<PAGE> 1
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, 1999
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 0-12992
SYNTHETECH, INC.
(Exact name of registrant as specified in its charter)
Oregon 84-0845771
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1290 Industrial Way, Albany, Oregon 97321
(Address of Principal Executive Offices) (Zip Code)
(541) 967-6575
(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_____
The number of shares of the registrant's common stock,
$.001 par value, outstanding as of November 10, 1999 was
14,254,630.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SYNTHETECH, INC.
BALANCE SHEETS
-------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
(unaudited)
September 30, March 31,
1999 1999
- ------------ ------------- -----------
ASSETS
- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 7,574,000 $ 7,470,000
Accounts receivable, less allowance
for doubtful accounts of $15,000 for
both periods 2,326,000 3,414,000
Income tax receivable 10,000 -
Inventories 3,242,000 3,359,000
Prepaid expenses 395,000 284,000
Deferred income taxes 133,000 133,000
Other current assets 10,000 5,000
----------- -----------
TOTAL CURRENT ASSETS 13,690,000 14,665,000
PROPERTY, PLANT AND EQUIPMENT, at cost, net 12,408,000 11,561,000
OTHER ASSETS 4,000 4,000
----------- -----------
TOTAL ASSETS $ 26,102,000 $ 26,230,000
============ =============
See Notes To Financial Statements.
</TABLE>
<PAGE> 3
SYNTHETECH, INC.
BALANCE SHEET
-------------------------
(continued)
<TABLE>
<CAPTION>
<S> <C> <C>
(unaudited)
September 30, March 31,
1999 1999
- ------------------------------------------ ------------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------
CURRENT LIABILITIES:
Current portion of note payable $ 14,000 $ 15,000
Accounts payable 552,000 1,543,000
Accrued compensation 96,000 375,000
Deferred revenue 81,000 44,000
Accrued income taxes - 561,000
Other accrued liabilities 6,000 17,000
----------- -----------
TOTAL CURRENT LIABILITIES 749,000 2,555,000
DEFERRED INCOME TAXES 496,000 496,000
NOTE PAYABLE, net of current portion 145,000 152,000
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value;
authorized 100,000,000 shares;
issued and outstanding, 14,255,000
and 14,252,000 shares 14,000 14,000
Paid-in capital 8,746,000 8,740,000
Deferred compensation (47,000) (76,000)
Retained earnings 15,999,000 14,349,000
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 24,712,000 23,027,000
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 26,102,000 $ 26,230,000
============ ============
See Notes To Financial Statements.
</TABLE>
<PAGE>4
SYNTHETECH, INC.
STATEMENTS OF INCOME
--------------------------------------
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Three Months Ended For the Six Months Ended
September 30, September 30,
1999 1998 1999 1998
- --------------------- ------------ ------------ ------------ --------- --
REVENUES $ 3,370,000 $ 5,327,000 $ 8,006,000 $ 9,455,000
COST OF SALES 2,005,000 3,007,000 4,634,000 5,542,000
------------ ------------ ------------ -----------
GROSS PROFIT 1,365,000 2,320,000 3,372,000 3,913,000
RESEARCH AND DEVELOPMENT 121,000 76,000 248,000 157,000
SELLING, GENERAL AND ADMINISTRATIVE 289,000 383,000 632,000 738,000
------------ ------------ ------------ -----------
OPERATING EXPENSE 410,000 459,000 880,000 895,000
------------ ------------ ------------ -----------
OPERATING INCOME 955,000 1,861,000 2,492,000 3,018,000
OTHER INCOME, net 85,000 63,000 169,000 122,000
------------ ------------ ------------ -----------
INCOME BEFORE INCOME TAXES 1,040,000 1,924,000 2,661,000 3,140,000
PROVISION FOR INCOME TAXES 395,000 731,000 1,011,000 1,193,000
------------ ------------ ------------ ------------
NET INCOME $ 645,000 $ 1,193,000 $ 1,650,000 $ 1,947,000
=========== =========== =========== ============
BASIC EARNINGS PER COMMON SHARE $0.05 $0.08 $0.12 $0.14
===== ===== ===== =====
DILUTED EARNINGS PER COMMON SHARE $0.05 $0.08 $0.12 $0.14
===== ===== ===== =====
See Notes To Financial Statements.
</TABLE>
<PAGE>5
SYNTHETECH, INC.
