<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO________________
COMMISSION FILE NUMBER 000-24224
APOGEE, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3605119
- ------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1018 W. Ninth Avenue - Suite 202
King of Prussia, PA 19406
- -------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
(610) 992-7670
- ----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
----- -----
As of August 5, 1996, Apogee, Inc. had 9,785,502 shares of common stock, $0.01
par value, outstanding.
Page 1 of 21
<PAGE> 2
APOGEE, INC.
FORM 10-Q - QUARTER ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
FORM 10-Q FORM 10-Q FORM 10-Q
PART NO: ITEM NO. DESCRIPTION PAGE NO.
- -------- ---------- ----------- ----------
<S> <C> <C> <C>
I. FINANCIAL INFORMATION
1 Financial Statements
- Consolidated Balance Sheets
as of June 30, 1996 and
December 31, 1995 3
- Consolidated Statements of
Operations for the Three Months
Ended June 30, 1996 and 1995 4
- Consolidated Statements of
Operations for the Six Months
Ended June 30, 1996 and 1995 5
- Consolidated Statements of
Cash Flows for the Six Months
Ended June 30, 1996 and 1995 6
- Consolidated Statement of
Changes in Stockholders' Equity
for the Six Months Ended
June 30, 1996 7
- Notes to Consolidated Financial
Statements 8 - 10
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 17
II. OTHER INFORMATION
4. Submission of Matters to a Vote of Security Holders 18 - 19
6. Exhibits and Reports on Form 8-K 19
Signatures 20
Index to Exhibits 21
</TABLE>
Page 2 of 21
<PAGE> 3
APOGEE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
ASSETS 1996 DECEMBER 31
(UNAUDITED 1995
---------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $2,065 $11,949
Accounts receivable, net of allowance
for doubtful accounts of $7,975 in 1996 and $8,052
in 1995 14,178 14,555
Other accounts receivable 2,556 1,911
Other current assets 1,286 1,471
---------- -----------
Total current assets 20,085 29,886
Property and equipment, net 4,918 4,671
Intangible assets and excess cost over fair value
of net assets acquired, net of accumulated
amortization of $3,268 in 1996 and $2,320 in 1995 79,037 74,105
Other assets, net 900 389
---------- -----------
$104,940 $109,051
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank $272
Current portion of long-term debt $5,249 5,226
Accounts payable 1,896 1,457
Accrued expenses and other current liabilities 11,637 16,350
---------- -----------
Total current liabilities 18,782 23,305
Long-term debt 5,190 5,748
Other long-term liabilities 940 516
Deferred income tax liability 672 743
---------- -----------
Total liabilities 25,584 30,312
---------- -----------
Stockholders' equity :
Common stock, $.01 par value, 20,000,000 shares
authorized; issued 9,781,362 in 1996 and
9,741,050 in 1995 98 97
Capital in excess of par value 85,273 85,612
Accumulated deficit (5,952) (6,895)
Deferred compensation (63) (75)
---------- -----------
Total stockholders' equity 79,356 78,739
---------- -----------
$104,940 $109,051
========== ===========
</TABLE>
Page 3 of 21
<PAGE> 4
APOGEE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
Net revenues $20,393 $17,018
Cost of revenues 15,547 11,900
--------- ---------
Gross profit 4,846 5,118
Selling and administrative expenses 2,417 2,159
Provision for doubtful accounts 995 916
Amortization of intangible assets and excess
cost over fair value of net assets acquired 585 392
--------- ---------
Income from operations 849 1,651
Non-operating expenses (income):
Interest expense 154 113
Interest (income) (15) (289)
--------- ---------
Income before income taxes 710 1,827
Provision for income taxes 115 173
--------- ---------
Net income $595 $1,654
========= =========
Net income per common share $0.06 $0.18
========= =========
Weighted average number of common shares
outstanding 9,865,173 9,428,416
========= =========
</TABLE>
Page 4 of 21
<PAGE> 5
APOGEE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1996 1995
--------- ---------
<S> <C> <C>
Net revenues $40,061 $32,625
Cost of revenues 30,538 23,148
--------- ---------
Gross profit 9,523 9,477
Selling and administrative expenses 5,007 4,192
