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others". FIN 45, which is effective December 15, 2002 requires that upon
issuance of a guarantee, the guarantor must recognize and disclose a liability
for the fair value of the obligation it assumes under that guarantee. The
Company does not believe that the adoption of FIN 45 will have a significant
impact on its financial statements as it has no guarantees.
Forward Looking Statements
This Form 10-K 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 FertilityPartners agreements, including the Company's ability to
raise additional debt and/or equity capital to finance future growth, the loss
of significant FertilityPartners agreement(s), the profitability or lack thereof
at fertility centers serviced by the Company, increases in overhead due to
expansion, the exclusion of fertility and ART services from insurance coverage,
government laws and regulation regarding health care, changes in managed care
contracting, the timely development of and acceptance of new fertility, and ART
and/or genetic technologies and techniques.
-25-
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
ITEM 8. Financial Statements and Supplementary Data
See Index to Financial Statements on page F-1.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
Information with respect to the executive officers and directors of the
Company is incorporated by reference from the Company's Proxy Statement relating
to the Annual Meeting of Shareholders to be held on May 21, 2003.
ITEM 11. Executive Compensation
This information is incorporated by reference from the Company's Proxy
Statement relating to the Annual Meeting of Shareholders to be held on May 21,
2003.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management, and
Related Stockholder Matters
This information is incorporated by reference to the Company's Proxy
Statement relating to the Annual Meeting of Shareholders to be held on May 21,
2003.
ITEM 13. Certain Relationships and Related Transactions
This information is incorporated by reference to the Company's Proxy
Statement relating to the Annual Meeting of Shareholders to be held on May 21,
2003.
ITEM 14. Controls and Procedures
Evaluation of Disclosure Controls and Procedures - Under the supervision
and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, we evaluated the effectiveness of the
design and operation of our disclosure controls and procedures as of a date (the
"Evaluation Date") within 90 days prior to the filing date of this report. Based
upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that as of the Evaluation Date, our disclosure controls and procedures
are effective in timely alerting them to the material information relating to us
(or our consolidated subsidiaries) required to be included in our periodic SEC
filings.
Changes in Internal Controls - There were no significant changes made in
our internal controls during the period covered by this report or, to our
knowledge, in other factors that could significantly affect these controls
subsequent to the date of their evaluation.
ITEM 15. Principal Accounting Fees and Services
This information is incorporated by reference to the Company's Proxy
Statement relating to the Annual Meeting of Shareholders to be held on May 21,
2003.
-26-
PART IV
ITEM 16. Exhibits, Financial Statements, Schedule, and Reports on Form 8-K
(a) (1) Financial Statements.
(3) The exhibits that are listed on the Index to Exhibits
herein which are filed herewith as a management agreement
or compensatory plan or arrangement are: 10.118(b)
(b) Reports on Form 8-K.
For the quarter ended December 31, 2002, Registrant filed
a Form 8-K dated October 28, 2002, October 31, 2002,
November 21, 2002, November 27, 2002, December 13, 2002
and December 31, 2002 reporting Item 9, Regulation FD
Disclosure and a Form 8-K dated November 26, 2002,
reporting an Item 5 Disclosure.
(c) Exhibits. The list of exhibits required to be filed with this
Annual Report on Form 10-K is set forth in the Index to
Exhibits herein.
-27-
FINANCIAL STATEMENTS
Item 8 and 16 (a)(1)
Contents
Page
INTEGRAMED AMERICA, INC.
Report of Independent Accountants................................... F-2
Consolidated Balance Sheets as of December 31, 2002 and 2001........ F-3
Consolidated Statements of Operations for the years ended
December 31, 2002, 2001 and 2000................................. F-4
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 2002, 2001 and 2000..................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000................................. F-6
Notes to Consolidated Financial Statements.......................... F-7
F-1
Report of Independent Accountants
To the Board of Directors and Shareholders of
IntegraMed America, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of IntegraMed
America, Inc. and its subsidiaries at December 31, 2002 and 2001, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2003
F-2
INTEGRAMED AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(all amounts in thousands, except share amounts)
December 31,
--------------
2002 2001
----- -----
ASSETS
Current assets:
Cash and cash equivalents.................................................................. $ 8,693 $ 8,505
Due from Medical Practices, net (see Note 2)............................................... 5,297 4,949
Pharmaceutical sales accounts receivable, net.............................................. 1,637 1,511
Prepaids and other current assets.......................................................... 2,888 1,961
------- -------
Total current assets................................................................... 18,515 16,926
Fixed assets, net (see Note 6)................................................................ 5,141 5,263
Exclusive Service Rights, net (see Note 5).................................................... 19,529 17,378
Deferred taxes (see Note 9)................................................................... 3,980 4,791
Other assets.................................................................................. 279 263
------- -------
Total assets........................................................................... $47,444 $44,621
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................................... $ 823 $ 1,436
Accrued liabilities (see Note 7)........................................................... 6,446 5,228
Current portion of long-term notes payable and other obligations (see Note 8).............. 1,099 1,403
Patient deposits (see Note 2).............................................................. 7,208 4,651
------- -------
Total current liabilities.............................................................. 15,576 12,718
------- -------
Commitments and Contingencies (see Note 14)
Long-term notes payable and other obligations (see Note 8).................................... 311 1,288
------- -------
Shareholders' equity:
Preferred Stock, $1.00 par value 3,165,644 shares authorized in 2002 and 2001
2,500,000 undesignated; 665,644 shares designated as Series A Cumulative
Convertible of which 0 and 165,644 were issued and outstanding in 2002 and 2001.......... -- 166
Common Stock, $.01 par value - 50,000,000 shares authorized
in 2002 and 2001; 3,353,884 and 3,057,877 shares issued in 2002 and 2001, respectively... 34 31
Capital in excess of par................................................................... 47,183 47,218
Accumulated deficit........................................................................ (15,660) (16,800)
------- -------
Total shareholders' equity............................................................. 31,557 30,615
------- -------
Total liabilities and shareholders' equity............................................. $47,444 $44,621
======= =======
See accompanying notes to the consolidated financial statements.
F-3
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in thousands, except per share amounts)
For the years ended December 31,
--------------------------------
2002 2001 2000
-------- --------- --------
Revenues, net (see Note 2)
FertilityPartners service fees (including termination payment
of $1,440 in 2001) ........................................... $ 66,837 $ 58,394 $ 47,317
Pharmaceutical sales ............................................ 19,709 15,107 9,682
Other revenues .................................................. 1,654 397 --
-------- -------- --------
Total revenues ............................................... 88,200 73,898 56,999
-------- -------- --------
Costs of services and sales:
FertilityPartners center costs .................................. 58,193 48,867 39,447
Pharmaceutical costs ............................................ 18,936 14,503 9,358
Other costs ..................................................... 1,220 643 --
-------- -------- --------
Total costs of services and sales ............................ 78,349 64,013 48,805
-------- -------- --------
Contribution
FertilityPartners center contribution ........................... 8,644 9,527 7,870
Pharmaceutical contribution ..................................... 773 604 324
Other contribution .............................................. 434 (246) --
-------- -------- --------
Total contribution ........................................... 9,851 9,885 8,194
-------- -------- --------
General and administrative expenses ................................ 8,097 7,827 5,880
Interest income .................................................... (103) (179) (211)
Interest expense ................................................... 155 281 421
-------- -------- --------
Total other expenses ............................................ 8,149 7,929 6,090
-------- -------- --------
Income before income taxes ......................................... 1,702 1,956 2,104
Income tax (benefit) provision (see Note 9) ........................ 562 (4,557) 187
-------- -------- --------
Net income ......................................................... 1,140 6,513 1,917
Less: Dividends paid and/or accrued on Preferred Stock ............. 69 133 133
-------- -------- --------
Net income applicable to Common Stock .............................. $ 1,071 $ 6,380 $ 1,784
======== ======== ========
Basic and diluted net earnings per share of Common Stock (see Note 1
Basic earnings per share ...................................... $ 0.33 $ 2.07 $ 0.43
Diluted earnings per share .................................... $ 0.31 $ 2.01 $ 0.43
Weighted average shares - basic .................................... 3,195 3,081 4,110
======== ======== ========
Weighted average shares - diluted .................................. 3,468 3,175 4,172
======== ======== ========
See accompanying notes to the consolidated financial statements.
F-4
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(all amounts in thousands, except share amounts)
Cumulative
Convertible
Preferred Stock Common Stock Capital in Accumulated Treasury Stock
Amount Amount Excess of Par Deficit Shares Amount
--------------- ------------ ------------- ----------- ------ ------
BALANCE AT DECEMBER 31, 1999..... $166 $54 $54,140 ($25,230) 746,863 $(2,491)
Issuance of Restricted Stock Grants. -- -- 142 -- -- --
Dividends paid to preferred
shareholders................. -- -- (133) -- -- --
Purchase of Treasury Stock....... -- -- -- -- 853,150 (2,578)
Net income....................... -- -- -- 1,917 -- --
---- --- ------- -------- --------- -------
BALANCE AT DECEMBER 31, 2000..... $166 $54 $54,149 $(23,313) 1,600,013 $(5,069)
Issuance of Restricted Stock Grants. -- -- 164 -- -- --
Options Exercised................ -- 1 109 -- -- --
Warrants Exercised............... -- 1 2
Dividends paid to preferred
shareholders................. -- -- (133) -- -- --
Purchase of Treasury Stock....... -- -- -- -- 880,072 (2,029)
Retirement of Treasury Stock..... -- (25) (7,073) -- (2,480,085) 7,098
Net income....................... -- -- -- 6,513 -- --
---- --- ------- -------- --------- -------
BALANCE AT DECEMBER 31, 2001..... $166 $31 $47,218 $(16,800) -- $ --
Issuance of Common Stock......... -- -- 45 -- -- --
Issuance of Restricted Stock Grants -- -- 248 -- -- --
Options Exercised................ 1 100 -- -- --
Secondary Offering............... 2 1,136
Dividends paid to preferred
shareholders................. -- -- (69) -- -- --
Purchase of Preferred Stock...... (166) -- (1,495) -- -- --
Net income....................... -- -- -- 1,140 -- --
---- --- ------- -------- --------- -------
BALANCE AT DECEMBER 31, 2002..... $ -- $34 $47,183 $(15,660) -- $ --
==== === ======= ======== ========= =======
See accompanying notes to the consolidated financial statements.
F-5
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(all amounts in thousands)
For the years ended December 31,
--------------------------------
2002 2001 2000
---------- ------- --------
Cash flows from operating activities:
Net income ........................................... $ 1,140 $ 6,513 $ 1,917
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization ...................... 3,590 3,023 2,562
Deferred income tax provision (benefit) ............ 511 (4,791) --
Changes in assets and liabilities
Decrease (increase) in assets:
Due from Medical Practices ......................... (351) 2,634 804
Pharmaceutical sales accounts receivable ........... (126) (316) --
Prepaids and other current assets .................. (927) (608) (121)
Other assets ....................................... 284 239 158
Increase (decrease) in liabilities:
Accounts payable ................................... (613) (264) 620
Accrued liabilities ................................ 1,144 (208) 2,384
Patient deposits ................................... 2,557 2,121 (440)
------- ------- -------
Net cash provided by operating activities ................ 7,209 8,343 7,884
------- ------- -------
Cash flows from investing activities:
Payment for exclusive FertilityPartners service rights (3,586) (295) (476)
Purchase of fixed assets and leasehold improvements .. (2,030) (1,665) (1,352)
Proceeds from sale of fixed assets and leasehold
improvements ....................................... -- -- 10
------- ------- -------
Net cash used in investing activities .................... (5,616) (1,960) (1,818)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of Common Stock ............... 1,532 113 142
Principal repayments on debt ......................... (1,062) (1,000) (1,712)
Principal repayments under capital lease obligations . (145) (135) (129)
Repurchase of Common Stock ........................... -- (2,029) (2,578)
Repurchase of Preferred Stock ........................ (1,661) -- --
Dividends paid on Convertible Preferred Stock ........ (69) (133) (133)
------- ------- -------
Net cash used in financing activities .................... (1,405) (3,184) (4,410)
------- ------- -------
Net increase (decrease) in cash .......................... 188 3,199 1,656
Cash at beginning of period .............................. 8,505 5,306 3,650
------- ------- -------
Cash at end of period .................................... $ 8,693 $ 8,505 $ 5,306
======= ======= =======
See accompanying notes to the consolidated financial statements.
