-----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, JPzUz/8pcoAVpZRclB+cQJ1IExsBNStsnRebgoPjEle6EKXrhRdtoZT5hFGsCfKQ Fx0+BFompzS1kyxVvq3hJg== 0000950130-98-005496.txt : 19981116 0000950130-98-005496.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950130-98-005496 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 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: 98747884 BUSINESS ADDRESS: STREET 1: 669 RIVER DRIVE STREET 2: RIVER DRIVE CENTER II CITY: ELMWOOD PARK STATE: NJ ZIP: 07407-1361 BUSINESS PHONE: 2017033400 MAIL ADDRESS: STREET 1: 669 RIVER DRIVE STREET 2: RIVER DRIVE CENTER II 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, 1998 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 07407-1361 (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 11,1998 - ------------------------- ------------------------------- Common Stock 18,699,425 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, 1998 and June 30, 1998 3 Consolidated Statements of Income -- Three Months Ended September 30, 1998 and 1997 5 Consolidated Statements of Cash Flows -- Three Months Ended September 30, 1998 and 1997 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 11 Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 14 ---------------------------------------- This report contains certain forward-looking statements and information relating to the Company's future results and operations, external transactions, dealings with potential customers and business partners for its healthcare communications services business, development of its healthcare communications service business and the Year 2000 issue 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. The risks, and uncertainties include, but are not limited to, negotiation and execution of definitive agreements from initial agreements in principle, product demand and market acceptance risks, the feasibility of developing commercially profitable healthcare communications services, the effect of economic conditions, user acceptance, the impact of competitive products or services, and pricing, product development, commercialization and technical difficulties, and others risks detailed in the Company's Securities and Exchange commission filings. 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 expressly disclaims any intent or obligation to update these forward-looking statements. ---------------------------------------- -2- SYNETIC INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) ASSETS September 30, June 30, 1998 1998 ------------- -------- (unaudited) CURRENT ASSETS: Cash and cash equivalents............... $ 59,513 $ 90,645 Marketable securities................... 16,087 9,995 Accounts receivable, net of allowances for doubtful accounts and sales returns of $883 and $786 at September 30, 1998 and June 30, 1998, respectively..................... 13,208 11,071 Inventories............................. 9,687 5,813 Other current assets.................... 10,310 11,572 -------- -------- Total current assets................... 108,805 129,096 -------- -------- PROPERTY, PLANT AND EQUIPMENT: Land and improvements................... 3,202 1,605 Building and improvements............... 15,607 11,261 Machinery and equipment................. 36,474 28,428 Furniture and fixtures.................. 4,198 3,924 Construction in progress................ 10,226 6,249 -------- -------- 69,707 51,467 Less: Accumulated depreciation......... (23,649) (22,086) -------- -------- Property, plant and equipment, net..... 46,058 29,381 -------- -------- OTHER ASSETS: Marketable securities................... 220,234 217,067 Goodwill and other intangible assets, net of accumulated amortization of $2,895 and $2,241 at September 30, 1998 and June 30, 1998, respectively.. 73,497 12,378 Other................................... 8,972 9,004 -------- -------- Total other assets..................... 302,703 238,449 -------- -------- $457,566 $396,926 ======== ======== The accompanying notes are an integral part of these consolidated balance sheets. -3- SYNETIC INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data) LIABILITIES AND STOCKHOLDERS' EQUITY September 30, June 30, 1998 1998 ------------- -------- (unaudited) CURRENT LIABILITIES: Accounts payable............................ $ 2,859 $ 2,644 Accrued liabilities and other............... 12,492 13,002 Income taxes payable........................ 2,543 5,381 -------- -------- Total current liabilities................. 17,894 21,027 -------- -------- LONG-TERM DEBT, LESS CURRENT PORTION......... 166,203 159,500 DEFERRED TAXES AND OTHER..................... 17,449 6,426 OTHER LIABILITIES............................ 3,796 3,747 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 10,000,000 shares authorized; none issued.................................... - - Common stock $.01 par value; 50,000,000 shares authorized; 23,941,166 and 23,017,594 shared issued; 18,672,703 and 17,749,131 shares issued and outstanding at September 30, 1998 and June 30, 1998, respectively.............................. 239 230 Paid-in capital............................. 247,594 203,482 Treasury stock, at cost; 5,268,463 shares at September 30, 1998 and at June 30, 1998.......................... (38,287) (38,287) Retained earnings........................... 