Provision for doubtful accounts 1,978 1,577
Amortization of intangible assets and excess
cost over fair value of net assets acquired 1,161 763
--------- ---------
Income from operations 1,377 2,945
Non-operating expenses (income):
Interest expense 305 231
Interest (income) (102) (667)
--------- ---------
Income before income taxes 1,174 3,381
Provision for income taxes 231 338
--------- ---------
Net income $943 $3,043
========= =========
Net income per common share $0.10 $0.32
========= =========
Weighted average number of common shares
outstanding 9,873,448 9,401,754
========= =========
</TABLE>
Page 5 of 21
<PAGE> 6
APOGEE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1996 1995
<S> <C> <C>
Cash flows from operating activities: ------- --------
Net income $943 $3,043
Adjustments to reconcile net income to net cash
provided by (used in) operations:
Depreciation and amortization 1,700 1,020
Provision for doubtful accounts 1,978 1,577
Changes in assets and liabilities, net of
effects of businesses acquired:
Increase in accounts receivable (1,310) (4,878)
Increase in other current assets (801) (326)
Increase (decrease) in accounts payable 439 (403)
Decrease in accrued expenses and
other current liabilities (1,620) (805)
Decrease in other assets and other liabilities (141) (430)
------- --------
Net cash provided by (used in) operating
activities 1,188 (1,202)
------- --------
Cash flows from investing activities:
Acquisition of businesses:
Payments for acquisition of businesses,
net of cash acquired of $64 in 1996
and $94 in 1995 (2,394) (6,590)
Additional payments for businesses acquired
in prior years (5,580) (751)
------- --------
Net cash outlay for acquisition of
businesses (7,974) (7,341)
Purchases of property and equipment (753) (976)
------- --------
Net cash used in investing activities (8,727) (8,317)
------- --------
Cash flows from financing activities:
Proceeds from borrowings 1,000 275
Principal payments on long-term obligations (3,345) (1,909)
------- --------
Net cash used in financing activities (2,345) (1,634)
------- --------
Net decrease in cash and cash equivalents (9,884) (11,153)
Cash and cash equivalents at beginning of period 11,949 29,281
------- --------
Cash and cash equivalents at end of period $2,065 $18,128
======= ========
Supplemental disclosures of cash flow information:
Interest paid $330 $217
======= ========
Income taxes paid $50
======= ========
</TABLE>
Page 6 of 21
<PAGE> 7
APOGEE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Shares
Capital in
excess of Accumulated Deferred
Number Par value par value deficit compensation Total
--------- --------- --------- ----------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 9,741 $97 $85,612 ($6,895) ($75) $78,739
Common stock issued in connection with
acquisitions 80 1 392 393
Common stock reversal (40) (731) (731)
Amortization of deferred compensation 12 12
Net income 943 943
--------- -------- ---------- ------------ ---------- ---------
Balance at June 30, 1996 (unaudited) 9,781 $98 $85,273 ($5,952) ($63) $79,356
========= ======== ========== ============ ========== =========
</TABLE>
Page 7 of 21
<PAGE> 8
APOGEE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Dollars in thousands, except share and per share data)
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements are unaudited.
These statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission and should be read in
conjunction with the Company's consolidated financial statements and notes
thereto for the year ended December 31, 1995, included in its Form 10-K filed
with the Securities and Exchange Commission on April 1, 1996. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
Company management, the consolidated financial statements for the unaudited
interim periods presented include all adjustments, consisting only of normal
recurring adjustments, necessary to present a fair statement of the results for
such interim periods.
Operating results for the three and six month period ended June 30,
1996 are not necessarily indicative of the results that may be expected for a
full year or any portion thereof.
