-----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, SUcsyAs0zz2cXhOyr4nkZJ2+NjF9Y5bffUQZtgX8HOOJ2kbiOaiOccYJgrbBGZ2u tUbsXpWMjYtdsvIHinp8Kw== 0000950130-97-005029.txt : 19971117 0000950130-97-005029.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950130-97-005029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 000-17822 FILM NUMBER: 97718415 BUSINESS ADDRESS: STREET 1: 669 RIVER DRIVE CITY: ELMWOOD PARK STATE: NJ ZIP: 07407-1361 BUSINESS PHONE: 2017033400 MAIL ADDRESS: STREET 1: 669 RIVER DRIVE CITY: ELMWOOD PARK STATE: NJ ZIP: 07407-1361 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 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 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 November 10, 1997 --------------------- -------------------------------- Common Stock 17,662,956 shares par value $.01 per share SYNETIC, INC. AND SUBSIDIARIES Index ----- Page ---- Part I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Balance Sheets -- September 30, 1997 and June 30, 1997 3 Consolidated Statements of Income -- Three Months Ended September 30, 1997 and 1996 5 Consolidated Statements of Cash Flows -- Three Months Ended September 30, 1997 and 1996 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 ---------------------------------------- This report contains certain forward-looking statements and information relating to Synetic, Inc. (the "Company" or "Synetic") that are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. When used in this report, the words "anticipate", "believe", "estimate", "expect" and similar expressions, as they relate to the Company or the Company's management, are intended to identify forward-looking statements. Such statements reflect the current view of the Company's management with respect to future events and the Company's future performance and are subject to certain risks, uncertainties and assumptions. Should management's current view of the future or underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements. SYNETIC INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) ASSETS
September 30, June 30, 1997 1997 -------------- --------- (unaudited) CURRENT ASSETS: Cash and cash equivalents............. $ 75,002 $ 77,303 Marketable securities................. 11,745 11,765 Accounts receivable, net of allowances for doubtful accounts and sales returns of $789 and $739 at September 30, 1997 and June 30, 1997, respectively.................. 9,215 9,094 Inventories........................... 5,764 5,505 Other current assets.................. 10,510 9,233 -------- -------- Total current assets................ 112,236 112,900 -------- -------- PROPERTY, PLANT AND EQUIPMENT: Land and improvements................. 1,604 1,613 Building and improvements............. 10,055 9,911 Machinery and equipment............... 22,850 23,444 Furniture and fixtures................ 3,460 3,283 Construction in progress.............. 2,991 2,516 -------- -------- 40,960 40,767 Less: Accumulated depreciation....... (19,578) (18,681) -------- -------- Property, plant and equipment, net.. 21,382 22,086 -------- -------- OTHER ASSETS: Marketable securities................. 226,779 226,760 Other................................. 21,499 20,357 -------- -------- Total other assets 248,278 247,117 -------- -------- $381,896 $382,103 ======== ========
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
September 30, June 30, 1997 1997 -------------- --------- (unaudited) CURRENT LIABILITIES: Accounts payable............................ $ 1,805 $ 2,344 Accrued liabilities......................... 10,964 14,203 Income taxes payable........................ 2,723 3,044 -------- -------- Total current liabilities................. 15,492 19,591 -------- -------- LONG-TERM DEBT, LESS CURRENT PORTION......... 165,000 165,000 DEFERRED TAXES AND OTHER LIABILITIES......... 8,608 8,776 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 10,000,000 shares authorized; none issued.................................... - - Common stock $.01 par value; 50,000,000 shares authorized; 22,919,428 and 22,865,149 shared issued; 17,650,965 and 17,564,980 shares issued and outstanding at September 30, 1997 and June 30, 1997, respectively.............................. 229 229 Paid-in capital............................. 197,605 196,212 Treasury stock, at cost; 5,268,463 and 5,300,169 shares September 30, 1997 and at June 30, 1997, respectively............ (38,287) (39,462) Retained earnings........................... 33,249 31,757 -------- -------- Total stockholders' equity................ 192,796 188,736 -------- -------- $381,896 $382,103 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. 4 SYNETIC, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Three Months Ended September 30, 1997 and 1996 (in thousands, except per share data) (unaudited)
Three Months Ended September 30, 1997 1996 -------------- -------- Net sales................................. $14,833 $11,185 Cost of sales........................... 8,316 6,126 Selling, general and administrative..... 6,682 3,751 Interest and other income............... (5,006) (2,219) Interest expense........................ 2,191 - ------- ------- 12,183 7,658 ------- ------- Income before provision for income taxes.. 2,650 3,527 Provision for income taxes................ 1,158 1,138 ------- ------- Net income................................ $ 1,492 $ 2,389 ======= ======= Net income per share...................... $.08 $.13 ======= ======= Weighted average shares outstanding....... 19,445 18,257 ======= =======
