UNITED
STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A1
Current Report
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report: December 17, 1997
HAGLER BAILLY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 54-1759180
(State or other jurisdiction of incorporation or organization)
I.R.S. Employer Identification Number
1530 Wilson Boulevard, Suite 900, Arlington, VA 22209
(Address of principal executive offices) (Zip Code)
703-351-0300
(Registrant's telephone number, including area code)
<PAGE>
This Current Report of Form 8-K/A1 amends the Current Report of Form 8-K
filed by Hagler Bailly, Inc. on December 16, 1997 solely to add the
financial statements of the business acquired required by Item 7(a)
and the pro forma financial information required by Item 7(b).
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired (Apogee Research, Inc.)
The required financial statements of the business acquired are set
forth below.
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Certified Public Accountants 5
Audited consolidated balance sheet as of December 31, 1996 6
Audited Consolidated statement of income
for the year ended December 31, 1996 7
Audited Consolidated statement of cash flows
for the year ended December 31, 1996 8
Notes to audited consolidated financial statements 9
Unaudited condensed consolidated balance
sheet as of September 30, 1997 18
Unaudited condensed consolidated statement of income
for the nine months ended September 30, 1997 19
Unaudited condensed consolidated statement of
cash flows for the nine months ended September 30, 1997 20
Unaudited condensed consolidated statement of income
for the nine months ended September 30, 1996 21
Unaudited condensed consolidated statement of
cash flows for the nine months ended September 30, 1996 22
Notes to unaudited condensed consolidated
financial statements 23
</TABLE>
(b) Unaudited Pro Forma Financial Information
The required proforma financial information is set forth below.
<TABLE>
<CAPTION>
Page
<S> <C>
Unaudited pro forma combined condensed
balance sheet as of September 30, 1997 24
Unaudited pro forma combined condensed statement of
income for the nine months ended September 30, 1997 26
Unaudited pro forma combined condensed statement of
income for the nine months ended September 30, 1996 27
Unaudited pro forma combined condensed statement of
income for the nine months ended September 30, 1995. 28
Unaudited pro forma combined condensed statement of
income for the nine months ended September 30, 1994. 29
Notes to unaudited pro forma combined condensed
financial information. 30
SIGNATURES 4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
HAGLER BAILLY, INC.
(Registrant)
Date: December 15, 1997 By: /s/ Henri- Claude Bailly
Henri-Claude Bailly
President, Chief Executive Officer
and Chairman of the Board
Date: December 15, 1997 By: /s/ Daniel M. Rouse
Vice President, Chief Financial
Officer, and Treasurer
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Apogee Research, Inc. and Subsidiary
Bethesda, Maryland
We have audited the accompanying consolidated balance sheets
of Apogee Research, Inc. and subsidiary as of December 31, 1996,
and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the year then ended.
These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits 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 consolidated financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Apogee Research, Inc. and subsidiary as of
December 31, 1996, and the results of their operations and their
cash flows for the year then ended in conformity with generally
accepted accounting principles.
Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The condensed
consolidating financial information on page 12 is presented for
the purpose of additional analysis and is not a required part of
the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, is fairly stated
in all material respects in relation to the basic financial
statements taken as a whole.
As discussed in Note 11 to the financial statements, certain
errors in prior years resulting in the overstatement of
previously reported receivables as of December 31, 1995, were
discovered by management of the Company during the current year.
Accordingly, an adjustment has been made to retained earnings as
of January 1, 1996 to correct the error.
