form10ka312312008.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
_________________
FORM 10-K/A
Amendment No. 3

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from  _____  to  _____

Commission File No. 0-20260

INTEGRAMED AMERICA, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
06-1150326
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

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:

Title of each class
Name of exchange on which registered
Common Stock, $.01 par value
NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes                
No      X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act.
Yes                
No      X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes X No 

Indicate 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 a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large Accelerated Filer:
Accelerated Filer                               X
Non-Accelerated Filer:  (Do not check if a smaller reporting company)
Small Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes                
No      X
   
Aggregate market value of voting stock (Common Stock, $.01 par value) held by non-affiliates of the Registrant was approximately $61.9 million on June 30, 2008 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 8,760,300 on March 17, 2009.
 
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EXPLANATORY NOTE

IntegraMed America, Inc. (“we” or the “Company”) is filing this Amendment No. 3 on Form 10-K/A (the “Amendment”) to amend its Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed with the Securities and Exchange Commission on March 31, 2009 (the “Original Filing”), as amended by Amendment No. 1 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 5, 2009, and Amendment No. 2 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 14, 2009. The Amendment amends  “Item 8 Financial Statements and Supplementary Data”, as well as the Report of Independent Registered Public Accounting Firm.  In addition, new certifications are filed as exhibits to the Amendment.  The Amendment only sets forth the information that has been amended and does not restate the Annual Report on Form 10-K in its entirety.  The Amendment is filed to revise the date of the Report of the Independent Registered Public Accounting Firm to reflect a previous restatement, and to describe such restatement, as well as a previous restatement, as corrections of errors.  There have been no changes to any of the previously reported amounts.

 
The Amendment does not reflect events occurring after the filing of the Original Filing and unless otherwise stated herein, the information contained in the Amendment is current only as of the time of the Original Filing.  Except as described above, no other changes have been made to the Original Filing. Accordingly, the Amendment should be read in conjunction with the Company’s filings made with the Securities and Exchange Commission subsequent to the filing of the Original Filing, including the Company’s definitive proxy statement filed on April 15, 2009.
 

 
2
 

ITEM 8.
Financial Statements and Supplementary Data

 
See Index to Financial Statements on Page F-1.




 
3
 

FINANCIAL STATEMENTS

Item 8 and 15 (a)(1)

Contents





IntegraMed America, Inc
Page
   
Report of Independent Registered Public Accounting Firm
F-2-3
Consolidated Balance Sheets as of December 31, 2008 and 2007
F-4
Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006
 
F-5
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2008, 2007 and 2006
 
F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006
F-7
Notes to Consolidated Financial Statements
F-8
   
Financial Statement Schedule
  
   
Report of Independent Registered Public Accounting Firms on Financial Statement Schedule II
 
S-1
Valuation and Qualifying Accounts
S-2



 
 
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Shareholders of IntegraMed America, Inc.

We have audited the accompanying consolidated balance sheets of IntegraMed America, Inc. as of December 31, 2008 and 2007 and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2008.  We also have audited IntegraMed America, Inc.‘s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  IntegraMed America, Inc.’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying consolidated financial statements.  Our responsibility is to express an opinion on these financial statements and an opinion on the company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included 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.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances.  We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified and included in its assessment of internal controls over financial reporting the following material weakness as of December 31, 2008.  The Company’s systems did not properly recognize as revenue, with an equal reduction to the recorded liability (deferred revenue), a portion of nonrefundable fees on patients who voluntarily withdrew from the IVF Attain program.  This material weakness resulted in restatement of the Company’s previously issued financial statements for the years ended 2001 through 2008.
 
 

 
F-2
 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IntegraMed America, Inc. as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, management’s assessment that IntegraMed America, Inc. did not maintain effective internal control over financial reporting as of December 31, 2008 is fairly stated based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Also, in our opinion, as a result of the material weakness identified in the previous paragraph, IntegraMed America, Inc. has not maintained effective internal control over financial reporting as of December 2008 based on criteria established in Internal Control-Integrated Framework issued by COSO.

As discussed in Note 2 to the consolidated financial statements, the Company restated its consolidated financial statements as of December 31, 2008, 2007 and 2006.

As discussed in Note 15 to the consolidated financial statements, effective January 1, 2007, the Company adopted the provisions of Financial Interpretation (FIN) No. 48 “Accounting for Uncertainty in Income Taxes- an interpretation of Statement of Financial Accounting Standards No. 109.”



/s/Amper, Politziner & Mattia, LLP
Edison, New Jersey
March 30, 2009, except for the restatement discussed in Note 2
to the Consolidated Financial Statements, as to which the date is
October 28, 2009.



 
F-3
 

PART I — FINANCIAL INFORMATION
Item 1.                     Consolidated Financial Statements

INTEGRAMED AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(all dollars in thousands, except share amounts)


   
December 31,
    
December 31,
  
   
2008
    
2007
  
   
(restated)
    
(restated)
  
ASSETS
            
Current assets:
            
Cash and cash equivalents
   $ 28,275     $ 23,740  
Patient and other receivables, net
     6,681       5,511  
Deferred taxes
     5,744       5,565  
Other current assets
     6,466       4,668  
Total current assets
     47,166       39,484  
                 
Fixed assets, net
     16,618       16,912  
Intangible assets, Business Service Rights, net
     21,956       22,305  
Goodwill
     29,478       29,359  
Trademarks
     4,442       4,492  
Other assets
     1,781       1,619  
Total assets
   $ 121,441     $ 114,171  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                
Current liabilities:
                
Accounts payable
   $ 2,853     $ 1,895  
Accrued liabilities
     17,818       17,760  
Current portion of long-term notes payable and other obligations
     11,351       3,661  
Due to Fertility Medical Practices
     6,354       9,043  
Attain IVF Refund Program deferred revenue and other Patient Deposits
     11,237       10,560  
Total current liabilities
     49,613       42,919  
                 
Long-term notes payable and other obligations
     18,868       21,799  
Deferred and other tax liabilities
     696       1,819  
Total Liabilities
     69,177       66,537  
                 
Commitments and Contingencies
                
                 
Shareholders' equity:
                
Common Stock, $.01 par value – 15,000,000 shares authorized in 2008
                
and 2007, respectively, 8,668,376 and 8,572,258 shares issued and
                
outstanding in 2008 and 2007, respectively
     87       86  
Capital in excess of par
     54,943       53,890  
Other comprehensive loss
     (375 )     (82 )
Treasury stock, at cost – 22,682 and 14,175 shares in 2008 and 2007, respectively
     (211 )     (165 )
Accumulated deficit
     (2,180 )     (6,095 )
Total shareholders' equity
     52,264       47,634  
Total liabilities and shareholders' equity
   $ 121,441     $ 114,171  
                 

See accompanying notes to the consolidated financial statements.