F-6
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY:
IntegraMed America, Inc. (the "Company") offers products and services to
patients, providers and payers in the fertility industry. The IntegraMed Network
is comprised of twenty-two fertility centers in major markets across the United
States, a pharmaceutical subsidiary, a financing subsidiary, the Council of
Physicians and Scientists, and a leading fertility portal (www.integramed.com).
Sixteen fertility centers have access to the Company's FertilityDirect program
that provides contracted fertility centers with exclusive access to the
Company's products and services that support patient recruitment. Six of the
fertility centers are designated as "FertilityPartners" and as such, have access
to the Company's FertilityDirect program in addition to being provided with a
full range of services including: (i) administrative services, including
accounting and finance, human resource functions, and purchasing of supplies and
equipment; (ii) access to capital and servicing and financing of patient
accounts receivable; (iii) marketing and sales; (iv) integrated information
systems; and (v) assistance in identifying best clinical practices.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of consolidation --
The consolidated financial statements comprise the accounts of IntegraMed
America, Inc. and its wholly owned subsidiaries. All significant inter-company
transactions have been eliminated. The Company principally derives its revenues
from Services contracts and the sale of pharmaceutical products. The Company
does not have a controlling financial interest in any of the medical practices,
including the FertilityPartners, and as such does not consolidate their results.
Use of estimates --
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions in certain circumstances that
affect amounts reported in the accompanying consolidated financial statements
and related footnotes. In preparing these financial statements, management has
made its best estimates and judgments of certain amounts included in the
financial statements, giving due consideration to materiality. The Company does
not believe there is a great likelihood that materially different amounts would
be reported related to the accounting policies described below. However,
application of these accounting policies involves the exercise of judgment and
use of assumptions as to future uncertainties and, as a result, actual results
could differ from these estimates.
Revenue and cost recognition --
FertilityPartners Service fees
As of December 31, 2002, the Company provided comprehensive services to the
fertility centers under six FertilityPartners contracts. During the year ended
December 31, 2000, the Company had also provided services under two agreements
that were terminated effective February 1 and December 31, 2000, respectively.
Under five of the current agreements, the Company receives as compensation
for its services a three-part fee comprised of: (i) a tiered percentage of net
revenues, (ii) reimbursed costs of services (costs incurred in servicing a
FertilityPartner and any costs paid on behalf of the FertilityPartner) and (iii)
a fixed percentage of earnings after services fees.
Under the sixth current agreement, as compensation for its services, the
Company receives a fixed fee plus reimbursed costs of services.
F-7
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
All revenues from FertilityPartners service fees are recorded in the period
services are rendered. Direct costs incurred by the Company in performing
services and costs incurred on behalf of the FertilityPartners are reported as
costs of services. Revenue and costs are recognized in the same period in which
the related services have been performed. The physicians receive as compensation
all remaining earnings of the fertility practice after payment of the Company's
fees.
The Company agreed to terminate its contract with its hospital based
FertilityPartner effective December 31, 2000. As compensation for certain
performance obligations in the termination agreement, the Company received a
total of $1,440,000 from this FertilityPartner. This balance was recognized as
FertilityPartners revenue during the fiscal year ended December 31, 2001.
Pharmaceutical Sales
The Company distributes fertility related pharmaceutical products through
IntegraMed Pharmaceutical Services, Inc. (IPSI), a wholly owned subsidiary. The
Company has an arrangement with ivpcare, inc. to fulfill the purchase and
distribution of pharmaceuticals. The Company and ivpcare have no common
ownership or management. IPSI accepts patient orders, verifies patient insurance
coverage where applicable and ships prescription-based pharmaceuticals directly
to patients of the IntegraMed Provider Network. Revenue is derived from the
sales of these pharmaceuticals and is recorded, along with the related costs
including the fee due ivpcare, when shipments are made.
Shared Risk Refund Program
The Shared Risk Refund program was established at the Shady Grove Fertility
Reproductive Science Center ("Shady Grove"), the leading fertility center in the
metropolitan Washington, DC area, a member of the IntegraMed Provider Network
and a FertilityPartner. Based on the experience at Shady Grove, the Company
developed an actuarial model that allows pricing a treatment package to
consumers. The Shared Risk Refund program consists of a package that includes up
to three cycles of in vitro fertilization for one fixed price with a significant
refund if the patient does not deliver a baby. Under this innovative financial
program, the Company receives payment directly from consumers who qualify for
the program and pays contracted fertility centers a defined reimbursement for
each treatment cycle performed. Expenses related to the program are recorded as
incurred. Revenues related to refundable amounts are deferred until the
pregnancy outcome is determined. The Company manages the risk associated with
the Shared Risk Refund program through a case management program. This case
management program authorizes patient care and provides information to be used
in recognizing revenue. A reserve for estimated refunds due to pregnancy loss is
maintained and based on historical averages of pregnancy losses applied to the
revenues recorded within the applicable periods. Actual results relating to the
recording of revenue, expenses and refunds to date have not varied materially
from the estimates used in the actuarial model.
Patient Financing
IntegraMed Financial Services, Inc. ("IFS"), a wholly owned subsidiary of
the Company, arranges financing to qualified patients of the IntegraMed Provider
Network at rates significantly lower than credit cards and other finance
companies. IFS is administered by AmeriFee LLC, a third party vendor, which
provides administrative management services to IFS. The loans are made to
qualified patients by a third party bank. The patient makes payment directly to
the medical practice. The bank pays a placement fee to the Company. Such revenue
is recorded when the Company receives the cash at the time of closing the
transaction.
Cash and cash equivalents --
Cash and cash equivalents primarily include all highly liquid debt
instruments with original maturities of three months or less, recorded at cost,
which approximates market.
Due from Medical Practices --
Due from Medical Practices represents the net amounts owed to the Company
by the fertility centers for the Company's share of the medical providers'
earnings, service fees and reimbursement of practice expenses, net of the
Company's advances to the fertility centers for the financing of patient
accounts receivable. Due from Medical Practices excludes amounts owed by the
F-8
Company to medical practices for acquired exclusive services rights since the
Financial Accounting Standards Board Interpretation 39 conditions for offset are
not met for these obligations. Such acquired rights are reported as intangible
assets.
Pharmaceutical sales accounts receivable --
Pharmaceutical sales accounts receivable represent receivables held by IPSI
for medications sold directly to patients. Risk of loss in connection with
uncollectibility of these accounts receivable is borne by the Company.
Fixed assets --
Fixed assets are valued at cost less accumulated depreciation and
amortization. Depreciation is computed on a straight-line basis over the
estimated useful lives of the related assets, generally three to five years.
Leasehold improvements are amortized over the shorter of the asset life or the
remaining term of the lease. Assets under capital leases are amortized over the
term of the lease agreements. The Company periodically reviews the fair value of
fixed assets for impairment, the results of which have had no material effect on
the Company's financial position or results of operations.
When assets are retired or otherwise disposed of, the costs and related
accumulated depreciation are removed from the accounts. The difference between
the net book value of the assets and proceeds from disposition is recognized as
gain or loss. Routine maintenance and repairs are charged to expenses as
incurred, while costs of betterments and renewals are capitalized.
Exclusive Service Rights --
Exclusive service rights represent costs incurred by the Company for the
right to service certain fertility centers and are valued at cost less
accumulated amortization, which is provided on a straight-line basis over the
length of the contract, usually ten to twenty-five years. The Company
periodically reviews exclusive service rights to assess recoverability; any
impairments would be recognized in the consolidated statement of operations if a
permanent impairment was determined to have occurred. Recoverability is
determined based on undiscounted expected earnings from the related business
over the remaining amortization period.
Patient Deposits --
Patient deposits represent advanced payment for services made by patients
of the fertility centers. Such amounts are held by the Company until the time
service is rendered, at which point the fertility center records the revenue.
Stock based employee compensation --
The Company adopted Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" (FAS 123), on January 1, 1996. Under FAS 123,
companies can, but are not required to, elect to recognize compensation expense
for all stock based awards, using a fair value method. The Company has adopted
the disclosure only provisions, as permitted by FAS 123.
Concentrations of credit risk --
Financial instruments, which potentially expose the Company to
concentrations of credit risk consist primarily of trade accounts receivable.
Income taxes --
The Company accounts for income taxes utilizing the asset and liability
approach in accordance with Financial Accounting Standards No. 109, "Accounting
For Income Taxes" (FAS 109). The income tax (benefit) provision is determined
under the asset and liability approach. Deferred tax assets and liabilities are
F-9
recognized on differences between the book and tax basis of assets and
liabilities using presently enacted tax rates. The income tax (benefit)
provision is the sum of the amount of income tax paid or payable for the year as
determined by applying the provisions of enacted tax laws to the taxable income
for that year and the net change during the year in the Company's deferred tax
assets and liabilities. (See Note10).
Earnings per share --
The Company determines earnings per share in accordance with Financial
Accounting Standards No. 128, "Earnings Per Share" (FAS 128), which the Company
adopted in December 1997.
Fair value of financial instruments--
At December 31, 2002 and 2001, the carrying values of all financial
instruments, both short and long-term, approximated their fair value.
New accounting pronouncements --
Financial Accounting Standards 145 --
Financial Accounting Standard 145 (FAS 145) rescinds the Financial
Accounting Standards Board Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that statement, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. FAS 145
also rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor
Carriers. FAS 145 amends FASB Statement No. 13, Accounting for Leases, to
eliminate any inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. FAS 145
also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under
changed conditions. The Company does not believe the adoption of FAS 145 will
have an impact on its financial statements.
Financial Accounting Standard 146 --
Financial Accounting Standard 146 (FAS 146) addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The Company
does not believe the adoption of FAS 146 will have an impact on its financial
statements.
Financial Accounting Standard 147 --
FASB Statement No. 72, Accounting for Certain Acquisitions of Banking or
Thrift Institutions (FAS 72), and FASB Interpretation No. 9, Applying APB
Opinions No. 16 and 17 When a Savings and Loan Association or a Similar
Institution Is Acquired in a Business Combination Accounted for by the Purchase
Method (Interpretation 9), provided interpretive guidance on the application of
the purchase method to acquisitions of financial institutions. Except for
transactions between two or more mutual enterprises, this Financial Accounting
Standard 147 (FAS 147) removes acquisitions of financial institutions from the
scope of both FAS 72 and Interpretation 9 and requires that those transactions
be accounted for in accordance with FAS 141, Business Combinations, and FAS 142,
Goodwill and Other Intangible Assets. Thus, the requirement in paragraph 5 of
FAS 72 to recognize (and subsequently amortize) any excess of the fair value of
liabilities assumed over the fair value of tangible and identifiable intangible
assets acquired as an unidentifiable intangible asset no longer applies to
acquisitions within the scope of this Statement. In addition, FAS 147 amends FAS
144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include
in its scope long-term customer-relationship intangible assets of financial
institutions such as depositor- and borrower-relationship intangible assets and
credit cardholder intangible assets. Consequently, those intangible assets are
subject to the same undiscounted cash flow recoverability test and impairment
loss recognition and measurement provisions that FAS 144 requires for other
long-lived assets that are held and used. The Company does not believe FAS 147
will have an impact on its financial statements.