STATEMENTS OF CASH FLOWS
-----------------------------------
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
For the Six Month Period Ended September 30 1999 1998
- ------------------------------------------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,650,000 $ 1,947,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, amortization and other 785,000 583,000
Amortization of deferred compensation 23,000 54,000
Loss on disposal of property, plant
and equipment 3,000 -
(Increase) decrease in assets:
Accounts receivable, net 1,088,000 (410,000)
Inventories 117,000 (449,000)
Prepaid expenses (111,000) 6,000
Other assets (15,000) 9,000
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (1,843,000) 424,000
Deferred revenue 37,000 (201,000)
----------- ----------
Net cash provided by operating activities 1,734,000 1,963,000
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment purchases (1,633,000) (641,000)
----------- ----------
Net cash used by investing activities (1,633,000) (641,000)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term
debt obligations (8,000) (7,000)
Proceeds from stock option exercises
and disqualifying dispositions 11,000 7,000
----------- ----------
Net cash provided by financing activities 3,000 -
----------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 104,000 1,322,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,470,000 4,976,000
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,574,000 $ 6,298,000
=========== ===========
NON-CASH INVESTING ACTIVITIES:
Issuance of stock options at below fair value $ 4,000 $ 38,000
Mature shares exchanged for the exercise
of stock options $ - $ 231,000
See Notes To Financial Statements.
</TABLE>
<PAGE>6
NOTES TO FINANCIAL STATEMENTS
NOTE A. GENERAL AND BUSINESS
The summary financial statements included herein have been
prepared, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission.
Certain information and footnote 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, although
Synthetech management believes that the disclosures are
adequate to make the information presented not misleading.
It is suggested that these summary financial statements be
read in conjunction with the financial statements and the
notes thereto included in Synthetech's fiscal 1999 Form 10-K.
Interim financial statements are by necessity somewhat
tentative; judgments are used to estimate quarterly amounts
for items that are normally determinable only on an annual
basis. For example, provision for income taxes is an
estimate of the annual liability pro-rated over the quarters
of the fiscal year based on estimates of annual income.
Further, all inventory quantities are verified by physically
counting the units on hand at least once a year. Normally,
selected inventories are counted during each quarter. For
those inventories not counted during the quarter, quantities
are determined using measured sales and production data for
the period.
The interim period information included herein reflects all
adjustments which are, in the opinion of Synthetech
management, necessary for a fair statement of the results of
the respective interim periods. Results of operations for
interim periods are not necessarily indicative of results to
be expected for an entire year.
NOTE B. STATEMENTS OF CASH FLOWS
Supplemental cash flow disclosures for the three
month period ended September 30:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Cash Paid
---------
Three Months Six Months
1999 1998 1999 1998
---- ---- ---- ----
Income Taxes $ 1,082,000 $ 841,000 $ 1,572,000 $ 856,000
Interest $ 4,000 $ 4,000 $ 7,000 $ 8,000
</TABLE>
<PAGE>7
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE C. EARNINGS PER SHARE
Basic earnings per share (EPS) are computed by dividing net
income by the weighted average number of shares of common
stock outstanding during the period. Diluted earnings per
share are computed by dividing net income by the weighted
average number of shares of common stock and common stock
equivalents outstanding during the period, calculated using
the treasury stock method as defined in SFAS No. 128. The
following is a reconciliation of the shares used to
calculate basic earnings per share and diluted earnings per
share:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Three Months For the Six Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
Weighted average shares
outstanding for Basic EPS 14,254,630 14,201,171 14,253,376 14,180,688
Dilutive effect of
common stock options
issuable under
treasury stock method 51,566 86,039 59,507 91,928
---------- ---------- ---------- ----------
Weighted average common
and common equivalent
shares outstanding for
Diluted EPS 14,306,196 14,287,210 14,312,883 14,272,616
========== ========== ========== ==========
</TABLE>
The following common stock equivalents were excluded from the earnings per
share computation because their effect would have been anti-dilutive:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Three Months For the Six Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
Common stock options
outstanding 523,800 593,800 523,800 593,800
</TABLE>
<PAGE>8
NOTES TO FINANCIAL STATEMENTS (continued)
NEW ACCOUNTING PRONOUNCEMENT
In June 1999, the FASB issued Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 137"). SFAS 137
is an amendment to Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". SFAS 137 establishes accounting
and reporting standards for all derivative instruments.