 
F-4
 


INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in thousands, except per share amounts)



   
For the Year ended
  
   
2008
    
2007
    
2006
  
   
(restated)
    
(restated)
    
(restated)
  
Revenues, net
                  
Fertility Centers
   $ 138,440     $ 121,078     $ 112,767  
Consumer Services
     19,763       16,460       13,553  
Vein Clinics
     39,950       14,284    
 
Total revenues
     198,153       151,822       126,320  
                         
Costs of services and sales:
                        
Fertility Centers
     128,224       111,059       104,357  
Consumer Services
     14,344       12,336       9,421  
Vein Clinics
     37,299       13,304    
 
Total costs of services and sales
     179,867       136,699       113,778  
                         
Contribution
                        
Fertility Centers
     10,216       10,019       8,410  
Consumer Services
     5,419       4,124       4,132  
Vein Clinics
     2,651       980    
 
Total contribution
     18,286       15,123       12,542  
                         
General and administrative expenses
     10,654       10,537       9,380  
Interest income
     (383 )     (1,256 )     (1,073 )
Interest expense
     1,563       1,136       695  
Total other expenses
     11,834       10,417       9,002  
                         
Income before income taxes
     6,452       4,706       3,540  
Income tax provision
     2,537       1,662       1,291  
Income tax benefit
  
   
      (821 )
Net income
   $ 3,915     $ 3,044     $ 3,070  
                         
Basic and diluted net earnings per share:
                        
Basic earnings per share
   $ 0.45     $ 0.37     $ 0.38  
Diluted earnings per share
   $ 0.45     $ 0.36     $ 0.37  
                         
Weighted average shares - basic
     8,618       8,310       8,090  
Weighted average shares - diluted
     8,691       8,410       8,194  


See accompanying notes to the consolidated financial statements.


 
F-5
 


INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(all amounts in thousands)
(Restated)


   
Common Stock
    
Capital in
    
Accumulated
Comprehensive
    
Treasury Stock
    
Accumulated
    
Total
  
   
Shares
    
Amount
    
Excess of Par
    
Income (Loss)
    
Shares
    
Amount
    
Deficit
    
Equity
  
                                                 
BALANCE AT DECEMBER 31, 2005
     8,008     $ 80     $ 49,364    
      133     $ (937 )   $ (12,209 )   $ 36,298  
Stock grants issued, net
     85       1       58    
   
   
   
      59  
Stock grant compensation expense
                                                              
amortization
  
   
      405    
   
   
   
      405  
Exercise of common stock options and related tax benefits
     187       1       498    
   
   
   
      499  
Amortization of common stock option compensation expense
  
   
      87    
   
   
   
      87  
Unrealized loss on hedging transaction
  
   
   
      (9 )  
   
   
      (9 )
Retirement of Treasury stock, net of shares issued upon exercise of options
   or issuance of stock grants
     (153 )     (1 )     (1,167 )  
 
       (133 )       937    
 
       (231 )
Net income for the year ended 12/31/06
  
   
   
   
   
   
      3,070       3,070  
                                                                 
BALANCE AT DECEMBER 31, 2006
     8,127       81       49,245       (9 )  
   
      (9,139 )     40,178  
Stock grants issued, net
     78    
   
   
      19       (228 )  
      (228 )
Stock grant compensation expense amortization
  
   
      558    
   
   
   
      558  
Exercise of common stock options and related tax benefits
     35       1       154    
   
   
   
      155  
Treasury stock transactions, net
     (5 )  
      (63 )  
      (5 )     63    
   
 
Issuance of common stock upon  acquisition of Vein Clinics of America, Inc.
     337       4       3,996    
   
   
   
      4,000  
Unrealized loss on hedging transaction
  
   
   
      (73 )  
   
   
      (73 )
Net income for the year ended 12/31/07
  
   
   
   
   
   
      3,044       3,044  
                                                                 
BALANCE AT DECEMBER 31, 2007
     8,572       86       53,890       (82 )     14       (165 )     (6,095 )     47,634  
Stock grants issued, net
     99       1       (1 )  
   
   
   
   
 
Stock grant compensation expense amortization
  
   
      858    
   
   
   
      858  
Exercise of common stock options and related tax benefits
     11       1       360    
      2       (23 )  
      338  
Treasury stock transactions, net
     (14 )     (1 )     (164 )  
      7       (23 )  
      (188 )
Unrealized loss on hedging transaction
  
   
   
      (293 )  
   
   
      (293 )
Net income for the year ended 12/31/08
  
   
   
   
   
   
      3,915       3,915  
                                                                 
BALANCE AT DECEMBER 31, 2008
     8,668     $ 87     $ 54,943     $ (375 )     23     $ (211 )   $ (2,180 )   $ 52,264  

 
See accompanying notes to the consolidated financial statements


 
F-6
 

INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(all amounts in thousands)


 

 
   
For the
Twelve-month period
Ended December 31,
  
   
2008
    
2007
    
2006
  
   
(restated)
    
(restated)
    
(restated)
  
Cash flows from operating activities:
                  