NOTE 2 - BUSINESS ACQUISITIONS
During the six month period ended June 30, 1996, the Company acquired
four group practices which have been accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to assets and
liabilities acquired based upon their estimated fair values at the dates of
acquisition. The results of operations of the acquired companies are included
in the consolidated financial statements from the respective dates of
acquisition.
The following unaudited pro forma consolidated results of operations
of the Company and its subsidiaries for the six months ended June 30, 1996 give
effect on a pro forma basis as if the practices had been acquired as of January
1, 1996:
Page 8 of 21
<PAGE> 9
APOGEE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
JUNE 30, 1996
(Dollars in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1996
--------------------
<S> <C>
Net revenues $40,731
=======
Net income $ 1,020
=======
Net income per common share $ 0.10
=======
</TABLE>
The above pro forma information is not necessarily indicative of the
results of operations that would have occurred had the acquisitions been made
as of the beginning of the period or results which may occur in the future.
Information with respect to businesses acquired are as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1996
----------------
<S> <C>
Cash paid (net of cash acquired)................ $2,394
Common stock issued............................. 191
Subordinated promissory notes issued............ 1,205
------
3,790
Liabilities assumed............................. 259
------
$4,049
Fair value of assets acquired, principally
accounts receivable, property and equipment
and certain identifiable intangible assets... 412
------
Cost in excess of fair value of net assets
acquired..................................... $3,637
======
</TABLE>
NOTE 3 - INCOME TAXES
The provision for income taxes is based on the Company's estimated
effective income tax rate.
Page 9 of 21
<PAGE> 10
APOGEE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
JUNE 30, 1996
(Dollars in thousands, except share and per share data)
(Unaudited)
NOTE 4 - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
Furniture, fixtures and equipment.......... $6,582 $5,796
Less: Accumulated depreciation........ 1,664 1,125
------ ------
$4,918 $4,671
====== ======
</TABLE>
Page 10 of 21
<PAGE> 11
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
Apogee, Inc. ("Apogee" or the "Company") operates multi-disciplinary,
outpatient mental health group practices. The Company is one of the largest
providers of outpatient mental health services in the United States. Apogee
provides mental health and related services, principally at free-standing,
mental health clinics. In addition, the Company provides mental health
services in a number of inpatient facilities and at long-term care facilities
with which the Company has contractual agreements. The Company currently
operates 121 mental health clinics located in 14 states and the District of
Columbia.
Apogee's group practices provide a broad range of mental health
services, including diagnosis, psychiatric consultation, psychological
assessment and evaluation, medication monitoring, group and individual
psychotherapy, behavioral management, marriage, family and child therapy and
substance abuse and chemical dependency rehabilitation. The Company's
multi-disciplinary practices typically employ a variety of clinical
professionals.
The Company's strategy is to develop, in selected geographic markets,
wholly owned or managed mental health care delivery systems which provide a
high quality of care in a cost-effective manner. The Company intends to pursue
growth both in its existing markets and geographically through the select
acquisition and development of additional mental health group practices and
practice management agreements. The Company believes that group practices
represent an attractive consolidation opportunity. By providing integrated
coverage of a market, the Company is able to generate significant cost
advantages and is therefore more attractive to payors.
The Company will continue to seek internal growth within the markets
it currently serves through business development and marketing activities to
local and regional payors, recruiting providers with established reputations,
"fold-ins" of existing practices, start-ups of new mental health clinics and
through expansion of services to facilities under contract. During the six
months ended June 30, 1996, the Company acquired four group practices.
Page 11 of 21
<PAGE> 12
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
JUNE 30, 1996 AND 1995
NET REVENUES
For the three months ended June 30, 1996, the Company's net revenues
increased to $20,393 from $17,018 in the same period of the prior year, an
increase of 20%. This increase is a result of acquisitions made subsequent to
June 30, 1995. After adjusting for the impact of closing certain long term
care operations as a result of the Company's restructuring in the fourth
quarter of 1995, base business revenues decreased approximately $800,000,
primarily as a result of: 1) reduced revenue volume in certain long term care
markets which the Company continues to service, but is not actively replacing
terminated direct care providers due to marginal reimbursement rates; and 2)
the loss of several group practice contracts partially offset by increased
volumes from other payors/patients.
