Synagro revenue up 8.8% in 2Q

Revenues for Synagro Technologies Inc., a national company focused on water and wastewater residuals management services, rose 8.8% to $82.3 million for the period ended June 30. And net income before preferred stock dividends increased 4.1% to $5.2 million...

HOUSTON, Aug. 10, 2004 (BUSINESS WIRE) -- Revenues for Synagro Technologies Inc., a national company focused on water and wastewater residuals management services, rose 8.8% to $82.3 million for the period ended June 30. And net income before preferred stock dividends increased 4.1% to $5.2 million.

Meanwhile, earnings before interest, taxes, depreciation and amortization (EBITDA) increased 2.6% (15.7% excluding a one-time gain in 2003) to $19.0 million. Cash flow from operations increased by 339% to $8.1 million, and total debt was reduced by $4.4 million to $264.0 million.

Commenting on results for the second quarter of 2004, Synagro CEO Robert C. Boucher Jr. stated, "We are pleased with our solid performance during the second quarter. Operating margins from land application services again improved as we have experienced more normal weather patterns this year compared to last. Our general and administrative expenses decreased as we continued to focus on our cost reduction initiatives. These improvements were partially offset by higher than expected repairs and maintenance costs at our dryer and incinerator facilities that we expect to be completed this year."

Total revenue growth included internal growth of 8.3% and contract service revenue growth of 11.6%. Operating income adjusted to exclude a one-time non-cash gain in the prior year increased 10.0% to $13.3 million, which along with improvements in working capital increased our cash flow from operations 339% to $8.1 million for the quarter. This allowed us to pay about $4.4 million on debt during the quarter. In the first six months we have paid down $10.9 million in debt, more than half our $15 - $20 million goal for 2004. We remain comfortable with reaching that goal as well as achieving our expectations for revenue and earnings."

2Q financial summary
Revenue for the quarter increased $6.7 million or 8.8% to $82.3 million from $75.6 million in the comparable quarter last year, with about $7.2 million of the increase related to contract service revenues, about $1.2 million of the increase related to event type work primarily in the company's Northeast and Central regions and about $0.4 million of the increase related to an acquisition that was completed in the second quarter of 2003. These increases were partially offset by declines in design build and purchase order revenues.

Operating income for the quarter totaled $13.3 million compared to $14.2 million in the comparable quarter last year. Operating income in the second quarter of 2003 included a one-time gain of about $2.1 million recorded as a reduction in cost of operations related to a positive settlement of a warranty obligation. Excluding this one-time non-cash gain in 2003, operating income increased by about $1.2 million or 10.0% to $13.3 million in the second quarter of 2004 compared to $12.1 million in the second quarter of 2003. This increase in operating income is a result of internal growth, an improvement in land application operating margins (related to more normal weather patterns in 2004 compared to 2003), a reduction in selling, general and administrative expenses of $0.2 million attributed to cost reduction initiatives, which were partially offset by an increase in repairs and maintenance expenses primarily associated with the company's dryer and incineration facilities.

Year-to-date results
Revenue for the six months ended June 30 increased $16.1 million or 11.6% to $155.0 million from $138.9 million for the same period in the prior year, with about $14.4 million of the increase related to contract service revenues, about $2.6 million related to event type work primarily in the Company's Northeast and Central regions and about $1.1 million of the increase related to an acquisition that was completed in the second quarter of 2003. These revenue increases were partially offset by declines in design build and purchase order revenues.

Operating income for the six months ended June 30, 2004, totaled $19.8 million and remained unchanged from the first six months of the prior year. As noted above, operating income in 2003 included a one-time non-cash gain of about $2.1 million. Excluding this one-time gain from 2003, operating income for the six months increased about $2.1 million or 11.9% to $19.8 million in 2004 from $17.7 million in 2003. This increase in operating income is primarily a result of the increased revenue growth, an improvement in land application operating margins (related to more normal weather patterns in 2004 compared to 2003) and a reduction in selling, general and administrative expenses of $0.7 million, partially offset by higher repairs and maintenance expenses at the Company's drying and incineration facilities.

Pre-tax income for the six months increased $2.3 million or 29.9% to $10.0 million from $7.7 million for the comparable period last year. Excluding the one-time gain from the warranty settlement in 2003, pretax income increased about $4.4 million from the prior year primarily related to the $2.1 million increase from operating income discussed above, a $1.3 million reduction in interest expense and a $0.9 million increase in other income.

Net income applicable to common stock for the six months ended June 30, 2004, increased to $1.8 million from $0.3 million in the comparable period of the prior year. Diluted earnings per share increased to $0.09 per share for the first six months of 2004 compared to $0.02 per share in 2003. Diluted earnings per share for the six months ended June 30, 2003, adjusted to exclude the change in accounting for asset retirement obligations, totaled $0.04 per share.

Synagro is the largest national company focused on water and wastewater residuals management services in the United States, serving over 1,000 municipal and industrial water and wastewater generators in 37 states and the District of Columbia. It offers a range of water and wastewater residuals management services, focusing on beneficial reuse of organic, non-hazardous residuals resulting from the water and wastewater treatment process, including collection and transportation, land application, thermal drying and pelletization, incineration, composting, alkaline stabilization, dewatering, cleanout services, wastewater treatment plant operations and maintenance, product marketing, and related record keeping and regulatory reporting services.

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