Net income
   $ 3,915     $ 3,044     $ 3,070  
Adjustments to reconcile net income to net cash provided
                        
operating activities:
                        
Depreciation and amortization
     7,288       6,450       5,705  
Deferred income tax provision
     (1,068 )     469       (799 )
Deferred or stock-based compensation
     858       558       492  
                         
Changes in assets and liabilities —
                        
Decrease (increase) in assets, net of assets acquired from VCA
                        
Patient and other accounts receivables
     (1,170 )     (378 )     45  
Prepaids and other current assets
     (643 )     (1,040 )     (403 )
Other assets
     (162 )     (122 )     (99 )
                         
(Decrease) increase in liabilities, net of liabilities acquired from VCA
                        
Accounts payable
     958       (271 )     590  
Accrued liabilities
     (1,097 )     285       4,106  
Due to medical practices
     (2,689 )     4,744       (650 )
Attain IVF deferred revenue and other patient deposits
     677       2,217       1,906  
Net cash provided by operating activities
     6,867       15,956       13,963  
                         
Cash flows from investing activities:
                        
Purchase of business service rights
     (950 )     (2,653 )  
 
Cash paid to purchase VCA, net of cash acquired
     (119 )     (25,409 )  
 
Purchase of other intangibles
     50       (40 )     (12 )
Purchase of fixed assets and leasehold improvements, net
     (5,695 )     (6,222 )     (3,233 )
Net cash used in investing activities
     (6,714 )     (34,324 )     (3,245 )
                         
Cash flows from financing activities:
                        
Proceeds from issuance of debt
     7,880       25,000    
 
Debt repayments
     (3,648 )     (15,163 )     (1,382 )
Common Stock transactions, net
     150       87       327  
Net cash provided by (used in) financing activities
     4,382       9,924       (1,055 )
                         
Net increase (decrease) in cash and cash equivalents
     4,535       (8,444 )     9,663  
Cash and cash equivalents at beginning of period
     23,740       32,184       22,521  
Cash and cash equivalents at end of period
     28,275       23,740       32,184  
                         
Supplemental Information:
                        
Interest paid
     1,632       1,024       695  
Income taxes paid
     1,526       1,130       327  


See accompanying notes to the consolidated financial statements.


 
F-7
 

INTEGRAMED AMERICA, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 

 
NOTE 1 — THE COMPANY:
 

 
IntegraMed America, Inc. is a specialty healthcare services company offering products and services to patients and providers in the fertility and vein care segments of the health industry.

As of December 31, 2008, our fertility line of business encompassed two of our reporting segments and was comprised of 33 contracted fertility centers in major markets across the United States, with products and services designed to support fertility center growth, assist patients with treatment financing, an Attain IVF (formerly Shared Risk Refund) program and captive insurance offerings. We offer a comprehensive array of defined business services to 11 of these contracted fertility centers under our Partner program, and a more discrete menu of services to 22 other fertility centers under our Affiliate program. All 33 centers have access to our consumer services offerings which are comprised of our Attain IVF program and patient financing products.

In late 2008, our Consumer Services division re-launched its successful Shared Risk Refund program under the name “Attain IVF”. This re-branding was done to reflect advantages offered by the program beyond its basic risk sharing features and to position the program in a leadership role among smaller, similar programs offered by other providers. We have also corrected an error in our revenue recognition model for this program as described in Note 2 and Note 3.  All amounts presented for 2007 and 2006 have been restated to reflect the correction of the error in revenue recognition.

Our vein clinic division, which began operations in August, 2007, is currently comprised of 33 (32 as of December 31, 2008) vein clinics in major markets, which primarily provide advanced treatment for vein diseases. We offer a comprehensive array of defined business services to these clinics which are designed to support their operations and growth.

NOTE 2 ¾ RESTATEMENT OF REVENUE RECOGNITION FOR ATTAIN IVF REFUND PROGRAM:
 

 
Restatement No. 2 – The Correction of an Error
 

 
On October 28, 2009, management concluded and subsequently reported to the audit committee of our board of directors that our audited consolidated financial statements as of and for the years ended December 31, 2006, 2007, and 2008 should no longer be relied upon and will be restated due to an understatement in revenue recognized in connection with its Attain IVF Refund Program.

We had previously restated (see Restatement No. 1- Correction of an Error in Revenue Recognition Policy for the Attain IVF Program below) certain financial statements after determining that they could not be relied upon.   Specifically, we restated our prior financial statements with respect to the correction of an error in the timing of revenue and profit recognition of $3,477,000 of the revenue related to our Attain IVF Refund Program within our Consumer Services Division for the years 2001 through 2008.  That restatement did not impact the cash flows from operations of this program or the ultimate profits to be recognized, only the timing of the revenue and profit recognition.

Subsequent to Restatement No. 1, we developed, programmed and tested a new patient management and revenue recognition system for our Attain IVF Refund Program.  The new system recently reached sufficient operating proficiency to allow input of the patient information related to our Attain IVF Refund Program.  As a result, we identified that the deferred revenue amount of $3,477,000, related to the years 2001 through 2008, that had been previously restated should have been only $822,000.  We determined that while the previous system properly accounted for the recognition of the proportional fair value revenue related to the non-refundable portion of the patient fee (which was the subject of a comment and review process by the Staff of the Division of Corporation Finance of the Securities and Exchange Commission (SEC)), it assumed all patients would either achieve pregnancy or utilize all services available to them under the program.  It is a fact that most of the patients that seek a refund, do so prior to utilizing all services available under the program.  As a result, our revenue recognition model failed to recognize as revenue the remaining deferred revenue portion of the non-refundable fee on that class of patients.

