<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 SEPTEMBER 30, 1997
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 October 31, 1997, Apogee, Inc. had 10,004,565 shares of common stock,
$0.01 par value, outstanding.
Page 1 of 17
<PAGE> 2
APOGEE, INC.
FORM 10-Q - QUARTER ENDED SEPTEMBER 30, 1997
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 Statements of
Operations for the Three Months
Ended September 30, 1997 and 1996 3
- Consolidated Statements of
Operations for the Nine Months
Ended September 30, 1997 and 1996 4
- Consolidated Balance Sheets
as of September 30, 1997 and
December 31, 1996 5
- Consolidated Statements of
Cash Flows for the Nine Months
Ended September 30, 1997 and 1996 6
- Consolidated Statement of
Changes in Stockholders' Equity
for the Nine Months Ended
September 30, 1997 7
- Notes to Consolidated Financial
Statements 8
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K 15
Signatures 16
Index to Exhibits 17
</TABLE>
Page 2 of 17
<PAGE> 3
APOGEE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
NET REVENUES $ 17,106 $ 19,312
COST OF REVENUES 13,239 15,042
------------ ------------
GROSS PROFIT 3,867 4,270
SELLING AND ADMINISTRATIVE EXPENSES 2,210 2,241
PROVISION FOR DOUBTFUL ACCOUNTS 856 931
AMORTIZATION OF INTANGIBLE ASSETS AND EXCESS
COST OVER FAIR VALUE OF NET ASSETS ACQUIRED 525 555
------------ ------------
INCOME FROM OPERATIONS 276 543
NON-OPERATING EXPENSES (INCOME):
INTEREST EXPENSE 391 199
INTEREST (INCOME) (7) (10)
------------ ------------
(LOSS) INCOME BEFORE INCOME TAXES (108) 354
PROVISION FOR INCOME TAXES 34 74
------------ ------------
NET (LOSS) INCOME $ (142) $ 280
============ ============
NET (LOSS) INCOME PER COMMON SHARE $ (0.01) $ 0.03
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 10,024,626 9,852,900
============ ============
</TABLE>
PAGE 3 OF 17
<PAGE> 4
APOGEE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
NET REVENUES $ 54,216 $ 59,373
COST OF REVENUES 42,663 45,580
----------- -----------
GROSS PROFIT 11,553 13,793
SELLING AND ADMINISTRATIVE EXPENSES 6,436 7,248
PROVISION FOR DOUBTFUL ACCOUNTS 2,715 2,909
AMORTIZATION OF INTANGIBLE ASSETS AND EXCESS
COST OVER FAIR VALUE OF NET ASSETS ACQUIRED 1,589 1,716
----------- -----------
INCOME FROM OPERATIONS 813 1,920
NON-OPERATING EXPENSES (INCOME):
INTEREST EXPENSE 1,061 504
INTEREST (INCOME) (22) (112)
----------- -----------
(LOSS) INCOME BEFORE INCOME TAXES (226) 1,528
PROVISION FOR INCOME TAXES 72 305
----------- -----------
NET (LOSS) INCOME $ (298) $ 1,223
=========== ===========
NET (LOSS) INCOME PER COMMON SHARE $ (0.03) $ 0.12
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 9,977,914 9,866,598
=========== ===========
</TABLE>
PAGE 4 OF 17
<PAGE> 5
APOGEE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30,
ASSETS 1997 DECEMBER 31,
(UNAUDITED) 1996
-------- --------
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 2,418 $ 2,299
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE
FOR DOUBTFUL ACCOUNTS OF $7,604 IN 1997 AND $9,306
IN 1996 8,853 11,096
OTHER ACCOUNTS RECEIVABLE 958 1,643
OTHER CURRENT ASSETS 1,256 1,407
-------- --------
TOTAL CURRENT ASSETS 13,485 16,445
PROPERTY AND EQUIPMENT, NET 3,441 3,359
INTANGIBLE ASSETS AND EXCESS COST OVER FAIR VALUE
OF NET ASSETS ACQUIRED, NET OF ACCUMULATED
AMORTIZATION OF $5,619 IN 1997 AND $4,030 IN 1996 79,499 77,381
OTHER ASSETS, NET 353 598
-------- --------
$ 96,778 $ 97,783