SFAS 137 is effective for fiscal years beginning after June
15, 2000. Synthetech does not currently have any derivative
instruments and, accordingly, does not expect the adoption
of SFAS 137 to have an impact on its financial position or
results of operations.
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated,
the percentage of revenues represented by each item included
in the Statements of Income.
Percentage of Revenues
----------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Three Months For For the Six Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
- ------------------------- ---- ---- ---- ----
Revenues 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 59.5 56.4 57.9 58.6
------ ------ ------ ------
Gross Profit 40.5 43.6 42.1 41.4
Research and Development 3.6 1.4 3.1 1.7
Selling, General and
Administration 8.6 7.2 7.9 7.8
------ ------ ------ ------
Operating Expense 12.2 8.6 11.0 9.5
Operating Income 28.3 35.0 31.1 31.9
Other Income 2.5 1.2 2.1 1.3
------ ------ ------ ------
Income Before Income Taxes 30.8 36.2 33.2 33.2
Provision For Income Taxes 11.7 13.7 12.6 12.6
------ ------ ------ ------
Net Income 19.1 % 22.5 % 20.6 % 20.6 %
====== ====== ====== ======
</TABLE>
Revenues
- --------
Revenues decreased by 37% to $3.37 million in the second
quarter of fiscal 2000 from $5.33 million in the second
quarter of fiscal 1999. Revenues were $8.01 million for the
first half of fiscal 2000, a 15% decrease from revenues of
$9.46 million in the first half of fiscal 1999.
International sales, mainly to Europe, were $2.55 million
and $5.56 million for the second quarter and first half of
fiscal 2000, respectively, as compared to $799,000 and $2.06
million for the second quarter and first half of fiscal
1999, respectively.
<PAGE>10
The decrease in revenues for the second quarter and first
half of fiscal 2000 from the same period of fiscal 1999
primarily resulted from reduced revenues from large-scale
orders. The Company expects the revenues for the third
fiscal quarter will continue to be under pressure due to the
lack of near term large-scale orders. In addition, a
delivery delay of a raw material will likely shift the
completion of a significant order into the fourth fiscal
quarter. As a result, the Company expects that the
operating results for the third fiscal quarter may be around
a break-even level. Nevertheless, Synthetech has several
promising projects in the pipeline that could become the
drivers for future growth. Depending on the progress and
timing of these projects, there are a number of different
combinations with the potential to generate substantial
future revenues. (See "Industry Factors" below.)
Gross Profit
- ------------
Gross profit decreased to $1.37 million in the second
quarter of fiscal 2000 from $2.32 million in the second
quarter of fiscal 1999. As a percent of sales, gross profit
decreased to 41% in the second quarter of fiscal 2000 from
44% for the same period last year. Gross profit decreased
to $3.37 million in the first half of fiscal 2000 from $3.91
million for that same period of fiscal 1999. As a
percentage of sales, gross profit increased to 42% in the
first half of fiscal 2000 from 41% of revenues for the same
period of fiscal 1999.
The lower gross profit margins for the second quarter of
fiscal 2000 as compared to the same quarter in fiscal 1999
resulted primarily from the lower level of revenues. This
downward pressure was somewhat offset by higher margin
product mix produced in the second quarter of fiscal 2000 as
compared to the same quarter in fiscal 1999. Revenues from
large-scale Peptide Building Block (PBB) orders typically
generate a lower gross profit margin than the sale of
smaller quantities of the same PBB product during the drug
discovery and clinical stages. During the second quarter and
the first half of fiscal 2000, revenues from large-scale PBB
orders represented 16% and 42%, respectively, of total
revenue for the periods compared to 58% and 56% of revenues
for the same periods of fiscal 1999.
The relatively similar gross profit margins for the first
half of fiscal 2000 as compared to the same period in fiscal
1999 represents a combination of factors netting each other
out, including a weak gross profit margin in the first
quarter of fiscal 1999 when the Company had not yet reached
a higher manufacturing efficiency for a large-scale order
and the factors discussed above.
Operating Expenses
- ------------------
Research and development (R&D) expenses were $121,000 and
$248,000 in the second quarter and first half of fiscal
2000, respectively, compared to $76,000 and $157,000 in the
second quarter and first half of fiscal 1999, respectively.