42,805 40,801 Accumulated other comprehensive income (loss)............................. (127) - -------- -------- Total stockholders' equity................ 252,224 206,226 -------- -------- $457,566 $396,926 ======== ======== 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, 1998 and 1997 (in thousands, except per share data) (unaudited) Three Months Ended September 30, 1998 1997 -------------- -------- Net sales................................. $20,546 $14,833 Cost of sales........................... 11,290 8,316 Selling, general and administrative..... 7,851 6,682 Interest and other income............... (4,600) (5,006) Interest expense........................ 2,118 2,191 ------- ------- 16,659 12,183 ------- ------- Income before provision for income taxes.. 3,887 2,650 Provision for income taxes................ 1,883 1,158 ------- ------- Net income................................ $ 2,004 $ 1,492 ======= ======= Net income per share - basic: Net income per share..................... $.11 $ .08 ======= ======= Weighted average shares outstanding...... 18,409 17,615 ======= ======= Net income per share - diluted: Net income per share..................... $.10 $ .08 ======= ======= Weighted average shares outstanding...... 20,655 19,445 ======= ======= 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, 1998 and 1997 (in thousands) (unaudited) 1998 1997 --------- --------- Cash flows from operating activities: Net income...................................... $ 2,004 $ 1,492 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.............. 2,357 1,187 Changes in operating assets and liabilities: Accounts receivable, net................... 17 (121) Inventories................................ (250) (259) Other assets............................... 3,759 (2,709) Accounts payable........................... 44 (539) Accrued liabilities........................ (3,214) (3,239) Income taxes payable....................... 375 850 Other liabilities.......................... (157) (168) -------- -------- Net cash provided by (used for) operating activities.................... 4,935 (3,506) -------- -------- Cash flows from investing activities: Maturities and redemptions of marketable securities.................... 1,505 14,265 Purchases of marketable securities.............. (3,481) (14,264) Capital expenditures............................ (4,752) (193) Payment for purchase of Point Plastics, net of cash acquired................................. (29,311) - -------- -------- Net cash (used for) investing activities.................... (36,039) (192) -------- -------- Cash flows from financing activities: Purchases of treasury stock..................... (364) - Proceeds from exercises of stock options and 401(k) purchases.............................. 336 1,397 -------- -------- Net cash provided by (used for) financing activities.................... (28) 1,397 -------- -------- Net increase (decrease) in cash and cash equivalents..................................... (31,132) (2,301) Cash and cash equivalents, beginning of period... 90,645 77,303 -------- -------- Cash and cash equivalents, end of period......... $ 59,513 $ 75,002 ======== ======== 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" or "Synetic") as of September 30, 1998 (unaudited) and June 30, 1998 (audited), the results of their operations for the three months ended September 30, 1998 and 1997 (unaudited) and their cash flows for the three months ended September 30, 1998 and 1997 (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") and Avicenna Systems Corp. ("Avicenna"), 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, 1998 (the "1998 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, 1998 1998 ----------------------- -------- (unaudited) Raw materials and supplies.. $3,948 $3,219 Work-in-process............. 707 677 Finished goods.............. 5,032 1,917 ------ ------ $9,687 $5,813 ====== ====== (3) Marketable securities: At September 30, 1998 and June 30, 1998, marketable securities consisted primarily of U.S. Treasury Notes and Federal Agency Notes and are classified as held-to-maturity and are carried at cost, net of unamortized premium or discount. (4) Computation of net income per share: In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"). The new standard simplifies the computation of net income per share and increases comparability to international standards. Under SFAS No. 128, basic net income per share is computed by dividing net income by the weighted-average -7- number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The Company's 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. The Company adopted the new standard during fiscal 1998, beginning with the December 31, 1997 interim consolidated financial statements. In accordance with SFAS No. 128, all prior periods presented have been restated. The Company has historically reported its EPS on a fully diluted basis, which reflects the dilution resulting from employee stock options, warrants and convertible securities, if dilutive, and is comparable to the new diluted EPS reported. A reconciliation of weighted average shares outstanding (basic) to weighted average shares outstanding assuming dilution (diluted) follows: Three Months Ended ------------------ September 30, ------------------ 1998 1997 -------- -------- (unaudited) Weighted average shares outstanding (basic)................. 