UNITED STATES
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 MARCH 31, 2004.
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 NO. 0-21911
SYNTROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 73-1565725 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
4322 South 49th West Ave.
Tulsa, Oklahoma 74107
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (918) 592-7900
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
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 was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x
At May 1, 2004, the number of outstanding shares of the issuer’s common stock was 39,741,919.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements as well as historical facts. These forward-looking statements include statements relating to the Syntroleum Process and related technologies including Synfining, gas-to-liquids (“GTL”) plants based on the Syntroleum Process, anticipated costs to design, construct and operate these plants, the timing of commencement and completion of the design and construction of these plants, obtaining required financing for these plants and our other activities, the economic construction and operation of GTL plants, the value and markets for plant products, testing, certification, characteristics and use of plant products, the continued development of the Syntroleum Process (alone or with co-venturers), our sub-quality gas monetization project and the economic production of gas reserves, anticipated capital expenditures, anticipated expense reductions, anticipated cash outflows, anticipated expenses, use of proceeds from our equity offerings, anticipated revenues, availability of catalyst materials, and any other statements regarding future growth, cash needs, capital availability, operations, business plans and financial results. When used in this document, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should” and similar expressions are intended to be among the statements that identify forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these kinds of statements involve risks and uncertainties. Actual results may not be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements are described in this Quarterly Report on Form 10-Q and under the caption “Risk Factors” in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2003.
As used in this Quarterly Report on Form 10-Q, the terms “we,” “our” or “us” mean Syntroleum Corporation, a Delaware corporation, and its predecessors and subsidiaries, unless the context indicates otherwise.
i
SYNTROLEUM CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
| March 31, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 30,704 | $ | 32,695 | ||||
| Restricted cash – Australia settlement |
24,039 | 13,546 | ||||||
| Accounts receivable |
1,131 | 1,377 | ||||||
| Catalyst materials |
— | 2,898 | ||||||
| Other current assets |
954 | 1,287 | ||||||
| Total current assets |
56,828 | 51,803 | ||||||
| INVESTMENTS |
78 | 125 | ||||||
| RESTRICTED CASH |
— | 10,464 | ||||||
| PROPERTY AND EQUIPMENT, net |
2,173 | 1,985 | ||||||
| NOTES RECEIVABLE |
1,832 | 1,833 | ||||||
| OTHER ASSETS, net |
1,049 | 1,025 | ||||||
| $ | 61,960 | $ | 67,235 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 3,293 | $ | 4,299 | ||||
| Accrued liabilities |
1,028 | 1,321 | ||||||
| Australia settlement liability |
25,539 | — | ||||||
| Current maturities of debt and deferred credit |
— | 13,546 | ||||||
| Current portion of convertible debt |
22,959 | 21,842 | ||||||
| Total current liabilities |
52,819 | 41,008 | ||||||
| OTHER NONCURRENT LIABILITIES |
23 | 78 | ||||||
| DEFERRED REVENUE |
26,822 | 38,273 | ||||||
| MINORITY INTERESTS |
706 | 706 | ||||||
| COMMITMENTS AND CONTINGENCIES |
||||||||
| STOCKHOLDERS’ EQUITY: |
||||||||
| Preferred stock, $0.01 par value, 5,000 shares authorized, no shares issued |
— | — | ||||||
| Common stock, $0.01 par value, 150,000 shares authorized, 47,367 and 47,212 shares issued in 2004 and 2003 respectively, including shares in treasury |
474 | 472 | ||||||
| Additional paid-in capital |
187,959 | 185,835 | ||||||
| Notes receivable from sale of common stock |
(100 | ) | (100 | ) | ||||
| Deferred compensation |
(1,336 | ) | — | |||||
| Accumulated deficit |
(205,330 | ) | (198,960 | ) | ||||
| (18,333 | ) | (12,753 | ) | |||||
| Less-treasury stock, 7,675 shares |
(77 | ) | (77 | ) | ||||
| Total stockholders’ equity |
(18,410 | ) | (12,830 | ) | ||||
| $ | 61,960 | $ | 67,235 | |||||
The accompanying notes are an integral part of these unaudited consolidated balance sheets.