<PAGE>
March 17, 1997
APOGEE RESEARCH, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
</TABLE>
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash (Note 12) $ 253,080
Accounts receivable (Note 3) 2,440,688
Other receivables 17,568
Prepaid expenses 22,771
Deferred income taxes (Note 9) 16,700
Total current assets 2,750,807
PROPERTY AND EQUIPMENT (Note 6)
Furniture and fixtures 128,079
Equipment 492,235
Computer software 10,805
631,119
Less: Accumulated depreciation and amortization (414,522)
Net property and equipment 216,597
OTHER ASSETS
Investment and advances to affiliate (Note 4) 149,515
Security deposit 6,279
Total other assets 155,794
TOTAL ASSETS $3,123,198
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
APOGEE RESEARCH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Contract revenue $6,360,815
Direct costs 5,304,763
Gross profit 1,056,052
General and administrative expense 546,919
Income from operations 509,133
Other income (expense):
Interest and other income 5,397
Interest expense (113,946)
Net income before taxes 400,584
Provision for income taxes (Note 9) 164,319
NET INCOME $ 236,265
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
APOGEE RESEARCH, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
[CAPTION]
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 236,265
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 88,939
Deferred taxes 19,100
Prior period adjustment (78,253)
(Increase) decrease in:
Accounts receivable 348,483
Prepaid expenses 65,789
Other assets (2,047)
Increase (decrease) in:
Accounts payable and accrued expenses (76,282)
Billings in excess of revenue recognized 63,490
Income taxes payable 15,934
Net cash provided by operating activities 681,418
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (17,220)
Investments and advances to affiliate (7,791)
Net cash used by investing activities (25,011)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (repayment) on line of credit (416,299)
Principal payments of long-term debt (34,631)
Proceeds from issuance of common stock 13,066
Net cash used by financing activities (437,864)
Net increase in cash 218,543
Cash at beginning of year 34,537
CASH AT END OF YEAR $ 253,080
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
APOGEE RESEARCH, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. DESCRIPTION OF OPERATIONS
Apogee Research, Inc. (the Company) was incorporated in 1986
in the State of Maryland. The Company provides financial,
economic and market research consulting in environmental and
transportation services to U.S. government agencies, state
and local governments, international organizations and
commercial organizations.
Apogee Research International, Ltd., a Canadian company, was
formed in 1989 as a wholly-owned subsidiary of the Company to
engage in business with Canadian and U.S. government agencies
and commercial organizations to provide financial and
economic consulting.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of accounting -
The financial statements have been prepared on the
accrual basis of accounting.
Revenue recognition -
Revenue from cost type contracts is recognized on the
basis of direct and indirect costs incurred plus the fee
earned. Revenue from fixed price contracts is recognized on
the percentage-of-completion method. Revenue under time and
material contracts is recorded at the fixed contractual
rates as the services are performed. The fixed rate
includes direct labor, indirect expenses and profits.
Consolidation -
The accompanying financial statements reflect the
consolidated accounts of Apogee Research, Inc. and its
wholly-owned subsidiary, Apogee Research International,
Ltd. All intercompany transactions have been eliminated in
consolidation.
Property and equipment -
Property and equipment are stated at cost. Depreciation
is being provided over the estimated useful lives of the
assets (three to ten years).
Foreign currency exchange -
The subsidiary's assets and liabilities denominated in
Canadian dollars are translated into U.S. dollars at the
current rate of exchange existing at year end, and revenue
and expenses are translated at average exchange rates for
the year.
Use of estimates -
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company considers the recorded value of its financial
assets and liabilities, which consist primarily of accounts
receivable and accounts payable and other accrued
liabilities, and debt to approximate the fair value of the
respective assets and liabilities at September 30, 1996.
Income Taxes
The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, Accounting for
Income Taxes (SFAS 109). Under SFAS 109, deferred tax
liabilities and assets are determined based on the
difference between financial statement and tax basis of
assets and liabilities using enacted rates expected to be
in effect during the year in which the differences reverse.
3. ACCOUNTS RECEIVABLE
The following summary shows the elements of accounts
receivable from long-term contracts and programs:
[CAPTION]
U.S. GOVERNMENT CONTRACTS AND SUBCONTRACTS
<TABLE>
<S> <C>
Amounts billed $1,737,520
Recoverable costs and accrued profit on progress
completed - not billed 84,614
Retained fees 41,814
COMMERCIAL CUSTOMERS
Amounts billed 519,863
Recoverable costs and accrued profit on progress
completed - not billed 56,877
$2,440,688
</TABLE>
The Company's contract revenue from the U.S. Government is
from various Federal and state agencies, primarily the
Environmental Protection Agency and Department of
Transportation.