18,409 17,615 Common stock equivalents(a).......... 2,246 1,830 ------ ------ Weighted average shares outstanding assuming dilution (diluted)........ 20,655 19,445 ====== ====== ---------- (a) Issuable primarily under stock option plans. (5) Supplemental cash flow information: For the three months ended September 30, 1998 and 1997, 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 $1,316,000 and $1,171,000, respectively. September 30, Cash paid during the periods for: 1998 1997 ------ ------ (in thousands) (unaudited) Interest...................... $4,125 $4,010 Income taxes.................. 1,530 261 (6) Accumulated other comprehensive income (loss): Effective July 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130 - "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 increases financial reporting disclosures and has no impact on the Company's financial position or results of operations. Accumulated other comprehensive loss is comprised substantially of currency translation adjustments. -8- (7) Development costs: The Company capitalizes costs incurred for the production of computer software for use in the sale of its services. Costs capitalized include direct labor and related overhead for software produced by the Company and the costs of software purchased from third parties. All costs in the software development process which are classified as research and development are expensed as incurred until technological feasibility has been established. Once technological feasibility has been established, such software development costs are capitalized until the software is commercially available. Such costs are recorded at the lower of unamortized cost or net realizable value. As of September 30, 1998 and June 30, 1998, capitalized costs were $6,734,000 and $4,368,000, respectively. (8) Acquisitions: On July 21, 1998, the Company completed the acquisition of Point Plastics, Inc.("Point Plastics"), a manufacturing company located in Petaluma, California, for $34,399,942 in cash and 832,259 shares of the Company's common stock. The shares issued are subject to certain limitations restricting the liquidity and transferability of such shares. The fair value of the shares, as determined by management, was approximately $51.1822 per share. Point Plastics designs, manufactures and distributes injection-molded, disposable laboratory plastics used for liquid handling in the life sciences marketplace. The acquisition was accounted for using the purchase method with the purchase price being allocated to assets acquired and liabilities assumed based on their appraised fair values. Point Plastics' results of operations have been included in the Company's financial statements as of July 21, 1998. A preliminary summary of the purchase price allocation is as follows (in thousands): Current assets $17,345 Intangible assets 61,725 Other noncurrent assets 17,011 ------- Total assets $96,081 ======= Current liabilities 1,152 Noncurrent liabilities 17,932 ------- Total liabilities $19,084 ======= The following summary, prepared on a pro forma basis, combines the results of operations of the Company and Point Plastics assuming the acquisition was consummated at the beginning of the prior period presented (in thousands, except per share amount): Three months ended September 30, 1997 --------------------- (unaudited) Net sales $21,052(a) Net income (loss) 2,038 Net income (loss) per share - basic .11 Net income (loss) per share - diluted $ .10 (a) The pro forma results for the three months ended September 30, 1997 include sales to a major customer that informed Point Plastics on May 4, 1998 that it would be substantially reducing its purchases of products from Point Plastics. Net sales to this customer were $1,991,000 for the quarter ended September 30, 1997. -9- The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been in effect for the entire period presented. In addition, they are not intended to be a projection of future results. The pro forma impact of the Point Plastics acquisition for the quarter ended September 30, 1998 was not material. (9) Subsequent events: In October 1998, the Company entered into agreements in principle with two strategic partners for its healthcare communications business, which are described below. The consummation of these agreements in principle are subject to conditions, including execution of definitive agreements and receipt of final corporate approvals. The parties intend to complete these transactions before the end of calendar year 1998. However, no assurances can be given that the Company will be successful in concluding these agreements and that definitive agreements will be executed. The Company signed an agreement in principle with The Health Information Network Connection ("THINC"), a regional healthcare network initiative created by Empire Blue Cross and Blue Shield ("Empire"), Group Health Incorporated ("GHI"), Health Insurance Plan of Greater New York ("HIP") and Greater New York Hospital Association ("GNYHA"). As part of this agreement, Synetic would manage the operations of THINC, provide THINC with relevant content, messaging and clinical transaction services and make a minority equity investment in THINC. Additionally, Empire, GHI and HIP would enter into agreements with Synetic, on an exclusive basis, for Synetic to be their provider of clinical transaction services, including