Synagro (NASDAQ:SYGR)
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From May 2019 to May 2024
Synagro Technologies, Inc. (Nasdaq:SYGR):
Key Second Quarter Highlights and Other Events
-- Payment of initial cash dividend on August 2, 2005 of $0.10
per common share to all of its shareholders of record as of
July 18, 2005
-- New $305 million senior secured credit facility closed in
connection with repurchase of $150 million of 9 1/2 %
subordinated notes, the conversion of preferred stock, and
$160 million common stock offering (the "Recapitalization")
-- Revenue during the quarter increased 1.7% to $83.5 million
from the second quarter in 2004
-- Net loss before preferred stock dividends for the quarter
totaled $13.9 million after charges for $1.5 million of
transaction costs and expenses, $6.8 million of stock option
redemptions and transaction bonuses, and $19.5 million of debt
extinguishment costs related to the Recapitalization
-- Earnings before interest, taxes, depreciation, and
amortization, adjusted to exclude transaction costs and
expenses, stock option redemptions and transaction bonuses,
and debt extinguishment costs for the quarter totaled $17.1
million
Synagro Technologies, Inc. (Nasdaq SmallCap and ArcaEx
Markets:SYGR), ("the Company") announced today its results of
operations for the three and six months ended June 30, 2005.
Commenting on the results for the quarter, the Company's Chief
Executive Officer, Robert C. Boucher, Jr. stated, "We are pleased to
report that yesterday we paid our initial quarterly dividend of $0.10
per share. During the quarter we recapitalized the Company's balance
sheet including refinancing our debt, converting all outstanding
preferred stock into common stock, and completing a primary and
secondary common stock offering. Our new senior credit agreement
allows us to pay dividends and should result in cash interest savings
of over $4 million per year. The Recapitalization resulted in $27.8
million of expected write-offs for transaction costs and expenses,
stock option redemptions and transaction bonuses, and debt
extinguishment costs, which makes our second quarter operating results
more difficult to analyze, but they are in-line with our expectations
going into the quarter."
For the quarter our top line revenue increased 1.7% to $83.5
million, including a $4.4 million increase in design build revenues
offset by reductions in event and contract revenues. The reductions in
event and contract revenues were anticipated when we established our
revenue and earnings guidance for 2005 as our in process and pre-sold
event work was higher at the beginning of 2004 than 2005 and we
generated $6.7 million of revenue in 2004 on a long-term cleanout
contract that will not have significant activity in 2005. This
contract did not generate revenue this quarter, but did generate $2.2
million of revenue in the second quarter of 2004.
Operating income for the quarter, adjusted to exclude $1.5 million
of transaction costs expenses and $6.8 million of stock option
redemptions and transaction bonuses related to the Recapitalization
totaled $11.7 million compared to $13.9 million reported last year.
Our earnings before interest, taxes, depreciation and amortization
(EBITDA) for the quarter, adjusted to exclude $27.8 million of
write-offs related to the Recapitalization, totaled $17.1 million
compared to $18.8 million reported last year. The decreases in
adjusted operating income and EBITDA are primarily due to the $3.8
million increase in low margin construction revenue, the $2.2 million
decrease in revenue on a cleanout contract that had higher than normal
margins, a $0.6 million increase in facility natural gas costs, and a
$0.6 million decrease in gains from asset sales. We are expecting
higher natural gas costs for the remainder of the year but also expect
a significant gain from an asset sale in the third quarter.
During the quarter we continued to make progress on the five
facility development projects that are expected to be completed over
the next year. We expect these projects will generate approximately
$26.0 million of annual revenue and $9.0 million of EBITDA once
completed.
Our revenue and EBITDA guidance remains unchanged at $320 to $330
million, and $66 to $70 million, respectively; while our guidance for
net income (loss) before preferred stock dividends has been revised to
a range of a loss of $3.0 million to a loss of $0.2 million as a
result of the $27.8 million of write-offs related to the
Recapitalization. See Note C to the attached year to date financial
statements for a reconciliation of EBITDA to net loss before preferred
stock dividends.
June 30, 2005 -- Second Quarter Financial Results
Revenue for the quarter ended June 30, 2005, increased $1.4
million or 1.7 percent to $83.5 million from $82.2 million in the
comparable period last year. Design build construction revenues
increased $4.4 million, primarily due to a $3.9 million increase in
construction revenue on the Honolulu dryer facility project which is
expected to be completed and commence operations by year end. Contract
revenues decreased $1.5 million due primarily to an expected $2.2
million decrease in revenue on a long-term cleanout job partially
offset by an increase in revenues from the Sacramento dryer facility
that commenced operations in December 2004, and other contract
changes. Event revenues decreased $1.0 million due to timing of larger
projects between years and are expected to significantly increase in
the second half of 2005.