F-10
Financial Accounting Standard 148 --
On December 31, 2002, the Financial Accounting Standards Board issued
Financial Accounting Standard 148, Accounting for Stock-Based Compensation --
Transition and Disclosure -- an amendment of FAS 123, Accounting for Stock Based
Compensation (FAS 148). As the title of the FAS 148 implies, it is fairly
limited in its scope, however it will have implications for all entities that
issue stock-based compensation to their employees.
FAS 148 provides additional transition guidance for those entities that
elect to voluntarily adopt the accounting provisions of FAS 123. FAS 148 does
not change the provisions of FAS 123 that permit entities to continue to apply
the intrinsic value method of APB 25, Accounting for Stock Issued to Employees
(APB 25).
FAS 148 is intended to encourage the adoption of the accounting provisions
of FAS 123. Under the provisions of FAS 148, companies that choose to adopt the
accounting provisions of FAS 123 will be permitted to select from three
transition methods:
a. Prospective method. Apply the recognition provisions to all employee
awards granted, modified, or settled after the beginning of the fiscal year in
which the recognition provisions are first applied. The prospective method,
however, may no longer be applied for adoptions of the accounting provisions of
FAS 123 for periods beginning after December 15, 2003.
b. Modified prospective method. Recognize stock-based employee
compensation cost from the beginning of the fiscal year in which the recognition
provisions are first applied as if the fair value based accounting method had
been used to account for all employee awards granted, modified, or settled in
fiscal years beginning after December 15, 1994.
c. Retroactive restatement method. Restate all periods presented to
reflect stock-based employee compensation cost under the fair value based
accounting method for all employee awards granted, modified, or settled in
fiscal years beginning after December 15, 1994.
The following information about stock-based employee compensation costs, is
to be disclosed prominently and in tabular form for all periods presented
pursuant to the provisions of FAS 148, if awards of stock-based employee
compensation were outstanding and accounted for under the intrinsic value method
of Opinion 25 for any period for which an income statement is presented:
(1) Net income and basic and diluted earnings per share as reported
(2) The stock-based employee compensation cost, net of related tax
effects, included in the determination of net income as reported
(3) The stock-based employee compensation cost, net of related tax
effects, that would have been included in the determination of net income if the
fair value based method had been applied to all awards*
(4) Pro forma net income as if the fair value based method had been
applied to all awards
(5) Pro forma basic and diluted earnings per share as if the fair value
based method had been applied to all awards.
The Company is currently evaluating the adoption of FAS 148 and is in the
process of determining the impact of this Statement on its financial statements.
The Company does not believe the application of FAS 148 will materially affect
its results of operations in 2003.
Emerging Issues Taskforce statement 01-9 --
During 2002, the Company adopted Emerging Issues Task Force statement 01-9
(EITF 01-9), Accounting for Consideration Given by a Vendor to a Customer or a
Reseller of the Vendor's Products. Adoption of this EITF 01-9 required the
Company to report revenues from its FertilityPartners agreements net of the
F-11
amortization of the costs of the related exclusive service rights. As a result
of adopting EITF 01-9 in 2002, the Company offset the amortization expense
against revenues versus the prior year presentation of reporting amortization
expense below the contribution line item. Amortization expense was $1,435,000,
$945,000 and $865,000 for the years ended December 31, 2002, 2001 and 2000,
respectively. The Company does not believe that the adoption of EITF 01-9 will
have a significant impact on its financial statements. All years presented have
been reclassified to conform to the presentation used in 2002.
Financial Accounting Standards Board Interpretation 45 --
In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45).
FIN 45, which is effective December 15, 2002 requires that upon issuance of a
guarantee, the guarantor must recognize and disclose a liability for the fair
value of the obligation it assumes under that guarantee. The Company does not
believe that the adoption of FIN 45 will have a significant impact on its
financial statements.
Reclassifications --
Certain amounts for the years ended December 31, 2001 and 2000, have been
reclassified to conform with the presentation adopted for the year ended
December 31, 2002.
NOTE 3 -- SEGMENT INFORMATION:
The Company is principally engaged in providing products and services to
the fertility market. For disclosure purposes, the Company recognizes Services
offered to its network of fertility centers and its pharmaceutical distribution
operations as separate reporting segments. The Services segment includes revenue
and costs categorized as FertilityPartners Service Fees and Other Revenue, as
follows (000's omitted):
Pharmaceutical
Corporate Services Distribution Consolidated
--------- -------- ------------ ------------
For the Year ended December 31, 2002
Revenues............................... $ (322) $68,813 $19,709 $88,200
Cost of Services....................... -- 59,953 18,396 78,349
------- ------- ------- -------
Contribution........................... (322) 8,860 1,313 9,851
General and administrative costs....... 8,097
Interest, net.......................... 52
-------
Income before income taxes............. 1,702
-------
Depreciation expense included above.... 2,152
Capital expenditures................... 238 1,792 -- 2,030
Total assets........................... 10,214 35,403 1,827 47,444
For the Year ended December 31, 2001
Revenues............................... $ -- $58,791 $15,107 $73,898
Cost of Services....................... -- 49,510 14,503 64,013
------- ------- ------- -------
Contribution........................... -- 9,281 604 9,885
General and administrative costs....... 7,827
Interest, net.......................... 102
-------
Income before income taxes............. $ 1,956
=======
Depreciation expense included above.... $ 1,652
Capital expenditures................... $ 161 $ 1,504 $ -- $ 1,665
Total assets........................... $11,325 $31,138 $ 2,158 $44,621
F-12
Pharmaceutical
Corporate Services Distribution Consolidated
--------- -------- ------------ ------------
For the Year ended December 31, 2000
Revenues............................... $ -- $47,317 $ 9,682 $56,999
Cost of Services....................... -- 39,447 9,358 48,805
------- ------- ------- -------
Contribution........................... -- $ 7,870 $ 324 $ 8,194
General and administrative costs....... 5,880
Interest, net.......................... 210
-------
Income before income taxes............. $ 2,104
=======
Depreciation expense included above.... $ 1,697
Capital expenditures................... $ 199 $ 1,153 $ -- $ 1,352
Total assets........................... $ 3,335 $34,238 $ 1,272 $38,845
NOTE 4 -- SIGNIFICANT SERVICE CONTRACTS:
For the years ended December 31, 2002, 2001, and 2000 the following
fertility centers each individually provided greater than 10% of the Company's
revenues, net and/or contribution as follows:
Percent of Company Percent of
Revenues, net Contribution
------------------------- -------------------------
2002 2001 2000 2002 2001 2000
---- ---- ---- ---- ---- ----
Boston......................... 10.8 10.9 13.9 14.2 12.6 18.7
Long Island.................... 10.0 10.8 10.4 5.2 6.9 6.9
New Jersey..................... -- 1.9 5.1 -- 12.0 18.6
Illinois....................... 27.7 29.3 26.9 31.0 29.5 26.7
Shady Grove.................... 17.7 17.3 17.6 26.3 21.2 17.7
Bay Area....................... 7.4 8.4 8.2 10.9 10.6 9.1
NOTE 5 -- EXCLUSIVE SERVICE RIGHTS:
Exclusive Service Rights at December 31, 2002 and 2001 consisted of the
following (000's omitted):
2002 2001
-------- -------
Exclusive Service rights........... $24,533 $20,947
Less accumulated amortization...... (5,004) (3,569)
------- -------
Total.......................... $19,529 $17,378
======= =======
On April 26, 2002, the Company acquired the right to provide Services to
the Northwest Center for Infertility and Reproductive Endocrinology (NCIRE), a
physician corporation providing fertility services in the Margate, Florida area,
for $2.4 million in cash. The practice is comprised of 5 physicians practicing
in three locations.
On June 14, 2002, the Company financed the acquisition of the fertility
practice of Sheridan Healthcare Corp., Inc, by NCIRE. The aggregate investment
was $625,000, all of which was allocated to exclusive service rights.
On November 25, 2002, the Company announced the ending of its
FertilityPartners agreement with RSA of New York. The agreement is to end on
November 15, 2003. RSA of New York serves the Long Island market and revenues
for the four quarterly periods ending prior to the announcement were $9.1
million. The program had a contribution of $750,000 for the same period. At the
time of the announcement, the Company evaluated its exclusive business rights
F-13
asset associated with RSA of New York and reduced that asset to its realizable
value by adjusting the asset downward by $350,000.
On January 1, 2001, the Company amended its FertilityPartners agreement
with the Bay Area Fertility and Gynecology Medical Group, Inc., to encompass the
medical practice of Susan P. Willman, M.D., Inc. In consideration for the right
to provide additional Services and the acquisition of certain assets, the
Company paid Dr. Willman approximately $515,000, of which approximately $332,000
was in cash and approximately $183,000 in the form of a promissory note.
Approximately $368,000 of the purchase price was allocated to exclusive service
rights.
On January 1, 2001, the Company amended its FertilityPartners agreement
with the Shady Grove, to encompass the medical practice of David S. Saffan, M.D.
In consideration for the right to provide additional Services and the
acquisition of certain assets, the Company agreed to pay Dr. Saffan amounts to
be determined based upon Dr. Saffan achieving certain performance targets
through December 31, 2003. The purchase price based on performance through
December 31, 2002 was approximately $373,000 of which approximately $299,000 was
paid in cash. Additional amounts up to approximately $100,000 may become due in
2003, contingent upon achievement of performance targets.
NOTE 6 -- FIXED ASSETS, NET:
Fixed assets, net at December 31, 2002 and 2001 consisted of the following
(000's omitted):
2002 2001
------- ------
Furniture, office and computer equipment............... $ 5,139 $ 4,654
Medical equipment...................................... 3,520 2,833
Leasehold improvements................................. 5,936 5,211
Construction in process................................ 133 --
Assets under capital leases............................ 1,260 1,260
------- ------
Total................................................ 15,988 13,958
Less -- Accumulated depreciation and amortization...... (10,847) (8,695)
------- -------
$ 5,141 $ 5,263
======= =======
Depreciation expense on fixed assets for the years ended December 31, 2002,
2001 and 2000 was $2,152,000, $1,652,000 and $1,697,000, respectively. Assets
under capital leases primarily consist of computer equipment. Accumulated
amortization related specifically to capital leases at December 31, 2002, 2001
and 2000 was $1,100,000, $977,000 and $870,000, respectively.
NOTE 7 -- ACCRUED LIABILITIES:
Accrued liabilities at December 31, 2002 and 2001 consisted of the
following (000's omitted):
2002 2001
------ ------
Accrued costs on behalf of Medical Practices...... $3,473 $2,757
Reserves for estimated refunds.................... 422 477
Accrued incentives and benefits................... 1,655 930
Accrued state taxes............................... 338 546
Other............................................. 558 518
------ ------
Total accrued liabilities......................... $6,446 $5,228
====== ======
F-14
NOTE 8 -- NOTES PAYABLE AND OTHER OBLIGATIONS:
Debt at December 31, 2002 and 2001 consisted of the following (000's
omitted):
2002 2001
------ ------
Note payable to bank............................... $1,250 $2,250
Acquisition notes payable.......................... 122 257
Obligations under capital lease.................... 38 184
------ ------
Total notes payable and other obligations.......... 1,410 2,691
Less -- Current portion............................ (1,099) (1,403)
------ ------
Long-term notes payable and other obligations...... $ 311 $1,288
====== ======
Note payable to Bank --
In September 2001, the Company amended its existing credit facility with
Fleet Bank, N.A. The amended facility is comprised of a $7.0 million three-year
working capital revolver and a continuance of the Company's existing $4.0
million 5.5 year term loan, of which approximately $2.8 million remained
outstanding with a remaining term of approximately 2.5 years as of the date of
the amendment. Each component bears interest by reference to Fleet's prime rate
or LIBOR, at the Company's option, plus a margin, which is dependent upon a
leverage test, ranging from 2.25% to 2.75% in the case of LIBOR-based loans.
