-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GXknLiVnV+IsYv8VPzZSZEGlUJ7JC4OWQP22jHcL+GhyC4WhflNGAGiAjMHCb4Lz eIaJ+4HALHeyKJ4RUN72bA== 0000950130-96-001758.txt : 19960517 0000950130-96-001758.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950130-96-001758 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNETIC INC CENTRAL INDEX KEY: 0000850436 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 222975182 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17822 FILM NUMBER: 96566019 BUSINESS ADDRESS: STREET 1: 669 RIVER DRIVE CITY: ELMWOOD PARK STATE: NJ ZIP: 07407 BUSINESS PHONE: 2017033400 MAIL ADDRESS: STREET 1: 669 RIVER DRIVE CITY: ELMWOOD PARK STATE: NJ ZIP: 07407 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q MARK ONE [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 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 0-17822 SYNETIC, INC. (Exact name of registrant as specified in its charter) Delaware 22-2975182 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) River Drive Center 2 669 River Drive Elmwood Park, New Jersey 07407 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (201) 703-3400 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 10, 1996 --------------------- ------------------------------ Common Stock 16,691,747 shares par value $.01 per share SYNETIC, INC. AND SUBSIDIARIES Index ----- Page ---- Part I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Balance Sheets -- March 31, 1996 and June 30, 1995 3 Consolidated Statements of Income -- Quarters and Nine Months Ended March 31, 1996 and 1995 5 Consolidated Statements of Cash Flows -- Nine Months Ended March 31, 1996 and 1995 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 9 Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 SYNETIC INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) ASSETS
March 31, June 30, 1996 1995 ----------- --------- (unaudited) CURRENT ASSETS: Cash and cash equivalents............. $ 16,509 $ 7,499 Marketable securities................. 93,400 98,000 Accounts receivable, net of allowances for doubtful accounts and sales returns of $638 and $636 at March 31, 1996 and June 30, 1995, respectively.................. 7,059 6,665 Inventories........................... 4,966 5,446 Other current assets.................. 4,861 4,031 -------- -------- Total current assets................ 126,795 121,641 -------- -------- PROPERTY, PLANT AND EQUIPMENT: Land and improvements................. 797 780 Building and improvements............. 8,550 8,286 Machinery and equipment............... 18,965 17,389 Furniture and fixtures................ 2,860 2,696 Construction in progress.............. 1,220 1,331 -------- -------- 32,392 30,482 Less: Accumulated depreciation....... (15,385) (13,523) -------- -------- Property, plant and equipment, net.. 17,007 16,959 -------- -------- OTHER ASSETS: Marketable securities................. 46,790 46,854 Other................................. 2,016 2,720 -------- -------- Total other assets 48,806 49,574 -------- -------- $192,608 $188,174 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. -3- SYNETIC INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30, 1996 1995 ---------- -------- (unaudited) CURRENT LIABILITIES: Current portion of long-term debt.......... $ - $ 216 Accounts payable........................... 898 648 Accrued liabilities........................ 5,531 9,337 Income taxes payable....................... 6,656 6,161 -------- -------- Total current liabilities................. 13,085 16,362 -------- -------- DEFERRED TAXES AND OTHER LIABILITIES........ 4,980 4,980 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 10,000,000 shares authorized; none issued.................................... - - Common stock $.01 par value; 50,000,000 shares authorized; 16,690,373 and 16,598,530 shares issued at March 31, 1996 and June 30, 1995, respectively.............................. 220 219 Paid-in capital............................ 154,168 152,556 Treasury stock, at cost; 5,268,463 shares at March 31, 1996......................... (36,575) (36,575) Retained earnings.......................... 56,730 50,632 -------- -------- Total stockholders' equity................ 174,543 166,832 -------- -------- $192,608 $188,174 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. -4- SYNETIC, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Quarters and Nine Months Ended March 31, 1996 and 1995 (in thousands, except per share data) (unaudited)
Quarters Ended Nine Months Ended March 31, March 31, 1996 1995 1996 1995 ---- ---- ---- ---- Net Sales.................................. $11,311 $ 9,865 $32,630 $28,288 Cost and expenses: Cost of sales............................ 6,301 5,828 18,461 16,875 Selling, general and administrative...... 3,896 3,318 10,845 8,729 Interest and other income................ (2,071) (2,029) (6,119) (5,011) Interest expense......................... 1 635 8 3,603 Purchase and Sale Agreement related expenses and other..................... - 1,083 - 6,663 ------- ------- ------- ------- 8,127 8,835 23,195 30,859 ------- ------- ------- ------- Income (loss) from continuing operations before provision for income taxes........ 3,184 1,030 9,435 (2,571) Provision (benefit)for income taxes........ 1,083 386 3,337 (970) ------- ------- ------- ------- Income (loss) from continuing operations. 2,101 644 6,098 (1,601) ------- ------- ------- ------- Discontinued operations: Income from operations, net of income taxes of $842 for the nine months ended March 31, 1995........................... - - - 963 Gain on sale of Institutional Pharmacy operations, net of taxes of $22,638............................... - - - 11,785 ------- ------- ------- ------- Income from discontinued operations........ - - - 12,748 ------- ------- ------- ------- Net income................................. $ 2,101 $ 644 $ 6,098 $11,147 ======= ======= ======= ======= Primary - ------- Net income per share: Continuing operations.................... $.12 $.04 $.34 $ (.09) Discontinued operations.................. - - - .74 ------- ------- ------- ------- Net income per share....................... $.12 $.04 $.34 $ .65 ======= ======= ======= ======= Weighted average shares outstanding........ 18,125 15,829 17,947 17,236 ======= ======= ======= =======