During the quarter, the Company entered into a new $305 million
senior credit agreement, repaid $190 million of debt under its
previously outstanding senior and subordinated debt agreements,
converted all outstanding shares of preferred stock into 41,885,597
shares of common stock, and completed a $160 million offering of
9,302,326 primary and 27,847,674 secondary shares of common stock (the
"Recapitalization"). Accordingly, the Company incurred certain costs
and write-offs relating to the Recapitalization, including $1.5
million of transaction costs and expenses, $6.8 million of stock
option redemptions and transaction bonuses, and $19.5 million of debt
extinguishment costs. The Company also recognized as dividends $4.6
million of previously unrecognized accretion on preferred stock. These
costs and write-offs have been included in the Company's second
quarter consolidated statement of operations.
Operating income for the quarter totaled $3.4 million compared to
$13.9 million in the comparable quarter last year. Operating income,
adjusted to exclude transaction costs, and expenses totaling $1.5
million, stock option redemptions and transaction bonuses of $6.8
million, decreased by approximately $2.2 million to $11.7 million
compared to $13.9 million reported in the second quarter of 2004. This
decrease in operating income is a result of revenue mix changes on
gross profit associated with the increase in low margin construction
revenue, the decrease in higher margin contract and event revenues, a
$0.6 million increase in the cost of natural gas of certain
facilities, and a $0.6 million decrease in gains from asset sales.
Operating income was positively impacted by a $0.3 million decrease on
general and administrative expenses which decreased due to $0.8
million of net credits related to reserve adjustments.
Pre-tax income (loss) for the quarter decreased to a loss of $22.2
million from income of $8.4 million reported in the second quarter of
2004. Pre-tax income, adjusted to exclude the transaction costs and
expenses, stock option redemptions and transaction bonuses, and debt
extinguishment costs related to the Recapitalization totaling $27.8
million, totaled $5.6 million and decreased $2.8 million from the
prior year, including the $2.2 million decrease in operating income,
and a $0.6 million increase in interest expense, which relates to
increases in market interest rates and interest on a facility financed
with tax exempt debt that commenced operations in December 2004.
Net loss before preferred stock dividends totaled $13.9 million,
while net loss applicable to common stock totaled $20.4 million, or
$0.81 per diluted share for the three months ended June 30, 2005,
compared to net income of $3.0 million or $0.09 per diluted share for
the same period in 2004. Supplemental proforma diluted earnings per
share totaled $0.06 for the three months ended June 30, 2005.
Supplemental proforma diluted earnings per share is intended to show
the proforma effects assuming the Recapitalization had occurred at the
beginning of 2005 (See Note B to the attached financial statements for
the detailed calculation of supplemental EPS.)
Earnings before interest, taxes, depreciation and amortization
expense (EBITDA) for the quarter, adjusted to exclude the transaction
costs and expenses, stock option redemptions and transaction bonuses,
and debt extinguishment costs related to the Recapitalization totaling
$27.8 million, decreased to $17.7 million from $18.8 million in the
comparable quarter last year. See Note C to the attached financial
statements for the reasons why management believes that EBITDA is a
useful financial measure and for a reconciliation of EBITDA to net
income (loss) before preferred stock dividends.
June 30, 2005 -- Year-to-Date Financial Results
Revenue for the six months ended June 30, 2005, increased $4.9
million or 3.2 percent to $159.7 million from $154.8 million in the
comparable six months last year. Design build construction revenues
increased $12.9 million primarily due to a $11.8 million increase in
construction revenue on the Honolulu dryer facility project which is
expected to be completed and start up by year end. Contract revenues
decreased $3.0 million due primarily to an expected $3.2 million
decrease in revenue on a long-term cleanout job partially offset by an
increase in revenues from the Sacramento dryer facility that commenced
operations in December 2004, and other contract changes. Event
revenues decreased $3.3 million due to several large event projects in
2004. Event revenues are expected to significantly increase in the
second half of 2005.
Operating income for the six months totaled $9.3 million compared
to $20.6 million in the comparable six months last year. Operating
income, adjusted to exclude transaction costs and expenses totaling
$1.5 million, and stock option redemptions and transaction bonuses of
$6.8 million decreased by approximately $2.9 million to $17.6 million
compared to $20.6 million reported in the first six months of 2004.