Prime based loans are made at Fleet Bank's prime rate and do not contain an
additional margin. Interest on the prime-based loans is payable monthly and
interest on LIBOR-based loans is payable on the last day of each applicable
interest period. As of December 31, 2002, interest on the term loan was payable
at a rate of approximately 4.25%. Unused amounts under the working capital
revolver bear a commitment fee of 0.25% and are payable quarterly. Availability
of borrowings under the working capital revolver is based on eligible accounts
receivable, as defined in the credit facility. As of December 31, 2002, under
the working capital revolver, there were no amounts outstanding and the full
amount of $7.0 million was available. The credit facility is collateralized by
all of the Company's assets.
Due to the continued expansion of the FertilityPartners centers, the
Company exceeded the capital spending threshold as defined in one restrictive
covenant during 2002, and obtained the required waiver effective December 31,
2002.
Acquisition notes payable --
Acquisition notes payable represent the liability owed by the Company to
certain medical providers for the cost of acquiring the exclusive right to
supply services to their fertility practices. The acquisition obligation at
December 31, 2002 represents amounts owed by the Company to acquire the
additional service rights at the Bay Area Fertility practice. The acquisition
obligation at December 31, 2001 represents amounts owed by the Company to
acquire additional service rights at the Shady Grove and Bay Area Fertility
practices. These obligations are non-interest bearing.
Debt Maturities --
At December 31, 2002, aggregate note payments, including capital lease
obligation payments, in future years were as follows (000's omitted):
2003........................................... $1,099
2004........................................... 311
2005........................................... --
------
Thereafter..................................... --
------
Total payments................................. $1,410
======
F-15
Obligations under capital lease --
Capital lease obligations relate primarily to computer and data processing
equipment for the FertilityPartners. The current portion of capital lease
obligations, excluding interest, was approximately $38,000 at December 31, 2002.
The Company has operating leases for its corporate headquarters and for
medical office space for its FertilityPartners centers. The Company also has
operating leases for certain medical equipment. Aggregate rental expense under
operating leases was $3,533,000, $3,665,000, and $2,635,000 for the years ended
December 31, 2002, 2001 and 2000, respectively.
At December 31, 2002, the minimum lease payments for assets under capital
and non-cancelable operating leases in future years were as follows (000's
omitted):
Capital Operating
------- ---------
2003.................................... $38 $ 2,813
2004.................................... -- 2,877
2005.................................... -- 2,853
2006.................................... -- 2,891
2007.................................... -- 2,432
Thereafter.............................. -- 7,233
--- -------
Total minimum lease payments............ $38 $21,099
=== =======
Less -- Amount representing interest.... --
---
Present value of minimum lease payments. $38
===
NOTE 9 -- INCOME TAXES
The provision for income taxes consisted of:
For the years
ended December 31,
-----------------------
2002 2001 2000
---- ---- ----
Current taxes (benefits):
Federal .................................. $ -- $ -- $ --
State .................................. 51 34 187
------ ------- ----
Total Current Taxes.................... $ 51 $ 234 $187
------ ------- ----
Deferred taxes (benefits):
Federal ........................ $ 595 $ -- $ --
State ........................ (90) -- --
Valuation Allowance...................... 6 (4791) --
------ ------- ----
Total Deferred Taxes.................. $ 511 (4,791) --
------ ------- ----
Total tax provision ....................... $ 562 $(4,557) $187
====== ======= ====
At December 31, 2002, the Company had Federal net operating loss carry
forwards of approximately $15.2 million, which expire in 2004 through 2019. For
tax purposes, there is an annual limitation of approximately $2.0 million on the
utilization of approximately $10.4 million of net operating losses resulting
from changes in ownership attributable to the Company's May 1993 Preferred Stock
Offering and the August 1997 Common Stock Offering and FertilityPartners
agreements. For the years ended December 2002, 2001 and 2000, the Company
utilized net operating loss carry forwards of approximately $2.0 million, $2.5
million and $1.9 million, respectively. Valuation allowances have been recorded
for net operating loss carry forwards that may expire prior to utilization due
to the annual limitation. In the fourth quarter of 2001, the Company recorded a
reduction of its deferred tax asset valuation allowance as a result of the
Company's sustained profitability and likelihood of net operating loss
utilization.
F-16
Significant components of the deferred tax assets (liabilities) at December
31, 2002 and 2001 were as follows (000's omitted):
December 31,
------------------
2002 2001
------- -------
Deferred tax assets
Net operating loss carry forwards ................ $ 5,180 $ 5,791
Doubtful accounts ................................ 954 767
Other ............................................ 43 59
------- -------
Total deferred tax assets .................... 6,177 6,617
------- -------
Deferred tax liabilities
Depreciation and amortization .................... (303) (346)
------- -------
Total deferred tax liabilities ............... (303) (346)
------- -------
Deferred tax asset ................................. 5,875 6,271
Valuation allowance ................................ (1,594) (1,480)
------- -------
Net total deferred tax asset ....................... $ 4,280 $ 4,791
Less deferred tax asset reflected as current asset (300) --
------- -------
Deferred tax asset ............................... $ 3,980 $ 4,791
======= =======
The financial statement income tax (benefit) provision differed from income
taxes determined by applying the statutory federal income tax rate to the
financial statement income before income taxes for the years ended December 31,
2002, 2001 and 2000 primarily as a result of the following (000's omitted):
For the years
ended December 31,
-------------------------
2002 2001 2000
---- ---- ----
Tax expense at Federal statutory rate $ 579 $ 585 $ 652
State income taxes .................. (39) 234 187
Non-deductible expenses ............. 31
Other ............................... (15)
Net operating loss utilization ...... (585) (652)
Change in valuation allowance ....... 6 (4,791) --
------- ------- -------
Income tax (benefit) expense ........ $ 562 $(4,557) $ 187
======= ======= =======
NOTE 10 - EARNINGS PER SHARE:
The reconciliation of the numerators and denominators of the basic and
diluted EPS computations for the years ended December 31, 2002, 2001 and 2000 is
a follows (000's omitted, except for per share amounts):
For the years
ended December 31,
----------------------
2002 2001 2000
---- ---- ----
Numerator
Net Income ........................................ $1,140 $6,513 $1,917
Less: Preferred stock dividends paid and/or accrued 69 133 133
------ ------ ------
Net Income available to Common Stock .............. $1,071 $6,380 $1,784
====== ====== ======
Denominator
Weighted average shares outstanding ............... 3,195 3,081 4,110
Effect of dilutive options and warrants ........... 273 94 62
------ ------ ------
Weighted average shares and dilutive potential
Common shares ................................... 3,468 3,175 4,172
====== ====== ======
Basic earnings per common share ................... $ 0.33 $ 2.07 $ 0.43
====== ====== ======
Diluted earnings per common share ................. $ 0.31 $ 2.01 $ 0.43
====== ====== ======
For the years ended December 31, 2002, 2001 and 2000, options to purchase
approximately 52,500, 297,000, and 494,000 shares, respectively, of Common Stock
at exercise prices ranging from $6.15 to $8.57, $4.50 to $5.38, and $2.97 to
F-17
$5.00 per share, respectively, were excluded in computing the diluted per share
amounts as they were antidilutive.
For the years ended December 31, 2002, 2001 and 2000, warrants to purchase
approximately 105,600, 25,000, and 103,000 shares, respectively, of Common Stock
at exercise prices ranging from $6.25 to $9.00, $5.13 to $7.24, and $4.12 to
$8.54 per share, respectively, were excluded in computing the diluted per share
amounts as they were antidilutive.
For the years ended December 31, 2001 and 2000, approximately 133,000
shares of Common Stock from the assumed conversion of Preferred Stock were
excluded in computing the diluted per share amounts as they were antidilutive.
NOTE 11 -- SHAREHOLDERS' EQUITY:
In 2002, 2001 and 2000, the Company issued 37,640, 33,265 and 44,610
shares, respectively, of restricted Common Stock to several officers and
directors of the Company for an aggregate amount of $249,000 and $164,000 and
$142,000 respectively.
During 2002, the Board of Directors authorized the redemption of all
outstanding shares of the Company's Series A Preferred Stock. Effective October
15, 2002, the Company had redeemed all 165,644 outstanding shares at a cost of
approximately $1.7 million.
In 2002, the Company issued an aggregate of 7,089 shares of restricted
Common Stock to the physician partners of the Northwest Center for Fertility and
Reproductive Endocrinology, in connection with the FertilityPartners agreement.
These shares had a market value of $45,000 on the date of issuance.
The Board of Directors had previously authorized the repurchase of shares
of the Company's outstanding Common Stock. As of December 31, 2001, the Company
had repurchased and retired 2,480,085 shares of its Common Stock for an
aggregate cost of approximately $7.1 million. No repurchases or retirements of
Common Stock were made during 2002 and the Company currently does not anticipate
any additional Common Stock repurchases.
As of December 31, 2002 and 2001, warrants to purchase an aggregate of
144,350 and 62,407 shares of Common Stock were outstanding at weighted average
exercise prices of $7.39 and $5.20 respectively.
NOTE 12 -- STOCK OPTIONS AND GRANTS:
Under the 1992 Stock Option Plan (as amended) (the "1992 Plan") and the
2000 Stock Option Plan (the "2000 Plan"), 500,000 and 600,000 shares,
respectively, were reserved for issuance of incentive and non-incentive stock
options. Under the 1992 and 2000 Plans, incentive stock options, as defined in
Section 422 of the Internal Revenue Code, may be granted only to employees and
non-incentive stock options may be granted to employees, directors and such
other persons as the Board of Directors (or a committee (the "Committee")
appointed by the Board) determines will contribute to the Company's success at
exercise prices equal to at least 100%, or 110% for a ten percent shareholder,
of the fair market value of the Common Stock on the date of grant with respect
to incentive stock options and at exercise prices determined by the Board of
Directors or the Committee with respect to non-incentive stock options. Stock
options issued under the 2000 Plan are exercisable, subject to such conditions
and restrictions as determined by the Board of Directors or the Committee,
during a ten-year period, or a five-year period for incentive stock options
granted to a ten percent shareholder, following the date of grant; however, the
maturity of any incentive stock option may be accelerated at the discretion of
the Board of Directors or the Committee. Under the 1992 Plan, the Board of
Directors or the Committee determines the exercise dates of options granted;
however, in no event may incentive stock options be exercised prior to one year
from date of grant. Under the 1992 and 2000 Plans, the Board of Directors or the
Committee selects the optionees, determines the number of shares of Common Stock
F-18
subject to each option and otherwise administers the Plans. Under the 1992 and
2000 Plans, options expire three months from the date of the holder's
termination of employment with the Company or twelve months in the event of
disability or death.
Under the 1994 Outside Director Stock Purchase Plan ("Outside Director
Plan"), 31,250 shares of Common Stock are reserved for issuance. Under the
Outside Director Plan, directors who are not full-time employees of the Company
may elect to receive all or a part of their annual retainer fees, the fees
payable for attending meetings of the Board of Directors and the fees payable
for serving on committees of the Board, in the form of shares of Common Stock
rather than cash, provided that any such election be made at least six months
prior to the date that the fees are to be paid. As of December 31, 2002, 2001
and 2000, there were no options outstanding, respectively, under the Outside
Director Plan.
Stock option activity, under the 1992 and 2000 Plans combined, is
summarized as follows:
Number of
shares of
Common Stock
underlying Weighted Average
options exercise price
----------- ----------------
Options outstanding at December 31, 1999..... 437,181 $4.05
Granted...................................... 254,000 $2.99
Canceled..................................... (77,332) $3.87
------- -----
Options outstanding at December 31, 2000..... 613,849 $3.63
Granted...................................... 192,500 $4.77
Exercised.................................... (36,126) $3.39
Canceled..................................... (14,177) $4.04
------- -----
Options outstanding at December 31, 2001..... 756,046 $3.92
Granted...................................... 250,487 $5.90
Exercised.................................... (83,266) $2.75
Canceled..................................... (70,627) $5.79
------- -----
Options outstanding at December 31, 2002..... 852,640 $4.29
Options exercisable at:
December 31, 2000....................... 282,222 $4.12
December 31, 2001....................... 386,868 $3.91
December 31, 2002....................... 512,124 $3.92
Included in options that were canceled during 2002, 2001 and 2000 were
forfeitures of 27,627, 14,177 and 6,301 with weighted average exercise prices of
$5.79, $4.04 and $4.12, respectively.