Billed accounts receivable include amounts earned in December
of each year that were billed in the normal billing cycle
during January of the subsequent year.
Unbilled accounts receivable consist of costs recorded as
revenue which will be billed upon certain milestones or close
of the contract and fee retentions that are billable upon
final acceptance and completion of the contracts. Consistent
with industry standards, these amounts which relate to long
term contracts are classified as current assets although a
portion of these amounts are not expected to be realized
within one year.
4. INVESTMENT AND ADVANCES TO AFFILIATE
The Company has an investment interest of 40% in Apogee
Capital, L.L.C. The investment totals $5,000 and is accounted
for using the equity method of accounting. Certain
stockholders of the Company also have an ownership interest
in Apogee Capital. The Company has advances receivable from
Apogee Capital of $144,515 at December 31, 1996. Interest has
not been charged on these advances.
5. LINE OF CREDIT
The Company has an agreement with a bank for a line of credit
for $1,250,000 that expires on April 30, 1997. Borrowings are
secured by a blanket lien on all assets, including accounts
receivable, guaranteed by the majority shareholders up to
$250,000, and payable on demand. Interest is due monthly at
the bank's prime rate, which was 8.25% at December 31, 1996.
The amount outstanding at December 31, 1996 was $850,000. The
line of credit agreement requires the Company, among other
covenants, to meet certain ratios for working capital, debt
and equity.
6. LONG-TERM DEBT
[CAPTION]
Notes payable at December 31, 1996 consisted of the
following:
Note payable, interest at prime
plus 1.5% (9.75% at December 31, 1996); payable
in monthly principal installments, with final
payment due March 1997; secured by
assets purchased $15,241
An equipment loan, interest at
prime plus 1% (9.25% at December 31, 1996); payable in
monthly principal installments of $2,778 beginning July 31,
1995, with
final payment due June 30, 1999. 89,172
104,413
Less: Current portion 48,466
TOTAL LONG-TERM PORTION $55,947
The following is a schedule of future minimum note
payments as of December 31, 1996:
Year Ended December 31, Amount
1997 $ 48,466
1998 36,432
1999 19,515
$104,413
7. COMMITMENTS AND CONTINGENCIES
Operating leases -
The Company has leases for office space in both the United
States and Canada effective through August 31, 1998 and
July 31, 1999, respectively. The leases contain annual
escalation clauses for both increases in property taxes and
general operating and maintenance costs of the landlord.
The future minimum payments relating to these leases are as
follows:
Year Ended December 31, Amount
1997 $304,096
1998 203,221
1999 13,232
$520,549
The total office rental expense for 1996 was $314,506.
Government contracts -
Certain of the Company's contracts are with agencies of
the Federal Government. Approximately 70% of the Company's
income is subject to audit; however, no audits have been
performed. In the opinion of management, adjustments, if
any, would not have a material effect on the financial
position of the Company at December 31, 1996 and 1995.
8. EMPLOYEE STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard (SFAS) No.
123, "Accounting for Stock Based Compensation, " which
requires a fair value based methodology of accounting for all
stock option plans. Under SFAS No. 123, the Company may
account for stock options under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and provide pro forma disclosure of net income, as
if the fair value based method of accounting defined in SFAS
No. 123 had been applied. The Company has elected to follow
APB 25 in accounting for its employee stock options and
provide pro forma fair value disclosure under SFAS 123.
The Company has a non-qualified stock option plan for certain
key employees. Options are exercisable in varying amounts and
are issued for a term not to exceed ten years from the date
of the grant at the estimated fair market value as of the
date of the grant. The ability to exercise the options vests
ratably to the employee over a three-year period. Upon
termination of employment, any unexercised options remaining
are considered void.