This decrease in operating income is a result of revenue mix changes
associated with the increase in low margin construction revenue, a
decrease in higher margin contract and event revenues, a $1.5 million
increase in the cost of natural gas and kerosene at certain
facilities, and a $0.6 million decrease in gains from asset sales,
partially offset by a decrease in repair costs. Approximately $0.4
million of the fuel increase related to an unexpected supply
interruption at a dryer facility in January 2005.
Pre-tax income (loss) for the six months decreased to a loss of
$22.8 million from income of $9.8 million reported in the first six
months of 2004. Pre-tax income, adjusted to exclude transaction costs
and expenses, stock option redemptions and transaction bonuses, and
debt extinguishment costs related to the Recapitalization totaling
$27.8 million, totaled $5.0 million and decreased $4.8 million from
the prior year, including the $2.9 million decrease in operating
income, and a $1.8 million increase in interest expense, which relates
to increases in market interest rates and interest on a facility
financed with tax exempt debt that commenced operations in December
2004.
Net loss before preferred stock dividends totaled $14.2 million,
while net loss applicable to common stock totaled $23.1 million, or
$1.02 per diluted share for the six months ended June 30, 2005,
compared to net income of $1.7 million or $0.09 per diluted share for
the same period in 2004. Supplemental proforma diluted earnings per
share totaled $0.07 for the six months ended June 30, 2005.
Supplemental proforma diluted earnings per share is intended to show
the proforma effects assuming the Recapitalization had occurred at the
beginning of 2005 (See Note B to the attached financial statements for
the detailed calculation of supplemental EPS.)
EBITDA for the first six months of 2005, adjusted to exclude the
transaction costs and expenses, stock option redemptions and
transaction bonuses, and debt extinguishment costs related to the
Recapitalization totaling $27.8 million, decreased to approximately
$28.3 million from approximately $30.1 million in the comparable
period last year. See Note C to the attached financial statements for
the reasons why management believes that EBITDA is a useful financial
measure and for a reconciliation of EBITDA to net income before
preferred stock dividends.
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 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 and other organic residuals in the United States
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. The Company offers a broad range of water and wastewater
residuals management services focusing on the beneficial reuse of
organic, nonhazardous residuals resulting from the wastewater
treatment process, including drying and pelletization, composting,
product marketing, incineration, alkaline stabilization, land
application, collection and transportation, regulatory compliance,
dewatering, and facility cleanout services.
Safe Harbor Statement
This press release contains certain forward-looking statements,
within the meaning of the Private Securities Litigation Reform Act 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 customer; our ability to complete new facilities as
scheduled; our level of debt; our ability to obtain additional
financing; our ability to maintain sufficient insurance; the effect of
the restrictions in our senior secured credit facility on our
operations; and our ability to service our debt. Other factors are
discussed in Synagro's periodic filings with the Securities and
Exchange Commission.
-0-
*T
Synagro Technologies, Inc.
Consolidated Statement of Operations
For the Three Months Ended June 30
(dollars in thousands, except per share data)
(unaudited)
2005 2004
---------------- --------------
Revenue $ 83,532 100.0% $82,164 100.0%
Cost of operations 66,561 79.7% 63,253 77.0%
-------- ------- ------- ------
Gross profit 16,971 20.3% 18,911 23.0%
Transaction costs and expenses 1,517 1.9% -- 0.0%
Stock option redemptions and
transaction bonuses 6,805 8.1% -- 0.0%
General and administrative expenses 5,390 6.4% 5,699 6.9%
Gain on sale of assets (129) (0.2)% (734) (0.9)%
-------- ------- ------- ------
Income from operations 3,388 4.1% 13,946 17.0%
Debt extinguishment costs 19,487 23.3% -- 0.0%
Interest expense, net 6,086 7.3% 5,582 6.8%
Other expense (income), net 62 0.1% (40) (0.0)%
-------- ------- ------- ------
Other expense, net 25,635 30.7% 5,542 6.8%
-------- ------- ------- ------
Income (loss) before provision for
income taxes (22,247) (26.6)% 8,404 10.2%
Provision (benefit) for income taxes (8,348) (10.0)% 3,278 4.0%
-------- ------- ------- ------
Net income (loss) before preferred
stock dividends (13,899) (16.6)% 5,126 6.2%
======= ======
Preferred stock dividends (Note A) 6,551 2,176
-------- -------
Net income (loss) applicable to
common stock $(20,450) $ 2,950
======== =======
Earnings (loss) per share (Note B):
Basic $ (0.81) $ 0.15
======== =======
Diluted $ (0.81) $ 0.09
======== =======
Depreciation and amortization $ 5,437 6.5% $ 4,861 5.9%
Earnings (loss) before interest,
taxes, depreciation and
amortization ("EBITDA") (Note C) $(10,724) (12.8)%$18,847 22.9%
Adjusted EBITDA (Note C) $ 17,085 20.5% $18,847 22.9%
Note A: The Company's preferred stock accrued at 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 $6,551,000 and $2,176,000
during the three months ended June 30, 2005 and 2004 respectively, of
which $1,865,000 and $1,912,000, respectively, represent the eight
percent dividend (noncash), $4,648,000 and $222,000, respectively,
represents accretion of preferred stock, and the remainder represents
amortization of issuance costs.