The accompanying notes are an integral part of these consolidated statements. 5 SYNETIC, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended September 30, 1997 and 1996 (in thousands) (unaudited)
1997 1996 --------- ---------- Cash flows from operating activities: Net income..................................... $ 1,492 $ 2,389 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............. 1,187 921 Changes in operating assets and liabilities: Accounts receivable, net.................. (121) 269 Inventories............................... (259) (656) Other assets.............................. (2,709) (140) Accounts payable.......................... (539) 7 Accrued liabilities....................... (3,239) 583 Income taxes payable...................... 850 2,228 Other liabilities......................... (168) - -------- --------- Net cash provided by (used for) operating activities................... (3,506) 5,601 -------- --------- Cash flows from investing activities: Sales of marketable securities................. 14,265 162,021 Purchase of marketable securities.............. (14,264) (162,351) Capital expenditures........................... (193) (1,468) -------- --------- Net cash (used for) investing activities................... (192) (1,798) -------- --------- Cash flows from financing activities: Payments for treasury stock.................... - (1,712) Proceeds from exercises of stock options and 401(k) purchases............................. 1,397 1,136 -------- --------- Net cash provided by (used for) financing activities................... 1,397 (576) -------- --------- Net increase (decrease) in cash and cash equivalents.................................... (2,301) 3,227 Cash and cash equivalents, beginning of period.. 77,303 22,210 -------- --------- Cash and cash equivalents, end of period........ $ 75,002 $ 25,437 ======== =========
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 September 30, 1997 (unaudited) and June 30, 1997 (audited), the results of their operations for the three months ended September 30, 1997 and 1996 (unaudited) and the results of their operations and their cash flows for the three months ended September 30, 1997 and 1996 (unaudited). Principles of Consolidation-- The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned operating subsidiaries, Porex Technologies Corp. and subsidiaries ("Porex"), Avicenna Systems Corp. ("Avicenna") and CareAgents, Inc.("CareAgents"), after elimination of all material intercompany accounts and transactions. 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, 1997 (the "1997 10-K"), 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): September 30, June 30, 1997 1997 ----------------------- -------- (unaudited) Raw materials and supplies.. $3,119 $2,672 Work-in-process............. 362 347 Finished goods.............. 2,283 2,486 ------ ------ $5,764 $5,505 ====== ====== (3) Marketable securities: At September 30, 1997 and June 30, 1997, marketable securities consisted primarily of U.S. Treasury Notes and Federal Agency Notes. (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 outstanding during the periods presented and, if dilutive, common stock equivalents. Common stock equivalents consist of common stock which may be issuable upon exercise of outstanding stock options as calculated using the treasury stock method. The $165 million 5% Convertible Subordinated Debentures due 2007 (the "Convertible Debentures"), if converted, would not have had a dilutive effect on net income per share for the periods presented. 7 (5) Supplemental cash flow information (in thousands): For the three months ended September 30, 1997 and 1996, the Company recognized tax benefits related to the exercise of stock options as increases to additional paid-in capital and decreases to income taxes payable of $1,171,000 and $2,473,000, respectively. September 30, Cash paid during the periods for: 1997 1996 ------- ----- Interest...................... $4,010 $ - Income taxes.................. 261 940 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. The historical operations of the Company are primarily related to its plastics technology business. All revenues and a significant majority of operating expenses were derived from these operations. As discussed below, the consolidated financial statements for the three months ended September 30, 1997 include certain costs associated with the Company's activities in developing its healthcare communications business. Consolidated Results of Operations: - ---------------------------------- Net sales for the quarter ended September 30, 1997 increased by $3,648,000, or 32.6%, over the comparable prior year period as a result of sales increases across several product lines and, to a lesser extent, sales of Interflo Technologies Inc. ("Interflo"), a company acquired in February 1997. The sales increase was due principally to increased sales to medical original equipment manufacturers ("OEMs") of porous components used in diagnostic products in the healthcare area, increased sales of writing instrument components in the consumer area and increased sales of porous plastic components used in electronic devices in the industrial area. Cost of sales for the quarter ended September 30, 1997 increased by $2,190,000, or 35.7%, over the comparable prior