As of December 31, 2002, stock options outstanding and exercisable by price
range were as follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------------------------ ---------------------------------
Outstanding Weighted-Average Exercisable
Range of as of Remaining Weighted-Average as of Weighted-Average
Exercise Prices 12/31/2002 Contractual Life Exercise Price 12/31/2002 Exercise Price
--------------- ---------- ---------------- ---------------- ---------- ----------------
$0.00 - $3.00 109,501 7.0 $2.72 71,063 $2.86
$3.01 - $5.00 574,277 5.9 $4.10 437,936 $4.08
$5.01 - $7.00 168,862 9.2 $5.94 3,125 $5.38
----- ----- ------- --- ----- ----- -----
852,640 6.7 $4.29 512,124 $3.92
F-19
Pro forma information:
FAS 123 requires pro forma disclosures of net income and earnings per share
amounts as if compensation expense, using the fair value method, was recognized
for options granted after 1994. Using this approach, pro forma net income and
earnings per share for the year ended December 31, 2002 would be $334,000 and
$0.10 lower, respectively, versus reported amounts. Pro forma net income and
diluted income per share would be $264,000 and $0.08 lower, respectively, for
the year ended December 31, 2001. Pro forma net income and diluted income per
share would be $163,000 and $0.04 lower, respectively, for the year ended
December 31, 2000. The weighted average fair value of options granted at prices
equal to fair market value during the years ended December 31, 2002, 2001 and
2000 was $4.59, $3.11 and $1.78, respectively. These values, which were used as
a basis for the pro forma disclosures, were estimated using the Black-Scholes
Options-Pricing Model with the following assumptions used for grants in the
years ended December 31, 2002, 2001, and 2000, respectively; dividend yield of
0% in each year; volatility of 75.3%, 55.2% and 40.0% in 2002, 2001 and 2000,
respectively; risk-free interest rate of 1.06%, 2.00% and 5.00% in 2002, 2001
and 2000, respectively; and an expected term of 10 years in the year reported.
These pro forma disclosures may not be representative of the effects for
future years since options vest over several years and additional awards
generally are made each year.
The Company recognizes compensation cost for stock-based employee
compensation plans over the vesting period based on the difference, if any,
between the quoted market price of the stock and the amount an employee must pay
to acquire the stock. There was no compensation cost recognized in income for
the years ended December 31, 2002, 2001 and 2000.
Under restricted stock grant agreements with several officers of the
Company, beginning in 2001, shares vest at the grant date. The Company
recognizes compensation expense in the period the grants are awarded for years
after 2000 (in 2000 the grants were amortized over a three-year period, but the
change in vesting required the balance of the unamortized 2000 grant to be
expensed in 2001). Compensation expense recognized in connection with the
restricted stock grants for the years ended December 31, 2002, 2001 and 2000 was
$336,000, $422,000 and $45,000, respectively. After withholding applicable
taxes, Common Stock with aggregate market values of $249,000, $164,000 and
$142,000 were issued in the years ended December 31, 2002, 2001 and 2000,
NOTE 13 -- QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for continuing operations for 2002 and
2001 (in thousands, except per share data) appear below:
Diluted net
Revenues, net Contribution Net income income per share
------------- ------------ ---------- ----------------
2002 2001 2002 2001 2002 2001 2002 2001
---- ---- ---- ---- ---- ---- ---- ----
First quarter........ $20,051 $16,275 $2,280 $2,131 $ 291 $ 359 $0.08 $0.10
Second quarter ...... 21,171 18,062 2,391 2,382 310 406 0.08 0.12
Third quarter........ 23,273 19,734 2,741 2,497 325 469 0.09 0.14
Fourth quarter....... 23,705 19,827 2,439 2875 214 5,279(a) 0.06 1.61
Total year .......... $88,200 $73,898 $9,851 $9,885 $1,140 $6,513 0.31 $2.01
(a) See Note 9
The sum of the quarters for 2002 and 2001 may not equal the annual
amount due to rounding.
NOTE 14 -- COMMITMENTS AND CONTINGENCIES:
Operating Leases --
Refer to Note 8 for a summary of lease commitments.
F-20
Reliance on Third Party Vendors --
The FertilityPartners centers, as well as all other medical providers who
deliver services requiring fertility medication, are dependent on third-party
vendors that produce such medications (including but not limited to: Lupron,
Follistim, Repronex, GonalF and Pregnyl) that are vital to the provision of
fertility and ART services. Should any of these vendors experience a supply
shortage, it may have an adverse impact on the operations of the fertility
centers. To date, the fertility centers have not experienced any such adverse
impacts.
Employment Agreements --
The Company has entered into employment and change in control severance
agreements with certain of its management employees, which include, among other
terms, noncompetitive provisions and salary and benefits continuation. The
Company's minimum aggregate commitment under these agreements at December 31,
2002 was approximately $1.7 million.
Commitments to FertilityPartners --
Pursuant to the majority of the Company's FertilityPartners agreements, the
Company is obligated to perform the following: (i) advance funds to the
fertility centers to fund operations and provide services; and (ii) on or before
the fifteenth business day of each month finance the net accounts receivable of
the fertility center arising during the previous month and to transfer or pay to
the fertility centers such amount of funds equal to the net accounts receivable
less any amounts owed to the Company for Services fees and/or advances.
Litigation --
In June 2002, the Company was served with a complaint, captioned
WINFertility, Inc. vs. IntegraMed America, Inc., in which the plaintiff filed an
action in the Supreme Court of New York, Westchester County, alleging breach of
contract and seeking damages in excess of $5 million. The Company has served and
filed an answer denying all material allegations of the complaint and asserting
affirmative defenses. The Company has also filed a counterclaim against the
plaintiff demanding an accounting and return of certain fees paid to plaintiff
by the Company. The Company has meritorious defenses to the claims, and based on
opinion of counsel, believes that the likelihood of the suit having a material
adverse effect on the financial position, results of operations or the cash flow
of the Company is remote.
There are other minor legal proceedings to which the Company is a party. In
the Company's opinion, the claims asserted and the outcome of such proceedings
will not have a material adverse effect on the financial position, results of
operations or the cash flow of the Company.
Insurance --
The Company and its affiliated fertility centers are insured with respect
to medical malpractice risks on a claims made basis. Management believes it will
be able to obtain renewal coverage in the future. Management is not aware of any
claims against it or its affiliated medical practices, which would expose the
Company, or its affiliated medical practices to liabilities in excess of insured
amounts. Therefore, none of these claims is expected to have a material impact
on the Company's financial position, results of operations or cash flows.
NOTE 15 -- RELATED PARTY TRANSACTIONS:
SDL Consultants, a company owned by Sarason D. Liebler, who became a
director of the Company in August, 1994, rendered consulting services to the
Company during 2002, 2001 and 2000 for aggregate fees of approximately $78,000,
$96,000 and $131,000, respectively.
F-21
Pursuant to the Company's FertilityPartners agreement with Shady Grove,
Michael J. Levy, M.D., an employed shareholder physician of the P.C., became a
member of the Company's Board of Directors effective March 12, 1998. The medical
practice at Shady Grove paid the Company $2,940,000, $2,360,000 and $2,650,000
in 2002, 2001 and 2000, respectively in service fees.
Pursuant to the Company's FertilityPartners agreement with FCI (the
Illinois practice), Aaron Lifchez, M.D., an employed shareholder physician of
FCI, became a member of the Company's Board of Directors in August 1997. The
medical practice FCI paid the Company $3,500,000, $3,270,000 and $1,700,000 in
2002, 2001 and 2000, respectively in Service Fees.
NOTE 16 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND
NON-CASH TRANSACTIONS:
In 2000, in connection with the Company's termination of its Kansas City,
MO FertilityPartner agreement, the Company charged approximately $273,000 of
fixed assets, primarily comprised of leasehold improvements, to the previously
established reserve.
Income tax payments of $271,000, $12,800, and $21,000 were paid in the
years ended December 31, 2002, 2001 and 2000, respectively.
Interest paid in cash during the year ended December 31, 2002, 2001 and
2000, amounted to $155,000, $281,000, and $421,000, respectively. Interest
received during the years ended December 31, 2002, 2001 and 2000 amounted to
approximately $103,000, $179,000, and $211,000, respectively.
F-22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 26, 2003
By/s/JOHN W. HLYWAK, JR.
John W. Hlywak, Jr.
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ GERARDO CANET
----------------------
Gerardo Canet President,
Chief Executive Officer
and Director
(Principal Executive Officer) March 26, 2003
/s/ JOHN W. HLYWAK, JR
----------------------
John W. Hlywak, Jr. Senior Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer March 26, 2003
/s/ MICHAEL J. LEVY, M.D.
----------------------
Michael J. Levy, M.D. Director March 26, 2003
/s/ SARASON D. LIEBLER
----------------------
Sarason D. Liebler Director March 26, 2003
/s/ AARON S. LIFCHEZ, M.D.
----------------------
Aaron S. Lifchez, M.D. Director March 26, 2003
/s/ WAYNE R. MOON
----------------------
Wayne R. Moon Director March 26, 2003
/s/ LAWRENCE J. STUESSER
----------------------
Lawrence J. Stuesser Director March 26, 2003
/s/ ELIZABETH E. TALLETT
----------------------
Elizabeth E. Tallett Director March 26, 2003
INDEX TO EXHIBITS
Item 14(c)
Exhibit
Number Exhibit
- ------- -------
3.1(a) -- Amended and Restated Certificate of Incorporation of Registrant
effecting, inter alia, reverse stock split (ii)
3.1(b) -- Amendment to Certificate of Incorporation of Registrant
increasing authorized capital stock by authorizing Preferred
Stock (ii)
3.1(c) -- Certificate of Designations of Series A Cumulative Convertible
Preferred Stock (ii)
3.1(d) -- Certificate of Amendment to Amended and Restated Certificate of
Incorporation increasing authorized Common Stock to 50,000,000
shares (xxiv)
3.2 -- Copy of By-laws of Registrant (i)
3.2(a) -- Copy of By-laws of Registrant (As Amended and Restated on
December 12, 1995) (xi)
3.2(b) -- Copy of By-laws of Registrant (As Amended and Restated on March
4, 1997) (xxi)
4.1 -- Warrant Agreement of Robert Todd Financial Corporation. (i)
4.2 -- Copy of Warrant, as amended, issued to IG Labs. (i)
4.3 -- RAS Securities Corp. and ABD Securities Corporation's Warrant
Agreement. (ii)
4.4 -- Form of Warrants issuable to Raymond James & Associates, Inc.
(vii)
4.6 -- Warrant issued to Morgan Stanley Venture Partners III, L.P.
(xviii)
4.7 -- Warrant issued to Morgan Stanley Venture Partners III, L.P.
