Synagro Technologies, Inc. Reports First Quarter Revenue And Earnings.HOUSTON Houston, city (1990 pop. 1,630,553), seat of Harris co., SE Tex., a deepwater port on the Houston Ship Channel; inc. 1837. Economy The fourth largest city in the nation and the largest in the entire South and Southwest, Houston is a port of entry; -- Synagro Technologies, Inc. (Nasdaq:SYGR)(ArcaEx ArcaEx See Archipelago. :SYGR) Key First Quarter Results --Revenue during the quarter increased 4.0 percent to $79.3 million --Loss before benefit for income taxes for the quarter totaled $1.3 million --Earnings before interest, taxes, depreciation and amortization totaled $9.5 million Synagro Technologies, Inc. (Nasdaq:SYGR)(ArcaEx:SYGR), (the "Company") announced today its results of operations for the three months ended March 31, 2006. Commenting on the results of the quarter, the Company's Chief Executive Officer, Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. C. Boucher Bou·cher , François 1703-1770. French artist whose paintings and tapestries are representative of the rococo style. , Jr. stated, "We are pleased with our first quarter results which are in-line In-line Used in the context of general equities. (1) An order or market in a specific security within the inside market; 2) any announcement (earnings) that adheres closely to Wall Street analysts' expectations. with our internal expectations. For the quarter our top line revenue increased 4.0 percent over the prior year's quarter to $79.3 million, including a $6.2 million increase in our contract revenues and a $4.2 million increase in event revenues, partially offset by a decrease in design build revenues of $7.8 million as we have substantially completed the Honolulu Honolulu (hŏn'əl  `l, hōnō–), city (1990 pop. dryer
facility.""Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the quarter totaled $3.5 million compared to $5.9 million reported last year. Our earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. for share based compensation expense totaled $10.2 million compared to $11.2 million reported in the same period last year. This decrease is primarily due to an increase in general and administrative expense including $0.9 million of costs related to completion of the 2005 financial statement audit and audit of internal controls required by Section 404 of the Sarbanes-Oxley Act See SOX. , $0.3 million of severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs for changes in our region management, and other items. "Based on our actual results for the first quarter and our expectations for the remainder of the year, we remain comfortable with our 2006 expectations, which include revenues of approximately $325 million to $340 million, net income of approximately $9.0 million to $11.5 million, and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become adjusted to exclude non-cash charges for share based compensation expense of approximately $60.0 million to $64.0 million." "During the quarter, we made substantial progress with our new facility development projects. Specifically, the Central Valley compost compost, substance composed mainly of partly decayed organic material that is applied to fertilize the soil and to increase its humus content; it is often used in vegetable farming, home gardens, flower beds, lawns, and greenhouses. facility and the Providence Providence, city (1990 pop. 160,728), state capital and seat of Providence co., NE R.I., a port at the head of Providence Bay; founded by Roger Williams 1636, inc. as a city 1832. Soil dewatering Dewatering (dē′wöd·ər·iŋ) is the removal of water from solid material or soil by wet classification, centrifugation, filtration, or similar solid-liquid separation processes. facility commenced operations in the quarter and the Honolulu dryer was substantially completed and is expected to commence operations in the second quarter of 2006. These three projects are expected to generate approximately $9.0 million of annual operating revenue operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. after they commence operations. We also have been busy managing construction of the Kern Kern, river, 155 mi (249 km) long, rising in the S Sierra Nevada Mts., E Calif., and flowing south, then southwest to a reservoir in the extreme southern part of the San Joaquin valley. The river has Isabella Dam as its chief facility. composting
nsŏk`ĭt, w n–), city (1990 pop. 43,877), Providence co., N R.I. incinerator incinerator, furnace for burning refuse. The older and simpler kind of incinerator was a brick-lined cell with a metal grate over a lower ash pit, with one opening in the top or side for loading and another opening in the side for removing incombustible masses called expansion, which is approximately 31 percent complete. These
two projects are expected to generate in excess of $14.0 million of
annual operating revenue when they commence commercial operations, which
