<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 December 31, 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 February 4, 2000 was 14,256,130.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SYNTHETECH, INC.
BALANCE SHEETS
-------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
(unaudited)
December 31, March 31,
1999 1999
- ------------ ------------- -------------
ASSETS
- ------------
Current Assets:
Cash and cash equivalents $ 7,757,000 $ 7,470,000
Accounts receivable, less allowance
for doubtful accounts of $15,000 for
both periods 812,000 3,414,000
Income tax receivable 132,000 -
Inventories 3,896,000 3,359,000
Prepaid expenses 362,000 284,000
Deferred income taxes 133,000 133,000
Other current assets 10,000 5,000
---------- ----------
Total Current Assets 13,102,000 14,665,000
Property, Plant and Equipment, at cost, net 13,012,000 11,561,000
Other Assets 4,000 4,000
---------- ----------
Total Assets $ 26,118,000 $ 26,230,000
============ ============
</TABLE>
See Notes To Financial Statements.
<PAGE> 3
SYNTHETECH, INC.
BALANCE SHEETS
-------------------------
(continued)
<TABLE>
<CAPTION>
<S> <C> <C>
(unaudited)
December 31, March 31,
1999 1999
- -------------------------------------- ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------
Current Liabilities:
Current portion of note payable $ 15,000 $ 15,000
Accounts payable 671,000 1,543,000
Accrued compensation 106,000 375,000
Deferred revenue 44,000 44,000
Accrued income taxes - 561,000
Other accrued liabilities 13,000 17,000
--------- ---------
Total Current Liabilities 849,000 2,555,000
Deferred Income Taxes 496,000 496,000
Note Payable, net of current portion 141,000 152,000
Shareholders' Equity:
Common stock, $.001 par value; authorized
100,000,000 shares; issued and outstanding,
14,256,000 and 14,252,000 shares 14,000 14,000
Paid-in capital 8,747,000 8,740,000
Deferred compensation (36,000) (76,000)
Retained earnings 15,907,000 14,349,000
---------- ----------
Total Shareholders' Equity 24,632,000 23,027,000
---------- ----------
Total Liabilities And Shareholders' Equity $ 26,118,000 $ 26,230,000
============ ============
</TABLE>
See Notes To Financial Statements.
<PAGE> 4
SYNTHETECH, INC.
STATEMENTS OF OPERATIONS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Three Months For the Nine Months
Ended December 31 Ended December 31,
1999 1998 1999 1998
- ----------------------- ---------- ---------- ----------- ----------
Revenues $ 1,503,000 $ 6,047,000 $ 9,509,000 $ 15,502,000
Cost of Sales 1,368,000 3,624,000 6,002,000 9,166,000
------------ ------------ ------------ ------------
Gross Profit 135,000 2,423,000 3,507,000 6,336,000
Research and development 87,000 71,000 335,000 228,000
Selling, general and
administrative 291,000 373,000 923,000 1,111,000
------------ ------------ ------------ ------------
Operating Expense 378,000 444,000 1,258,000 1,339,000
------------ ------------ ------------ ------------
Operating Income (Loss) (243,000) 1,979,000 2,249,000 4,997,000
Other Income, net 99,000 69,000 275,000 199,000
Interest Expense (4,000) (4,000) (11,000) (12,000)
------------ ------------ ------------ ------------
Income (Loss) Before
Income Taxes (148,000) 2,044,000 2,513,000 5,184,000
Provision (Benefit)
For Income Taxes (56,000) 777,000 955,000 1,970,000
------------ ------------ ------------ ------------
Net Income (Loss) $ (92,000) $ 1,267,000 $ 1,558,000 $ 3,214,000
============= ============ ============ ============
Basic Earnings (Loss)
Per Common Share $ (0.01) $ 0.09 $ 0.11 $ 0.23
======== ======= ======= =======
Diluted Earnings (Loss)
Per Common Share $ (0.01) $ 0.09 $ 0.11 $ 0.23
======== ======= ======= =======
</TABLE>
See Notes To Financial Statements.
<PAGE> 5
SYNTHETECH, INC.