1
SYNTROLEUM CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| For the Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| REVENUES: |
||||||||
| Joint development revenue |
$ | 252 | $ | 795 | ||||
| Catalyst materials revenues |
5,674 | — | ||||||
| Other revenues |
2 | — | ||||||
| Total revenues |
5,928 | 795 | ||||||
| COST AND EXPENSES: |
||||||||
| DOE Catoosa project |
1,905 | 10,802 | ||||||
| Project costs |
1,058 | 87 | ||||||
| Pilot plant, engineering and research and development |
1,770 | 2,261 | ||||||
| Cost of catalyst materials sales |
3,033 | — | ||||||
| General, administrative and other |
4,005 | 4,129 | ||||||
| OPERATING INCOME (LOSS) |
(5,843 | ) | (16,484 | ) | ||||
| INVESTMENT AND INTEREST INCOME |
384 | 312 | ||||||
| INTEREST EXPENSE |
(435 | ) | (215 | ) | ||||
| OTHER INCOME (EXPENSE) |
(386 | ) | (8 | ) | ||||
| FOREIGN EXCHANGE GAIN (LOSS) |
(78 | ) | (64 | ) | ||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |
(6,358 | ) | (16,459 | ) | ||||
| INCOME TAXES |
(12 | ) | (20 | ) | ||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS |
(6,370 | ) | (16,479 | ) | ||||
| OPERATIONS OF DISCONTINUED REAL ESTATE BUSINESS: |
||||||||
| Income from discontinued operations |
— | 216 | ||||||
| Minority interest of discontinued operations |
— | (57 | ) | |||||
| Gain on sale of discontinued operations |
— | — | ||||||
| INCOME FROM DISCONTINUED REAL ESTATE BUSINESS |
— | 159 | ||||||
| NET INCOME (LOSS) |
$ | (6,370 | ) | $ | (16,320 | ) | ||
| BASIC AND DILUTED PER SHARE DATA - |
||||||||
| Income (loss) from continuing operations |
$ | (0.16 | ) | $ | (0.49 | ) | ||
| Income from operations of discontinued real estate business |
$ | 0.00 | $ | 0.01 | ||||
| Net income (loss) |
$ | (0.16 | ) | $ | (0.48 | ) | ||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
39,133 | 33,694 | ||||||
The accompanying notes are an integral part of these unaudited consolidated statements.
2
SYNTROLEUM CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
| Common Stock |
Additional Paid-In Capital |
Note Receivable From Sale Of Common Stock |
Deferred Compensation |
Accumulated Deficit |
Treasury Stock |
Total Stockholders’ Equity |
||||||||||||||||||||||||
| Number of Shares |
Amount |
|||||||||||||||||||||||||||||
| BALANCE, December 31, 2003 |
47,212 | $ | 472 | $ | 185,835 | $ | (100 | ) | $ | — | $ | (198,960 | ) | $ | (77 | ) | $ | (12,830 | ) | |||||||||||
| ISSUANCE OF RESTRICTED COMMON STOCK |
— | — | 2,137 | — | (2,137 | ) | — | — | — | |||||||||||||||||||||
| VESTING OF RESTRICTED COMMON STOCK |
125 | 1 | (1 | ) | — | 801 | — | — | 801 | |||||||||||||||||||||
| PURCHASE AND RETIREMENT OF TREASURY STOCK |
(40 | ) | — | (227 | ) | — | — | — | — | (227 | ) | |||||||||||||||||||
| ISSUANCE OF COMMON STOCK |
1 | — | 4 | — | — | — | — | 4 | ||||||||||||||||||||||
| STOCK OPTIONS EXERCISED |
69 | 1 | 194 | — | — | — | — | 195 | ||||||||||||||||||||||
| VALUATION OF CONSULTANT OPTIONS |
— | — | 17 | — | — | — | — | 17 | ||||||||||||||||||||||
| NET INCOME (LOSS) |
— | — | — | — | — | (6,370 | ) | — | (6,370 | ) | ||||||||||||||||||||
| BALANCE, March 31, 2004 |
47,367 | $ | 474 | $ | 187,959 | $ | (100 | ) | $ | (1,336 | ) | $ | (205,330 | ) | $ | (77 | ) | $ | (18,410 | ) | ||||||||||
The accompanying notes are an integral part of these unaudited consolidated statements.
3
SYNTROLEUM CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| For the Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income (loss) |
$ | (6,370 | ) | $ | (16,320 | ) | ||
| Income from discontinued operations |
— | (216 | ) | |||||
| Minority interest of discontinued operations |
— | |||||||