The accompanying notes are an integral part of these consolidated statements. -5- SYNETIC, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended March 31, 1996 and 1995 (in thousands) (unaudited)
1996 1995 ---------- ---------- Cash flows from operating activities: Net income........................................... $ 6,098 $ 11,147 Adjustments to reconcile net income to net cash provided by operating activities: Income from Discontinued Operations.............. - (963) Income from Sale of Institutional Pharmacy business.............................. - (11,785) Other expense.................................... - 1,083 Depreciation and amortization.................... 2,008 1,724 Changes in operating assets and liabilities: Accounts receivable, net......................... (394) (652) Inventories...................................... 480 38 Other assets..................................... 154 (1,158) Accounts payable................................. 250 (303) Accrued liabilities.............................. (4,232) (1,301) Other liabilities................................ - 4,980 Income taxes payable............................. 917 (22,627) --------- --------- Net cash provided by (used for) operating activities......................... 5,281 (19,817) --------- --------- Cash flows from investing activities: Sales of marketable securities....................... 526,763 201,871 Purchase of marketable securities.................... (522,099) (244,312) Capital expenditures................................. (1,910) (3,384) Proceeds from sale of Institutional Pharmacy business................................ - 102,314 --------- --------- Net cash provided by investing activities......................... 2,754 56,489 --------- --------- Cash flows from financing activities: Payments for treasury stock.......................... - (35,778) Proceeds from exercise of stock options and 401(k) purchases................................... 1,191 3,987 Payments of long-term debt........................... (216) (3,413) --------- --------- Net cash provided by (used for) financing activities......................... 975 (35,204) --------- --------- Net increase (decrease) in cash and cash equivalents 9,010 1,468 Cash and cash equivalents, beginning of period........ 7,499 4,232 --------- --------- Cash and cash equivalents, end of period.............. $ 16,509 $ 5,700 ========= =========
The accompanying notes are an integral part of these consolidated statements. -6- SYNETIC, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Financial statement presentation: In the opinion of management, the accompanying consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the financial position of Synetic, Inc. and subsidiaries (the "Company") as of March 31, 1996 (unaudited) and June 30, 1995 (audited), and the results of their operations and their cash flows for the nine months ended March 31, 1996 and 1995 (unaudited). Principles of Consolidation-- The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned operating subsidiary, Porex Technologies Corp. ("Porex"), after elimination of all material intercompany accounts and transactions. All periods and related notes thereto have been restated to reflect the sale of the Institutional Pharmacy Business consummated on December 14, 1994. The accounting policies followed by the Company are set forth in the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995 (the "Annual Report"), which notes are incorporated herein by reference. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. (2) Inventories: Inventories consisted of the following (in thousands):
March 31, June 30, 1996 1995 ----------------------- -------- (unaudited) Raw materials and supplies.. $2,306 $2,843 Work-in-process............. 498 549 Finished goods.............. 2,162 2,054 ------ ------ $4,966 $5,446 ====== ======
(3) Marketable securities: At March 31, 1996, marketable securities consisted primarily of U.S. Treasury Notes and Money Market Preferred Stock. (4) Computation of net income per share: Net income per share is determined by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the applicable period. Common stock equivalents consist of common stock which may be issuable upon exercise of outstanding stock options as calculated using the treasury stock method. -7- (5) Supplemental cash flow information (in thousands):
March 31, Cash paid during the periods for: 1996 1995 --------- ------- Interest...................... $ 6 $ 2,864 Income taxes.................. 2,530 25,007