STATEMENTS OF CASH FLOWS
----------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
For the Nine Month Period Ended December 31 1999 1998
- ------------------------------------------- --------- ---------
Cash Flows From Operating Activities:
Net income $ 1,558,000 $ 3,214,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, amortization and other 1,180,000 957,000
Amortization of deferred compensation 33,000 85,000
(Gain) Loss on disposal of property,
plant and equipment (2,000) 1,000
(Increase) decrease in assets:
Accounts receivable, net 2,602,000 (894,000)
Inventories (537,000) (300,000)
Prepaid expenses (78,000) (36,000)
Income tax receivable (132,000) -
Other assets (5,000) 18,000
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (1,706,000) 87,000
Deferred revenue - (203,000)
----------- ------------
Net cash provided by operating activities 2,913,000 2,929,000
----------- ------------
Cash Flows From Investing Activities:
Property, plant and equipment purchases (2,629,000) (1,652,000)
----------- ------------
Net cash used in investing activities (2,629,000) (1,652,000)
----------- ------------
Cash Flows From Financing Activities:
Principal payments under long-term debt
obligations (11,000) (11,000)
Proceeds from stock option exercises and
disqualifying dispositions 14,000 135,000
----------- -----------
Net cash provided by financing activities 3,000 124,000
----------- -----------
Net Increase In Cash And Cash Equivalents 287,000 1,401,000
Cash And Cash Equivalents At The Beginning Of
Period 7,470,000 4,976,000
----------- -----------
Cash And Cash Equivalents At End Of Period $ 7,757,000 $ 6,377,000
=========== ===========
Non-Cash Investing Activities:
Issuance of stock options at below fair value $ 4,000 $ 57,000
Mature shares exchanged for the exercise of
stock options $ - $ 231,000
</TABLE>
See Notes To Financial Statements.
<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 December 31:
Cash Paid
---------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Nine Months
------------ -----------
1999 1998 1999 1998
---- ---- ---- ----
Income Taxes $ 66,000 $ 1,360,000 $ 1,637,000 $ 2,216,000
Interest $ 4,000 $ 4,000 $ 11,000 $ 12,000
</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 For the Nine
Months Ended Months Ended
December 31, December 31,
---------------- ---------------
1999 1998 1999 1998
---- ---- ---- ----
Weighted average shares
outstanding for Basic EPS 14,255,347 14,207,622 14,254,035 14,189,698
Dilutive effect of
common stock options
issuable under
treasury stock method - 82,733 47,703 90,905
---------- ---------- ---------- ----------
Weighted average common
and common equivalent
shares outstanding for
Diluted EPS 14,255,347 14,290,355 14,301,738 14,280,603
========== ========== ========== ==========
</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 For the Nine
Months Ended Months Ended
December 31, December 31,
------------- ---------------
1999 1998 1999 1998
---- ---- ---- ----
Common stock options
outstanding 777,813 593,800 523,800 593,800
</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 Operations.
Percentage of Revenues
----------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Three Months For the Nine Months
Ended December 31, Ended December 31,
1999 1998 1999 1998
- ------------------- ---- ---- ---- ----
Revenues 100.0 % 100.0 % 100.0 % 100.0 %
Cost of Sales 91.0 59.9 63.1 59.1
----- ----- ----- -----
Gross Profit 9.0 40.1 36.9 40.9
Research and development 5.8 1.2 3.5 1.5
Selling, general and
administrative 19.4 6.2 9.7 7.2
----- ----- ----- -----
Operating Expense 25.2 7.4 13.2 8.7
----- ----- ----- -----
Operating Income (Loss) (16.2) 32.7 23.7 32.2
Other Income, net 6.6 1.1 2.8 1.3
Interest Expense ( 0.3) - ( 0.1) ( 0.1)
----- ----- ----- -----
Income (Loss) Before
Income Taxes ( 9.9) 33.8 26.4 33.4
Provision (Benefit) For
Income Taxes ( 3.7) 12.8 10.0 12.7
----- ----- ----- -----
Net Income (Loss) ( 6.2) % 21.0 % 16.4 % 20.7 %
====== ===== ===== =====
</TABLE>
Revenues
- --------
Revenues decreased by 75% to $1.50 million in the third quarter of
fiscal 2000 from $6.05 million in the third quarter of fiscal 1999.
Revenues were $9.51 million in the first nine months of fiscal 2000, a
39% decrease from revenues of $15.50 million in the first nine months of
fiscal 1999. International sales, mainly to Europe, were $664,000 and
$6.22 million in the third quarter and first nine months of fiscal 2000,
respectively, as compared to $1.59 million and $3.65 million in the
third quarter and first nine months of fiscal 1999, respectively.
<PAGE> 10
The decrease in revenues in the third quarter and first nine months of
fiscal 2000 from the same period of fiscal 1999 primarily resulted from
reduced revenues from large-scale orders, the unpredictable ordering
cycles inherent in drug development projects and the timing of the
Company's product shipments. The Company expects that the results for
the fourth quarter ending March 31, 2000 will continue to be under
pressure, though likely some improvement from the third quarter.
