FORM 10-Q
Securities and Exchange Commission
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended July 1, 1995
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 Number 0-19687
SYNALLOY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 57-0426694
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Post Office Box 5627
Croft Industrial Park
Spartanburg, South Carolina 29304
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (803) 585-3605
Not Applicable
(Former name, former address and former
fiscal year, if changed since last year.)
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 the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practical date.
Number of Shares Outstanding
Title of Class As of July 1, 1995
Common Stock, $1.00 Par Value 7,211,300
SYNALLOY CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - July 1, 1995
Condensed consolidated statements of income - Three and six months
ended July 1, 1995 and July 2, 1994
Condensed consolidated statements of cash flows - Six months ended
July 1, 1995 and July 2, 1994
Notes to condensed consolidated financial statements - July 1, 1995
Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
PART 1. FINANCIAL STATEMENTS
SYNALLOY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 1, December 31,
1995 1994
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents 14,588 20,770
Accounts receivable, less allowance for
doubtful accounts 22,052,183 14,758,847
Inventories:
Raw materials 13,727,242 10,252,207
Work-in-process 5,736,428 3,765,329
Finished goods 17,395,626 13,958,918
Total inventories 36,859,296 27,976,454
Deferred income taxes 514,000 514,000
Prepaid expenses and other current assets 628,106 167,791
Total current assets 60,068,173 43,437,862
Cash surrender value of life insurance 1,572,831 1,535,131
Investment 543,100 543,100
Property, plant & equipment, net of accumulated
depreciation of $21,320,000 and $20,156,000 18,775,907 16,239,584
Deferred charges and other assets 691,113 676,748
Total assets 81,651,124 62,432,425
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable 7,219,000 4,455,000
Accounts payable 9,581,656 5,900,018
Income taxes 716,701 448,367
Accrued expenses 5,158,216 3,024,370
Current portion of environmental reserves 201,776 356,800
Current portion of long-term debt 334,615 334,615
Total current liabilities 23,211,964 14,519,170
Long-term debt, less current portion 12,800,000 7,910,577
Environmental compliance costs 2,182,200 2,182,200
Deferred compensation 553,746 554,236
Deferred income taxes 377,000 377,000
Contingencies -- Note 3
Shareholders' equity
Common stock, par value $1 per share -
authorized 8,000,000 shares; issued 8,000,000
shares period ended July 1, 1995 and
6,000,000 shares year ended December 31, 1994 8,000,000 6,000,000
Capital in excess of par value 664,538 6,931,064
Retained earnings 37,465,832 31,373,461
Less treasury stock (3,604,156) (7,415,283)
Total shareholders' equity 42,526,214 36,889,242
Total liabilities and shareholders' equity 81,651,124 62,432,425
<FN>
Note: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date. See accompanying notes to
condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SYNALLOY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales 41,380,776 30,217,198 75,956,743 57,549,376
Cost of sales 30,581,922 25,035,793 57,983,113 48,176,386
Gross profit 10,798,854 5,181,405 17,973,630 9,372,990
Selling, general and
administrative expense 3,120,105 2,110,834 5,725,272 4,136,452
Operating income 7,678,749 3,070,571 12,248,358 5,236,538
Other (income) and expense
Interest expense 297,245 144,812 533,000 273,716
Other, net (13,917) 4,073 (28,820) (6,955)
Income before taxes 7,395,421 2,921,686 11,744,178 4,969,777
Provision for income taxes 2,782,000 1,023,000 4,369,000 1,740,000
Net income 4,613,421 1,898,686 7,375,178 3,229,777
Net income per common share
Primary and fully diluted 0.63 0.26 1.01 0.44
Dividends paid per common share 0.06 0.06 0.13 0.12
Average shares outstanding 7,337,996 7,357,542 7,337,139 7,350,524
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SYNALLOY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
July 1, 1995 July 2, 1994
<S> <C> <C>
Operating activities
Net income 7,375,178 3,229,777
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 1,237,463 966,286
Deferred compensation (490) (880)
Provision for losses on accounts receivable 347,210 98,015
Gain on sale of property, plant and equipment (17,100) (13,430)
Cash surrender value of life insurance (37,700) (37,700)
Environmental compliance costs (155,024) (249,704)
Changes in operating assets and liabilities:
Accounts receivable (7,640,546) (1,741,149)
Inventories (8,882,842) (1,850,878)
Other assets (504,948) (454,616)
Accounts payable and accrued expenses 5,815,484 4,443,902
Income taxes payable 268,334 (26,070)
Net cash (used in) provided by operating activities (2,194,981) 4,363,553
Investing activities
Purchases of property, plant and equipment (3,746,520) (2,501,741)
Proceeds from sale of property, plant and equipment 17,100 25,295
Proceeds from notes receivable 3,002 2,719
Acquisition costs (350,000)
Net cash (used in) investing activities (3,726,418) (2,823,727)
Financing activities
Proceeds from revolving lines of credit 39,821,231 11,350,000
Payments on revolving lines of credit (37,057,231) (12,195,000)
Addition to long-term debt 5,000,000
Principal payments on long-term debt (110,577) (190,384)
Proceeds from exercising stock options 100,441 63,411
Purchase of treasury stock (1,078,718) (14,768)
Dividends paid (964,254) (863,328)
Contributions to 401(k)/ESOP 204,325
Net cash provided by (used in) financing activities 5,915,217 (1,850,069)
Decrease in cash and cash equivalents (6,182) (310,243)
Cash and cash equivalents at beginning of year 20,770 451,471
Cash and cash equivalents at end of period 14,588 141,228
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
SYNALLOY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
July 1, 1995
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the six-month
period ended July 1, 1995, are not necessarily indicative of the results that
may be expected for the year ending December 30, 1995. For comparative
purposes, certain amounts in the 1994 financial statements have been
reclassified to conform with the 1995 presentation. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the period ended December 31,
1994.
