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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
of the
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996 Commission File Number 0-21054
SYNAGRO TECHNOLOGIES, INC.
- - -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Nevada 88-0219860
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
16000 Stuebner Airline Rd., Suite 420 Spring, Texas 77379
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (713) 370-6700
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 is required to file such reports), 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 close of the latest practicable date.
Class Outstanding at May 14, 1996
- - ------------------------------- ------------------------------
Common stock, par value $.002 6,197,102
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SYNAGRO TECHNOLOGIES, INC.
INDEX
PART I - FINANCIAL INFORMATION
PAGE
Condensed Consolidated Balance Sheets as of
March 31, 1996 (Unaudited) and December 31, 1995 3
Condensed Consolidated Statements of Income
for the Three Months Ended March 31, 1996 and 1995
(Unaudited) 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1996 and 1995
(Unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Results
of Operations and Financial Condition 7
PART II - OTHER INFORMATION 8
2
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SYNAGRO TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $1,556,650 $2,687,624
Certificates of deposit 1,527,190 1,015,743
Restricted cash, current portion 80,000 80,000
Accounts receivable, net 1,980,604 1,723,937
Note Receivable 690,990 -
Inventory 402,587 448,977
Prepaid expenses and other assets 575,773 725,849
---------------- -----------------
Total current assets 6,813,794 6,682,130
Property, Machinery & Equipment, net 7,034,282 7,348,081
Agency rights, net 1,172,110 1,178,325
Cost in excess of fair value of net assets acquired, net 4,001,579 4,059,599
Restricted cash, long-term portion 253,144 260,257
Machinery and equipment held for sale - 605,000
Other assets 6,136 78,994
---------------- -----------------
$19,281,045 $20,212,386
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long term debt $1,625,913 $2,024,408
Notes payable 884,669 220,069
Current portion of notes payable related parties 337,500 489,952
Accounts payable and accrued expenses 1,432,107 1,872,145
Accrued interest 132,582 186,118
---------------- -----------------
Total current liabilities 4,412,771 4,792,692
Long term debt 3,643,314 4,429,291
Long-term notes payable - 18,750
Stockholders' Equity
Preferred stock, $.002 par value 10,000,000 shares authorized, - -
no shares issued or outstanding
Common Stock, $.002 par value, shares authorized 100,000,000, 12,394 12,106
6,197,102, 6,052,757 issued and outstanding
Additional paid-in capital 22,350,297 22,160,585
Accumulated deficit (11,137,731) (11,201,038)
---------------- -----------------
Total stockholders' equity 11,224,960 10,971,653
---------------- -----------------
$19,281,045 $20,212,386
================ =================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
3
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SYNAGRO TECHNOLOGIES, INC.
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31
--------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Net Sales $4,111,425 $4,532,469
Cost of goods sold $3,433,703 3,545,261
----------------- -----------------
Gross Margin 677,722 987,208
Selling, general and administrative expenses 682,392 875,938
----------------- -----------------
Income (loss) from operations (4,670) 111,270
Other income (expenses)
Other Income 189,423 39,173
Interest Expense (121,446) (216,404)
Legal Settlement - 119,028
Equity in loss from investment in Pan American - (30,963)
----------------- ----------------
Net Income (Loss) $63,307 $22,104
================= =================
Net Income (Loss) per share $0.01 $ 0.01
================= =================
Weighted average shares outstanding 6,190,757 1,962,638
================= =================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
4
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SYNAGRO TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Cash Flows from operating activities:
Net Income (Loss) $63,307 $22,104
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization 482,535 505,697
Gain on sale of equipment (177,341) (11,389)
Stock issued for payment of interest - 1,760
Equity in loss in Pan American N-Viro, Inc. - 30,963
Gain from Legal Settlement - (119,028)
Increase (decrease) in cash due to changes in assets and
liabilities:
Accounts receivable (256,667) (55,274)
Note receivable (690,990) -
Inventory 46,390 50,560
Prepaid expenses and other 150,076 31,900
