IntegraMed America CEO Discusses Q2 2011 Results - Earnings Call Transcript

IntegraMed America, Inc. ( INMD)

Q2 2011 Earnings Call

August 4, 2011 10:00 a.m. ET


Norberto Aja – IR

Jay Higham – President and CEO

Timothy P. Sheehan – VP and Interim CFO


Nicholas Halen – Sidoti & Company, LLC

Brooks O'Neil – Dougherty & Company

Kevin Ellich - Piper Jaffray

Frank DiLorenzo – Singular Research



Good morning. My name is Fredrick and I will be your conference operator today. At this time, I'd like to welcome everyone to the IntegraMed Second Quarter Investor Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. Mr. Norberto Aja, Investor Relations. You may begin your conference.

Norberto Aja

Thank you, operator. Good morning, everyone, and thank you for participating in IntegraMed's Second Quarter Conference Call. I’m joined today by Mr. Jay Higham, President and CEO; and by Tim Sheehan, Vice President and Interim CFO of IntegraMed.

Before we begin, however, I would like to caution that some of comments made on this call, may refer to certain measures such normalized earnings, which are not calculated in accordance with Generally Accepted Accounting Principles or GAAP.

Management believes these results are representative of the performance of the ongoing business of the company. For recalculation and reconciliation of normalized earnings to GAAP results in accordance with Regulation G under the Securities and Exchange Act, please see the company’s press release furnished as an exhibit to its current report on Form 8-K filed with the Securities and Exchange Commission today August 4, 2011, which maybe found under the News tab of the company’s website at

The content of this conference call contains time-sensitive information that is accurate only as of today, August 4, 2011. IntegraMed undertakes no obligation to revise or update any statements to reflect events or circumstances occurring after the date of this conference call.

With that, I'd now like to turn the call over to Mr. Jay Higham, President and CEO. Jay.

Jay Higham

Thank you, Norberto, and good morning everyone. We appreciate your joining us today and hope you’ve had a chance to review our Q2 release issued earlier this morning.

Before I review our Q2 operating results, I do want to explain the background or around the $1.65 million charge. The expense is a pre-tax provision for the settlement of medical malpractice suit brought against one of our partner fertility centers, a physician at the practice, and the company which reduced our reported net income by about $1 million. Absent this charge, IntegraMed would have reported normalized EPS of $0.12 per share for the quarter. And though, we have disclosed this as a legal risk factor in our last two quarterly SEC filings. And malpractice is unfortunate reality of healthcare and healthcare-related business, this is not the outcome we expected.

It was only in late May that we gained clarity on where the case is going, and since then, we’ve been actively involved in reaching a satisfactory resolution on the settlement of the terms we reported today.

Despite by this setback, we continue to believe our operating structure provides substantial protections against medical malpractice liability, both in terms of how we’re structured and through insurance. We do not believe that this case represents an unfavorable precedent and materially changes our business risk.

However, having endured this proceeding and having increased our insurance coverage over the past year by creating an additional entity level of coverage. There maybe other steps we can take, such as requiring each nurse to carry an additional level of individual malpractice insurance, which we are evaluating as well.

I want to turn the basic operations, I understand there’s likely to be other questions regarding this case and I’m prepared to address those in detail during the Q&A.

With that behind us, let’s now turn to our quarterly operating performance and our plans going forward.

Our second quarter revenue growth demonstrates the underlying strength of core business as revenue from our Attain Fertility Centers Division increased 8.9% and revenue from our Vein Clinics Division grew 19.8% for an overall growth rate of 11.8% versus the second quarter of last year.

Looking first at the Attain Fertility Centers, growth took place across IVF and IUI treatments at our partner centers, as well as from enrollment growth and a modest increase in the pregnancy rate in our Attain IVF program.

IntegraMed partner centers continue to shift to achieve growth rates that are well in access of the broader fertility market reflecting our proven track record of taking market share away from our competing non-IntegraMed fertility centers.

From an operating income perspective, as we stated last quarter, the Attain Fertility Centers Division Q2 and first-half results for 2011 were impacted by the reallocation of certain expenses from the corporate to the division level.

The effect was an increase in Attain Fertility Center Division G&A of approximately $200,000 in both Q2 and Q1 of this year as compared to last year. Of course, corporate G&A had a corresponding decrease which was principally – which was the principal factor in the year-over-year decline in corporate G&A.

Growth in our high-margin Attain IVF fertility treatment program moderated during the second quarter as we annualized the launch of the Multi-Cycle program, which had provided strong growth last year.

The drop in applications is principally related training physicians and nurses to help them better identify patient profiles. They’re likely to meet the program's requirements, which has allowed us increased enrollments from fewer applications.

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