NOTE 2--INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
NOTE 3--LEGAL MATTERS
In late summer 1983, the Company, together with co-defendants Allied
Corporation and E.I. duPont de Nemours & Co., settled approximately 115
individual tort actions arising out of alleged injurious exposure to
betanaphthylamine (BNA) by employees of Augusta Chemical Company and Synalloy
Corporation from 1949 to 1982. As part of the settlement, the Company agreed
to be responsible for certain future medical payments for approximately 80
individuals and for payment of certain amounts in the event an individual is
diagnosed as having bladder cancer. To date, only three individuals have
received payments under these settlements. The Company does not believe a
significant number of these individuals will have bladder cancer. The Company
also believes that it is not probable that any losses payable under the terms
of the settled cases should be in an amount to significantly impair the
consolidated operating results or financial condition of the Company.
Furthermore, based on the Georgia Supreme Court holding in Newton v. Synalloy,
254 GA. 174 (1985), it is not anticipated that future claims will be brought
against the Company.
On July 11, 1995, the Company entered into a settlement agreement with H.B.
Zachry ("Zachry") and the United States resolving the action, H. B. Zachry v.
Synalloy Corporation and Bristol Metals, Inc. v. U.S., in the 37th Judicial
District, Bexar County, Texas, arising out of the sale by Bristol Metals to
Zachry of pipe for use at an Air Force base. The specific terms of the
settlement are subject to a confidentiality agreement; however, the Company's
<PAGE>
SYNALLOY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
contribution to the settlement was less than the $370,000 originally paid to
the Company for the pipe. The Company is aware of two other claims between
the government and contractors arising out of pipe purchased from Bristol.
The Company is not party to either of these actions nor is it, in the opinion
of the Company's counsel, bound by the terms of those actions. No separate
action has been brought against the Company.
The Company does not believe that either the amounts potentially involved in
the BNA settlements or unasserted, but potential, claims arising out of the
sale of pipe to two Air Force bases meet the disclosure requirements of Item
103 of Regulation S-K. Accordingly, unless new information changes these
beliefs, these items will no longer be reported in the quarterly and annual
reports of the Company filed under the Securities and Exchange Act of 1934.
The Company is from time to time subject to various claims, other possible
legal actions for product liability and other damages, and other matters
arising out of the normal conduct of the Company's business. Management
believes that based on present information, it is unlikely that liability, if
any, exists that would have a materially adverse effect on the consolidated
operating results or financial position of the Company.
NOTE 4--NET INCOME PER COMMON SHARE
Income per share is computed using the weighted average shares of Common Stock
and dilutive Common Stock equivalents (options) outstanding during the
respective periods.
NOTE 5--SHAREHOLDERS' EQUITY
On April 28, 1995, the Board of Directors of the Company declared a three-for-
two split of the Company's common stock. This was paid in the form of a stock
dividend on June 12, 1995 to shareholders of record May 22, 1995.
Accordingly, all share and per share information throughout the consolidated
financial statements has been restated to reflect this split. The par value
for the additional shares issued was transferred from capital in excess of par
to common stock.
<PAGE>
SYNALLOY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion of certain significant factors which
affected the Company during the quarter ended July 1, 1995.
Consolidated sales were $41,381,000 for the quarter and $75,957,000 year-to-
date reflecting 37 and 32 percent increases, respectively, over the same
periods one year ago. Consolidated net income increased 143 percent to
$4,613,000 for the quarter, or $.63 per share, and increased 128 percent to
$7,375,000 year-to-date, or $1.01 per share, over the same periods one year
ago.