As a percentage of sales, R&D expenses increased to 3.6% in
the second quarter of fiscal 2000 from 1.4% in the same
period of fiscal 1999 and increased to 3.1% for the first
half of fiscal 2000 as compared to 1.7% in the first half of
fiscal 1999. These increases were primarily due to
increases in staffing and associated expenses and a lower
portion of the R&D group effort being allocated to product
manufacturing.
<PAGE> 10
SG&A expenses decreased to $289,000 and $632,000 in the
second quarter and first half of fiscal 2000, respectively,
from $383,000 and $738,000 in the second quarter and first
half of fiscal 1999, respectively. The decreases in SG&A
expenses for the second quarter and first half of fiscal
2000 as compared to the same periods of fiscal 1999
primarily reflected a reduction in the size of the bonus
pool, and of certain compensation expenses related to the
granting of a non-qualified stock option and of payments
made pursuant to a termination of employment. As a
percentage of sales, SG&A expenses increased to 8.6% in the
second quarter of fiscal 2000 as compared to 7.2% in the
second quarter of fiscal 1999, and increased to 7.9% for the
first half of fiscal 2000 as compared to 7.8% in the same
period of fiscal 1999. The increase in the second quarter
of fiscal 2000 as compared to the second quarter of fiscal
1999 was primarily attributable to lower revenues.
Operating Income
- ----------------
Operating income decreased to $955,000 or 28% of revenues in
the second quarter of fiscal 2000 from $1.86 million or 35%
for the same period last year. For the first half of fiscal
2000 operating income decreased to $2.49 million or 31% of
revenues compared with $3.02 million or 32% for the first
half of fiscal 1999. The significant decrease in operating
income for the second quarter and first half of fiscal 2000
reflected the substantial decrease in revenues from the
prior periods.
Other Income
- ------------
The net other income of $85,000 for the second quarter of
fiscal 2000 included $92,000 of interest earnings, $4,000 of
interest expense and a $3,000 loss on disposal of fixed
assets. The net other income of $169,000 for the second
half of fiscal 2000 included $179,000 of interest earnings,
$7,000 of interest expense and a $3,000 loss on disposal of
fixed assets. The $63,000 and $122,000 net other income in
the second quarter and first half of fiscal 1999,
respectively, came primarily from interest earnings and
$8,000 and $4,000 of interest expense, respectively.
Net Income
- ----------
For the second quarter and first half of fiscal 2000, the
Company earned $1.04 million, and $2.66 million before
income taxes, respectively. A provision for income taxes of
$395,000 resulted in net income of $645,000 for the second
quarter and a provision for income taxes of $1.01 million
resulted in net income of $1.65 million for the first half
of fiscal 2000.
INDUSTRY FACTORS
The market for PBBs is driven by the market for
synthetically manufactured peptide, peptidomimetic small
molecule and other drugs in which they are incorporated. The
drug development process for these drugs is dictated by the
marketplace, drug companies and the regulatory environment.
The Company has no control over the pace of these drug
development efforts, which drugs get selected for clinical
trials, which drugs are approved by the FDA and, even if
approved, the ultimate market potential of such drugs.
<PAGE>12
The three stages of the drug development process include:
R&D or discovery stage, clinical trial stage and marketed
drug stage. Synthetech's customers can spend years
researching and developing new drugs, taking only a small
percentage to clinical trials and fewer yet to commercial
market. A substantial amount of the activity continues to
occur at the earlier stages of research and development and
clinical trials. The market for peptide and peptidomimetic
small molecule drugs is still very early in development.
Recurring sales of PBBs for development programs is sporadic
at best. The high cancellation rate for drug development
programs results in a significant likelihood that there will
be no subsequent or "follow-on" PBB sales for any particular
drug development program. Accordingly, the level of
purchasing by the Company's customers for specific drug
development programs varies substantially from quarter to
quarter and the Company cannot rely on any one customer as a
constant source of revenue.
The size of the PBB orders for marketed drugs can be
substantially larger than those for the discovery or
clinical trial stages. Sales of PBBs for marketed drugs can
also provide an opportunity for continuing longer-term
sales. While not subject to the same high cancellation rate
faced by discovery and clinical trial stage drug development
programs, the demand for the approved drugs, however,
remains subject to many uncertainties, including, without
limitation, the drug price, the drug side effects and the
existence of other competing drugs. These factors, which are
outside of the control of the Company, will affect the level
of demand for the drug itself and, therefore, the demand for
PBBs. Also, industry cost pressures can cause pharmaceutical
companies to explore and, as was the case with one of the
fiscal 1999 large-scale orders, ultimately adopt alternative
manufacturing processes which do not include the Company's
PBBs as an intermediate. Finally, with the longer-term,
larger-scale orders, the Company expects increased
competition to supply these PBBs.