(xviii)
4.8 -- Warrant issued to the Morgan Stanley Venture Partners
Entrepreneur Fund, L.P. (xxi)
4.9 (a) -- Warrant issued to Brian Kaplan, M.D. (xxii)
4.9 (b) -- Warrant issued to Aaron S. Lifchez, M.D. (xxii)
4.9 (c) -- Warrant issued to Jacob Moise, M.D. (xxii)
4.9 (d) -- Warrant issued to Jorge Valle, M.D. (xxii)
4.10 (a) -- Warrant issued to Donald Galen, M.D. (xxii)
4.10 (b) -- Warrant issued to Arnold Jacobson, M.D. (xxii)
INDEX TO EXHIBITS (Continued)
Item 14(c)
Exhibit
Number Exhibit
4.10 (c) -- Warrant issued to Louis Weckstein, M.D. (xxii)
4.11 (a) -- Warrant issued to Michael J. Levy, M.D. (xxii)
4.11 (b) -- Warrant issued to Arthur W. Sagoskin, M.D. (xxii)
4.11 (c) -- Warrant issued to Robert J. Stillman, M.D. (xxii)
4.11 (d) -- Warrant issued to Robert J. Stillman, M.D. dated January 6, 1999
(xxvi)
4.12 (a) -- Warrant issued to Patricia M. McShane, M.D. dated November 18,
1998 (xxvi)
4.12 (b) -- Warrant issued to Samuel C. Pang, M.D. dated November 18, 1998
(xxvi)
4.12 (c) -- Warrant issued to Issac Glatstein, M.D. dated November 18, 1998
(xxvi)
4.13 -- Warrant issued to Vector Securities International, Inc. (xxvi)
4.14 -- Registration Rights Ageement dated July 20, 2002 (l)
4.14(a) -- Form of Warrant issued on July 30, 2002 (l)
10.1 -- Copy of Registrant's 1988 Stock Option Plan, including form of
option (i)
10.2 -- Copy of Registrant's 1992 Stock Option Plan, including form of
option (i)
10.2 (a) -- Copy of Amendment to Registrant's 1992 Stock Option Plan (xxii)
10.4 -- Severance arrangement between Registrant and Vicki L. Baldwin
(i)
10.4(a) -- Copy of Change in Control Severance Agreement between Registrant
and Vicki L. Baldwin (vii)
10.5(a) -- Copy of Severance Agreement with Release between Registrant
and David J. Beames (iv)
10.6 -- Severance arrangement between Registrant and Donald S. Wood (i)
10.6(a) -- Copy of Executive Retention Agreement between Registrant and
Donald S. Wood, Ph.D. (viii)
10.7(a) -- Copy of lease for Registrant's executive offices relocated to
Purchase, New York (viii)
10.8 -- Copy of Lease Agreement for medical office in Mineola, New York
(i)
10.8(a) -- Copy of new 1994 Lease Agreement for medical office in Mineola,
New York (v)
10.8(b) -- Copy of Letter of Credit in favor of Mineola Pavilion
Associates, Inc. (viii)
10.9 -- Copy of Service Agreement for ambulatory surgery center in
Mineola, New York (i)
10.10 -- Copy of Agreement with MPD Medical Associates, P.C. for Center
in Mineola, New York (i)
10.10 -- Copy of Agreement with MPD Medical Associates, P.C. for Center
in Mineola, New York dated September 1, 1994 (vii)
10.10(a) -- Copy of Agreement with MPD Medical Associates, P.C. for
Center in Mineola, New York dated September 1, 1994 (vii)
10.11 -- Copy of Service Agreement with United Hospital (i)
10.12 -- Copy of Service Agreement with Waltham Weston Hospital and
Medical Center (i)
10.15(a) -- Copy of post-Dissolution Consulting Agreement between
Registrant and Allegheny General Hospital (vi)
10.18(a) -- Copy of post-Dissolution Consulting, Training and License
Agreement between Registrant and Henry Ford Health Care Systems
(iii)
10.19 -- Copy of Guarantee Agreement with Henry Ford Health System (i)
10.20 -- Copy of Service Agreement with Saint Barnabas Outpatient Centers
for center in Livingston, New Jersey (i)
10.21 -- Copy of Agreement with MPD Medical Associates, P.C. for center
in Livingston, New Jersey (i)
10.22 -- Copy of Lease Agreement for medical offices in Livingston, New
Jersey (i)
10.23 -- Form of Development Agreement between Registrant and IG
Laboratories, Inc. (i)
10.24 -- Copy of Research Agreement between Registrant and Monash
University (i)
10.24(a) -- Copy of Research Agreement between Registrant and Monash
University (ix)
10.28 -- Copy of Agreement with Massachusetts General Hospital to
establish the Vincent Center for Reproductive Biology and a
Technical Training Center (ii)
10.29 -- Copy of Agreement with General Electric Company relating to
Registrant's training program (ii)
10.30 -- Copy of Indemnification Agreement between Registrant and
Philippe L. Sommer (vii)
10.31 -- Copy of Employment Agreement between Registrant and Gerardo
Canet (vii)
10.31(a) -- Copy of Change in Control Severance Agreement between
Registrant and Gerardo Canet (vii)
10.31(b) -- Copy of the Amendment of Change in Control Severance
Agreement between Registrant and Gerardo Canet (viii)
10.33 -- Copy of Change in Control Severance Agreement between Registrant
and Dwight P. Ryan (vii)
10.35 -- Revised Form of Dealer Manager Agreement between Registrant and
Raymond James & Associates, Inc. (vii)
10.36 -- Copy of Agreement between MPD Medical Associates, P.C. and
Patricia Hughes, M.D. (vii)
10.37 -- Copy of Agreement between IVF America (NJ) and Patricia Hughes,
M.D. (vii)
10.38 -- Copy of Management Agreement between Patricia M. McShane, M.D.
and IVF America (MA), Inc. (vii)
10.39 -- Copy of Sublease Agreement for medical office in North
Tarrytown, New York (viii)
10.40 -- Copy of Executive Retention Agreement between Registrant and
Patricia M. McShane, M.D. (viii)
10.41 -- Copy of Executive Retention Agreement between Registrant and
Lois Dugan (viii)
10.42 -- Copy of Executive Retention Agreement between Registrant and Jay
Higham (viii)
10.43 -- Copy of Service Agreement between Registrant and Saint Barnabas
Medical Center (ix)
10.43 (a) -- Termination Agreement between IntegraMed America, Inc. and Saint
Barnabas Medical Center dated December 7, 2000. (xxxvi)
10.44 -- Asset Purchase Agreement among Registrant, Assisted Reproductive
Technologies, P.C. d/b/a Main Line Reproductive Science Center,
Reproductive Diagnostics, Inc. and Abraham K. Munabi, M.D. (ix)
10.44(a) -- Management Agreement among Registrant and Assisted Reproductive
Technologies, P.C. d/b/a Main Line Reproductive Science Center
and Reproductive Diagnostics, Inc. (ix)
10.44(b) -- Physician Service Agreement between Assisted Reproductive
Technologies P.C. d/b/a Main Line Reproductive Science Center
and Abraham K. Munabi, M.D. (ix)
10.44(c) -- Stipulation of Settlement and Compromise of all Claims Among
IntegraMed America, Inc. and Assisted Reproductive Technologies,
P.C., d/b/a Mainline Reproductive Science Center, Reproductive
Diagnostics, Abraham Munabi, M.D.,
Reproductive Science Center of Suburban Philadelphia (xxv)
10.45 -- Copy of Executive Retention Agreement between Registrant and
Stephen Comess (x)
10.46 -- Copy of Executive Retention Agreement between Registrant and
Peter Callan (x)
10.47 -- Management Agreement between Registrant and Robert Howe, M.D.,
P.C. (x)
10.47 (a) -- P.C. Funding Agreement between Registrant and Robert Howe, M.D.
(x)
10.48 -- Management Agreement among Registrant and Reproductive Endocrine
& Fertility Consultants, P.A. and Midwest Fertility Foundations
& Laboratory, Inc. (x)
10.48 (a) -- Asset Purchase Agreement among Registrant and Reproductive
Endocrine & Fertility Consultants, Inc. and Midwest Fertility
Foundations & Laboratory, Inc. (x)
10.48 (b) -- Amendment No. 2 to Management Agreement among IntegraMed
America, Inc. and Reproductive Endocrine & Fertility
Consultants, P.A. and Midwest Fertility Foundations &
Laboratory, Inc. dated July 1, 1998 (xxiv)
10.48 (c) -- Management Agreement among IntegraMed America, Inc. and
Reproductive Endocrine & Fertility Consultants, P.A. and Midwest
Fertility Foundations & Laboratory, Inc. (xxvii)
10.49 -- Copy of Sublease Agreement for office space in Kansas City,
Missouri (x)
10.50 -- Copy of Lease Agreement for office space in Charlotte, North
Carolina (x)
10.51 -- Copy of Contract Number DADA15-96-C-0009 as awarded to IVF
America by the Department of the Army, Walter Reed Army Medical
Center for In Vitro Fertilization Laboratory Services (xi)
10.52 -- Agreement and Plan of Merger By and Among IVF America, Inc.,
INMD Acquisition Corp., The Climacteric Clinic, Inc., Midlife
Centers of America, Inc., Women's Research Centers, Inc.,
America National Menopause Foundation, Inc. and Morris
Notelovitz (xii)
10.52 (a) -- Agreement dated September 1, 1998 By and Among Women's Medical &
Diagnostic Center, Inc., IntegraMed America, Inc. and Florida
Medical and Research Institute, P.A. (xxv)
10.53 -- Employment Agreement between Morris Notelovitz, M.D., Ph.D. and
IVF America, Inc., d/b/a IntegraMed America (xii)
10.54 -- Physician Employment Agreement between Morris Notelovitz, M.D.,
Ph.D., and INMD Acquisition Corp. ("IAC"), a Florida corporation
and wholly owned subsidiary of IVF America, Inc. ("INMD") (xii)
10.55 -- Management Agreement between IVF America, Inc., d/b/a IntegraMed
America, Inc. and W.F. Howard, M.D., P.A. (xii)
10.56 -- Asset Purchase Agreement between IVF America, Inc., d/b/a/
IntegraMed America, Inc. and W.F. Howard M.D., P.A. (xii)
10.57 -- Business Purposes Promissory Note dated September 8, 1993 in the
amount of $100,000 (xiii)
10.58 -- Business Purposes Promissory Note dated November 18, 1994 in the
amount of $64,000 (xiii)
10.59 -- Guaranty Agreement (xiii)
10.60 -- Security Agreement (Equipment and Consumer Goods) (xiii)
10.61 -- Management Agreement dated January 7, 1997 by and between the
Registrant and Bay Area Fertility and Gynecology Medical Group,
Inc. (xiv)
10.61 (a) -- Amendment No. 1 to Management Agreement between IntegraMed
America, Inc. and Bay Area Fertility and Gynecology Medical
Group, Inc. (xxii)
10.61 (b) -- Amendment No. 2 to Management Agreement between IntegraMed
America, Inc. and Bay Area Fertility and Gynecology Medical
Group, Inc. (xxvii)
10.61 (c) -- Amendment No. 3 to Management Agreement between IntegraMed
America, Inc. and Bay Area Fertility and Gynecology Medical
Group, Inc. dated April 1, 2000 (xxxi)
10.61 (d) -- Amendment No. 4 to Management Agreement between IntegraMed
America, Inc. and Bay Area Fertility and Gynecology Medical
Group, P.C. (xxxx)
10.61 (e) -- Amendment No. 5 to Management Agreement between IntegraMed
America, Inc. and Bay Area Fertility and Gynecology Medical
Group, P. C. (xxxx)
10.62 -- Asset Purchase Agreement dated January 7, 1997 by and between
the Registrant and Bay Area Fertility and Gynecology Medical
Group, a California Partnership. (xiv)
10.63 -- Physician Employment Agreement between Robin E. Markle, M.D. and
Women's Medical & Diagnostic Center, Inc. (xv)
10.64 -- Physician Employment Agreement between W. Banks Hinshaw, Jr.,
M.D. and Women's Medical & Diagnostic Center, Inc. (xv)
10.65 -- Agreement between IntegraMed America, Inc., f/k/a IVF America
Inc.; Women's Medical & Diagnostic Center, Inc., f/k/a INMD
Acquisition Corp, and Morris Notelovitz, M.D. (xv)
10.66 -- Personal Responsibility Agreement between IntegraMed America,