Nevertheless, the Company continues to believe that it is well
positioned and its prospects remain bright. It recently received a
large-scale Peptide Building Block (PBB) order ($3.6 million) for a drug
in clinical trials. The Company has been involved in this project for
the past couple of years from early drug development stages. Since the
Company anticipates that the timing of production and shipments for this
order will be spread over the fourth quarter of fiscal 2000 and the
first half of fiscal 2001, this order alone will not resolve the
Company's near term revenue challenges. The Company, however, has
several other promising projects in the pipeline. While the progress
and timing of these projects remains outside the Company's control,
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 $135,000 in the third quarter of fiscal 2000
from $2.42 million in the third quarter of fiscal 1999. As a percent of
sales, gross profit decreased to 9% in the third quarter of fiscal 2000
from 40% for the same period last year. Gross profit decreased to $3.51
million in the first nine months of fiscal 2000 from $6.34 million for
the same period of fiscal 1999. As a percentage of sales, gross profit
decreased to 37% in the first nine months of fiscal 2000 from 41% of
revenues for the same period of fiscal 1999.
The substantially lower gross profit margins for the third quarter of
fiscal 2000 as compared to the same quarter in fiscal 1999 resulted from
the low level of revenues in the third quarter of fiscal 2000. While
the gross profit margins for the first nine months of fiscal 2000 as
compared to the same period in fiscal 1999 are lower, it is not as
pronounced as the third quarter since the decline in revenue in the nine
month period was less precipitous. There was a 75% decrease in revenue
in the third quarter of fiscal 2000 as compared to the third quarter of
fiscal 1999, and the decrease in revenue in the first nine months of
fiscal 2000 as compared to the similar period in fiscal 1999 was 39%.
Revenue in general and large-scale orders in particular significantly
impact the Company's margins. For example, during the third quarter of
fiscal 2000, revenues from large-scale PBB orders represented 0% of
total revenues for the period compared to 67% of revenues for the same
period in fiscal 1999. During the first nine months of fiscal 2000,
revenues from large-scale PBB orders represented 35% of total revenues
for the period compared to 60% of revenues for the same period in fiscal
1999.
<PAGE> 11
Operating Expenses
- ------------------
Research and development (R&D) expenses were $87,000 and $335,000 in the
third quarter and the first nine months of fiscal 2000, respectively,
compared to $71,000 and $228,000 in the third quarter and the first nine
months of fiscal 1999, respectively. As a percentage of sales, R&D
expenses increased to 6% in the third quarter of fiscal 2000 from 1% in
the same period of fiscal 1999 and increased to 4% in the first nine
months of fiscal 2000 as compared to 2% in the first nine months of
fiscal 1999. These increases were primarily due to increases in
staffing and associated expenses.
Selling, general and administrative (SG&A) expenses decreased to
$291,000 and $923,000 in the third quarter and the first nine months of
fiscal 2000, respectively, from $373,000 and $1.11 million in the third
quarter and the first nine months of fiscal 1999, respectively. The
decreases in SG&A expenses in the third quarter and the first nine
months 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 19% in
the third quarter of fiscal 2000 as compared to 6% in the third quarter
of fiscal 1999, and increased to 10% in the first nine months of fiscal
2000 as compared to 7% in the same period of fiscal 1999. The
percentage increase in the third quarter of fiscal 2000 as compared to
the third quarter of fiscal 1999 was primarily attributable to lower
revenues.
Operating Income (Loss)
- -----------------------
The Company had an operating loss of $243,000 or 16% of revenues in the
third quarter of fiscal 2000 compared to operating income of $1.98
million or 33% of revenues in the same period last year. For the first
nine months of fiscal 2000 operating income decreased to $2.25 million
or 24% of revenues compared with $5.00 million or 32% in the first nine
months of fiscal 1999. The significant decrease in operating income for
the third quarter and first nine months of fiscal 2000 reflected the
substantial decrease in revenues from the prior periods.
Other Income, net
- -----------------
The net other income of $99,000 for the third quarter of fiscal 2000
included $94,000 of interest earnings and a $5,000 gain on disposal of
fixed assets. The net other income of $275,000 in the first nine months
of fiscal 2000 included $273,000 of interest earnings and a $2,000 net
gain on disposal of fixed assets. The $69,000 and $199,000 net other
income in the third quarter and the first nine months of fiscal 1999,
respectively, came primarily from interest earnings.