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
CURRENT PORTION OF LONG-TERM DEBT $ 2,453 $ 4,584
ACCOUNTS PAYABLE 1,982 2,196
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES 13,853 16,767
-------- --------
TOTAL CURRENT LIABILITIES 18,288 23,547
LONG-TERM DEBT 12,202 8,224
OTHER LONG-TERM LIABILITIES 370 485
DEFERRED INCOME TAX LIABILITY 346 346
-------- --------
TOTAL LIABILITIES 31,206 32,602
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
COMMON STOCK, $.01 PAR VALUE, 20,000,000 SHARES
AUTHORIZED; ISSUED 10,004,565 IN 1997 AND
9,822,570 IN 1996 100 98
CAPITAL IN EXCESS OF PAR VALUE 86,293 85,624
ACCUMULATED DEFICIT (20,787) (20,489)
DEFERRED COMPENSATION (34) (52)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 65,572 65,181
-------- --------
$ 96,778 $ 97,783
======== ========
</TABLE>
PAGE 5 OF 17
<PAGE> 6
APOGEE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET (LOSS) INCOME $ (298) $ 1,223
ADJUSTMENTS TO RECONCILE NET (loss) INCOME TO NET
CASH PROVIDED BY OPERATIONS:
DEPRECIATION AND AMORTIZATION 2,168 2,480
PROVISION FOR DOUBTFUL ACCOUNTS 2,715 2,909
CHANGES IN ASSETS AND LIABILITIES, NET OF
EFFECTS OF BUSINESSES ACQUIRED:
INCREASE IN ACCOUNTS RECEIVABLE (692) (1,685)
DECREASE (INCREASE) IN OTHER CURRENT ASSETS 447 (676)
(DECREASE) INCREASE IN ACCOUNTS PAYABLE (214) 641
DECREASE IN ACCRUED EXPENSES AND
OTHER CURRENT LIABILITIES (2,474) (1,745)
DECREASE IN OTHER ASSETS AND OTHER LIABILITIES 130 77
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,782 3,224
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
ACQUISITION OF BUSINESSES:
PAYMENTS FOR ACQUISITION OF BUSINESSES, NET OF
CASH ACQUIRED OF $0 IN 1997 AND $35 IN 1996 (2,590)
ADDITIONAL PAYMENTS FOR BUSINESSES ACQUIRED
IN PRIOR YEARS (2,407) (6,731)
-------- --------
NET CASH OUTLAY FOR ACQUISITION OF BUSINESSES (2,407) (9,321)
DISPOSITION OF BUSINESSES 100
PURCHASES OF PROPERTY AND EQUIPMENT (1,203) (1,065)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (3,510) (10,386)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM BORROWINGS 5,845 3,900
PRINCIPAL PAYMENTS ON LONG-TERM OBLIGATIONS (3,998) (5,023)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,847 (1,123)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 119 (8,285)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,299 11,949
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,418 $ 3,664
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
INTEREST PAID $ 1,100 $ 515
======== ========
INCOME TAXES PAID $ 230 $ 255
======== ========
</TABLE>
PAGE 6 OF 17
<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, 1996 9,823 $ 98 $ 85,624 $(20,489) $ (52) $ 65,181
COMMON STOCK ISSUED IN CONNECTION WITH
ACQUISITIONS 182 2 669 671
AMORTIZATION OF DEFERRED COMPENSATION 18 18
NET LOSS (298) (298)
-------- -------- -------- -------- -------- --------
BALANCE AT SEPTEMBER 30, 1997 (UNAUDITED) 10,005 $ 100 $ 86,293 $(20,787) $ (34) $ 65,572
======== ======== ======== ======== ======== ========
</TABLE>
PAGE 7 OF 17
<PAGE> 8
APOGEE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(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, 1996 included in its Form 10-K filed with the Securities and
Exchange Commission on March 28, 1997. 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 nine month periods ended September 30,
1997 are not necessarily indicative of the results that may be expected for a
full year or any portion thereof.