For purposes of pro forma disclosure, the estimated fair
value of the options is amortized to expense over the
options' vesting period. For the year ended December 31,
1996, the effect of SFAS No. 123 was immaterial to the
Company's financial statements.
The summary of the Company's stock option activity, and
related information for the year ended December 31, 1996 is
as follows:
<TABLE>
<CAPTION>
Optio Weighted- Weighted-
ns Average Average
(,000 Exercise Fair
) Price Value
<S> <C> <C> <C>
Options outstanding , 23 $5.52 $1.25
beginning of year
Granted 9 7.85 1.80
Exercised -
Outstanding December 31, 32 $5.59 $1.28
1996
</TABLE>
The Company has no options exerciseable at December 31, 1996.
The average contractual life of outstanding options at
December 31, 1996 is 4 years.
9. INCOME TAXES
The provision for income taxes for the year ended December
31, 1996 consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Current:
Federal $115,267
State 29,923
145,190
Deferred:
Federal 15,303
State 3,826
19,129
TOTAL PROVISIONS $164,319
The deferred tax assets (liabilities) at September 31, 1996
were as follows:
Current deferred tax assets (liabilities):
Vacation liability 16,700
Net current deferred tax asset 16,700
Non-current deferred tax asset (liabilities):
Depreciation $49,300
Net non-current deferred tax liability (49,300)
Income tax expense for the year ended December 31, 1996,
varies from the amount which would have been computed using
statutory rates as follows:
Tax computed at the Federal statutory $132,117
rate, net of state income tax benefit
State income taxes, net of Federal 28,041
income tax benefit
Other 4,161
$164,319
The provision for income taxes differs from the expected
using federal tax rates primarily due to the effect of state
income taxes and certain non-deductible expenses. The
difference between the provision for income taxes and the
provision calculated at the federal statutory rate would not
have a material effect on the financial position of the
Company.
10. RETIREMENT PLAN
The Company maintains a tax-deferred savings plan under
Section 401(k) of the Internal Revenue Code for substantially
all employees. The plan provides for contributions by
employees and a discretionary contribution by the Company.
The Company made contributions of $12,500 to the plan during
1996.
11. PRIOR PERIOD ADJUSTMENTS
During the audit of the current year's financial statements,
certain errors were discovered by the management of the
Company that resulted in an overstatement of reported
accounts receivable as of December 31, 1995. Beginning
retained earnings has been restated for the effect of the
following adjustments.
Write-off of incorrectly recorded billed and unbilled
accounts receivable $127,490
Income tax benefit (49,237)
PRIOR PERIOD ADJUSTMENT NET OF
INCOME TAXES $ 78,253
12. CONCENTRATION OF CREDIT RISK
At December 31, 1996, the Company had deposits at a local
bank totaling $213,584. Such deposits are insured up to
$100,000, the legal maximum established by the Federal
Deposit Insurance Corporation (FDIC).
<PAGE>
Consolidated Balance Sheet
September 30, 1997
Unaudited
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Current Assets:
Cash $ 366,524
Advances 21,066
Prepaids 94,749
Billed Receivable 1,988,529
Unbilled Receivable 33,022
Receivable from Parent 7,077
Other Receivable
Fixed Assets:
Fixed Assets (net) 289,806
Other Assets:
Investment in Apogee Capital, LLC 149,515
Deferred Tax Benefit 16,700
Total Assets $ 2,966,988
Current Liability:
Accounts Payable & Accrued Expenses $ 696,646
Line of Credit 250,000
Notes Payable 7,018
Payable to Parent
Payroll Taxes & Withholdings 124,309
Income Taxes Payable 263,004
American Express
Long -Term Liabilities:
Long-Term Notes Payable 60,148
Note Payable to Parent
Deferred Taxes Payable 35,961
Stockholder's Equity:
Common Stock, $.10 par value 26,709
Paid in Capital 295,690
Retained Earnings 1,288,470
Treasury Stock (46,467)
Stock Subscription Receivable (34,500)
Total Liabilities & Equity $ 2,966,988
See accompanying notes to condensed consolidated financial
statements.