Accounts payable and accrued expenses (440,038) (76,391)
Accrued interest (53,536) (15,721)
----------------- -----------------
Total adjustments (939,571) 343,078
----------------- -----------------
Net cash provided by (used in) operating activities (876,264) 365,181
Cash flows from investing activities:
Purchase of machinery and equipment (173,748) (293,825)
Proceeds from sale of machinery & equipment 921,009 240,560
Deposits and deferred acquisition costs 3,436 (140,943)
Net purchases of CD's (511,447) -
----------------- -----------------
Net cash used in investing activities 239,250 (194,208)
Cash flows from financing activities:
Payments on notes payable (115,407) (122,846)
Proceeds from notes payable 780,007 202,000
Proceeds from long-term debt 500,000 1,088,708
Payments on long-term debt (1,665,673) (1,062,536)
Payments or advances to officer/shareholder - (11,217)
Decrease (Increase) in Restricted Cash 7,113 (88,132)
Purchase of common stock - (24,000)
----------------- -----------------
Net cash provided by (used in) financing activities (493,960) (18,023)
----------------- -----------------
Net decrease in cash (1,130,974) 152,950
Cash, beginning of period 2,687,624 322,062
----------------- -----------------
Cash, end of period $1,556,650 $475,012
================= =================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
5
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SYNAGRO TECHNOLOGIES, INC.
Quarter Ended March 31,
Supplemental Cash Flow Information - (Unaudited) 1996 1995
---- ----
Interest paid during the period $204,225 $230,365
Taxes paid during the period - -
Non Cash Investing and Financing Activities
In January, 1996, $190,000 of debentures were converted to
144,344 shares of common stock.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
General
The accompanying unaudited condensed consolidated financial
statements have been prepared by the Registrant ("Synagro Technologies, Inc."
or the "Company") pursuant to the rules and regulations of the Securities and
Exchange Commission. These condensed consolidated financial statements reflect
all normal recurring adjustments which are, in the opinion of management,
necessary for the fair presentation of such financial statements for the
periods indicated. Certain information relating to the Company's organization
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted in this Form 10-Q pursuant to Rule 10-01 of Regulation S-X for interim
financial statements required to be filed with the Securities and Exchange
Commission. However, the Company believes that the disclosures herein are
adequate to make the information presented not misleading. The results for the
three months ended March 31, 1996 are not necessarily indicative of future
operating results. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
The accounting policies followed by the Company in preparing interim
consolidated financial statements are similar to those described in the "Notes
to Consolidated Financial Statements" in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
Earnings per common share is based on the weighted average number of
common shares.
Organization
Synagro Technologies, Inc., a Nevada corporation, provides services
to agri-business, the pulp and paper industry, municipal waste water treatment
plants and industrial clients.
6
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(2) INVENTORY
Inventory consists of the following:
March 31, December 31,
1996 1995
---- ----
Wood Shavings $ 23,718 $ 49,775
Truck Parts 378,869 399,202
-------- --------
$402,587 $448,977
========= ========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
attached condensed consolidated financial statements and notes thereto, and
with the Company's audited financial statements and notes thereto for the
fiscal year ended December 31, 1995.
RESULTS OF OPERATIONS. For the quarter ended March 31, 1996, net
sales were $4,111,425 compared to $4,532,469 for the first quarter of 1995, or
a decrease of $421,044. This decrease in net sales is directly attributable to
inclement weather affecting the biosolids business during the quarter.
Cost of goods sold and gross margin for the first quarter of 1996
were $3,433,703 and $677,722 respectively, compared with $3,545,261 and
$987,208, respectively for the first quarter of 1995, resulting in gross
margin as a percentage of sales of 16% in 1996 and 22% in 1995. The decrease
in gross margin is a result of lower sales volume and is directly in line with
gross margin percentage for fiscal 1995.
Selling, general and administrative expenses decreased to $682,392
from $875,938 in 1995. This decrease in selling, general and administrative
expense is directly the result of management's cost reduction efforts
throughout fiscal 1995.