-8- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. Consolidated Results of Operations: - ---------------------------------- Net sales for the quarter and nine months ended March 31, 1996 increased by $1,446,000, or 14.7% and $4,342,000, or 15.4%, respectively, over the comparable prior year periods as a result of sales improvements across several product lines, principally increased sales of medical components in the healthcare sector and consumer products. Cost of sales for the quarter and nine months ended March 31, 1996 increased by $473,000, or 8.1%, and $1,586,000, or 9.4%, respectively, over the comparable prior year periods due to the increased sales volume noted above. As a percent of net sales, cost of sales for the quarter and nine months ended March 31, 1996 decreased to 55.7% and 56.6% from 59.1% and 59.7%, respectively, in the comparable prior year periods principally due to increased sales of higher margin products and the reduction of certain fixed manufacturing costs. Selling, general and administrative expenses for the quarter and nine months ended March 31, 1996 increased by $578,000 or 17.4% and $2,116,000 or 24.2%, respectively, over the comparable prior year periods due primarily to an increase in expenses associated with the increase in sales volume noted above and an increase in corporate overhead expenses. As a percent of net sales, selling, general and administrative expenses for the quarter ended March 31, 1996 did not vary materially from the comparable prior year. For the nine months ended March 31, 1996 selling, general and administrative expenses increased to 33.2% from 30.9% over the comparable prior year period primarily due to the increase in corporate overhead noted above. Interest and other income for the quarter ended March 31, 1996 increased by $42,000 or 2.1% over the comparable prior year period due to slightly higher interest earned on the Company's marketable securities. For the nine months ended March 31, 1996 interest and other income increased by $1,108,000 or 22.1% over the comparable prior year period due primarily to the investment of the net proceeds from the sale of the Institutional Pharmacy Business. Interest expense for the quarter and nine months ended March 31, 1996 decreased by $634,000 and $3,595,000, respectively, from the comparable prior year periods as a result of the conversion and redemption of the Company's 7% Convertible Subordinated Debentures into common stock of the Company in February 1995. The Company incurred non-recurring costs associated with the conversion and redemption of the Company's Convertible Debentures during the quarter ended March 31, 1995 and a one-time charge in December 1994 related to the issuance of stock options issued to certain officers as compensation for services in conjunction with the consummation of the Purchase and Sale Agreement. The effective tax rate for the quarter and nine months ended March 31, 1996 decreased to 34% and 35%, respectively, from 38% in the comparable prior year periods as a result of an increase in income in the current year eligible for dividends received reduction. -9- Capital Resources and Liquidity: - ------------------------------- The description of the Company's Capital Resources and Liquidity below, including the descriptions of the acquisition program contained herein or referenced in "Item 1. Business - Acquisition Program" of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995 (the "1995 10-K"), contained forward-looking statements with respect to possible events, outcomes or results that are, and may continue to be, subject to risks, uncertainties and contingencies, including the respective risks, uncertainties and contingencies identified in such descriptions. Cash, cash equivalents and marketable securities increased by $4,346,000 to $156,699,000 during the nine months ended March 31, 1996 principally due to the income earned from operations. The Company believes that its cash flow from operations and the income earned on its investments are sufficient to meet the anticipated working capital requirements of its business. The Company continues to pursue an acquisition program pursuant to which it seeks to effect one or more acquisitions or other similar business combinations with businesses it believes have significant growth potential. Financing for such acquisitions may come from several other sources, including, without limitation, (a) its cash, cash equivalents and marketable securities and (b) proceeds from the incurrence of additional indebtedness or the issuance of common stock, preferred stock, convertible debt or other securities. For a further description of the Company's Acquisition Program, see "Item 1. Business - - Acquisition Program" in the 1995 10-K. -10- SYNETIC INC. AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits Exhibit No. Description 27 Financial Data Schedule (b) No reports on Form 8-K were filed by the Company during the quarter for which this report was filed. -11- SIGNATURE 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 thereunto duly authorized. SYNETIC, INC. /s/ VICTOR L. MARRERO -------------------------------- Victor L. Marrero Vice President - Finance and Chief Financial Officer Dated: May 15, 1996 -12- EXHIBIT INDEX Number Description ------ ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SYNETIC, INC.'S QUARTERLY REPORT FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUN-30-1996 JUL-01-1995 MAR-31-1996 16,509 140,190 7,697 638 4,966 126,795 32,392 15,385 192,608 13,085 0 220 0 0 174,323 192,608 32,630 32,630 18,461 18,461 0 0 8 9,435 3,337 6,098 0 0 0 6,098 .34 0
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