</TABLE>
<PAGE>
Apogee Research, Inc.
Consolidated Income Statement
Nine months ended
September 30, 1997
Unaudited
<TABLE>
<CAPTION>
<S> <C>
Revenue $6,070,647
Direct Cost 3,055,814
Gross Profit 3,014,833
General and Administrative Expense 2,216,039
Operating Income: 798,794
Other Income & Expense:
Other Income (expense)
Interest and other income 25,213
Interest Expense (154,996)
Net income before taxes 669,011
Provision for Income Taxes 215,413
Net Income $ 453,598
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE>
Apogee Research, Inc.
Consolidated Statement of Cash Flows
for the nine month ended September 30, 1997
Unaudited
<TABLE>
<CAPTION>
<S> <C>
Cash Flow from Operating Activity:
Net Income 453,598
Adjustment to reconcile net income to net cash:
Depreciation & Amortization 69,570
(Gain) Loss on Foreign Currency 2,410
Changes in operating assets and liabilities
(Increase)Decrease in:
Accounts Receivable 296,840
Prepaid Expense (71,978)
Other Receivable (10,575)
Deposits 6,279
Deferred Tax Asset
Increase(Decrease) in:
Accounts Payable 9,927
Billing in excess of Revenue (21,494)
Accrued Payroll Taxes
Other Payable
Bonus Payable
Deferred Tax Liability
Taxes Payable 205,360
Net cash provided(used) by Operating Activity 939,937
Investing Activity:
(Purchase) Sale of PPE (142,779)
(Purchase) Sale of Investments 0
Net cash provided(used) by Investing Activity (142,779)
Cash Flow from Financing Activity:
Sale of Common Stock 0
Draw(Payoff) on LOC (600,000)
Stock Sub Receivable
(Purchase) Sale of Treasury (46,467)
Draw(Payoff) on Notes Payable (37,247)
(Purchase)Sale of Treasury
Net cash provided(used) by Financing Activity (683,714)
Net Increase in Cash 113,444
Beginning Balance of Cash 253,080
Ending Balance of Cash 366,524
</TABLE>
<PAGE>
Apogee Research, Inc.
Consolidated Income Statement
Nine months ended
September 30, 1996
Unaudited
<TABLE>
<CAPTION>
<S> <C>
Revenue $ 4,264,067
Direct Cost 2,376,913
Gross Profit 1,887,154
General and Administrative Expense 1,669,585
Operating Income: 217,568
Other Income & Expense:
Other Income (expense)
Interest and other income 3,704
Interest Expense (103,560)
Net income before taxes 117,712
Provision for Income Taxes 26,090
Net Income $ 91,622
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Apogee Research, Inc.
Consolidated Statement of Cash Flows
for the period ended September 30, 1996
<TABLE>
<CAPTION>
<S> <C>
Cash Flow from Operating Activity:
Net Income 91,622
Adjustment to reconcile net income to net cash:
Depreciation & Amortization 62,340
Prior Period Adjustment (40,771)
Changes in operating assets and liabilities
Accounts Receivable 1,009,812
Prepaid Expense 15,984
Other Receivable (148,582)
Deposits 6,516
Accounts Payable (482,946)
Billing in excess of Revenue (80,301)
Taxes Payable (32,894)
Net cash provided(used) by Operating Activity 400,780
Investing Activity:
(Purchase) Sale of PPE (19,943)
(Purchase) Sale of Investments (12,591)
Net cash provided(used) by Investing Activity (32,534)
Cash Flow from Financing Activity:
Sale of Common Stock 1,501
Draw(Payoff) on LOC (16,299)
Draw(Payoff) on Notes Payable (31,053)
Net cash provided(used) by Financing Activity (45,851)
Net Increase in Cash
Beginning Balance of Cash 322,395
Ending Balance of Cash 34,537
356,932
</TABLE>
<PAGE>
APOGEE RESEARCH, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,1997
UNAUDITED
NOTE 1 - GENERAL
The interim financial information furnished herein was prepared
from the books and records of Apogee and its subsidiary (the
"Company") as of September 30, 1997 and for the period then
ended, without audit; however, such information reflects all
normal and recurring accruals and adjustments which are, in the
opinion of management, necessary for a fair presentation of
financial position and of the statements of operations and cash
flows for the interim period presented. The interim financial
information furnished herein should be read in conjunction with
the consolidated financial statements for the year ended December
31, 1996. The interim financial information presented is not
necessarily indicative of the results from operations expected
for the full fiscal year.
