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 April 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 April 1, 1995
Common Stock, $1.00 Par Value 4,798,578
<PAGE>
SYNALLOY CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - April 1, 1995
Condensed consolidated statements of income - Three months ended
April 1, 1995 and April 2, 1994
Condensed consolidated statements of cash flows - Three months
ended April 1, 1995 and April 2, 1994
Notes to condensed consolidated financial statements - April 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
<PAGE>
<TABLE>
PART 1. FINANCIAL STATEMENTS
SYNALLOY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
April 1, 1995 December 31, 1994
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents 11,928 20,770
Accounts receivable, less allowance for
doubtful accounts 19,672,452 14,758,847
Inventories:
Raw materials 12,882,035 10,252,207
Work-in-process 5,797,637 3,765,329
Finished goods 15,321,132 13,958,918
Total inventories 34,000,804 27,976,454
Deferred income taxes 514,000 514,000
Prepaid expenses and other current assets 970,831 167,791
Total current assets 55,170,015 43,437,862
Cash surrender value of life insurance 1,553,981 1,535,131
Investment 543,100 543,100
Property, plant & equipment, net of accumulated
depreciation of $20,759,000 and $20,156,000 16,812,463 16,239,584
Deferred charges and other assets 659,688 676,748
Total assets 74,739,247 62,432,425
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable 9,003,000 4,455,000
Accounts payable 10,403,765 5,900,018
Income taxes 1,983,901 448,367
Accrued expenses 3,366,072 3,024,370
Current portion of environmental reserves 266,332 356,800
Current portion of long-term debt 334,615 334,615
Total current liabilities 25,357,685 14,519,170
Long-term debt, less current portion 7,876,923 7,910,577
Environmental compliance costs 2,182,200 2,182,200
Deferred compensation 553,991 554,236
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 6,000,000 shares 6,000,000 6,000,000
Capital in excess of par value 6,944,691 6,931,064
Retained earnings 33,651,245 31,373,461
Less treasury stock (8,204,488) (7,415,283)
Total shareholders' equity 38,391,448 36,889,242
Total liabilities and shareholders' equity 74,739,247 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
</FN>
</TABLE>
<PAGE>
<TABLE>
SYNALLOY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
April 1, 1995 April 2, 1994
<S> <S> <S>
Net sales 34,575,967 27,332,178
Cost of sales 27,401,191 23,140,593
Gross profit 7,174,776 4,191,585
Selling, general and administrative expense 2,605,167 2,025,618
Operating income 4,569,609 2,165,967
Other (income) and expense
Interest expense 235,755 128,904
Other, net (14,903) (11,028)
Income before taxes 4,348,757 2,048,091
Provision for income taxes 1,587,000 717,000
Net income 2,761,757 1,331,091
Net income per common share
Primary and fully diluted $.56 $.27
Dividends paid per common share $.10 $.09
Average share outstanding 4,898,513 4,902,442
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
SYNALLOY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
April 1, 1995 April 2, 1994
<S> <C> <C>
Operating activities
Net income 2,761,757 1,331,091
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 636,645 479,591
Deferred compensation (245) (440)
Provision for losses on accounts receivable 255,971 67,009
Gain on sale of property, plant and (8,500) (3,750)
Cash surrender value of life insurance (18,850) (18,850)
Environmental compliance costs (90,468) (138,461)
Changes in operating assets and liabilities:
Accounts receivable (5,169,576) (807,392)
Inventories (6,024,350) (452,639)
Other assets (802,673) (491,559)
Accounts payable and accrued expenses 4,845,449 1,648,929
Income taxes payable 1,535,534 546,354
Net cash (used in) provided by operating activities (2,079,306) 2,159,883
Investing activities
Purchases of property, plant and equipment (1,194,313) (1,194,609)
Proceeds from sale of property, plant and equipment 8,500 3,750
Proceeds from notes receivable 1,482 1,342
Net cash (used in) investing activities (1,184,331) (1,189,517)
Financing activities
Proceeds from revolving lines of credit 21,847,231 2,300,000
Payments on revolving lines of credit (17,299,231) (3,100,000)
Principal payments on long-term debt (33,654) (104,807)
Proceeds from exercising stock options 71,076 42,245
Purchase of treasury stock (1,050,979) (1,274)
Dividends paid (483,973) (431,227)
Contributions to 401(k)/ESOP 204,325
Net cash provided by (used in) financing activities 3,254,795 (1,295,063)
Decrease in cash and cash equivalents (8,842) (324,697)
Cash and cash equivalents at beginning of year 20,770 451,471
Cash and cash equivalents at end of year 11,928 126,774
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
SYNALLOY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
April 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 three-month
period ended April 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 1972. 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, three individuals have received
payments under these settlements. The Company does not believe a significant
number of these individuals will have bladder cancer.