NOTE 2 - INCOME TAXES
The provision for income taxes is based on the Company's estimated
effective income tax rate for 1997. At December 31, 1996, the Company had net
operating loss carryforwards for Federal income tax purposes of approximately
$2,000. Their use is limited to future taxable earnings of the Company and, as
specified in the Internal Revenue Code, use of certain of the net operating loss
carryforwards is limited as they were acquired by the Company in a purchase of
the stock of other companies. The carryforwards expire in varying amounts
through 2010. A valuation reserve has been established against the potential
future benefit of the net operating loss carryforwards and other deferred tax
assets.
NOTE 3 - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Furniture, fixtures and equipment...... $5,210 $5,201
Less: Accumulated depreciation........ 1,769 1,842
------ ------
$3,441 $3,359
====== ======
</TABLE>
Page 8 of 17
<PAGE> 9
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
Apogee, Inc. ("Apogee" or the "Company") is one of the largest
multi-disciplinary providers of outpatient behavioral health services in the
United States. The Company provides behavioral health and related services,
principally at free-standing clinics and currently operates 115 behavioral
health clinics located in 13 states and the District of Columbia. The Company
offers full and shared risk arrangements to employers and managed care
organizations to perform behavioral health services on a capitated,
sub-capitated and case rate basis. In addition, Apogee provides an array of
other behavioral health services, including: employee assistance programs; third
party clinical case management and claims adjudication; and management and
staffing for acute and sub-acute inpatient facilities, correctional and other
institutions through contractual agreements.
Apogee's outpatient practices provide a broad range of behavioral 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 some or all of the following
professionals: board certified or board eligible psychiatrists; licensed
clinical psychologists; licensed clinical social workers; registered psychiatric
nurse practitioners; licensed marriage, family and child counselors; and other
allied mental health professionals.
Company management is currently evaluating the Western Region group
practice operations which are primarily located in Arizona, California and
Nevada. Collectively, these operations have incurred significant operating
losses and negative same store revenue growth throughout 1997. The Company is
reviewing options including: selling selected group practice operations;
consolidating certain geographic markets; and exiting certain markets.
Management anticipates that a final recommendation to Apogee's Board of
Directors will be completed by no later than December 31, 1997 and may result in
a material charge to the Company's earnings.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
NET REVENUES
For the three months ended September 30, 1997, the Company's net revenues
decreased to $17,106 from $19,312 in the same period of the prior year. This
decrease is a result of the impact of operations which were discontinued or
downsized in conjunction with the Company's restructuring in the fourth quarter
of 1996. After adjusting for the impact of these operations, base business
revenues increased approximately $350, primarily as a result of continued
expansion of the Company's managed care and contract services businesses,
partially offset by reimbursement pricing pressure from managed care and other
third party payors.
Page 9 of 17
<PAGE> 10
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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 to $3,867 for the three months ended September
30, 1997 from $4,270 for the comparable period last year. This decrease is
primarily a result of the impact of operations which were discontinued or
downsized in conjunction with the Company's restructuring in the fourth quarter
of 1996. After adjusting for the impact of these operations, gross profit from
base business decreased approximately $375 due largely to continued
reimbursement pricing pressure from managed care and other third party payors
and the disappointing operating results of selected Western Region group
practices.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses are primarily comprised of corporate
office, regional management and centralized billing expenses. Selling and
administrative expenses were fairly consistent at $2,210 for the three months
ended September 30, 1997 as compared to $2,241 for the same period in 1996.
PROVISION FOR DOUBTFUL ACCOUNTS
The provision for doubtful accounts decreased to $856 of net revenues for
the three months ended September 30, 1997 from $931 for the same period in 1996.