 
F-8
 
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



 
The change in our Consolidated Balance Sheet  and Consolidated Statement of Operations as of and for the twelve months ended December 31, 2008, 2007 and 2006 related to Restatement No. 2 is presented below (000’s, except per share amounts):


                   
   
Twelve Months Ending
 
   
December 31,
 
   
2008
   
2007
   
2006
 
                   
Revenue recognized from prior period
  $ 750     $ 1,406     $ 1,908  
Revenue deferred to future period
    0       (750 )     (1,406 )
Net change in period revenue
  $ 750     $ 656     $ 502  
                         
                         
Revenue as reported
  $ 197,403     $ 151,166     $ 125,818  
Net change in reported revenue
    750       656       502  
Revenue as restated
  $ 198,153     $ 151,822     $ 126,320  
                         
                         
Income before income taxes as reported
  $ 5,715     $ 4,062     $ 3,047  
Net change in reported revenue
    750       656       502  
Net change in reserve for medical costs
    (13 )     (12 )     (9 )
Income before income taxes as restated
  $ 6,452     $ 4,706     $ 3,540  
                         
                         
Income tax provision as reported
  $ 2,227     $ 1,392     $ 263  
Net change in income taxes from above adjustments
    310       270       207  
Income tax provision as restated
  $ 2,537     $ 1,662     $ 470  
                         
                         
Net Income as reported
  $ 3,488     $ 2,670     $ 2,784  
Summary of above adjustments
    427       374       286  
Net income as restated
  $ 3,915     $ 3,044     $ 3,070  
                         
                         
Diluted earnings per share as reported
  $ 0.40     $ 0.32     $ 0.34  
Change in earnings per share from above adjustments
  $ 0.05     $ 0.04     $ 0.03  
Diluted earnings per share as restated
  $ 0.45     $ 0.36     $ 0.37  
                         
                         
Current liabilities as reported
  $ 51,126     $ 44,005     $ 27,856  
Cumulative effect of restatement on current liabilities
    (1,513 )     (1,086 )     (712 )
Current liabilities as restated
  $ 49,613     $ 42,919     $ 27,144  
                         
                         
Shareholders Equity as reported
  $ 50,753     $ 46,549     $ 39,466  
Cumulative effect of restatement on Shareholders Equity
    1,511       1,085       712  
Shareholders Equity as restated
  $ 52,264     $ 47,634     $ 40,178  

There was no change to cash flow as a result of this restatement.

 
F-9
 
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Restatement No. 1 – Correction of an Error in Revenue Recognition Policy for the Attain IVF Program.

The accompanying 2007 and 2006 consolidated financial statements have been restated to reflect the correction of an error in the revenue recognition policy for our attain IVF program.  The 2008 data is restated as to the interim period and the full year of 2008 is shown as a comparison of the previous and new revenue recognition methods.  Our previous revenue recognition policy had generally recognized the non-refundable patient fees (generally 30% of the contract amount) as revenue upon the completion of the first treatment cycle and we now recognize the non-refundable fees based on the relationship of the relative fair value of each treatment to the total fair value of the treatment package available to each patient.  We also recognize a “warranty reserve” representing the estimated cost of services to be provided in the event a qualified patient miscarries.  This restatement does not impact the cash flows from the operations of this program or the ultimate profits to be recognized, only the timing of the revenue recognition for a portion of the fees that we collect from our customers.

The impact of the correction of the error  in the timing of revenue recognition for Restatement No. 1 only, is as follows:
 

 
   
2008
   
2007
   
2006
 
                   
Revenue as reported
  $ 198,084     $ 151,998     $ 126,438  
Net Change in reported revenue
    (681 )     (832 )     (620 )
Revenue as restated
  $ 197,403     $ 151,166     $ 125,818  
                         
Income before income taxes as reported
  $ 6,454     $ 4,952     $ 3,731  
Net change in reported revenue
    (681 )     (832 )     (620 )
Net change in reserve for medical costs
    (58 )     (58 )     (64 )
Income before income taxes as restated
  $ 5,715     $ 4,062     $ 3,047  
                         
Income tax provision as reported
  $ 2,514     $ 1,695     $ 507  
Net change in income taxes from above adjustments
    (288 )     (304 )     (244 )
Income tax provision as restated
  $ 2,226     $ 1,391     $ 263  
                         
Net income as reported
  $ 3,940     $ 3,257     $ 3,224  
Summary of above adjustments
    (451 )     (586 )     (440 )
Net income as restated
  $ 3,489     $ 2,671     $ 2,784  
                         
Diluted earnings per share as reported
  $ 0.45     $ 0.39     $ 0.39  
Change in earnings per share from above adjustments
    (0.05 )     (0.07 )     (0.05 )
Diluted earnings per share as restated
  $ 0.40     $ 0.32     $ 0.34  
                         
Current liabilities as reported
  $ 47,329     $ 40,946     $ 25,687  
Cumulative effect of restatement on liabilities
    3,797       3,059       2,169  
Current liabilities as restated
  $ 51,126     $ 44,005     $ 27,856  
                         
Shareholders’ Equity as reported
  $ 53,158     $ 48,503     $ 40,834  
Cumulative effect of restatement on  Shareholders’ Equity
    (2,405 )     (1,954 )     (1,368 )
Shareholders’ Equity as restated
  $ 50,753     $ 46,549     $ 39,466  

The Cumulative Impact of Both Restatements

The cumulative effect of the corrections of errors is to decrease net income in 2008, 2007, and 2006 by ($25,000), ($213,000) and ($154,000) respectively.  The change in our financial statements for the years ended December 31, 2008, 2007 and 2006 for the effects of both restatements is illustrated below (000’s).