GROSS PROFIT
Gross profit comprises net revenues less personnel, field management,
facility and other costs and expenses directly associated with the delivery of
services. Gross profit decreased 5% to $4,846 for the three months ended June
30, 1996 from $5,118 for the comparable period last year. The gross profit
from acquisitions made subsequent to June 30, 1995 was approximately $1.1
million. After adjusting for the impact of closing certain long term care
operations as a result of the Company's restructuring in the fourth quarter of
1995, gross profit from base business decreased approximately $1.2 million,
primarily as a result of: 1) the loss of several group practice contracts; 2)
clinician turnover/productivity at certain group practice operations; and 3)
investment in clinical and field support positions in preparation for
anticipated future revenue growth.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses comprise corporate office,
regional management and centralized billing expenses. Selling and
administrative expenses increased to $2,417 for the three months ended June 30,
1996 from $2,159 for the same period in 1995, primarily as a result of
acquisitions and, to a lesser extent, an increase in regional management
personnel. Selling and administrative expenses have decreased to 12% of net
revenues from 13% for the same period in 1995 due primarily to improved
leverage of overhead costs.
Page 12 of 21
<PAGE> 13
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
PROVISION FOR DOUBTFUL ACCOUNTS
The provision for doubtful accounts increased to $995 for the three
months ended June 30, 1996 from $916 for the same period in 1995. This
increase is a result of increased revenues as the provision for doubtful
accounts has remained consistent at 5% of net revenue.
AMORTIZATION OF INTANGIBLE ASSETS AND EXCESS OF COST OVER FAIR VALUE NET ASSETS
ACQUIRED
Amortization of intangible assets and excess of cost over fair value
of net assets acquired increased to $585 for the three months ended June 30,
1996 from $392 for the same period in 1995. This increase was due to
additional acquisitions made subsequent to June 30, 1995.
INTEREST INCOME AND EXPENSE
Interest expense increased to $154 for the three months ended June 30,
1996 from $113 for the same period in 1995. Interest expense relates primarily
to acquisition related debt which has increased as a result of acquisitions
subsequent to June 30, 1995.
Interest income is primarily related to the Company's portfolio of
short-term investments. Interest income decreased to $15 from $289 for the
three month period ending June 30, 1996 and 1995, respectively. This decrease
is primarily a result of a lower average outstanding investment portfolio
balance in 1996.
Page 13 of 21
<PAGE> 14
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
NET REVENUES
For the six months ended June 30, 1996, the Company's net revenues
increased to $40,061 from $32,625 in the same period of the prior year, an
increase of 23%. This increase is a result of acquisitions made subsequent to
June 30, 1995. After adjusting for the impact of closing certain long term
care operations as a result of the Company's restructuring in the fourth
quarter of 1995, base business revenues decreased approximately $1.5 million,
primarily as a result of: 1) reduced revenue volume in certain long term care
markets which the Company continues to service, but is not actively replacing
terminated direct care providers due to marginal reimbursement rates; and 2)
the loss of several group practice contracts partially offset by increased
volumes from other payors/patients.
GROSS PROFIT
Gross profit comprises net revenues less personnel, field management,
facility and other costs and expenses directly associated with the delivery of
services. Gross profit increased to $9,523 for the six months ended June 30,
1996 from $9,477 for the comparable period last year. This increase is a
result of acquisitions made subsequent to June 30, 1995. After adjusting for
the impact of closing certain long term care operations as a result of the
Company's restructuring in the fourth quarter of 1995, gross profit from base
business decreased approximately $2.0 million, primarily as a result of: 1)
the loss of several group practice contracts; 2) clinician
turnover/productivity at certain group practice operations; and 3) investment
in clinical and field support positions in preparation for anticipated future
revenue growth.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses comprise corporate office,
regional management and centralized billing expenses. Selling and
administrative expenses increased to $5,007 for the six months ended June 30,
1996 from $4,192 for the same period in 1995, primarily as a result of
acquisitions and, to a lesser extent, an increase in regional management
personnel. Selling and administrative expenses remained consistent at 13% of
net revenues.