Accordingly, these industry factors create an inability for
the Company to predict future demand beyond its current
order base. Until the Company develops a stable baseload of
demand, the Company is likely to continue to experience
significant fluctuations in its quarterly results.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had working capital of
$12.94 million compared to $12.11 million at March 31, 1999.
The Company's cash and cash equivalents at September 30,
1999 totaled $7.57 million. The Company does not invest in
derivative securities. In addition, the Company had a $1
million unsecured bank line of credit of which there was no
amount outstanding at September 30, 1999.
The decrease in accounts receivable to $2.33 million at
September 30, 1999 from $3.41 million at March 31, 1999
reflected the lower level of revenues during the second
quarter. The decrease in accounts payable to $552,000 at
September 30, 1999 from $1.54 million at March 31, 1999
reflected reduced expenditure commitments related to the
second-phase of the plant expansion and reduced raw material
purchases. The decrease in accrued compensation to $96,000
at September 30, 1999 from $375,000 at March 31, 1999
primarily reflected accrued bonus and related compensation
paid during the first quarter. The reduction of accrued
income taxes to $0 at September 30, 1999 from $561,000 at
March 31, 1999 reflected payments of estimated taxes.
<PAGE>13
The Company had approximately $1.63 million of capital
expenditures during the first six months of fiscal 2000.
Approximately $282,000 was spent for equipment and equipment
upgrades in the existing plant and $1.35 million was spent
for the second-phase of the new plant expansion. The
Company anticipates total capital expenditures for fiscal
2000 for the existing plant to be $1.3 million and for the
second-phase of the new plant expansion to be $2.2 million
for a total of $3.5 million. The Company expects to finance
these capital expenditures from internal cash flow and does
not anticipate the need for any new debt or equity
financing.
YEAR 2000
The Year 2000 ("Y2K") issue arose as the result of existing
computer programs that use only the last two digits to refer
to a year. Any of the Company's computer programs that have
date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. If not corrected,
many computer applications could fail or create erroneous
results.
The Company has established a Y2K team lead by its Chief
Financial Officer. The team has completed its assessment of
the Company's information systems which support business
applications. The Company utilizes packaged application
strategies for these information systems functions. The
Company believes that these information system components
are current with all Y2K updates and changes recommended by
the vendors. These information systems include enterprise
software, operating systems, networking components,
application and data servers, PC hardware and core office
automation software. The team has also completed its
assessment of the Company's research and development,
manufacturing processes and facility management systems. The
Company believes that these systems and components are
current with all Y2K updates and changes recommended by the
vendors. The Company is undertaking a Y2K supplier and
customer assessment program. It is in the process of
completing its survey of key suppliers and customers to
determine the level of their Y2K readiness.
The Company's information technology expenditures for fiscal
1999 were $90,000, of which approximately 22% related to the
Company's Y2K program. These expenses were paid out of
revenues from operations. In connection with its
responsibility to undertake a Y2K program, the Company has
hired an outside consultant to provide limited advice to the
Company's Y2K team and Board of Directors on the Company's
Y2K program. The Company has hired another outside
consultant to assist the Company's Y2K team in developing
and running certain Y2K on-site testing protocols. The
Company has incurred expenditures of $18,000 for these
consultants.
Like all businesses, the Company will be at risk from
external infrastructure failures that could arise from Y2K
failures. It is not clear that electrical power, telephone
and computer networks, for example, will be fully functional
across the nation in the year 2000. Investigation and
assessment of infrastructures, like the nations' power grid,
is beyond the scope and resources of the Company. Investors
should use their own awareness of the issues in the nations'
infrastructure to make ongoing infrastructure risk
assessments and their potential impact to a company's
performance.
It should also be noted that there have been predictions of
failures of key components in the transportation
infrastructure due to the Y2K issue. It is possible that
there could be delays in rail, over-the-road and air
shipments due to failure in transportation control systems.
Investigation and validation of the world's transportation
infrastructure is
<PAGE>14
beyond the scope and the resources of the Company. Investors
should use their own awareness of the issues in the nations'
infrastructure to make ongoing infrastructure risk
assessments and their potential impact to a company's
performance.