This decrease results primarily from a decrease in net revenues as the provision
for doubtful accounts has remained constant at 5% of net revenues.
INTEREST INCOME AND EXPENSE
Interest expense increased to $391 for the three months ended September
30, 1997 from $199 for the same period in 1996 due to a higher average
outstanding debt balance.
Interest income is primarily related to the Company's cash and cash
equivalents and portfolio of short-term investments. Interest income for the
three months ended September 30, 1997 was fairly consistent with the same
period in 1996.
Page 10 of 17
<PAGE> 11
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
NET REVENUES
For the nine months ended September 30, 1997, the Company's net revenues
decreased to $54,216 from $59,373 in the same period of the prior year. This
decrease is a result of the impact of operations which were discontinued or
downsized in conjunction with the Company's restructuring in the fourth quarter
of 1996. After adjusting for the impact of these operations, base business
revenues increased approximately $1,800, primarily as a result of continued
expansion of the Company's managed care and contract services businesses
partially offset by reimbursement pricing pressure from managed care and other
third party payors.
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 to $11,553 for the nine months ended September
30, 1997 from $13,793 for the comparable period in 1996. This decrease is
primarily a result of the impact of operations which were discontinued or
downsized in conjunction with the Company's restructuring in the fourth quarter
of 1996. After adjusting for the impact of these operations, gross profit from
base business decreased approximately $1,100 due largely to continued
reimbursement pricing pressure from managed care and other third party payors
and the disappointing operating results of selected Western Region group
practices.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses are primarily comprised of corporate
office, regional management and centralized billing expenses. Selling and
administrative expenses decreased to $6,436 for the nine months ended September
30, 1997 from $7,248 for the same period in 1996, due to a combination of
reduced administrative costs as a result of discontinued or downsized operations
and the Company's ongoing administrative cost containment initiatives.
PROVISION FOR DOUBTFUL ACCOUNTS
The provision for doubtful accounts decreased to $2,715 of net revenues
for the nine months ended September 30, 1997 from $2,909 for the same period in
1996. This decrease results primarily from a decrease in net revenue as the
provision for doubtful accounts has remained constant at 5% of net revenues.
Page 11 of 17
<PAGE> 12
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
INTEREST INCOME AND EXPENSE
Interest expense increased to $1,061 for the nine months ended September
30, 1997 from $504 for the same period in 1996 due to a higher average
outstanding debt balance.
Interest income is primarily related to the Company's cash and cash
equivalents and portfolio of short-term investments. Interest income decreased
to $22 for the nine months ended September 30, 1997 from $112 for the same
period in 1996.
MEDICARE REVIEW
During 1996, certain of the Company's Medicare Part B and related
co-insurance billings previously submitted by one of Apogee's subsidiaries were
selected for review by the Office of the Inspector General of the Department of
Health and Human Services ("OIG") and the Department of Justice ("DOJ"). Apogee
has been informed by the DOJ that the review is a civil matter relating to
billings for services to Medicare patients in long term care facilities in the
State of Florida during the period from approximately January 1994 through March
1996. During the pendency of this review, the Medicare intermediary has
suspended all Medicare payments to this subsidiary. It is the Company's policy
to comply with all federal, state and local laws including those applicable to
the Medicare program and the Company is fully cooperating with the review. Due
to the preliminary nature of the review, the Company cannot predict when the
review will be completed, its ultimate outcome, or its potential impact on
earnings but believes the outcome of the review, including repayments, if any,
should not have a material adverse impact on the Company's financial condition.
LIQUIDITY AND CAPITAL RESOURCES
Net cash generated by operations was approximately $3,300 for the nine
months ended September 30, 1997 after excluding the impact of the downsized and
discontinued operations. In total, net cash provided by operations was $1,782
for the nine months ended September 30, 1997, compared to net cash provided by
operations of $3,224 for the same period in 1996. Cash and cash equivalents
remained fairly consistent at $2,418 at September 30, 1997, compared to $2,299
at December 31, 1996.