Inc., Bay Area Fertility and Gynecology Medical Group, Inc. and
Donald I. Galen, M.D. (xv)
10.67 -- Personal Responsibility Agreement between IntegraMed America,
Inc., Bay Area Fertility and Gynecology Medical Group, Inc. and
Louis N. Weckstein, M.D. (xv)
10.68 -- Personal Responsibility Agreement between IntegraMed America,
Inc., Bay Area Fertility and Gynecology Medical Group, Inc. and
Arnold Jacobson, M.D. (xv)
10.69 -- Copy of Executive Retention Agreement between Registrant and
Glenn G. Watkins (xv)
10.70 -- Management Agreement between Registrant and Fertility Centers of
Illinois, S.C. dated February 28, 1997 (xvi)
10.71 -- Asset Purchase Agreement between Registrant and Fertility
Centers of Illinois, S.C. dated February 28, 1997 (xvi)
10.72 -- Physician-Shareholder Employment Agreement between Fertility
Centers of Illinois, S.C. and Aaron S. Lifchez, M.D. dated
February 28, 1997 (xvi)
10.73 -- Physician-Shareholder Employment Agreement between Fertility
Centers of Illinois, S.C. and Brian Kaplan, M.D. dated February
28, 1997 (xvi) 10.74 -- Physician-Shareholder Employment
Agreement between Fertility Centers of Illinois S.C. and Jacob
Moise, M.D. dated February 28, 1997 (xvi)
10.75 -- Physician-Shareholder Employment Agreement between Fertility
Centers of Illinois, S.C. and Jorge Valle, M.D. dated February
28, 1997 (xvi)
10.76 -- Personal Responsibility Agreement among Registrant, Fertility
Centers of Illinois, S.C. and Aaron S. Lifchez, M.D. dated
February 28, 1997 (xvi)
10.77 -- Personal Responsibility Agreement among Registrant, Fertility
Centers of Illinois, S.C. and Jacob Moise, M.D. dated February
28, 1997 (xvi)
10.78 -- Personal Responsibility Agreement among Registrant, Fertility
Centers of Illinois, S.C. and Brian Kaplan, M.D. dated February
28, 1997 (xvi)
10.79 -- Personal Responsibility Agreement among Registrant, Fertility
Centers of Illinois, S.C. and Jorge Valle, M.D. dated February
28, 1997 (xvi)
10.80 -- Amendment to Contract Number DADA15-96-C-009 between Registrant
and the Department of the Army, Walter Reed Army Medical Center
for In Vitro Fertilization Laboratory Services dated February
11, 1997 (xvi)
10.80(a) -- Amendment Effective January 29, 1998 to Contract Number
DADA 15-96-C-009 between INMD and the Department of the Army,
Walter Reed Army Medical Center for In Vitro Fertilization
Laboratory Services (xxii)
10.81 -- Management Agreement between Registrant and Reproductive
Sciences Medical Center, Inc. (xvii)
10.81 (a) -- Amendment Dated July 11, 1997 to Agreement with Reproductive
Sciences Medical Center, Inc. (xxiv)
10.81 (b) -- Stipulation of Settlement and Compromise of all Claims Among
IntegraMed America, Inc. and Reproductive Sciences Medical
Center, Inc. and Samuel H. Wood, M.D. (xxv)
10.82 -- Asset Purchase Agreement between Registrant and Samuel H. Wood,
M.D., Ph.D. (xvii)
10.83 -- Personal Responsibility Agreement between Registrant and Samual
H. Wood, M.D., Ph.D. (xvii)
10.84 -- Physician-Shareholder Employment Agreement between Reproductive
Sciences Medical Center, Inc. and Samuel H. Wood, M.D., Ph.D.
(xvii)
10.85 -- Physician-Shareholder Employment Agreement between Reproductive
Endocrine & Fertility Consultants, P.A. and Elwyn M. Grimes,
M.D. (xvii)
10.86 -- Amendment to Management Agreement between Registrant and
Reproductive Endocrine & Fertility Consultants, P.A. (xvii)
10.87 -- Amendment to Management Agreement between Registrant and
Fertility Centers of Illinois, S.C. dated May 2, 1997 (xvii)
10.88 -- Management Agreement between Registrant and MPD Medical
Associates, P.C. dated June 2, 1997 (xvii)
10.88(a) -- Amendment to Management Agreement between
IntegraMed America, Inc. and MPD Medical Associates, P.C. dated
as of January 1, 1998 (xxiv)
10.88 (b) -- Management Agreement between IntegraMed America, Inc. and MPD
Medical Associates, P.C. dated July 1, 1999 (xxix)
10.88 (c) -- Amendment No. 1 dated as of October 1, 2000 to the Management
Agreement dated as of July 1, 1999 by and between IntegraMed
America, Inc. and MPD Medical Associates, P.C. (xxxii)
10.88 (d) -- Amendment No. 2 to Management Agreement between IntegraMed
America, Inc. and MPD Medical Associates, P.C. dated December 3,
2001. (lxiv)
10.89 -- Physician-Shareholder Employment Agreement between MPD Medical
Associates P.C. and Gabriel San Roman, M.D. (xvii)
10.90 -- Amendment No. 2 to Management Agreement between Registrant and
Fertility Centers of Illinois, S.C. dated June 18, 1997 (xvii)
10.91 -- Commitment Letter dated June 30, 1997 between Registrant and
First Union National Bank (xvii)
10.92 -- Amendment No. 3 to Management Agreement between Registrant and
Fertility Centers of Illinois, S.C. dated August 19, 1997
(xviii)
10.93 -- Amendment No. 4 to Management Agreement between Registrant and
Fertility Centers of Illinois, S.C. dated January 9, 1998 (xx)
10.94 -- Investment Agreement between Registrant and Morgan Stanley
Venture Partners III, L.P.., Morgan Stanley Venture Investors
III, L.P. and the Morgan Stanley Venture Partners Entrepreneur
Fund, L.P. (xix)
10.95 -- Amendment No. 5 to Management Agreement between Registrant and
Fertility Centers of Illinois, S.C. dated March 5, 1998 (xxi).
10.95 (a) -- Amendment No. 6 to Management Agreement between IntegraMed
America, Inc. and Fertility Centers of Illinois, S.C. dated July
1, 1999 (xxiii)
10.95 (b) Amendment No. 7 to Management Agreement between IntegraMed
America, Inc. and Fertility Centers of Illinois, P.C. dated
April 1, 2000. (xxxi)
10.95 (c) -- Amendment No. 8 to Management Agreement between IntegraMed
America, Inc. and Fertility Centers of Illinois, S.C. (xxxx)
10.96 -- Termination Agreement by and among Women's Medical & Diagnostic
Center, Inc., W. Banks Hinshaw, Jr., Ph.D., M.D., and Robin E.
Markle, M.D.
10.97 -- Loan Agreement between First Union National Bank and IntegraMed
America, Inc. dated November 13, 1997.
10.98 -- Management Agreement between IntegraMed America, Inc. and MPD
Medical Associates (MA), P.C. dated October 1, 1997 (xxi)
10.98 (a) -- Amendment No. 1 to Management Agreement between IntegraMed
America, Inc. and MPD Medical Associates (MA) P.C. and Patricia
M. McShane, M.D. dated November 11, 1998 (xxvi)
10.98 (b) -- Service Agreement between IntegraMed America, Inc. and MPD
Medical Associates (MA) P.C. dated May 25, 2001. (xxxvii)
10.98 (c) -- Amendment No. 1 to Service Agreement between IntegraMed America,
Inc. and MPD Medical Associates (MA), P.C. dated March 5, 2002.
(lxiv)
10.99 -- Physician-Shareholder Employment Agreement between MPD Medical
Associates (MA), P.C. and Patricia McShane, M.D. dated October
1, 1997 (xxi)
10.100 -- Asset Purchase and Sale Agreement by and among IntegraMed
America, Inc. and Fertility Centers of Illinois, S.C., Advocate
Medical Group, S.C. and Advocate MSO, Inc. dated January 9, 1998
(xxi)
10.101 -- Physician Employment Agreement between Fertility Centers of
Illinois, S.C. and Laurence A. Jacobs, M.D. dated January 9,
1998 (xxi)
10.102 -- Physician Employment Agreement between Fertility Centers of
Illinois, S.C. and John J. Rapisarda, M.D. dated January 9, 1998
(xxi)
10.103 -- Personal Responsibility Agreement entered into by and among
IntegraMed America, Inc., Fertility Centers of Illinois, S.C.
and John J. Rapisarda, M.D. dated January 9, 1998 (xxi)
10.104 -- Personal Responsibility Agreement entered into by and among
IntegraMed America, Inc., Fertility Centers of Illinois, S.C.
and Laurence A. Jacobs, M.D. dated January 9, 1998 (xxi)
10.105 -- Management Agreement between Shady Grove Fertility Centers, P.C.
and Levy, Sagoskin and Stillman, M.D., P.C. dated March 11, 1998
(xxi)
10.105 (a)-- Amendment No. 1 to Management Agreement between Shady Grove
Fertility Centers, Inc. and Levy Sagoskin and Stillman, M.D.,
P.C (xxii)
10.105 (b)-- Amendment No. 2 to Management Agreement between Shady Grove
Fertility Centers, Inc. and Levy Sagoskin and Stillman, M.D.,
P.C. dated May 6, 1998 (xxvi)
10.105 (c)-- Amendment No. 3 to the Management Agreement between IntegraMed
America, Inc. and Shady Grove Reproductive Science Center, P.C.
dated September 1, 1999 (xxix)
10.105 (d)-- Amendment No. 4 to Management Agreement between IntegraMed
America, Inc. and Shady Grove Reproductive Science Center, P.C.
dated April 1, 2000. (xxxi)
10.105 (e)-- Amendment No. 5 to Management Agreement between IntegraMed
America, Inc. and Shady Grove Reproductive Science Center, P.C.
(xxxx)
10.105 (f)-- Amendment No. 6 to Management Agreement between IntegraMed
America, Inc. and Shady Grove Reproductive Science Center, P.C.
(xxxx)
10.106 -- Submanagement Agreement between Shady Grove Fertility Centers,
Inc. and IntegraMed America, Inc. dated March 12, 1998 (xxi)
10.107 -- Stock Purchase and Sale Agreement among IntegraMed America, Inc.
and Michael J. Levy, M.D., Robert J. Stillman, M.D. and Arthur
W. Sagoskin, M.D. dated March 12, 1998 (xxi)
10.108 -- Personal Responsibility Agreement by and among IntegraMed
America, Inc. and Arthur W. Sagoskin, M.D. dated March 12, 1998
(xxi)
10.109 -- Personal Responsibility Agreement by and among IntegraMed
America, Inc. and Michael J. Levy, M.D. dated March 12, 1998
(xxi)
10.110 -- Physician-Stockholder Employment Agreement between Levy,
Sagoskin and Stillman, M.D., P.C. and Michael J. Levy, M.D.
dated March 11, 1998 (xxi)
10.111 -- Physician-Stockholder Employment Agreement between Levy,
Sagoskin and Stillman, M.D., P.C. and Arthur W. Sagoskin, M.D.
dated March 11, 1998 (xxi)
10.112 -- Physician-Stockholder Employment Agreement between Levy,
Sagoskin and Stillman, M.D., P.C. and Robert J. Stillman, M.D.
dated March 11, 1998 (xxi)
10.113 -- Commitment letter with Fleet Bank, National Association (xxiv)
10.113 (a)-- Loan Agreement dated September 11, 1998 between IntegraMed
America, Inc. and Fleet Bank, National Association (xxv)
10.113 (b)-- Master Lease Agreement between Fleet Capital Corporation and
IntegraMed America, Inc. (xxix)
10.113 (c)-- Amendment Number One to Loan Agreement dated September 11, 1998
between IntegraMed America, Inc. and Fleet Bank, National
Association. (xxx)
10.113 (d)-- Amendment Number Two to Loan Agreement dated September 11, 1998
between IntegraMed America, Inc. and Fleet Bank, National
Association. (xxx)
10.113 (e)-- Amendment Number Three to Loan Agreement dated September 11,
1998 between IntegraMed America, Inc. and Fleet Bank, National
Association. (xxxvi)
10.113 (f)-- Amendment Number Four to Loan Agreement dated September 11, 1998
between IntegraMed America, Inc. and Fleet Bank, National
Association. (xxxvi)
10.113 (g)-- Amended and Restated Loan Agreement dated as of September 28,
2001 between IntegraMed America, Inc. and Fleet National Bank.