The failure to correct a material Y2K problem could result
in an interruption in, or a failure of, certain normal
business activities or operations. Such failures could
materially and adversely affect the Company's results of
operations, liquidity and financial condition. Due to the
general uncertainty inherent in the Y2K issue, resulting in
part from the uncertainty of the Y2K readiness of third-
party suppliers and customers, the Company is unable to
determine at this time whether the consequences of Y2K
failures will have a material impact on the Company's
results of operations, liquidity or financial condition. The
Company's efforts to help ensure Y2K preparedness are
expected to significantly reduce the Company's level of
uncertainty about the Y2K issue. The Company believes that,
with completion of the above-mentioned system upgrades and
testing, the possibility of significant interruptions of
normal operations should be reduced.
Due to the nature and size of its operations and its Y2K
efforts to date described above, the Company does not intend
to develop any contingency plans other than to identify
second sources for any of its key vendors who cannot advise
the Company that they will be Y2K compliant.
_______________________
This Form 10-Q includes "forward-looking" information (as
defined in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934). Investors
are cautioned that forward-looking statements involve risks
and uncertainties, and various factors could cause actual
results to differ materially from those in the forward-looking
statements.Forward-looking statements include, without limitation,
any statement that may predict, forecast,indicate or imply
future results, performance or achievements, and may contain
the words "believe," "anticipate," "expect," "estimate,"
"project," "will be," "will continue," "will likely result,"
or words or phrases of similar meanings. The risks and
uncertainties include, but are not limited to, the
following: the uncertain market for products, customer
concentration, potential quarterly revenue fluctuations,
industry cost factors, competition, government regulation,
product liability risks, technological change, increased
costs associated with the Company's facility expansions,
international business risks, and Y2K risks. Investors are
directed to the Company's filings with the Securities and
Exchange Commission, including the Company's Form 10-K for
the fiscal year ended March 31, 1999, which are available
from the Company without charge, for a further description
of the risks and uncertainties related to forward-looking
statements made by the Company as well as to other aspects
of the Company's business.
<PAGE>15
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
The Company held its Annual Meeting of Shareholders on July 23, 1999.
At that meeting, the following Directors were elected by the Shareholders:
Election of Directors
<TABLE>
<CAPTION>
<S> <C> <C>
Class/Name Votes For Votes Withheld
----------
Class II Directors (term expiring in 2002):
Edward M. Giles 7,473,029 44,830
Charles B. Williams 7,472,729 45,130
</TABLE>
Continuing Directors
Class/Name
----------
Class I Directors (term expiring in 2001):
Paul C. Ahrens
Page E. Golsan, III
Class III Directors (term expiring in 2000):
Howard L. Farkas
Donald E. Kuhla, Ph.D.
M. ("Sreeni") Sreenivasan
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i)1 Articles of Incorporation of Synthetech, Inc., as amended.
3(ii)2 Bylaws of Synthetech, Inc., as amended.
27 Financial Data Schedule
__________________
1 Incorporated by reference herein from the Company's Form 10-KSB for
the year ended March 31, 1997.
2 Incorporated by reference herein from the Company's Form 10-Q for
the quarter ended June 30, 1999.
(b) Reports
No reports on Form 8-K were filed during the quarter.
<PAGE>16
SIGNATURES
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.
SYNTHETECH, INC.
(Registrant)
Date: November 10, 1999 /s/ M.Sreenivasan
M. Sreenivasan
President & C.E.O.
Date: November 10, 1999 /s/ Charles B. Williams
Charles B. Williams
Vice President, Finance
and Administration, C.F.O.,
Chief Accounting Officer
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the September 30, 1999 10-Q Balance Sheets,
Income Statements, and Cash Flow Statements, and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Mar-31-2000
<PERIOD-END> Sep-30-1999
<CASH> 75740000
<SECURITIES> 0
<RECEIVABLES> 2341000
<ALLOWANCES> 15000
<INVENTORY> 3242000
<CURRENT-ASSETS> 13690000
<PP&E> 12408000
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<CURRENT-LIABILITIES> 749000
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<COMMON> 14000
0
0
<OTHER-SE> 24712000
<TOTAL-LIABILITY-AND-EQUITY> 26102000
<SALES> 3370000
<TOTAL-REVENUES> 3370000
<CGS> 2005000
<TOTAL-COSTS> 2415000
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