Chemical Segment sales were $14,451,000 for the quarter and $27,624,000 year-
to-date reflecting five and four percent increases, respectively, over the
same periods one year ago. Operating income increased 30 percent to $2,435,000
for the quarter and 15 percent to $3,821,000 year-to-date, over the same
periods one year ago. Demand for textile dyestuffs, which represent the bulk
of the chemical business, remained weak continuing the same softness
experienced in the first quarter and in 1994. Sales and profits from these
products were down approximately six and 13 percent, respectively, because of
competitive conditions. However, sales of specialty chemicals almost doubled
compared to last year's second quarter, and their contribution to operating
income more than offset the decline in dyestuffs. Seasonal factors normally
make the third quarter the weakest for sales and profits from textile
dyestuffs. Price cutting by certain competitors and the question of when the
cyclically depressed demand will improve add uncertainty to the third quarter.
In addition, specialty chemicals sales and profits will decline from the
second quarter level because of completion of annual production volumes of
certain products.
Metals Segment sales were $26,930,000 for the quarter and $48,333,000 year-to-
date reflecting 64 and 56 percent increases, respectively, over the same
periods one year ago. Operating income increased 291 percent to $5,850,000 for
the quarter and 283 percent year-to-date, over the same periods one year ago.
Higher sales for the quarter and year-to-date were partly the result of a
significant increase in unit volume which was driven by stronger demand.
Substantially higher prices that passed on the higher cost of stainless steel
raw material made an even larger contribution to the sales gain. The surge in
operating income for the quarter and year-to-date resulted from the
convergence of three factors. Improved market conditions led to better
profitability industry wide, increased volume resulted in lower unit
production costs, and sharply rising prices generated profits from a large
inventory. Demand continues to be strong from most of the industries using
these products and current prices are much higher than they were in the second
half of last year. Based on this, the Company expects sales and profits in
the last half of this year to be substantially better than they were in the
comparable period in 1994.
Selling and administrative expense for the quarter and year-to-date were
approximately seven percent of consolidated sales which is consistent with
prior years' amounts. Interest expense increased significantly due to
increased borrowings needed for working capital requirements.
Cash flows from operations decreased $2,195,000 during the first six months of
the year compared to a $4,364,000 increase during the same period one year
ago. The significant increase in activity in the Metals Segment has caused an
expected increase in accounts receivable and inventories, net of accounts
payable, of $12,495,000 from December 31, 1994. In June 1995, the Company
consolidated its two working capital lines into a single $9,000,000 line of
credit and borrowed $12,000,000 under a seven year Revolving Credit/Term Loan
Facility. The proceeds are being used to refinance an existing $7,000,000
note payable with the Bank and fund two capital expenditure projects totaling
$5,000,000. The Company expects that available cash and existing lines of
credit will be sufficient to meet normal operating requirements, including
capital expenditures and payment of dividends over the near term.
<PAGE>
PART II: OTHER INFORMATION
SYNALLOY CORPORATION
Item 1. Legal Proceedings
Reference is made to Note 3 on Page 6 and Note O in the Notes to
Consolidated Financial Statements included in the Form 10-K for the
year ended December 31, 1994.
Item 2. Change In Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission Of Matters To A Vote Of Security Holders
A. The Annual Meeting of Shareholders was held April 28, 1995 at
the offices of the Company.
B. The following individuals were elected as directors at the
Annual Meeting: Votes For Votes Withheld
1. James G. Lane, Jr. 3,729,820 13,311
2. Sibyl N. Fishburn 3,726,921 16,210
3. Richard E. Ingram 3,729,770 13,361
4. Glenn R. Oxner 3,729,820 13,311
5. Carroll D. Vinson 3,728,095 15,036
C. By a vote of 3,562,862 for, 115,408 against and 5,522
abstaining, the shareholders voted to amend the Non-Employee
Director's Stock Option Plan to delete certain requirements
limiting the exercise of such options.
D. Ernst & Young LLP, independent certified public accountants,
were selected as independent auditors for the fiscal year
ending December 30, 1995 by a vote of 3,709,714 for, 21,003
against and 12,414 abstentions.
Item 5. Other Information
None
Item 6. Exhibits And Reports On Form 8-K
The following exhibits are included herein:
None
The Company did not file any reports on Form 8-K during the three
months ended July 1, 1995.
<PAGE>
SYNALLOY CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYNALLOY CORPORATION
(Registrant)
Date: August 4, 1995 /s/ James G. Lane, Jr.
James G. Lane, Jr., Chairman and
Chief Executive Officer
Date: August 4, 1995 /s/ Gregory M. Bowie
Gregory M. Bowie
Vice President, Finance
<TABLE> <S> <C>
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<S> <C>
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<PERIOD-END> JUL-01-1995
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0
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