online prescription drug and laboratory test ordering consistent with patient histories and plan guidelines. The Company also signed an agreement in principle with Cerner Corporation, a supplier of clinical and management information systems for care management. This agreement would provide Synetic with both a perpetual license to use Cerner's technology underlying its Health Network Architecture and a source of distribution to support Synetic's healthcare communications business. This transaction would also result in Cerner having a minority equity participation in Synetic's healthcare communications business. -10- 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 and filtration technologies business. All revenues and a majority of operating expenses were derived from these operations. As discussed below, the consolidated financial statements for the three months ended September 30, 1998 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, 1998 increased by $5,713,000, or 38.5%, over the comparable prior year period. The Company's net sales for the quarter ended September 30, 1998 include the sales of Point Plastics, acquired July 21, 1998. Inclusion of Point Plastics sales accounted for 25.6% of the Company's overall increase in net sales. The remaining 12.9% of the Company's increase in net sales was due principally to sales by the Porous Media Group of components for consumer applications. Cost of sales for the quarter ended September 30, 1998 increased by $2,974,000, or 35.8%, over the comparable prior year period. This increase was attributable to the inclusion of the operations of Point Plastics and the increased sales volume noted above. As a percent of net sales, cost of sales for the quarter ended September 30, 1998 decreased to 54.9% from 56.1% in the prior year period principally due to improvements in manufacturing efficiency. Selling, general and administrative expenses for the quarter ended September 30, 1998 increased by $1,169,000, or 17.5%, over the comparable prior year period due primarily to the inclusion in the current period of $901,000 in expenses associated with Point Plastics. As a percentage of net sales, selling, general and administrative expenses for the quarter ended September 30, 1998 decreased to 38.2% from 45.0% in the prior quarter principally due to increased sales which were not proportionately offset by expenses, since these expenses do not vary directly with sales. Interest and other income, net of interest expense, for the quarter ended September 30, 1998 decreased by $333,000 or 11.8% over the comparable prior year period principally as a result of a decrease in funds available for investment primarily due to the $34,400,000 payment for the cash portion of the purchase price for Point Plastics. The effective tax rate for the three months ended September 30, 1998 increased to 48.4% from 43.7% in the prior year period principally due to the amortization of intangible assets from the Point Plastics acquisition for which no tax benefit will be recognized. Capital Resources and Liquidity: - ------------------------------- Cash, cash equivalents and marketable securities decreased by $21,873,000 to $295,834,000 during the three months ended September 30, 1998 principally due to the $34,400,000 payment for the cash portion of the purchase price for Point Plastics. As a result of the continuing efforts in developing its healthcare communications business, the Company expects to incur significant research and -11- 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, 1998, the Company incurred expenditures of approximately $4,028,000 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 1998 10-K. Disclosures About Market Risk - ----------------------------- The Company's exposure to market risk for changes in interest rates relates primarily to the Company's investment in marketable securities. The Company does not use derivative financial instruments in its investments. The Company's investments consist primarily of U.S. Treasury Notes and Federal Agency Notes. The table below presents principal amounts and related weighted average interest rates by expected maturity date for the Company's investment portfolio and debt obligations.
Fiscal Years (in thousands) 1999 2000 2001 2002 2003 Thereafter ------ ----- ----- ------- ------ ---------- Assets - ------ Cash equivalents: Fixed rate.............. 57,686 - - - - - Average interest rate... 5.36% - - - - - Short term investments:.. Fixed rate.............. 16,138 - - - - - Average interest rate... 5.02% - - - - - Long term investments: Fixed rate.............. - - - 144,800 76,675 - Average interest rate... - - - 6.46% 6.08% - Total investment securities............. 73,824 - - 144,800 76,675 - Average interest rate... 5.50% - - 6.46% 6.08% - Long term debt: Fixed rate.............. 8 9 10 11 6,544 159,625 Average interest rate.................. 12.94% 12.94% 12.94% 12.94% 6.24% 5.01%