NOTE 2 - ACCOUNTS RECEIVABLE
The following summary shows the elements of accounts receivable
from long-term contracts and programs:
Amounts billed.......................
$2,110,826
Retained fees and unbilled receivable
costs
And accrued profit on progress
completed........................... 33,022
Billings in excess of revenue recorded
(122,297)
$2,021,551
NOTE 3 - LINE OF CREDIT
The Company renewed its line of credit with First Union Bank
until April 30, 1998 under the same terms and conditions as its
previous line of credit. The amount outstanding at September 30,
1997 was $250,000.
NOTE 4 - SUBSEQUENT EVENTS
On November 18, 1997, Apogee entered into an agreement to merge,
intended to be treated as a pooling of interests for accounting
purposes, with a subsidiary of Hagler Bailly. The transaction
provides for stockholders of the company to receive shares of
Hagler Bailly, Inc. stock in exchange for their Apogee stock.
Other conditions of the merger agreement included the requirement
that certain employees enter into employment and non-compete
agreements with Hagler Bailly.
<PAGE>
Hagler Bailly, Inc. and Apogee Research, Inc.
Proforma Combined Condensed Balance Sheet
September 30, 1997
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Historical Proforma Proforma
Assets Hagler Bailly, Apogee Research, Adjustments Combined
Current assets
Cash and cash equivalents 1,996,983 367,998 2,364,981
Investments 13,165,257 13,165,357
Accounts receivable, net 24,429,714 1,936,952 26,366,666
Prepaid 786,639 94,779 881,418
Other current assets 1,242,117 21,101 1,263,218
Total current assets 41,620,710 2,420,830 44,041,540
Property and equipment, net 2,568,101 277,952 2,846,053
Goodwill, net 7,109,743 7,109,743
Other 937,722 16,700 954,422
Total assets $ 52,236,277 $ 2,715,482 $ 54,951,759
Liabilities and Stockholders' Equity
Current liabilities
Bank line of credit $ $ 250,000 $ 250,000
Accounts payable and accrued expenses 1,322,989 697,458 2,020,447
Accrued compensation and benefits 5,676,127 124,309 5,800,436
Billings in excess of cost 1,564,902 1,564,902
Current portion of long-term debt 7,018 7,018
Deferred income taxes 1,795,467 244,441 2,039,908
Total current liabilities 10,359,485 1,323,226 11,682,711
Long-term debt 96,109 96,109
Total liabilities 10,359,485 1,419,335 11,778,820
Stockholders' equity
Preferred stock, $0.01 par value, 5,000,000
shares authorized; none issued and outstanding
Hagler Bailly, Inc. common stock, $0.01 par value,
20,000,000 authorized; 7,982,516 issued and outstan 79,825 4,100 83,925
Apogee Research, Inc. common stock, $.10 par value;
shares authorized; 267,088 issued and outstanding 26,709 (26,709)
Additional paid-in capital 40,584,863 295,690 (23,858) 40,856,695
Retained earnings(deficit) 1,212,103 1,054,715 2,266,818
Treasury Stock (46,467) 46,467
Stock Subscription Receivable (34,500) (34,500)
Total stockholders' equity 41,876,791 1,296,147 43,172,938
Total liabilities and stockholders' equity $ 52,236,275 $ 2,715,482 $ 54,951,759
Note: The balance sheet at September 30, 1997 has been derived from the unaudited financial
statements at that date but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
See accompanying notes to Proforma Combined Condensed Financial Statements.