year period due to the increased sales volume noted above, the inclusion in the current period of the operations of Interflo, and, to a lesser extent, additional depreciation for equipment associated with process improvements. As a percent of net sales, cost of sales for the quarter ended September 30, 1997 increased to 56.1% from 54.8% in the prior year period due to certain higher costs associated with the operations of Interflo. The Company expects to improve the productivity of Interflo through the introduction of the Company's more efficient technology and manufacturing processes. Selling, general and administrative expenses for the quarter ended September 30, 1997 increased by $2,931,000, or 78.1%, over the comparable prior year period due primarily to the inclusion of $2,299,000 in expenses associated with the Company's healthcare communications business which related primarily to research and development activities for which there was no comparable amount in the prior year period. Excluding these costs, as a percent of net sales, selling, general and administrative expenses for the quarter ended September 30, 1997 decreased to 29.5% from 33.5% in the comparable prior year period due principally to an increase in sales which was not proportionately offset by expenses, since a portion of these expenses is fixed and does not vary directly with sales. Interest and other income, net of interest expense, for the quarter ended September 30, 1997 increased by $596,000 or 26.9% over the comparable prior year period principally as a result of an increase in funds available for investment generated by the proceeds of the Company's Convertible Debentures issued in February 1997 partially offset by the interest expense associated with the Convertible Debentures. 9 The effective tax rate for the three months ended September 30, 1997 increased to 43.7% from 32.3% in the prior year period as the Company currently records no state tax benefit for the expenses associated with its healthcare communications business and, to a lesser extent, due to the change in composition of the Company's marketable securities resulting in a decrease in investment income subject to the dividend received deduction. Capital Resources and Liquidity: - ------------------------------- Cash, cash equivalents and marketable securities decreased by $2,302,000 to $313,526,000 during the three months ended September 30, 1997 principally due to the interest payment related to the Convertible Debentures partially offset by cash provided by operations. As a result of the continuing efforts in developing its healthcare communications business, the Company expects to incur significant research and development expenditures in connection with this new area of business until the products and services are successfully developed and marketed. During the three months ended September 30, 1997, the Company incurred expenditures of approximately $2,497,000 related to the development of its healthcare communications business. 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, including the research and development expenditures noted above. 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 sources, including, without limitation, (a) the Company's 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. There can be no assurance that the Company's acquisition program will be successful. See "Item 1. Business--Acquisition Program" in the 1997 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 ----------- ----------- 11 Computation of Earnings Per Share 27 Financial Data Schedule 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/ Anthony Vuolo ------------------------------- Anthony Vuolo Vice President and Chief Financial Officer Dated: November 14, 1997 12 EXHIBIT INDEX Number Description ------ ----------- 11 Computation of Earnings Per Share 27 Financial Data Schedule EX-11 2 COMPUTATION OF EARNINGS PER SHARE Exhibit 11 ---------- SYNETIC, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE THREE MONTHS ENDED SEPTEMBER 30, --------------- 1997 1996 ------- ------- Primary earnings from operations........ (A) $ 1,492 $ 2,389 Assumed conversion of convertible debentures............................. 1,424 - ------- ------- Fully diluted earnings from operations.. (B) $ 2,916 $ 2,389 ======= ======= Weighted average shares outstanding..... 17,615 16,796 Dilutive common stock equivalents for primary earnings per share using the treasury stock method.................. 1,830 1,461 ------- ------- Weighted average shares and common equivalent shares outstanding for primary earnings per share......... (C) 19,445 18,257 Additional equivalent shares upon assumed conversion of convertible debentures............................. 2,750 - ------- ------- Weighted average shares and common equivalent shares outstanding for fully diluted earnings per share.................................. (D) 22,195 18,257 EARNINGS PER SHARE Primary................................. (A)/(C) $ .08 $ .13 Fully diluted........................... (B)/(D) $ .13 $ .13 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SYNETIC INC.'S 9/30/97 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-30-1998 JUL-01-1997 SEP-30-1997 75,002 11,745 10,004 789 5,764 112,236 40,960 19,578 381,896 15,492 165,000 0 0 229 192,567 381,896 14,833 14,833 8,316 8,316 0 0 2,191 2,650 1,158 1,492 0 0 0 1,492 .08 0
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