Year 2000 - --------- The Year 2000 issue is the result of computer programs using two digits rather than four digits to define the applicable year. Any of the Company's computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a disruption of normal business activities. Many of the Company's suppliers, vendors and customers also face this issue. -12- The Company has completed an assessment of its Year 2000 readiness and is undergoing a conversion of its internal systems which are not currently Year 2000 compliant. As of September 15, 1998, the Company completed the conversion of all significant non-manufacturing systems. The Company expects conversion of the remaining information technology ("IT") related systems to be completed and fully tested by June 30, 1999. For non-IT systems, all significant microprocessor-embedded production equipment has been upgraded and the Company believes it is Year 2000 compliant. The Company is in the process of communicating with its suppliers, vendors and customers concerning the state of their readiness for the Year 2000. The information gathered to date does not permit the Company to complete its assessment of risk related to the Year 2000 that these third parties may present to the Company. If third parties upon which the Company relies are unable to address this issue in a timely manner, such occurrence could result in a material financial risk to the Company. The Company expects that the cost of Year 2000 compliance will not be material. If the Company does not complete the conversion of its manufacturing systems by the end of 1999, the Company has Year 2000 compliant upgrades it believes can readily be installed for its existing systems. The Company believes that, should it be necessary, the cost of installing such upgrades would not be material. The Company intends to have in inventory a reserve of raw materials, which it believes is sufficient to avoid a disruption in its manufacturing process, to minimize the risk associated with third-party suppliers experiencing Year 2000 problems on January 1, 2000. The Company's statements regarding its Year 2000 project constitute forward looking statements. As the Year 2000 issue has many elements and potential consequences, some of which are not reasonably foreseeable, the ultimate impact of the Year 2000 on the operations of the Company could differ materially from the Company's expectations. -13- 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 (b) The Company filed a current report on Form 8-K dated July 21, 1998 disclosing the completion of the acquisition of Point Plastics. The following historical financial statements and notes thereto of Point Plastics prior to the consummation of the acquisition are attached thereto. - Independent Auditor's Report - Consolidated balance sheets as of December 31, 1996 and December 31, 1997. - Consolidated statements of income for the years ended December 31, 1996 and December 31, 1997. - Consolidated statements of changes in stockholders' deficit for the years ended December 31, 1995, December 31, 1996 and December 31, 1997. - Consolidated statements of cash flows for the years ended December 31, 1995, December 31, 1996 and December 31, 1997. - Notes to the consolidated financial statements. - Consolidated balance sheets (unaudited) as of March 31, 1998. - Consolidated statements of income (unaudited) for the three months ended March 31, 1997 and March 31, 1998. - Consolidated statements of cash flows (unaudited) for the three months ended March 31, 1997 and March 31, 1998. - Notes to the consolidated financial statements (unaudited). The following pro forma financial statements and notes thereto are attached thereto. - Pro Forma Combined Condensed Consolidated Statement of Income (unaudited) for the year ended June 30, 1997. - Pro Forma Combined Condensed Consolidated Statement of Income (unaudited) for the nine months ended March 31, 1998. - Pro Forma Combined Condensed Balance Sheet (unaudited) as of March 31, 1998. - Notes to Pro Forma Combined Condensed Consolidated Financial Statements (unaudited). -14- 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 Executive Vice President - Finance and Administration and Chief Financial Officer Dated: November 12, 1998 -15- 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 (IN THOUSANDS, EXCEPT PER SHARE DATA) THREE MONTHS ENDED SEPTEMBER 30, --------------------- 1998 1997 ------- ------- Basic earnings from operations......... (A) $ 2,004 $ 1,492 Assumed conversion of convertible debentures(1)......................... - - ------- ------- Diluted earnings from operations....... (B) $ 2,004 $ 1,492 ======= ======= Weighted average shares outstanding - basic................... (C) 18,409 17,615 Common stock equivalents for dilutive earnings per share using the treasury stock method............. 2,246 1,830 ------- ------- Additional equivalent shares upon assumed conversion of convertible debentures(1)......................... - - ------- ------- Weighted average shares and common equivalent shares outstanding for diluted earnings per share........ (D) 20,655 19,445 EARNINGS PER SHARE Basic.................................. (A)/(C) $ .11 $ .08 Diluted................................ (B)/(D) $ .10 $ .08 - -------------------- (1) The Convertible Debenture conversion is not included in the computation of earnings per share as it is anti-dilutive for all periods presented. EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SYNETIC, INC.'S 9/30/98 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-30-1999 JUL-01-1998 SEP-30-1998 59513 16087 14091 883 9687 108805 69707 23649 457566 17894 166203 0 0 239 251985 457566 20546 20546 11290 11290 0 0 2118 3887 1883 2004 0 0 0 2004 .11 .10
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