Note B: The following summarizes reported basic and diluted earnings
per share (dollars in thousands, except share data):
Three Months Ended
------------------------
2005 2004
Basic earnings (loss) per share: ---- ----
--------------------------------
Net income (loss) before preferred stock
dividends $ (13,899) $ 5,126
Preferred stock dividends 6,551 2,176
----------- -----------
Net earnings (loss) applicable to common
stock $ (20,450) $ 2,950
=========== ===========
Net earnings (loss) per share -- basic $ (0.81) $ 0.15
=========== ===========
Weighted average shares outstanding 25,334,290 19,775,821
=========== ===========
Diluted earnings (loss) per share:
----------------------------------
Net income (loss) before preferred stock
dividends $ (13,899) $ 5,126
Less antidilutive effect of dividends
and common stock equivalents 6,551 --
----------- -----------
$ (20,450) $ 5,126
=========== ===========
Diluted earnings (loss) per share, as
reported $ (0.81) $ 0.09
=========== ===========
Diluted shares outstanding 64,263,900 58,432,471
=========== ===========
Less: Antidilutive effect of common
stock equivalents 38,929,610
-----------
25,334,290
===========
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, 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 June 30, 2005, have been
adjusted to exclude preferred stock dividends and to exclude shares
assuming conversion of the Company's preferred stock and certain other
common stock equivalents for options and warrants outstanding
determined using the treasury stock method because diluted earnings
per share was less dilutive than basic earnings per share
("antidilutive").
Supplemental proforma diluted EPS is intended to show the proforma
effects assuming the Recapitalization had occurred at January 1, 2005
and also excludes the transaction costs and expenses, stock option
redemptions and transaction bonuses, and debt extinguishment costs
related to the Recapitalization. The following table summarizes the
calculation of supplemental proforma diluted EPS (dollars in
thousands, except share data):
Three Months Ended
2005
-------------------
Income (loss) before taxes $ (22,247)
Addback:
Transaction costs and expenses (a) 1,517
Stock option redemptions and transaction bonuses (a) 6,805
Debt extinguishment costs (a) 19,487
Interest (b) 6,086
Deduct:
Proforma Interest (c) (4,312)
---------------
Adjusted pre-tax income 7,336
Tax provision (d) 2,935
---------------
$ 4,401
===============
Diluted shares outstanding (e)
Options 1,447,000
Shares outstanding 71,460,000
---------------
72,907,000
===============
Supplemental proforma diluted EPS $ 0.06
===============
The following adjustments were made in calculating supplemental
proforma diluted earnings per share:
(a) To remove transaction costs and expenses, stock option
redemptions and transaction bonuses, and debt extinguishment
costs incurred in connection with the Recapitalization.
(b) To remove historical interest expense.
(c) To estimate interest expense on the new senior secured credit
agreement based on $180 million of term loans and $9.9 million
of revolver borrowings outstanding at closing at an assumed
interest rate of LIBOR plus 2.25% and 2.75% respectively,
along with an estimate of fees for $37.5 million of letters of
credit outstanding at 2.75% and estimated non-use fees and
expenses, plus actual interest expense on other debt and
capital leases outstanding during the period.
(d) Taxes were assumed at 40 percent of pretax income.
(e) Shares outstanding for the period were calculated using the
actual weighted shares outstanding for the period adjusted to
assume 41,885,597 shares issued from conversion of the
preferred stock and 9,302,326 shares issued in the primary
equity offering were outstanding at the beginning of the
period presented.