we expect to occur by the first quarter of 2007."March 31, 2006 - First Quarter Financial Results Revenue for the quarter ended March 31, 2006, increased $3.1 million or 4.0 percent to $79.3 million from $76.2 million in the comparable period last year. Contract revenues increased $6.2 million due primarily to a $1.2 million increase in revenue from the startup (STARTing UP) "At startup" means when the computer is first turned on or when a program is first loaded. See Startup folder. of the Central Valley compost and Providence Soils dewatering facilities, a $1.2 million increase related to a disposal contract that started in the third quarter of 2005, an increase in volumes on existing contracts, and other contract changes. Event revenues increased $4.2 million due primarily to $1.9 million of revenue generated on a large clean water lagoon lagoon Area of relatively shallow, quiet water with access to the sea but separated from it by sandbars, barrier islands, or coral reefs. Coastal lagoons have low to moderate tides and constitute about 13% of the world's coastline. clean-out project that is being completed over a two year period, $1.3 million of emergency digester di·gest·er n. 1. One that makes a digest. 2. Chemistry A vessel in which substances are softened or decomposed, usually for further processing. Noun 1. clean-out work, and other volume changes on event projects this year compared to last year. Design build construction revenues decreased $7.8 million primarily due to the decrease in construction revenue on the Honolulu dryer facility project that has been substantially completed. Gross profit for the quarter increased $0.2 million to $12.2 million compared to $12.0 million in the comparable quarter last year due to revenue mix changes associated with the increase in higher margin contract and event work and the decrease in lower margin design build construction work, partially offset by expected higher fuel and utility costs, an increase in repairs expense, and a $0.4 million increase in depreciation expense. Operating income for the quarter decreased $2.4 million to $3.5 million compared to $5.9 million in the comparable quarter last year. The decrease in operating income is primarily due to a $2.6 million increase in general and administrative expense. The increase in general and administrative expense is primarily due to $0.7 million of non-cash expense Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) for share based compensation expense related to the issuance of restricted stock and the implementation of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R in January January: see month. 2006 which requires that the Company expense the fair value of employee stock options over the related service period, $0.9 million of costs related to completion of the 2005 audit, including the external audit of internal controls required by Section 404 of the Sarbanes-Oxley Act, $0.3 million of severance costs related to changes in regional management, an increase in commission and other incentive compensation, and other changes. Pre-tax loss for the quarter increased $0.7 million to $1.3 million from $0.6 million reported in the first quarter of 2005 due to the $2.4 million decrease in operating income described above, offset by a $1.7 million decrease in other expense, net related primarily to a $1.2 million decrease in interest expense, $0.2 million increase in interest income and $0.3 million of other income related primarily to gains from the increase in value of interest cap agreements. The decrease in interest expense relates to lower interest rates on debt refinanced in the second quarter of 2005. Benefit for income taxes for the quarter increased from $0.2 million to $0.5 million in 2006. The effective tax rate for the first quarter of 2006 was approximately 42 percent compared to 40 percent in the same period in 2005. The Company's tax provision is currently principally a deferred tax provision that will not significantly impact cash flow because of tax deductions Tax deduction An expense that a taxpayer is allowed to deduct from taxable income. tax deduction See deduction. that have historically exceeded book deductions and net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. that are available to offset future taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. . Net loss before preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. dividends totaled $0.8 million, or $(0.01) per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to $0.3 million, or $(0.13) per diluted share, for the same period in 2005. There were no preferred stock dividends in 2006 as all outstanding preferred stock was retired in connection with the refinancing Refinancing An extension and/or increase in amount of existing debt. of debt and equity offering in the second quarter of 2005. Earnings before interest, taxes, depreciation and amortization expense (EBITDA) for the quarter ended March 31, 2006, adjusted to exclude the $0.7 million non-cash charge for share based compensation expense (Adjusted EBITDA) totaled $10.2 million compared to $11.2 million in the comparable quarter last year primarily due to the changes in income from operations and other expense described above. See Note C to the attached financial statements for the reasons why management believes that EBITDA and Adjusted EBITDA are a useful financial measure and for a reconciliation of net income (loss) before preferred stock dividends to EBITDA and Adjusted EBITDA. Consistent with historical operating trends, the Company expects to report lower profits during the first and fourth calendar quarters than the second and third quarters as seasonal weather conditions prevent the Company from handling and processing customer materials in several geographic markets. Unseasonable un·sea·son·a·ble adj. 1. Not suitable to or appropriate for the season. 2. Not characteristic of the time of year: unseasonable weather. 