Page 14 of 21
<PAGE> 15
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
PROVISION FOR DOUBTFUL ACCOUNTS
The provision for doubtful accounts increased to $1,978 for the six
months ended June 30, 1996 from $1,577 for the same period in 1995. This
increase is a result of increased revenues as the provision for doubtful
accounts has remained consistent at 5% of net revenues.
AMORTIZATION OF INTANGIBLE ASSETS AND EXCESS OF COST OVER FAIR VALUE NET ASSETS
ACQUIRED
Amortization of intangible assets and excess of cost over fair value
of net assets acquired increased to $1,161 for the six months ended June 30,
1996 from $763 for the same period in 1995. This increase was due to
additional acquisitions made subsequent to June 30, 1995.
INTEREST INCOME AND EXPENSE
Interest expense increased to $305 for the six months ended June 30,
1996 from $231 for the same period in 1995. Interest expense relates primarily
to acquisition related debt which has increased as a result of acquisitions
subsequent to June 30, 1995.
Interest income is primarily related to the Company's portfolio of
short-term investments. Interest income decreased to $102 from $667 for the
six month period ending June 30, 1996 and 1995, respectively. This decrease is
primarily a result of a lower average outstanding investment portfolio balance
during 1996.
Page 15 of 21
<PAGE> 16
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company's working capital decreased to $1,303
from $6,581 at December 31, 1995. The decrease in working capital was
principally a result of: 1) payments for businesses acquired and related
transaction costs; 2) principal payments on long-term acquisition debt; and 3)
to a lesser extent, payments for property and equipment.
Net cash provided by operations was $1,188 for the six months ended
June, 1996 compared to net cash used by operations of ($1,202) for the same
period in 1995. The increase in net cash flows from operations was mainly due
to increases in noncash expenses and improvement in the Company's accounts
receivable days sales outstanding ("DSO"). Cash and cash equivalents decreased
$9,884 from December 31, 1995 to June 30, 1996 due primarily to payments for
acquisitions of businesses, principal payments on long-term acquisition debt
and purchases of property and equipment.
The Company is already experiencing benefits from the enhanced
management and financial controls implemented during the first quarter of 1996.
Accounts receivables decreased approximately $700 without including the impact
of accounts receivables acquired in the 1996 acquisitions, and the Company's
overall DSO decreased to 63 days at June 30, 1996 from 75 days at December 31,
1995.
In April 1996, the Company finalized an agreement with a bank
establishing a two year credit facility ("credit facility") for up to a maximum
of $15 million. Borrowings availability under this credit facility are: based
on the value of selected assets, principally accounts receivable and property
and equipment; subject to various financial and non-financial covenants; and
secured by substantially all of the assets of the Company. Borrowings under
this facility bear interest at the bank's prime rate plus 2.85% or LIBOR plus
1.0%. The proceeds of this credit facility are available for future
acquisitions, working capital and general corporate purposes. As of June 30,
1996, the Company had borrowings of $1.0 million under this credit facility.
The Company's current ratio, working capital and debt to equity ratio
are set forth below for the dates indicated.
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Current ratio 1.07:1 1.28:1
Working capital $1,303 $6,581
Debt to equity .13:1 .14:1
</TABLE>
Page 16 of 21
<PAGE> 17
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS)
The Company believes that the cash flows generated by the Company's operations,
together with its existing cash and availability of borrowings under the credit
facility, will be sufficient to meet the Company's cash requirements in 1996.
FORWARD LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain "forward-looking statements" as defined
in the Private Securities Litigation Reform Act of 1995. Such statements are
based on management's estimates, assumptions and projections. Major factors
that could cause results to differ materially from those expected by management
include, but are not limited to: the timing and nature of reimbursement
changes; the nature of changes in laws and regulations that govern various
aspects of behavioral health care; the availability, retention and productivity
of clinicians; decisions by managed care and other third party payors; the
availability of acquisition candidates at purchase prices the Company believes
to be fair market; the direction and success of competitors; management
retention; and unanticipated market changes.