Management and counsel of the Company do not believe that it is 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.
There is presently pending an 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 H.B. Zachry ("Zachry") of
pipe for use at an Air Force base. After portions of the pipe ruptured,
Zachry repaired the pipe at a cost of approximately $1,200,000. In July 1994,
the Company filed a third-party action against the United States Government
(the "Government") alleging they should indemnify the Company for any amount
the Company is found liable to Zachry arising out of the Government's
defective specification. The Government thereafter removed the case to
Federal Court in San Antonio, Texas, and filed a counterclaim against the
Company seeking indemnification for any amounts the Government is required to
pay Zachry. Discovery is proceeding with a trial date expected in late 1995.
The Company has also been vouched into the defense of a claim made by the U.S.
Army Corps of Engineers against Natkin & Co. for pipe sold to Natkin for use
at Ellsworth Air Force Base. The Company has not been made a party to this
action. The Company is also aware that the Corps of Engineers rejected its
pipe at Westover Air Force Base after installation by Lane Construction Co.
but before the system was operated. At the present time, Lane is repairing
the pipeline at this base and has a claim pending in the United States Court
of Claims against the Government.
The Company and its legal counsel believe that the pipe supplied met the
Corps' specifications. At the present time, with the exception of the Zachry
case it is unclear what, if any, damages will be asserted against the Company.
Based on present information, it is unlikely that liability, if any, in the
amount alleged exists and that the ultimate outcome will 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.
<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 April 1, 1995.
Consolidated sales were $34,576,000 for the quarter reflecting a 27 percent
increase over the same period one year ago. Consolidated net income increased
107 percent to $2,762,000 for the quarter, or $.56 per share, over the same
period one year ago.
Chemical Segment sales were $13,173,000 for the quarter reflecting a three
percent increase over the same period one year ago. Operating income decreased
five percent to $1,386,000 for the quarter over the same period one year ago.
Demand for textile dyestuffs continued to exhibit the same softness
experienced during 1994. Sales of the new line of sulphur dyes that the
Company began marketing In May 1994 more than offset a modest decline in other
dyestuff sales. Profit margins from these products were down modestly because
of competitive conditions. Specialty chemicals contributed about the same
percentage of operating profit that they did in the first quarter of 1994.
Demand for dyes improved in March and based on current conditions the Company
expects the second quarter to produce better results from this product group.
Present production schedules for specialty chemicals should also generate more
sales and profits from these products in the second quarter.
Metal Segment sales were $21,403,000 for the quarter reflecting a 47 percent
increase over the same period one year ago. Operating income increased 271
percent to $3,574,000 for the quarter over the same period one year ago.
After five years of declining prices and weak demand, markets for stainless
steel pipe have improved dramatically. Most of the sales increase came from a
surge in unit volume. Higher sales prices resulting from increased raw
material costs also made a contribution. The profit improvement resulted from
increased raw material conditions, lower unit production costs associated with
substantially higher volumes and inventory profits generated from the rising
price of stainless steel. Sales prices in January were up only slightly, but
February and March reflected a significant uptrend. These conditions make the
Company believe that the average selling prices in the second quarter will
exceed those of the first quarter. Demand seems to be holding up well so
second quarter unit volume should also be strong. In addition, the Company
should benefit from the increase in value of its large inventory because of
the rising prices of stainless steel.
Selling and administrative expense for the quarter was approximately 7 percent
which is of consolidated sales consistent with prior year's amount. Interest
expense increased significantly due to increased borrowings needed for working
capital requirements.
Cash flows from operations of $2,079,000 for the first quarter of the year were
consistent with cash flows of $2,160,000 over the same period one year ago.
Funds from operations were sufficient to pay normal dividends and capital
expenditures. During the first quarter,the Company consolidated its two
working capital lines into a single $9,000,000 line of credit and entered
into a commitment with the same Bank to borrow $12,000,000 under a seven
year Revolving Credit/Term Loan Facility. The proceeds will be 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 increased capital expenditures 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
None
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 April 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: May 8, 1995 /s/ James G. Lane, Jr.
James G. Lane, Jr., Chairman and
Chief Executive Officer
Date: May 8, 1995 /s/ Gregory M. Bowie
Gregory M. Bowie
Vice President, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000095953
<NAME> SYNALLOY CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> APR-1-1995
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0
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