3. Poorly timed; inopportune. or unusual weather conditions may materially impact the Company's results of operations and cash flow during the affected period. A reconciliation of all non-Generally Accepted Accounting Principles financial information disclosed herein is included in the notes to the attached financial statements. Synagro Technologies, Inc. believes that it is the largest recycler of biosolids biosolids Sewage sludge, the residues remaining from the treatment of sewage. For use as a fertilizer in agricultural applications, biosolids must first be stabilized through processing, such as digestion or the addition of lime, to reduce concentrations of heavy metals and and other organic residuals in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and it believes that it is the only national company focused exclusively on the estimated $8 billion organic residuals industry, which includes water and wastewater residuals. The Company serves approximately 600 municipal and industrial water and wastewater treatment accounts with operations in 37 states and the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). . The Company offers a broad range of water and wastewater residuals management services focusing on the beneficial reuse reuse - Using code developed for one application program in another application. Traditionally achieved using program libraries. Object-oriented programming offers reusability of code via its techniques of inheritance and genericity. of organic, nonhazardous residuals resulting from the wastewater treatment process, including drying and pelletization, composting, product marketing, incineration incineration the act of burning to ashes. , alkaline alkaline /al·ka·line/ (al´kah-lin) (-lin) 1. having the reactions of an alkali. 2. having a pH greater than 7.0. al·ka·line adj. 1. stabilization Stabilization The action undertakes a country when it buys and sells its own currency to protect its exchange value. Actions registered competitive traders undertake by on the NYSE to meet the exchange requirement that 75% of their traded be stabilizing, meaning that sell orders , land application, collection and transportation, regulatory compliance, dewatering, and facility cleanout services. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement This press release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, which involve known and unknown risks, uncertainties or other factors not under Synagro's control which may cause the actual results, performance or achievement of Synagro to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include, but are not limited to: the risk that our stockholders may not receive the level of dividends provided for in the dividend policy adopted by our board or any dividends at all; unseasonable weather; changes in government regulations; the ability to find, timely close, and integrate acquisitions; changes in federal wastewater treatment and biosolid regulation; our ability to comply with federal, state and local environmental regulations or to maintain and obtain necessary permits; competition in the wastewater residuals management business; the risk of early termination of customer contracts; loss of significant customers; our ability to complete new facilities as scheduled; our level of debt and our ability to service our debt; our ability to obtain additional financing; our ability to maintain sufficient insurance; and the effect of the restrictions in our senior secured credit agreement on our operation. Other factors are discussed in Synagro's periodic filings with the Securities and Exchange Commission.
Synagro Technologies, Inc.
Consolidated Statement of Operations
For the Three Months Ended March 31
(dollars in thousands, except per share data)
(unaudited)
2006 2005
------------------- -------------------
Revenue $79,278 100.0% $76,214 100.0%
Cost of services (including
depreciation) 67,057 84.6% 64,176 84.2%
--------- --------- --------- ---------
Gross profit 12,221 15.4% 12,038 15.8%
General and administrative
expenses (includes $0.7
million and $0 million of
share based compensation
expense in 2006 and 2005,
respectively) 8,771 11.1% 6,169 8.1%
Gain on sale of assets (35) 0.0% (76) (0.1)%
--------- --------- --------- ---------
Income from operations 3,485 4.3% 5,945 7.8%
Interest expense 5,268 6.6% 6,515 8.5%
Interest income (155) (0.2)% -- --%
Other, net (321) (0.4)% (3) (0.0)%
--------- --------- --------- ---------
Other expense, net 4,792 6.0% 6,512 8.5%
--------- --------- --------- ---------
Loss before provision for
income taxes (1,307) (1.7)% (567) (0.7)%
Benefit for income taxes (546) (0.7)% (227) (0.3)%
--------- --------- --------- ---------
Net loss before preferred
stock dividends (761) (1.0)% (340) (0.4)%
========= =========
Preferred stock dividends
(Note A) -- 2,272
--------- ---------
Net loss applicable to
common stock $(761) $(2,612)
========= =========
Loss per share (Note B):
Basic $(0.01) $(0.13)
========= =========
Diluted $(0.01) $(0.13)
========= =========
Depreciation and amortization $5,674 7.2% $5,229 6.9%
Earnings before interest,
taxes, depreciation and
amortization ("EBITDA")
(Note C) $9,480 12.0% $11,177 14.7%
Adjusted EBITDA (Note C) $10,190 12.9% $11,177 14.7%
Note A: The Company's preferred stock accrued an eight percent
dividend per annum through June 21, 2005. On June 21, 2005 the
Company's preferred stock was converted to common stock and dividends
were no longer accrued. Dividends totaled $2,272,000 during the three
months ended March 31, 2005, of which $2,009,000 represents the eight
percent dividend (noncash), and the remainder represents accretion of
preferred stock and amortization of issuance costs.