 
F-10
 
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



   
Twelve Months Ending
December 31,
 
   
2008
   
2007
   
2006
 
                   
Revenue initially recognized from prior period, first restatement
  $ 2,796     $ 1,964     $ 1,344  
Revenue deferred to future period, first restatement
    (3,477 )     (2,796 )     (1,964 )
Revenue initially recognized from prior period, second restatement
    750       1,406       1,908  
Revenue deferred to future period, second restatement
    —       (750 )     (1,406 )
Net change in period revenue
  $ 69     $ (176 )   $ (118 )
                         
Revenue as initially reported
  $ 198,084     $ 151,998     $ 126,438  
Net change in reported revenue, first restatement
    (681 )     (832 )     (602 )
Net change in reported revenue, second restatement
    750       656       502  
Revenue as restated
  $ 198,153     $ 151,822     $ 126,320  
                         
Income before income taxes as initially reported
  $ 6,454     $ 4,952     $ 3,731  
Net change in reported revenue, first restatement
    (681 )     (832 )     (620 )
Net change in reserve for medical costs, first restatement
    (58 )     (58 )     (64 )
Net change in reported revenue, second restatement
    750       656       502  
Net change in reserve for medical costs, second restatement
    (13 )     (12 )     (9 )
Income before income taxes as restated
  $ 6,452     $ 4,706     $ 3,540  
                         
Income tax provision as initially reported
  $ 2,514     $ 1,695     $ 507  
Net change in income taxes from above adjustments, first restatement
    (287 )     (304 )     (244 )
Net change in income taxes from above adjustments, second restatement
    310       271       207  
Income tax provision as restated
  $ 2,537     $ 1,662     $ 407  
                         
Net income as initially reported
  $ 3,940     $ 3,257     $ 3,224  
Summary of above adjustments, first restatement
    (452 )     (586 )     (440 )
Summary of above adjustments, second restatement
    427       373       286  
Net income as restated
  $ 3,915     $ 3,044     $ 3,070  
                         
Diluted earnings per share as initially reported
  $ 0.45     $ 0.39     $ 0.39  
Change in Earnings per share from above adjustments, first restatement
    (0.05 )     (0.07 )     (0.05 )
Change in earnings per share from above adjustments, second restatement
    0.05       0.04       0.03  
Diluted earnings per share as restated
  $ 0.45     $ 0.36     $ 0.37  
                         
Current liabilities as initially reported
  $ 47,329     $ 40,946     $ 25,687  
Cumulative effect of restatement on current liabilities, first restatement
    3,797       3,059       2,169  
Cumulative effect of restatement on current liabilities, second restatement
    (1,513 )     (1,086 )     (712 )
Current liabilities as restated
  $ 49,613     $ 42,919     $ 27,144  
                         
Shareholders Equity as initially reported
  $ 53,158     $ 48,503     $ 40,834  
Cumulative effect of restatement on Shareholders Equity, first restatement
    (2,405 )     (1,954 )     (1,368 )
Cumulative effect of restatement on Shareholders Equity, second restatement
    1,511       1,085       712  
Shareholders Equity as restated
  $ 52,264     $ 47,634     $ 40,178  

 
Our new revenue recognition policy, as more fully explained in Note 3 – “Summary of Significant Accounting Policies” changes the timing of revenue recognition for non-refundable fees, and it aligns it more closely to the underlying treatment cycles delivered to the patients.

The financial statements, schedules and related footnotes reflect included herein reflect these restatements.


 
F-11
 
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



NOTE 3 ¾ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 

 
Basis of consolidation —
 

 
The consolidated financial statements comprise the accounts of IntegraMed America, Inc. and its wholly owned subsidiaries. With the acquisition of Vein Clinics of America (VCA) in the third quarter of 2007, we reorganized our service offerings into three major product lines, Fertility Centers, Consumer Services and Vein Clinics. In our Fertility Centers Segment, we derive our revenues from business service contracts with independent fertility centers. Our Consumer Services Segment derives its revenues from fees assessed to patients enrolling in our Attain IVF Program, fees assessed to affiliated fertility clinics, and fees derived from fertility patient financing products. Our Vein Clinics Segment derives revenues from billings to patients and third party payers for treatment services rendered based upon the amount billed to the patient or their payer less any expected contractual allowances resulting from specified rates contained within payer contracts.
 
 
We evaluate whether we should report the results of the clinical operations in which we have management service contracts in accordance with FASB Interpretation No. 46 (FIN 46R) "Consolidation of Variable Interest Entities" ("VIE's"). Since we do not have a controlling financial interest in any of the fertility medical practices to which we provide services, and we are not the primary beneficiary or obligor of their financial results (our contracts provide for the physician owners of the clinics to receive any excess or deficit of profits) we do not consolidate their results. This is further supported by the facts that the physician owners of the clinics have the voting rights with respect to the entity and sufficient equity interests to fund their entity.  We do have effective voting control and a controlling financial interest in the operations of each of the vein clinics, where we are the primary beneficiary and obligor of their financial results (our contracts provide for us to receive any excess or deficit of profits) and therefore consolidate the results of those clinic operations. Accordingly, we report the revenue for patient services only from the vein clinic segment and those fertility patients who enroll in the Attain IVF Program (included in our consumer services segment).
 
Reclassifications—
 
 
With the addition of VCA, we have realigned the way we operate our business into three segments. As a result, we have reclassified certain costs for all years presented within the three divisions to reflect this change in our operating structure and to provide a clearer view of each division's operating performance and efficiency.  The result of this change is to reduce overall contribution margins and unallocated General and Administrative costs, as reported in previous periods.
 

 
Stock split effected in the form of a stock dividend —
 

 
In May 2007 and June 2006, we effected a 25% stock split in the form of a stock dividend. Where applicable,we have restated our capital accounts, shares outstanding, weighted average shares and earnings per share calculations for all years in these financial statements and related footnotes to reflect these transactions.
 

 
Revenue Recognition —
 

 
Fertility Centers - Partner service fees
 

 
Under all of our fertility Partner agreements, we receive as compensation for our services a three-part fee comprised of: (i) a tiered percentage of the fertility centers 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) either a fixed percentage ranging from 10% to 20%, or a fixed dollar amount (limited to $1,071,000 and $1,865,000 for the year ended December 31, 2008 at our two largest fertility centers) of the fertility centers earnings after services fees, which may be subject to further limits. All revenues from Partner contracts are recorded in the period services are rendered.  Direct costs incurred by us in performing our 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.
 