<PAGE> 12
Interest expense in the third quarter and first nine months of fiscal
2000 were $4,000 and $11,000, respectively, and were $4,000 and $12,000,
respectively, in the third quarter and first nine months of fiscal 1999.
Net Income (Loss)
- -----------------
In the third quarter of fiscal 2000 the Company lost $148,000 before
income taxes and in the first nine months of fiscal 2000 earned $2.51
million before income taxes. A reduction in the provision for income
taxes of $56,000 resulted in a net loss of $92,000 in the third quarter
of fiscal 2000 and a provision for income taxes of $955,000 resulted in
net income of $1.56 million in the first nine months 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.
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
<PAGE> 13
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 December 31, 1999, the Company had working capital of $12.25 million
compared to $12.11 million at March 31, 1999. The Company's cash and
cash equivalents at December 31, 1999 totaled $7.76 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 December 31, 1999.
The decrease in accounts receivable to $812,000 at December 31, 1999
from $3.41 million at March 31, 1999 reflected the lower level of
revenues during the third quarter. The increase of income tax receivable
to $132,000 at December 31, 1999 from $0 at March 31, 1999 and the
reduction of accrued income taxes to $0 at December 31, 1999 from
$561,000 at March 31, 1999 reflected payments of estimated taxes. The
increase in inventories to $3.90 million at December 31, 1999 from $3.36
million at March 31, 1999 principally reflected the manufacturing and
stocking of certain products for future sale and, to a lesser extent,
the restocking of raw materials. The decrease in accounts payable to
$671,000 at December 31, 1999 from $1.54 million at March 31, 1999
reflected the timing of expenditure commitments related to the second-
phase of the plant expansion and the timing of raw material purchases.
The decrease in accrued compensation to $106,000 at December 31, 1999
from $375,000 at March 31, 1999 primarily reflected accrued bonus and
related compensation paid during the first quarter.
The Company had approximately $2.63 million of capital expenditures
during the first nine months of fiscal 2000. Approximately $352,000 was
spent for equipment and equipment upgrades in the existing plant and
$2.28 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 $452,000 and for the second-phase of the new
plant expansion to be $2.88 million for a total of $3.33 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.
<PAGE> 14
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 established a Y2K team lead by its Chief Financial Officer.
The team 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 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 also completed its survey of key suppliers and
customers to determine the level of their Y2K readiness.
Due to the nature and size of its operations and its Y2K efforts, the
Company did not develop any contingency plans other than to identify
second sources for any of its key suppliers who could not advise the
Company that they were Y2K compliant.
To date, the Company is unaware of any significant Y2K issues affecting
it, its key suppliers or customers.
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 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 also 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.
The failure to correct a material Y2K problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. While such failures could materially and adversely affect
the Company's results of operations, liquidity and financial condition,
the Company believes implementation of its plan has been successful
after the first key rollover date occurred on December 31, 1999. Other
key dates associated with potential Y2K problems will occur in the next
few months and are also expected to be uneventful and, provided that
third parties mitigate their own risks successfully, the Company
believes it will have no material business risk from such Y2K issues.
<PAGE> 15
However, there can be no assurances that third parties, over which the
Company has no control, will successfully address their own Y2K issues.
________________________________
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> 16
PART II - OTHER INFORMATION
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> 17
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: February 10, 2000 /s/ M. Sreenivasan
M. Sreenivasan
President & C.E.O.
Date: February 10, 2000 /s/ Charles B. Williams
Charles B. Williams
Vice President, Finance
and Administration, C.F.O.,
Chief Accounting Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 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> 9-Mos
<FISCAL-YEAR-END> Mar-31-2000
<PERIOD-END> Dec-31-1999
<CASH> 77570000
<SECURITIES> 0
<RECEIVABLES> 827000
<ALLOWANCES> 15000
<INVENTORY> 3896000
<CURRENT-ASSETS> 13102000
<PP&E> 13012000
<DEPRECIATION> 0
<TOTAL-ASSETS> 26118000
<CURRENT-LIABILITIES> 849000
<BONDS> 0
<COMMON> 14000
0
0
<OTHER-SE> 24618000
<TOTAL-LIABILITY-AND-EQUITY> 26118000
<SALES> 9509000
<TOTAL-REVENUES> 9509000
<CGS> 6002000
<TOTAL-COSTS> 7260000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2513000
<INCOME-TAX> 955000
<INCOME-CONTINUING> 1558000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1558000
<EPS-BASIC> .11
<EPS-DILUTED> .11
</TABLE>