Note B: The following summarizes reported basic and diluted earnings
per share for the three months ended March 31, 2006, and 2005 (dollars
in thousands, except share data):
2006 2005
----------- -----------
Basic loss per share:
---------------------
Net loss before preferred stock dividends $(761) $(340)
Preferred stock dividends -- 2,272
----------- -----------
Net loss applicable to common stock $(761) $(2,612)
=========== ===========
Loss per share-
---------------
Loss per share -- basic $(0.01) $(0.13)
=========== ===========
Weighted average shares outstanding 72,923,667 20,020,183
=========== ===========
Diluted loss per share:
-----------------------
Net loss before preferred stock dividends $(761) $(340)
Less: Antidilutive effect of dividends and
common stock equivalents -- 2,272
----------- -----------
$(761) $(2,612)
=========== ===========
Loss per share-
---------------
Diluted loss per share, as calculated $(0.01) $(0.01)
Less: Antidilutive effect of dividends and
common stock equivalents -- (0.12)
----------- -----------
Diluted loss per share, as reported $(0.01) $(0.13)
=========== ===========
Diluted shares outstanding 74,077,642 62,066,509
Less: Antidilutive effect of common stock
equivalents 1,153,975 42,046,326
----------- -----------
72,923,667 20,020,183
=========== ===========
Basic earnings per share ("EPS") is computed by dividing net income
applicable to common stock by the weighted average number of common
shares outstanding for the period. Diluted EPS is computed by
dividing net income before preferred stock dividends by the total of
the weighted average number of common shares outstanding for the
period, the weighted average number of shares of common stock that
would be issued assuming conversion of the Company's preferred stock
in 2005, and other common stock equivalents for options and warrants
outstanding determined using the treasury stock method ("Diluted
shares outstanding").
Diluted EPS for the three months ended 2005, has been adjusted to
exclude preferred stock dividends and to exclude shares assuming
conversion of the Company's preferred stock and for the three months
ended March 31, 2006 and 2005, certain other common stock equivalents
for options outstanding determined using the treasury stock method
because diluted earnings per share was less dilutive than basic
earnings per share ("antidilutive").
Note C: "EBITDA" is defined as earnings before interest, taxes,
depreciation and amortization. Earnings are "net income before
preferred stock dividends." EBITDA and Adjusted EBITDA are presented
because the Company uses these measurements in evaluating its
performance and the Company believes they are frequently used by
securities analysts, investors and other interested parties in the
evaluation of companies in the water and wastewater business and
because they are measures used by the Company's debt holders to
determine compliance with financial ratios included in the Company's
senior secured credit agreement. However, other companies in the
Company's industry may calculate EBITDA and Adjusted EBITDA
differently than the Company does. EBITDA and Adjusted EBITDA are not
measures of performance under generally accepted accounting principles
and should not be considered as an alternative to net income as an
indicator of the Company's operating performance or any other measure
of performance or liquidity derived in accordance with generally
accepted accounting principles. The following table reconciles net
loss before preferred stock dividends to EBITDA and Adjusted EBITDA
(dollars in thousands):
For the three months
ended March 31, 2006 Guidance
--------------------- ---------------------
2006 2005 Low High
---------- ---------- ---------- ----------
Revenue $325,000 $340,000
========== ==========
Net income (loss) before
preferred stock dividends $(761) $(340) $9,000 $11,500
Interest expense 5,268 6,515 20,000 20,000
Interest income (155) -- -- --
Provision (benefit)
for income taxes (546) (227) 6,200 7,700
Depreciation and
amortization 5,674 5,229 22,000 22,000
---------- ---------- ---------- ----------
EBITDA $9,480 $11,177 $57,200 $61,200
Share based
compensation expense 710 --- 2,800 2,800
---------- ---------- ---------- ----------
Adjusted EBITDA $10,190 $11,177 $60,000 $64,000
========== ========== ========== ==========
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