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 we use these measurements in evaluating our performance and we
believe it is frequently used by securities analysts, investors and
other interested parties in the evaluation of companies in the water
and wastewater business and because it is a measure used by our debt
holders to determine compliance with financial ratios included in our
Senior Secured Credit Agreement. However, other companies in our
industry may calculate EBITDA and Adjusted EBITDA differently than we
do. EBITDA and Adjusted EBITDA are not a measure of performance under
generally accepted accounting principles and should not be considered
as an alternative to net income as an indicator of our operating
performance or any other measure of performance or liquidity derived
in accordance with generally accepted accounting principles. The
following table reconciles net income before preferred stock dividends
to EBITDA and Adjusted EBITDA (dollars in thousands):
Three Months Ended
------------------
2005 2004
-------- -------
Net income (loss) before preferred
stock dividends $(13,899) $ 5,126
Interest expense, net 6,086 5,582
Provision (benefit) for income taxes (8,348) 3,278
Depreciation and amortization 5,437 4,861
-------- -------
EBITDA (10,724) 18,847
Debt extinguishment costs 19,487 --
Transaction costs and expenses 1,517 --
Stock option redemptions and transaction bonuses 6,805 --
-------- -------
Adjusted EBITDA $ 17,085 $18,847
======== =======
Synagro Technologies, Inc.
Consolidated Statement of Operations
For the Six Months Ended June 30
(dollars in thousands, except per share data)
(unaudited)
2005 2004
---------------- ---------------
Revenue $159,746 100.0% $154,825 100.0%
Cost of operations 130,737 81.8% 123,597 79.8%
-------- ------- -------- ------
Gross profit 29,009 18.2% 31,228 20.2%
Transaction costs and expenses 1,517 1.0% -- 0.0%
Stock option redemptions and
transaction bonuses 6,805 4.3% -- 0.0%
General and administrative expenses 11,559 7.2% 11,521 7.4%
Gain on sale of assets (205) (0.1)% (892) (0.5)%
-------- ------- -------- ------
Income from operations 9,333 5.8% 20,599 13.3%
Debt extinguishment costs 19,487 12.2% -- 0.0%
Interest expense, net 12,601 7.9% 10,751 6.9%
Other expense, net 59 0.0% -- 0.0%
-------- ------- -------- ------
Other expense, net 32,147 20.1% 10,751 6.9%
-------- ------- -------- ------
Income (loss) before provision for
income taxes (22,814) (14.3)% 9,848 6.4%
Provision (benefit) for income
taxes (8,575) (5.4)% 3,841 2.5%
-------- ------- -------- ------
Net income (loss) before preferred
stock dividends (14,239) (8.9)% 6,007 3.9%
======= ======
Preferred stock dividends (Note A) 8,823 4,314
-------- --------
Net income (loss) applicable to
common stock $(23,062) $ 1,693
======== ========
Earnings (loss) per share (Note B):
Basic $ (1.02) $ 0.09
======== ========
Diluted $ (1.02) $ 0.09
======== ========
Depreciation and amortization $ 10,665 6.7% $ 9,492 6.1%
Earnings (loss) before interest,
taxes, depreciation and
amortization ("EBITDA") (Note C) $ 452 0.3% $ 30,091 19.4%
Adjusted EBITDA (Note C) $ 28,261 17.7% $ 30,091 19.4%
Note A: The Company's preferred stock accrued at 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 $8,823,000 and $4,314,000
during the six months ended June 30, 2005 and 2004 respectively, of
which $3,874,000 and $3,787,000, respectively, represent the eight
percent dividend (noncash), $4,871,000 and $444,000, respectively,
represents accretion of preferred stock, and the remainder represents
amortization of issuance costs.
Note B: The following summarizes reported basic and diluted earnings
per share (dollars in thousands, except share data):
Six Months Ended
-------------------------
2005 2004
----------- ------------
Basic earnings (loss) per share:
-------------------------------------------
Net income (loss) before preferred stock
dividends $ (14,239) $ 6,007
Preferred stock dividends 8,823 4,314
----------- -----------
Net earnings (loss) applicable to common
stock $ (23,062) $ 1,693
=========== ===========
Net earnings (loss) per share -- basic $ (1.02) $ 0.09
=========== ===========
Weighted average shares outstanding 22,691,916 19,775,821
=========== ===========
Diluted earnings (loss) per share:
-------------------------------------------
Net income (loss) before preferred stock
dividends $ (14,239) $ 6,007
Less antidilutive effect of dividends
and common stock equivalents 8,823 4,314
----------- -----------
$ (23,062) $ 1,693
=========== ===========
Diluted earnings (loss) per share, as
reported $ (1.02) $ 0.09
=========== ===========
Diluted shares outstanding 62,664,085 57,834,468
Less: Antidilutive effect of common
stock equivalents 39,972,169 38,058,647
----------- -----------
22,691,916 19,775,821
=========== ===========
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, and other
common stock equivalents for options and warrants outstanding
determined using the treasury stock method ("Diluted shares
outstanding").
