<PAGE>
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
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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
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<PAGE>
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.
<TABLE>
<CAPTION>
Fiscal Years
(in thousands)
1999 2000 2001 2002 2003 Thereafter
------ ----- ----- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
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%
</TABLE>
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-
<PAGE>
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-
<PAGE>
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).
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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
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EXHIBIT INDEX
Number Description
------ -----------
11 Computation of Earnings Per Share
27 Financial Data Schedule
<PAGE>
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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 59513
<SECURITIES> 16087
<RECEIVABLES> 14091
<ALLOWANCES> 883
<INVENTORY> 9687
<CURRENT-ASSETS> 108805
<PP&E> 69707
<DEPRECIATION> 23649
<TOTAL-ASSETS> 457566
<CURRENT-LIABILITIES> 17894
<BONDS> 166203
0
0
<COMMON> 239
<OTHER-SE> 251985
<TOTAL-LIABILITY-AND-EQUITY> 457566
<SALES> 20546
<TOTAL-REVENUES> 20546
<CGS> 11290
<TOTAL-COSTS> 11290
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2118
<INCOME-PRETAX> 3887
<INCOME-TAX> 1883
<INCOME-CONTINUING> 2004
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2004
<EPS-PRIMARY> .11
<EPS-DILUTED> .10
</TABLE>