 

 
F-12
 
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 
Consumer Services - Affiliate Service Fee
 

 
Under our Affiliate agreements, we receive as compensation for our services a fixed fee dependent upon the level of service provided. All revenues and costs from Affiliate contracts are recorded in the period services are rendered.
 

 
Consumer Services – Attain IVF Program
 

 
The Attain IVF program consists of a fertility treatment package that includes a fixed number of treatment cycles for one fixed price with a significant refund if treatment is unsuccessful. We receive payment directly from consumers who qualify for the program and the patient contracts with us to provide the medical treatment.  We discharge the obligation of patient treatment by arranging with affiliated fertility clinics for the provision of patient care.  We pay contracted fertility centers a defined reimbursement for each treatment cycle performed. Since the Company is the primary obligor in the arrangement, has latitude in establishing the price, performs a portion of the contracted service, has discretion in supplier selection, the amount earned by the Company per transaction is not fixed and the patient looks to the Company as the contracting party, these arrangements qualify for gross accounting under EITF 99-19.  We have revised our revenue recognition policy as a result of a correction of an error and have restated all periods presented to reflect the revised revenue recognition policy described below.

By contract, a portion of the enrollment fee (generally 30%) is non-refundable and is recognized as revenue based on the relative fair value of each treatment cycle completed relative to the total fair value of the contracted treatment package available to the patient, following the guidance of Emerging Issues Task Force statement 00-21. The remaining revenue, which consists of the 70% refundable portion as well as any part of the 30% non-refundable portion not yet recognized as revenue, is recorded upon the patient becoming pregnant and achieving a fetal heartbeat (most of the patients that are pregnant at this point go on to deliver a baby).  We are able to record income at the time of pregnancy as we have substantially completed our obligation to the patient, discharged the patient from the care of the fertility specialists,  and we can accurately estimate the amount of expenses and refunds that will become due if there is a pregnancy loss.  We are able to make these estimates for pregnancy loss based upon reliable Company specific data with respect to the large homogeneous population we have served for more than seven years. Expenses prior to pregnancy related to the program and principally paid to the affiliated fertility clinic are recorded as incurred.

Accordingly, at each balance sheet date, we have established a liability for patients in the Attain IVF program for the following:

 
1.
Deposits for customers who have not yet begun treatment and for whom no revenue has been recognized (we expect such amounts to be recognized as income or refunded within twelve to eighteen months)

 
2.
Refund reserve for those patients who became pregnant, but may  not deliver a baby (See Note 11)

 
3.
Medical costs associated with additional treatments to a patient who became pregnant, did not deliver a baby and still has additional treatments available under their treatment package.  (See Note 11)

The table below presents the balances of each of these liabilities as of the respective dates (000’s):

   
December 31,
  
   
2008
    
2007
  
             
Deposits or refundable fees
   $ 9,981     $ 9,349  
Refund reserve for pregnant patients
     397       326  
Medical cost reserve
     331       272  


 
F-13
 
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Due to the characteristics of the program, we assume the risk for a patient’s treatment cost in excess of their enrollment fee should initial treatment cycles be unsuccessful.  In order to moderate and manage this risk, we have developed a sophisticated statistical model and case management program in which Attain IVF patients are medically pre-approved prior to enrollment in the program. We also continuously review their clinical criteria as they undergo treatment.  If, while undergoing treatment, a patient’s clinical response falls outside our criteria for participation in the Attain IVF program, we have the right to remove that individual from the program, with an applicable refund to the patient. To date, our case management process has been effective in managing the risks associated with our Attain IVF program within expected limits.  A patient may withdraw from the program at anytime and will be issued a refund.

The Attain IVF Program is available to the self-pay patient.  Approximately 12.9%, 11.6% and 9.6% of the self-pay patients served by our network chose to enroll in the Attain IVF Program in 2008, 2007 and 2006, respectively.

 
Consumer Services - Pharmaceutical Sales
 

 
Marketing fees associated with third-party pharmaceutical sales are recorded upon shipment to customers. Our revenues for the periods presented are comprised of these marketing fees and not from the sales of actual pharmaceuticals.

 
Consumer Services - Patient Financing
 

A fertility treatment cycle can be an expensive process for which many patients do not have full medical insurance coverage. As a service to these patients, we can arrange financing to qualified patients of our network at rates significantly lower than credit cards and other finance companies. Our financing operations are administered by a third-party vendor and loans are made to qualified patients by an independent bank or finance organization. We are not at risk for loan losses and receive a placement fee from the lender involved.  Since many financing transactions are closely associated with our Attain IVF program, financing revenues, which we receive and record at the time the loans are closed, are reported as part of that program.

Vein Clinics – Patient Revenues and Accounts Receivable and Allowance for Uncollectible Accounts

Our relationship with the individual medical practices comprising our vein care division meets the test for consolidation under FIN 46R “Consolidation of Variable Interest Entities”. Among these tests is the fact that we hold a controlling financial interest in the medical practices, we are the primary beneficiary of the results of the practices and we are obligated to absorb any losses of the practices. As a result of these relationships, we consolidate the medical practice’s patient revenues in our financial statements. These revenues are derived from the treatment of individual patients and revenue is recognized when the services are performed, net of estimated contractual allowances.

The medical practices have agreements with third-party payers that provide for payments at amounts different from established rates.  Payment arrangements include prospectively determined rates for reimbursed cost and discounted charges.  Revenue is reported at the estimated net realizable amounts from patients and third-party payers.
 
A summary of the payment arrangements with major third-party payers follows:

 
F-14
 
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



 
●
Medicare:
All outpatient services related to Medicare beneficiaries are paid based on a fixed physician fee schedule per service which is updated annually. 

 
●
Other:
Estimates for contractual allowances under managed care health plans are based primarily on the payment terms of contractual arrangements, such as predetermined rates per diagnosis, per diem rates or discounted fee for service rates.
 
 
Approximately 17%, of gross patient revenues of the Vein Clinics Division for the year ended December 31, 2008, related to services rendered to patients covered by the Medicare program.
 