(xxxx)
10.113 (h)-- Amendment to Amended and Restated Loan Agreement between
IntegraMed America, Inc. and Fleet National Bank dated September
20, 2002 (liv)
10.114 -- Management Agreement Among IntegraMed Pharmaceutical Services,
Inc., IVP Pharmaceutical Care, Inc., and IntegraMed America,
Inc. (xxvii)
10.114(a) -- Service Agreement among IntegraMed Pharmaceutical Services,
Inc., ivpcare, Inc. and IntegraMed America, Inc. dated January
16, 2002. (lxiv)
10.115 -- Management Agreement between IntegraMed America, Inc. and David
R. Corley, M.D., P.C. dated July 1, 1999 (xxviii)
10115 (a) -- Personal Responsibility Agreement among Registrant and David R.
Corley, M.D. (xxviii)
10.116 -- Form of Retention Agreement between Registrant and Kathi
Baginski, Peter Cucchiara, Dan Desmarais, Anders Engen, Jay
Higham, John Hlywak, Jr., Mark Segal, Claude E. White, and
Donald S. Wood, Ph.D. (xxviii)
10.117 -- Form of Indemnification Agreement dated June 1, 2000 between
IntegraMed America, Inc. and M. Fazle Husain, Michale Levy,
M.D., Aaron Lifchez, M.D., Sarason Liebler, Larry Stuesser,
Elizabeth E. Tallett, Gerardo Canet, Peter Cucchiara, Jay
Higham, John Hlywak, Jr., Claude E. White, and Donald S. Wood,
Ph.D. (xxxi)
10.118 -- Service Agreement between IntegraMed America, Inc. and Northwest
Center for Infertility and Reproductive Endocrinology dated
April 26, 2002. (xxxxvi)
10.118 (a) -- Amendment No. 1 to Service Agreement between IntegraMed America,
Inc. and Northwest Center for Infertility and Reproductive
Endocrinology dated June 14, 2002. (liv)
10.118 (b) -- Amendment No. 2 to Service Agreement between IntegraMed America,
Inc. and Northwest Center for Infertility and Reproductive
Endocrinology dated November 1, 2002.
10.119 -- Copy of Registrant's 2000 Long Term Compensation Plan (l)
21 -- List of Subsidiaries
23.1 -- Consent of PricewaterhouseCoopers LLP
99.1 Registrant's Press Release dated November 1, 2000. (xxxiii)
99.2 Registrant's Press Release dated December 13, 2000 (xxxiv)
99.3 Registrant's Press Release dated January 26, 2001. (xxxv)
99.4 Registrant's Press Release dated May 2, 2001 (xxxviii)
99.5 Registrant's Press Release dated August 1, 2001 (xxxix)
99.6 Registrant's Press Release dated November 1, 2001 (xxxxi)
99.7 Registrant's Press Release dated November 30, 2001 (xxxxii)
99.8 Registrant's Press Release dated January 29, 2002 (xxxxiii)
99.9 Registrant's Press Release dated February 14, 2002 (xxxxiv)
99.10 Registrant's Press Release dated February 21, 2002 (xxxxv)
99.11 Registrant's Press Release dated March 25, 2002 (xxxxvii)
99.12 Registrant's Press Release dated May 2, 2002 (xxxxviii)
99.13 Registrant's Press Release dated May 9, 2002 (xxxxix)
99.14 Registrant's Press Release dated June 18, 2002 (li)
99.15 Registrant's Press Release dated July 25, 2002 (lii)
99.16 Registrant's Press Release dated July 20, 2002 (liii)
99.17 CEO Certification Pursuant to 18 U.S.C.ss.1350 as Adopted Pursuant to
Sections 906 of the Sarbanes Oxley Act of 2002 (l)
99.18 CFO Certification Pursuant to 18 U.S.C.ss.1350 as Adopted Pursuant to
Sections 906 of the Sarbanes Oxley Act of 2002 (l)
99.19 Registrant's Press Release dated October 25, 2002 (lv)
99.20 Registrant's Press Release dated October 30, 2002 (lvi)
99.21 CEO Certification Pursuant to 18 U.S.C.ss.1350 as Adopted Pursuant to
Sections 906 of the Sarbanes Oxley Act of 2002 dated November 13, 2002
(liv)
99.22 CFO Certification Pursuant to 18 U.S.C.ss.1350 as Adopted Pursuant to
Sections 906 of the Sarbanes Oxley Act of 2002 dated November 13, 2002
(liv)
99.23 Registrant's Press Release dated November 19, 2002 (lvii)
99.24 Registrant's Press Release dated November 27, 2002(lviii)
99.25 Registrant's Press Release dated December 11, 2002(lix)
99.26 Registrant's Press Release dated December 30, 2002(lx)
99.27 Registrant's Press Release dated February 19, 2003(lxi)
99.28 Registrant's Press Release dated March 17, 2003(lxii)
99.29 Registrant's Press Release dated March 24, 2003 (lxiii)
99.30 CEO Certification Pursuant to 18 U.S.C.ss.1350, as Adopted Pursuant to
Section 302 of the Sarbanes Oxley Act of 2002
99.31 CFO Certification Pursuant to 18 U.S.C.ss.1350 as Adopted Pursuant to
Sections 302 of the Sarbanes Oxley Act of 2002
99.32 CEO Certification Pursuant to 18 U.S.C.ss.1350 as Adopted Pursuant to
Sections 906 of the Sarbanes Oxley Act of 2002
99.33 CFO Certification Pursuant to 18 U.S.C.ss.1350 as Adopted Pursuant to
Sections 906 of the Sarbanes Oxley Act of 2002
- ---------------------------------------------------------
(i) Filed as Exhibit with identical exhibit number to Registrant's
Statement on Form S-1 (Registration No. 33-47046) and incorporated
herein by reference thereto.
(ii) Filed as Exhibit with identical exhibit number to Registrant's
Statement on Form S-1 (Registration No. 33-60038) and incorporated
herein by reference thereto.
(iii) Filed as Exhibit with identical exhibit number to Registrant's
Quarterly Report on Form 10-Q for the period ended March 31, 1994 and
incorporated herein by reference thereto.
(iv) Filed as Exhibit with identical exhibit number to Registrant's
Quarterly Report on Form 10-Q for the period ended June 30, 1994 and
incorporated herein by reference thereto.
(v) Filed as Exhibit with identical exhibit number to Registrant's
Quarterly Report on Form 10-Q for the period ended September 30, 1994
and incorporated herein by reference thereto.
(vi) Filed as Exhibit with identical exhibit number to Registrant's
Statement on Form 10-K for the year ended December 31, 1993.
(vii) Filed as Exhibit with identical exhibit number to Registrant's
Statement on Form S-4 (Registration No. 33-82038) and incorporated
herein by reference thereto.
(viii) Filed as Exhibit with identical exhibit number to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.
(ix) Filed as Exhibit with identical number to Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1995.
(x) Filed as Exhibit with identical number to Registrant's Quarterly
Report on Form 10-Q for the year ended September 30, 1995.
(xi) Filed as Exhibit with identical number to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995.
(xii) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated June 20, 1996.
(xiii) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K/A dated August 20, 1996.
(xiv) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated January 20, 1997.
(xv) Filed as Exhibit with identical exhibit number to Annual Report on
Form 10-K for the year ended December 31, 1996.
(xvi) Incorporated by Reference to the Exhibit with the identical exhibit
number to Registrant's Registration Statement on Form S-1
(registration No. 333-26551) filed with the Securities and Exchange
Commission on May 6, 1997.
(xvii) Incorporated by reference to the Exhibit with the identical exhibit
number to Registrant's Registration Statement on Form S-1
(Registration No. 333-26551) filed with the Securities and Exchange
Commission on June 20, 1997.
(xviii) Filed as Exhibit with identical exhibit number to Registrant's
Quarterly Report on Form 10-Q for the period ended September 30, 1997
and incorporated herein by reference thereto.
(xix) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated January 23, 1998.
(xx) Filed as Exhibit with identical exhibit number to Schedule 13D dated
February 11, 1998.
(xxi) Filed as Exhibit with identical exhibit number to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997.
(xxii) Filed as Exhibit with identical number to Registrant's Quarterly
Report on Form 10-Q for the period ended March 31, 1998.
(xxiii) Incorporated by reference to the Registrant's Definitive Proxy
Statement filed on May 5, 1997.
(xxiv) Filed as Exhibit with identical number to Registrant's Quarterly
Report on form 10-Q for the period ended June 30, 1998.
(xxv) Filed as Exhibit with identical number to Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1998.
(xxvi) Filed as Exhibit with identical number to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998.
(xxvii) Filed as Exhibit with identical number to Registrant's Quarterly
Report on Form 10-Q for the period ended March 31, 1999.
(xxviii) Filed as Exhibit with identical number to Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1999.
(xxix) Filed as Exhibit with identical number to Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1999.
(xxx) Filed as Exhibit with identical number to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1999.
(xxxi) Filed as Exhibit with identical exhibit number to Registrant's
Quarterly Report on Form 10-Q for the period ended June 30, 2000.
(xxxii) Filed as Exhibit with identical exhibit number to Registrant's
Quarterly Report on Form 10-Q for the period ended September 30,
2000.
(xxxiii) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated November 1, 2000.
(xxxiv) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated December 13, 2000.
(xxxv) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated January 26, 2001.
(xxxvi) Filed as Exhibit with identical exhibit number to Registrant's Annual
Report on Form 10-K for the year ended December 31, 2000.
(xxxvii) Filed as Exhibit with identical exhibit number to Registrant's
Quarterly Report on Form 10-Q for the period ended June 30, 2001.
(xxxviii) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated May 2, 2001
(xxxix) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated August 1, 2001.
(xxxx) Filed as Exhibit with identical exhibit number to Registrant's
Quarterly Report on Form 10-Q for the period ended September 30,
2001.
(xxxxi) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated November 1, 2001.
(xxxxii) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated November 30, 2001.
(xxxxiii) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated January 29, 2002.
(xxxxiv) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated February 14, 2002
(xxxxv) Filed as Exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated February 21, 2002.
(xxxxvi) Filed as Exhibit with identical number to Registrant's Quarterly
Report on Form 10-Q for the period ended March 31, 2002
(xxxxvii) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated March 25, 2002.
(xxxxviii) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated May 3, 2002.
(xxxxix) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated May 10, 2002.
(l) Filed as Exhibit with identical number to Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 2002
(li) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated June 19, 2002.
(lii) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated July 29, 2002.
(liii) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated July 31, 2002.
(liv) Filed as Exhibit with identical number to Registrant's Quarterly
Report on form 10Q for the period ended September 30, 2002.
(lv) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated October 28, 2002.
(lvi) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated October 31, 2002.
(lvii) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated November 21, 2002
(lviii) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated November 27, 2002
(lix) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated December 13, 2002
(lx) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated December 31, 2002
(lxi) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated dated February 21, 2003
(lxii) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated March 18, 2003
(lxiii) Filed as exhibit with identical exhibit number to Registrant's Report
on Form 8-K dated March 25, 2003
(lxiv) Filed as Exhibit with identical exhibit number to Registrant's Annual
Report on Form 10-K for the year ended December 31, 2001.