At September 30, 1997, the Company's working capital was ($4,803) compared
to ($7,102) at December 31, 1996. The improvement in working capital was
principally a result of a reduction in the accrued reserve for restructuring,
which decreased to $1,875 at September 30, 1997 from $4,003 at December 31,
1996.
Page 12 of 17
<PAGE> 13
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
In April, 1996, the Company entered into an agreement with a bank
establishing a two year revolving credit facility ("Credit Facility") for up to
a maximum of $15,000. Borrowings availability under this Credit Facility are
based on the Company's earnings before interest, income taxes, depreciation and
amortization, and 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 1.0%
or LIBOR plus 2.85%. The proceeds of this Credit Facility are available for
general corporate purposes, including working capital and future acquisitions.
Borrowings outstanding under the Credit Facility were $11,495 at September
30, 1997. The Credit Facility was amended in 1997 to extend the maturity to
November 30, 1998. The Amendment generally resets various financial covenants to
reflect the Company's restructuring and related non-recurring charges incurred
in 1996. In addition, the bank retains discretion for borrowings in excess of
$12,000.
The Company anticipates that the short-term cash requirements will exceed
the existing availability under the Company's current Credit Facility and
management is negotiating with the bank to extend and expand its existing Credit
Facility. While there are no assurances, management believes that terms and
conditions satisfactory to both parties will be reached to provide the Company
with the necessary borrowings availability which when combined with the cash
flows generated by the Company's operations, and its existing cash, will be
sufficient to meet the Company's cash requirements in the next year.
The Company's current ratio, working capital and debt to equity ratio are
set forth below for the dates indicated:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Current Ratio .74:1 .70:1
Working Capital ($4,803) ($7,102)
Debt to equity .22:1 .20:1
</TABLE>
Page 13 of 17
<PAGE> 14
APOGEE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CAUTIONARY STATEMENT
Matters discussed above contain forward-looking statements that are based on
management's estimates, assumptions and projections. Major factors which could
cause results to differ materially from those expected by management include the
timing and nature of reimbursement charges, the nature of changes in laws and
regulations that govern various aspects of the Company's business, new criteria
adopted to determine medical necessity for behavioral health service, the
outcome of the Department of Justice review, successful renegotiation of the
Company's Credit Facility, changes in procedures by third party payors, pricing
of managed care and other third party contracts, the number and productivity of
clinicians, the direction and success of competitors, management retention and
unanticipated market changes. The Company does not undertake any obligation to
update the information contained herein, which speaks only as of this date.
Page 14 of 17
<PAGE> 15
APOGEE, INC.
FORM 10-Q - QUARTER ENDED SEPTEMBER 30, 1997
PART II - OTHER INFORMATION
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: None
Page 15 of 17
<PAGE> 16
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)
October 31, 1997 /s/ Mark D. Gibson
- ---------------- ------------------------------------
(Date) By: Mark D. Gibson
Corporate Controller and
Chief Accounting Officer
Page 16 of 17
<PAGE> 17
APOGEE, INC.
FORM 10-Q - QUARTER ENDED SEPTEMBER 30, 1997
INDEX TO EXHIBITS
27 Financial Data Schedule, which is submitted electronically to the
Securities and Exchange commission for information only and not filed.
Page 17 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1997 AND THE CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,418
<SECURITIES> 0
<RECEIVABLES> 16,457
<ALLOWANCES> 7,604
<INVENTORY> 0
<CURRENT-ASSETS> 13,485
<PP&E> 5,210
<DEPRECIATION> 1,769
<TOTAL-ASSETS> 96,778
<CURRENT-LIABILITIES> 18,288
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 65,472
<TOTAL-LIABILITY-AND-EQUITY> 96,778
<SALES> 0
<TOTAL-REVENUES> 54,216
<CGS> 42,663
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,025
<LOSS-PROVISION> 2,715
<INTEREST-EXPENSE> 1,061
<INCOME-PRETAX> (226)
<INCOME-TAX> 72
<INCOME-CONTINUING> (298)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (298)
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