Reported diluted EPS for the six months ended June 30, 2005 and 2004,
have been adjusted to include preferred stock dividends and to exclude
shares assuming conversion of the Company's preferred stock and
certain other common stock equivalents for options and warrants
outstanding determined using the treasury stock method because diluted
earnings per share was less dilutive than basic earnings per share
("antidilutive").
Supplemental proforma diluted EPS is intended to show the proforma
effects assuming the Recapitalization had occurred at January 1, 2005
and also excludes the transaction costs and expenses and debt
extinguishment costs related to the Recapitalization. The following
table summarizes the calculation of supplemental proforma diluted EPS
(dollars in thousands, except share data):
Six Months Ended
------------------
2005
------------------
Income (loss) before taxes $ (22,814)
Addback:
Transaction costs and expenses (a) 1,517
Stock option redemptions and transaction bonuses (a) 6,805
Debt extinguishment costs (a) 19,487
Interest (b) 12,601
Deduct:
Proforma Interest (c) (8,894)
------------
Adjusted pre-tax income 8,702
Tax provision (d) 3,481
------------
$ 5,221
============
Diluted shares outstanding (e)
Options 1,278,000
Shares outstanding 71,335,000
------------
72,613,000
============
Supplemental proforma diluted EPS $ 0.07
============
The following adjustments were made in calculating supplemental
proforma diluted earnings per share:
(a) Remove transaction costs and expenses, stock option
redemptions and transaction bonuses, and debt extinguishment
costs incurred in connection with the Recapitalization.
(b) To remove historical interest expense.
(c) To estimate interest expense on the new senior secured credit
agreement based on $180 million of term loans and $9.9 million
of revolver borrowings outstanding at closing at an assumed
interest rate of LIBOR plus 2.25% and 2.75% respectively,
along with an estimate of fees for $37.5 million of letters of
credit outstanding at 2.75% and estimated non-use fees and
expenses, plus actual interest expense on other debt and
capital leases outstanding during the period.
(d) Taxes were assumed at 40 percent of pretax income.
(e) Shares outstanding for the period were calculated using the
actual weighted shares outstanding for the period adjusted to
assume that the 41,885,597 shares issued from conversion of
the preferred stock and 9,302,326 shares issued in the primary
equity offering were outstanding at the beginning of the
period presented.
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 we use these measurements in evaluating our performance and we
believe it is frequently used by securities analysts, investors and
other interested parties in the evaluation of companies in the water
and wastewater business and because it is a measure used by our debt
holders to determine compliance with financial ratios included in our
Senior Secured Credit Agreement. However, other companies in our
industry may calculate EBITDA and Adjusted EBITDA differently than we
do. EBITDA and Adjusted EBITDA are not a measure of performance under
generally accepted accounting principles and should not be considered
as an alternative to net income as an indicator of our operating
performance or any other measure of performance or liquidity derived
in accordance with generally accepted accounting principles. The
following table reconciles net income before cumulative effect of
change in accounting for asset retirement obligations and preferred
stock dividends to EBITDA and Adjusted EBITDA (dollars in thousands):
Six Months Ended 2005 Full Year
Guidance
------------------- --------------------
2005 2004 Low High
-------- -------- -------- --------
Revenue $159,746 $154,825 $320,000 $330,000
======== ======== ======== ========
Net income (loss) before
preferred stock dividends $(14,239) $ 6,007 $ (3,000) $ (200)
Interest expense, net 12,601 10,751 22,000 22,000
Provision (benefit) for
income taxes (8,575) 3,841 (1,300) (100)
Depreciation and
amortization 10,665 9,492 20,500 20,500
-------- -------- -------- --------
EBITDA 452 30,091 38,200 42,200
Debt extinguishment costs 19,487 -- 19,500 19,500
Transaction costs and
expenses 1,517 -- 1,500 1,500
Stock option redemptions
and transaction bonuses 6,805 --- 6,800 6,800
-------- -------- -------- --------
Adjusted EBITDA $ 28,261 $ 30,091 $ 66,000 $ 70,000
======== ======== ======== ========
*T