Interest expense for the quarter ended March 31, 1996 was $121,446 or
a decrease of $94,958 from the quarter ended March 31, 1995. This decrease in
interest cost is directly attributable to the October 1995 common stock
offering which generated $4,920,000 of net proceeds to the Company.
Other income of $189,423 compares with $39,173 for the period ending
March 31, 1995. Other income was predominantly the result of a gain on the
sale of the sawmill assets.
As a result of the foregoing, the first quarter 1996 reflects a net
profit of $63,307 or $.01 per share compared to net income of $22,104 or $.01
per share in the first quarter of 1995.
As a result of the Company's cumulative operating losses, the company
has not paid income tax since inception. As of December 31, 1995, the Company
had net operating loss carry forwards totaling approximately $5,500,000.
Utilization of the Company's net operating losses may be subject to limitation
under certain circumstances.
LIQUIDITY AND CAPITAL RESOURCES. The Company has historically
financed its operations principally through the sale of equity and debt
securities and through funds provided from operations.
7
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In March, 1996, the Company completed a sale of the sawmill in
Arkansas for gross proceeds of $791,200. The sale generated a reduction in
debt of $100,000 through a debt assignment with the balance of approximately
$691,000 financed over a 24 month period, payable in the form of wood shavings
that will be utilized in the poultry bedding operation.
During the period ending March 31, 1996, the Company expended
approximately $174,000 for capital equipment purchases. The majority of the
purchases were financed by the sale of obsolete equipment and/or by equipment
contracts payable, and therefore, did not require the use of cash during the
quarter.
As of March 31, 1996, the Company had short-term borrowings in the
aggregate amount of $884,669, an increase of $664,600 from December 31, 1995.
The increase is attributed to the replacement of certain long term convertible
debt payable to GFL Ultra Fund, Ltd., with short-term borrowings.
As of March 31, 1996, the Company had long-term borrowings in the
aggregate amount of $5,606,727, the current portion of which was $1,963,413.
The Company reduced its long-term borrowings by approximately $1,355,674
during the first quarter of 1996. The current portion of long-term borrowings
include $337,500 payable to Childers in connection with the asset acquisition
of Childers. This reduction in debt is attributable to the payoff of certain
GFL Ultra Fund debt, via short term borrowings, the conversion of $190,000
debt to common stock, and payments from working capital.
At March 31, 1996, the Company had positive working capital of
$2,401,023. Management believes that the Company will be able to continue to
reflect positive working capital as it pursues its goal of profitability
throughout 1996.
PART II - OTHER INFORMATION
Item 1.
On May 1, 1996, the legal suit, previously disclosed in the 1995 10K
(i.e. GFL Ultra Fund, Ltd. vs. Synagro), was transferred to the United States
District Court for the Southern District of Texas, pursuant to a motion filed
and granted on behalf of Synagro Technologies, Inc. There is no further update
at this time.
Item 6. Financial Statements, Exhibits and Reports on Form 8-K.
a. Exhibits
(27) Financial Data Schedule
b. Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
1996.
8
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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.
SYNAGRO TECHNOLOGIES, INC.
Date: May 14, 1996 By: /s/ Donald L. Thone
-------------------
Chief Executive Officer
Date: May 14, 1996 By: /s/ Daniel L. Shook
-------------------
Chief Financial Officer
9
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INDEX TO EXHIBITS
Ex-27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 1,556,650
<SECURITIES> 0
<RECEIVABLES> 2,671,594
<ALLOWANCES> 0
<INVENTORY> 402,587
<CURRENT-ASSETS> 6,813,794
<PP&E> 7,034,282
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,281,045
<CURRENT-LIABILITIES> 4,412,771
<BONDS> 3,643,314
<COMMON> 12,394
0
0
<OTHER-SE> 11,212,566
<TOTAL-LIABILITY-AND-EQUITY> 19,281,045
<SALES> 0
<TOTAL-REVENUES> 4,111,425
<CGS> 0
<TOTAL-COSTS> 3,433,703
<OTHER-EXPENSES> 67,977
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 121,446
<INCOME-PRETAX> 63,307
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,670)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,307
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