Laws and regulations governing the Medicare program are complex and subject to interpretation.  Management believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing.  While no such regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation. 

Our accounts receivable are primarily comprised of patient and third-party receivables arising from services provided by our vein care division. Receivables due from third-party payers are carried at an estimated collectible value determined by the original charge for the service provided, less an estimate for contractual allowances or discounts provided to the third-party payers. Receivables due directly from patients are carried at the original charge for the service provided less an estimated allowance for uncollectible amounts. Contractual allowance and uncollectible reserve amounts are determined based on historical collection performance data and are reviewed and adjusted monthly as necessary.

Vein Clinics – Deferred Compensation Arrangements

The Professional Corporations providing medical services at the clinics have entered into employment agreements with physicians at clinic sites providing for multi-year bonus compensation to be accumulated over a physician’s first five years of employment.  Accumulated balances are paid out during the years following this period, or after specific performance targets have been met.  These obligations are funded in physician designated investment accounts on a quarterly basis.  At December 31, 2008, these balances totaled approximately $938,000.


Intangible and Long-Lived Assets –

Our intangible assets are comprised of Business Service Rights associated with our fertility Partner contracts, Goodwill associated with our acquisition of Vein Clinics of America, Inc., and Trademarks, also principally associated with our Vein Clinic acquisition.

Business service rights represent payments we made for the right to service certain fertility centers. We amortize our non-refundable Business Service Rights on a straight-line basis over the life of the underlying contract, usually ten to twenty five years. Our refundable Business Service Rights are not amortized as they are contractually reimbursable from the medical practice upon termination of the underlying contract. Our Goodwill and Trademark assets associated with the Vein Clinics of America, Inc. acquisition are deemed to have indefinite lives and are therefore not amortized.

We test all of our intangible and long-lived assets for impairment on a regular basis in accordance with FAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. If we record an impairment loss, it may have a material adverse effect on our results of operations for the year in which the impairment is recorded. As of December 31, 2008, none of our long lived assets were deemed to be impaired.

 
F-15
 
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



 
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 that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The use of estimates and assumptions in the preparation of the accompanying consolidated financial statements is primarily related to the determination of net accounts receivable and reserves for estimated refunds due to pregnancy losses in our Attain IVF Program.

 
Due to Medical Practices —
 

 
Due to Medical Practices represents the net amounts owed by us by contracted medical practices in our Partner Program. This balance is comprised of amounts due to us by the medical practices for funds which we advanced for use in financing their accounts receivable, less balances owed to the medical practices by us for undistributed physician earnings and patient deposits we hold on behalf of the medical practices.
 

 
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.
 

 
Concentrations of credit risk —
 

Financial instruments, which potentially expose us to concentrations of credit risk, consist primarily of trade receivables from patients and third-party payers which totaled approximately $13.2 million and $12.2 million as of December 31, 2008 and 2007 respectively. Our related reserves for uncollectible accounts and contractual allowances totaled $6.5 million and $6.7 million as of December 31, 2008 and 2007 respectively.
 

Income taxes ¾
 

We account for income taxes utilizing the asset and liability approach in accordance with Financial Accounting Standards No. 109, “Accounting For Income Taxes” (FAS 109). 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 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 our deferred tax assets and liabilities.  (See Note 16).
 

 
Earnings per share —
 

 
We determine earnings per share in accordance with Financial Accounting Standards No. 128)  “Earnings Per Share” (FAS 128)  Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the reporting period.  Diluted earnings per share is calculated by dividing net income by the weighted average number of common shares, and potential common shares, outstanding during the reporting period.  (See Note 17)
 

 
Fair value of financial instruments —
 

The fair value of a financial instrument, such as a notes payable, represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Significant differences can arise between the fair value and carrying amounts of financial instruments that are recorded at historical cost amounts. We believe that the carrying amounts of cash and cash equivalents, our accounts receivable and accounts payable approximate fair value due to their short-term nature.

 
F-16
 
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 
As of December 31, 2008 and 2007, the carrying amount of our long-term liabilities approximates the fair value of such instruments based upon our best estimate of interest rates that would be available to us for similar debt obligations with similar maturities.

New accounting pronouncements ¾

Recently Issued Accounting Pronouncements

FAS 157-3: In October 2008, The FASB issued FASB Staff Position (FSP) FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active. The FSP clarifies the application of FASB Statement No. 157, Fair Value Measurements, in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. The FSP is effective for prior periods for which financial statements have not been issued. We currently believe that FAS 157-3 will not have a material impact on our consolidated financial statements.

FAS 142-3: In April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under Statement 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141R, and other U.S. generally accepted accounting principles. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We currently believe that FAS 142-3 will have no material impact on our consolidated financial statements.

FAS 161: In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FASB Statement No. 133 and its related interpretations, and (c) how derivative instruments and related hedge items affect an entity’s financial position, financial performance, and cash flows. This statement is effective for fiscal years after November 15, 2008. We currently believe that SFAS No. 161 will have no material impact on our consolidated financial statements.

FAS 160: In December 2007, the FASB issued Statement No. 160, Non-controlling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 requires a company to clearly identify and present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section but separate from the company’s equity. It also requires the amount of consolidated net income attributable to the parent and to the non-controlling interest be clearly identified and presented on the face of the consolidated statement of income; changes in ownership interest be accounted for similarly, as equity transactions; and when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary be measured at fair value. This statement is effective for fiscal years after December 15, 2008. We currently believe that SFAS No. 160 will have no material impact on our consolidated financial statements.
 
FAS 141R: In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement No. 141 (Revised 2007), Business Combinations (“SFAS No. 141R”).  The objective of SFAS No. 141R is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, SFAS No. 141R establishes principles and requirements for how the acquirer:
 

 
F-17
 
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 
 
a.
Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree
 
 
 
b.
Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase
 
 
 
c.
Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.
 
This statement is effective for fiscal years beginning on or after December 15, 2008. We currently believe that SFAS No. 141R will not have a material impact on our consolidated financial statements.
 