Page 17 of 21
<PAGE> 18
APOGEE, INC.
FORM 10-Q - QUARTER ENDED JUNE 30, 1996
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 11, 1996, the Company held its 1996 Annual Meeting of
Stockholders. At the Annual Meeting, the following matters were submitted to a
vote of stockholders:
1. The following nine individuals, constituting the full Board of
Directors of the Company, were nominated and elected to serve as the directors
of the Company:
<TABLE>
<S> <C> <C>
John H. Foster FOR: 8,107,886
WITHHOLD
AUTHORITY: 7,225
Lawrence M. Davies FOR: 8,107,886
WITHHOLD
AUTHORITY: 7,225
Henry C. Dudley FOR: 8,107,886
WITHHOLD
AUTHORITY: 7,225
Harvey V. Fineberg, M.D. FOR: 8,107,886
WITHHOLD
AUTHORITY: 7,225
Caroline H. Fleming FOR: 8,107,886
WITHHOLD
AUTHORITY: 7,225
Timothy E. Foster FOR: 8,107,886
WITHHOLD
AUTHORITY: 7,225
Irwin Lehrhoff, Ph.D. FOR: 8,107,886
WITHHOLD
AUTHORITY: 7,225
R. Bruce Mosbacher FOR: 8,107,886
WITHHOLD
AUTHORITY: 7,225
Shawkat Raslan FOR: 8,106,886
WITHHOLD
AUTHORITY: 8,225
</TABLE>
Page 18 of 21
<PAGE> 19
APOGEE, INC.
FORM 10-Q - QUARTER ENDED JUNE 30, 1996
PART II - OTHER INFORMATION
2. The holders of 7,808,031 shares of common stock voted in favor
of, the holders of 302,205 shares of common stock voted against, and the
holders of 4,875 shares of common stock abstained with respect to the
ratification of the selection of Price Waterhouse LLP, independent certified
public accountants, to serve as independent accountants for the Company.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) The exhibits required to be filed as part of this Quarterly
Report on Form 10-Q are contained in the attached Index to
Exhibits.
b) Current Reports on Form 8-K
During the quarter ended June 30, 1996, the Company filed a
Current Report on Form 8-K dated April 11, 1996, in which the
Company disclosed information under "Item 5 - Other Events".
Page 19 of 21
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
APOGEE, INC.
--------------------------------------------
(registrant)
August 8, 1996 /s/ Alan N. Vinick
- --------------- --------------------------------------------
(Date) By: Alan N. Vinick
Senior Vice President, Finance
and Administration and Chief
Financial Officer
Page 20 of 21
<PAGE> 21
INDEX TO EXHIBITS
10 (u) Credit agreement with PNC Bank, National Association dated
on April 11, 1996 (incorporated by reference to the Company's
current report on Form 8-K dated April 11, 1996).
27 Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only
and not filed.
Page 21 of 21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996 (UNAUDITED) AND THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE
30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,065
<SECURITIES> 0
<RECEIVABLES> 22,153
<ALLOWANCES> 7,975
<INVENTORY> 0
<CURRENT-ASSETS> 20,085
<PP&E> 6,582
<DEPRECIATION> 1,664
<TOTAL-ASSETS> 104,940
<CURRENT-LIABILITIES> 18,782
<BONDS> 5,190
0
0
<COMMON> 98
<OTHER-SE> 79,258
<TOTAL-LIABILITY-AND-EQUITY> 104,940
<SALES> 0
<TOTAL-REVENUES> 40,061
<CGS> 0
<TOTAL-COSTS> 30,538
<OTHER-EXPENSES> 1,161
<LOSS-PROVISION> 1,978
<INTEREST-EXPENSE> 305
<INCOME-PRETAX> 1,174
<INCOME-TAX> 231
<INCOME-CONTINUING> 943
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 943
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