</TABLE>
<PAGE>
Hagler Bailly, Inc. and Apogee Research, Inc.
Proforma Combined Condensed Statement of Income
Period Ended September 30, 1997
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION> Historical
Hagler Apogee Proforma Proforma
Bailly, Inc. Research, Inc. Adjustments Combined
<S> <C> <C> <C> <C>
Revenues:
Consulting revenues 36,226 5,151 41,377
Subcontractors and other revenue 21,581 930 22,511
Total revenues 57,807 6,081 63,888
Cost of services 44,536 4,802 49,338
Gross profit 13,271 1,279 14,550
Selling, general and administrati 7,196 479 7,675
Stock and stock option compensati 65 0 65
Income (loss) from operations 6,010 800 6,810
Other income (expense) net 180 (128) 52
Income (loss) before income tax ex 6,190 672 6,862
Income tax expense 2,229 215 2,444
Net income (loss) $ 3,961 $ 457 $ - $ 4,418
Net income (loss) per share $0.55 $1.75 $0.58
Weighted average shares
outstanding 7,153,747 261,747 7,563,747
See accompanying notes to Proforma Combined Condensed Financial Statements.
</TABLE>
<PAGE>
Hagler Bailly, Inc. and Apogee Research, Inc.
Proforma Combined Condensed Statement of Income
Year Ended December 31, 1996
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical
Hagler Apogee Proforma Proforma
Bailly, Inc. Research,Inc. Adj. Combined
<S> <C> <C> <C> <C>
Revenues:
Consulting revenues 38,762 5,407 44,169
Subcontractors and other revenues 22,821 954 23,775
Total revenues 61,583 6,361 67,944
Cost of services 48,786 5,305 54,091
Gross profit 12,797 1,056 13,853
Selling, general and administrative 8,583 547 9,130
Stock and stock option compensation 6,172 0 6,172
Income (loss) from operations (1,958) 509 (1,449)
Other income (expense) net (904) (109) (1,013)
Income (loss) before income tax exp (2,862) 400 (2,462)
Income tax expense 797 164 961
Net income (loss) (3,659) 236 $(3,423)
Net income (loss) per share ($0.58) $0.88 ($0.45)
Weighted average shares outstanding 6,273,831 267,088 7,570,534
</TABLE>
<PAGE>
Hagler Bailly, Inc. and Apogee Research, Inc.
Proforma Combined Condensed Statement of Income
Year Ended December 31, 1995
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical
Hagler Apogee Proforma Proforma
Bailly, Inc. Research, Inc. Adjustments Combined
<S> <C> <C> <C> <C>
Revenues:
Consulting revenues $ 29,172 $ 5,693 $ - $ 34,865
Subcontractors and other revenu 20,016 868 20,884
Total revenues 49,188 6,561 55,749
Cost of services 40,340 5,484 45,824
Gross profit 8,848 1,077 9,925
Selling, general and administrati 5,682 619 6,301
Stock and stock option compensati 0 0 0
Income (loss) from operations 3,166 458 3,624
Other income (expense) net (657) (97) (754)
Income (loss) before income tax e 2,509 361 2,870
Income tax expense 1,087 145 1,232
Net income (loss) $ 1,422 $ 216 $ $ 1,638
Net income (loss) per share * $0.81 $0.21
Weighted average shares outstandi * 265,424 7,568,420
</TABLE>
<PAGE>
Hagler Bailly, Inc. and Apogee Research, Inc.