FAS 157: In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This statement defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and became effective for us on January 1, 2008.
 
 
Fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties.  A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor.  The FASB establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation as of the measurement date and expands disclosures about financial instruments measured at fair value. Assets and liabilities recorded at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value.  Hierarchical levels defined by SFAS 157 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities are as follows:
 
Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.  The types of assets and liabilities carried at this level are equities listed in active markets, investments in publicly traded mutual funds with quoted market prices and listed derivatives.

Level 2: Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data of the instrument’s anticipated life.  Fair value assets and liabilities that are generally included in this category are municipal bonds and certain derivatives.

Level 3: Financial assets and financial liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.  Consideration is given to the risk inherent in the valuation method and the risk inherent in the inputs to the model.  Generally, assets and liabilities carried at fair value and included in this category are certain derivatives.
 
The adoption of this statement did not have a material impact on our consolidated financial statements.
 
NOTE 4 ¾ SIGNIFICANT SERVICE CONTRACTS:
 

 
For the years ended December 31, 2008, 2007, and 2006, the following contracted fertility centers each individually provided greater than 10% of our revenues, net and/or contribution as follows:
 

 
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INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



 

 

 
   
Percent of Company
Revenues, net
    
Percent of
Contribution
  
   
2008
    
2007
    
2006
    
2008
    
2007
    
2006
  
                                     
R.S.C. of New England
     7.2       8.9       10.7       8.7       10.5       11.7  
Fertility Centers of Illinois
     16.3       19.2       22.3       15.2       17.6       19.2  
Shady Grove Fertility Center
     18.0       21.3       22.9       17.2       21.4       20.5  

 
Under all of our fertility Partner agreements, we receive as compensation for our services a three-part fee comprised of: (i) a tiered percentage of the fertility centers 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 either a fixed percentage, or a fixed dollar amount of the fertility centers earnings after services fees, which may be subject to further limits.
 

 
The third tier of our fee structure with these significant contracts contains provisions as follows:

 
·
R.S.C. of New England – a fixed annual percentage of the center’s earnings.

 
·
Fertility Centers of Illinois – a fixed percentage of the center’s earnings subject to a fixed dollar amount as an upper boundary ($1,865,000) and a fixed dollar amount as a lower boundary ($932,000) subject to a fixed percentage of the center’s earnings limitation.

 
·
Shady Grove Fertility Center – a fixed dollar amount of the center’s earnings subject to a fixed percentage of the center’s earnings limitation ($1,071,000 is the upper boundary and $540,000 is the lower boundary of this calculation).

 
NOTE 5 ¾ SEGMENT INFORMATION:
 

 
We follow the requirements contained in Statement of Financial Accounting Standards (SFAS) No.131, “Disclosures about Segments of an Enterprise and Related Information”, with respect to identifying and reporting business segments. This statement requires that segment reporting reflect our organizational structure, major revenue sources, lines of responsibility and senior management’s perspective of an organization.  With the acquisition of Vein Clinics of America (VCA) during the third quarter of 2007, we reorganized our service offerings into three major product lines:  Fertility Centers, Consumer Services and Vein Clinics.  Each of the operating segments includes an element of overhead specifically associated with it. Such overhead costs were previously reported as General and Administrative costs, and have been reclassified in all periods presented to better reflect the operating results of our business segments.
 

 
Performance by segment, for the three years ended December 31 2008, 2007 (restated) and 2006 (restated) are presented below (000’s omitted):
 

 
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INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



 

 
   
Fertility
Centers
    
Consumer
Services
    
Vein
Clinics(1)
    
Corp G&A
    
Consolidated
  
                               
For the Year ended December 31, 2008
                              
Revenues
   $ 138,440     $ 19,763     $ 39,950     $ —     $ 198,153  
Cost of Services
     128,224       14,344       37,299       —       179,867  
Contribution
     10,216       5,419       2,651       —       18,286  
Operating Margin
     7.4 %     27.4 %     6.6 %     —       9.2 %
                                         
General and administrative
     —       —       —       10,654       10,654  
Interest (income) expense, net
     (181 )     0       8       1,353       1,180  
Income (loss) before income taxes
   $ 10,397     $ 5,419     $ 2,643     $ (12,007 )   $ 6,452  
Depreciation expense included above
   $ 4,327     $ 3     $ 761     $ 898     $ 5,989  
Capital expenditures, net
   $ 4,053     $ —     $ 1,057     $ 585     $ 5,695  
Total assets
   $ 36,885     $ 331     $ 46,750     $ 37,475     $ 121,441  
                                         
For the Year ended December 31, 2007
                                        
Revenues
   $ 121,078     $ 16,460     $ 14,284     $ —     $ 151,822  
Cost of Services
     111,059       12,336       13,304       —       136,699  
Contribution
     10,019       4,124       980       —       15,123  
Operating Margin
     8.3 %     25.1 %     6.9 %     —       10.0 %
                                         
General and administrative
     —       —       —       10,537       10,537  
Interest (income) expense, net
     (203 )     —       2       81       (120 )
Income (loss) before income taxes
   $ 10,222     $ 4,124     $ 978     $ (10,618 )   $ 4,706  
Depreciation expense included above
   $ 4,003     $ 3     $ 255     $ 846     $ 5,107  
Capital expenditures, net
   $ 4,654     $ —     $ 906     $ 662     $ 6,222  
Total assets
   $ 42,586     $ 888     $ 44,786     $ 25,911     $ 114,171  
                                         
For the Year ended December 31, 2006
                                        
Revenues
   $ 112,767     $ 13,553     $ —     $ —     $ 126,320  
Cost of Services
     104,357       9,421       —       —       113,778  
Contribution
     8,410       4,132       —       —       12,542  
Operating Margin
     7.5 %     30.5 %     —       —       9.9 %
                                         
General and administrative
     —       —       —       9,380       9,380  
Interest (income) expense, net
     (279 )     —