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Costs Force Firm to Go Private

Synbiotics Corp., a locally based maker of veterinary diagnostic testing and other products used on animals, is going private, citing escalating costs involved with maintaining its publicly traded status.

On Oct. 20, its shareholders approved a 1-for-2,000 reverse stock split that will effectively reduce the number of shareholders from 568 to about 60.

Once a company has fewer than 300 shareholders, its board of directors can vote to deregister its stock from public trading. The transaction was scheduled to occur Oct. 29.

A call for comment to the company wasn’t returned.

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As of Oct. 26, Synbiotics shares were trading on the Pink Sheets electronic exchange for 10 cents. Based on that price, the reverse transaction would result in every 2,000 shares converting to a single share and valued at $20.

Yet most of Synbiotics’ shareholders , 508 to be exact , own fewer than 2,000 shares. For those investors, the company will pay 13 cents for each share they own.

In an earlier securities filing, Synbiotics said it is spending far too much to comply with all the regulations required of public companies. Among the costs that would be eliminated or reduced once it went private is an estimated $95,000 to comply with the internal controls section of the Sarbanes-Oxley Act. It is also spending about $60,000 a year on the costs associated with public filings. In a recent report, the company said the total cost savings with going private would be a minimum of $245,000 in the first full year.

The biggest holder of Synbiotics stock is Redwood Holdings LLC, a Cincinnati-based equity investment firm, which controls 58 percent.

While its stock’s price might not be impressive, Synbiotics’ business has some heft. Incorporated in 1982, the firm sells its products worldwide. It has 93 employees.

Last year, it reported a net loss of $647,000 on revenues of $19.2 million, compared with a net loss of $455,000 on revenues of $19.2 million.

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Not Quite So Rough:

Carlsbad-based Callaway Golf Co. reported a net loss of $4.8 million for its third quarter on revenues of $220.6 million, compared with a net loss of $35.9 million on revenues of $128.5 million for the same period 2004.

For the nine months ended Sept. 30, Callaway reported net income of $31.9 million on sales of $843.6 million, compared with net income of $18.4 million on sales of $790 million for the same period of 2004.

Callaway, which has been the subject of continued speculation that it is a buyout candidate, has undertaken a restructuring effort that will cut some 500 jobs from its payroll. The plan is supposed to save between $50 million and $60 million next year.

Traded on the New York Stock Exchange under ELY, the first name of its founder, shares were at $13.45 in after-hours trading Oct. 26. Its 52-week range is from $10.21 and $15.95.

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Rising, Then Selling:

Captiva Software, a San Diego-based maker of software that converts written data to digital form, reported net income for its third quarter of $1.9 million on revenues of $21.2 million, compared with net income of $600,000 on revenues of $15 million for the same period of 2004.

The company that announced a definitive sales agreement with Massachusetts-based EMC Corp. Oct. 20 reported nine-month net profits of $4.5 million on revenues of $58.9 million, compared with net income of $1.9 million on revenues of $47.7 million for the prior year’s nine months.

EMC, which provides data storage equipment and totaled $8 billion in sales last year, agreed to purchase Captiva for $22.25 per share for an aggregate cash price of $275 million. The deal is scheduled to close this year or early next year. EMC, whose shares are traded on the New York Stock Exchange, operates an office in San Diego with about 75 employees. Captiva has about 400 employees worldwide.

Captiva said it expects fourth-quarter revenues to range from $26 million to $27 million and net income of 16 to 18 cents per share. Full year estimates are revenues between $85 million and $86 million and net income per share between 49 to 51 cents.

Traded on Nasdaq under CPTV, the stock closed at $21. 90 on Oct. 26, and has ranged from $9.35 to $22.35 in the past 52 weeks.

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A Good Quarter:

Cohu Inc., a Poway-based maker of semiconductor testing equipment, reported net income for its third quarter of $9.6 million on revenues of $68.6 million, compared with net income of $5.2 million on revenues of $54.9 million for the like period of 2004.

Chief Executive Officer James Donahue said sales orders and net income were the highest since 2000 , the height of the tech bubble.

The company enjoyed a 51 percent increase from the second quarter in orders of its general-purpose integrated circuits testing equipment.

Donahue also noted prospects in the near term are volatile, but that Cohu expected to report strong operating results for the fourth quarter.

Traded under COHU on Nasdaq, shares closed at $22.99 on Oct. 26, and ranged from $14.81 to $25.91 over the past 52 weeks.

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Profits Drop:

K2, a Carlsbad-based sporting goods manufacturer, reported better results on a third-quarter comparison, but reduced profits over the nine-month basis.

For the quarter, K2 earned $16.7 million on revenues of $340.4 million, compared with net income of $13.2 million on revenues of $333.5 million.

For the three quarters ended Sept. 30, K2 had net income of $20.5 million on sales of $960 million, compared with net income of $30.1 million on sales of $861.8 million.

In early October, the company said it wouldn’t hit its previously announced earnings forecast, blaming the decline on continued weakness in its paintball division.

Annual sales are estimated to finish this year in a range between $1.29 billion and $1.32 billion, lower than an earlier projection of $1.3 billion to $1.35 billion.

Traded on the New York Stock Exchange under KTO, shares closed at $9.63 on Oct. 26, and have ranged from $8.25 to $17.25 over the past 52 weeks.


Send any news of locally based public companies to Mike Allen via e-mail at mallen@sdbj.com. He can be reached at (858) 277-6359.

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