Proforma Combined Condensed Statement of Income
Year Ended December 31, 1994
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical
Hagler Apogee Proforma Proforma
Bailly, Inc. Research, Inc. Adjustments Combined
<S> <C> <C> <C> <C>
Revenues:
Consulting revenues $ 22,531 $ 4,772 $ $ 27,303
Subcontractors and other revenues 13,437 1,044 14,481
Total revenues 35,968 5,816 41,784
Cost of services 29,122 4,876 33,998
Gross profit 6,846 940 7,786
Selling, general and administrative expenses 4,836 548 5,384
Stock and stock option compensation 0 0 0
Income (loss) from operations 2,010 392 2,402
Other income (expense) net 12 (30) (18)
Income (loss) before income tax expense 2,022 362 2,384
Income tax expense 843 159 1,002
Net income (loss) $ 1,179 $ 203 $ - $ 1,382
Net income (loss) per share * $0.74 $0.18
Weighted average shares outstanding * 272,744 7,577,723
</TABLE>
* Due to the acquisition on May 25, 1995, and the change in capital
structure, earnings per share information for these periods are not
meaningful and accordingly are not presented.
<PAGE>
HAGLER BAILLY, INC. AND APOGEE
RESEARCH, INC.
NOTES TO PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
On November, 18, 1997, Hagler Bailly. and Apogee entered
into a definitive agreement that provides for the merger of a
subsidiary of Hagler Bailly, with and into Apogee, with Apogee
becoming a wholly-owned subsidiary of Hagler Bailly. Under the
terms of the agreement, each outstanding share of Apogee will be
converted into the right to receive shares of Hagler Bailly
Common Stock. The business combination is to be accounted for
using the "pooling of interests" method of accounting for
business combinations.
The unaudited pro forma combined condensed balance sheet
combines the Hagler Bailly and Apogee consolidated balance sheets
as of September 30, 1997. For the unaudited pro forma combined
condensed statements of income, the Hagler Bailly consolidated
statements of income of the years ended December 31, 1996, 1995
and 1994 have been combined with the Apogee consolidated
statements of income for the same periods. There were no material
transactions between Hagler Bailly and Apogee during any period
presented, and there are no material differences in the
accounting policies of Hagler Bailly and Apogee.
2. Non-recurring Items Attributable to the Transaction
Hagler Bailly and Apogee expect that certain adjustments
will be recorded subsequent to the Merger to accrue for specific
and identifiable costs related to the Merger. These adjustments
are expected to include direct transaction expenses such as
legal, accounting and related fees, and integration expenses.
These pretax costs are estimated to be as much as $300,000.
Because the transaction has not been completed, this amount is a
preliminary estimate and is subject to revision as more
information becomes available. These adjustments have not been
included in the accompanying unaudited pro forma combined
condensed statements of income as they are non-recurring and not
expected to be replicated in future periods.
3. Pro Forma Combined Financial Statements
Certain reclassifications have been made to conform Apogee's
financial statement to those of Hagler Bailly.
4. Pro Forma Adjustments
Adjustments for costs related to the merger have not been
included in the unaudited pro forma combined condensed statements
of income as they result directly from the transaction and are
not expected to be included in the combined net income beyond the
period succeeding the transaction.
5. Stockholders' Equity
Stockholders' equity has been adjusted to reflect the
following:
I. Common stock - Common stock has been adjusted to reflect the
exchange of 261,747 shares of Apogee Common Stock for 410,000
shares of Hagler Bailly Common Stock.
II. Additional paid in capital - Adjustments to addition paid in
capital are limited to those necessary to offset the adjustments
to the par value of common stock discussed above.
6. Earnings Per Share
Pro forma weighted average common shares outstanding for all
periods presented are based on Hagler Bailly's weighted average
number of shares outstanding for the nine months ended September
30, 1997 and Apogee's combined historical weighted average
shares, after adjustment of Apogee's historical number of shares
by the exchange ratio of 1.2709.
7. Pro Forma Combined Condensed Statement of Income
The Hagler Bailly December 31, 1995 pro forma combined condensed
statement of income includes the operations of RCG/Hagler Bailly
for the period from January 1, 1995 to May 25, 1995.
