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 September 30, 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 September 30, 1995
Common Stock, $1.00 Par Value 7,221,251
SYNALLOY CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - September 30, 1995
Condensed consolidated statements of income - Three and nine months
ended September 30, 1995 and October 1, 1994
Condensed consolidated statements of cash flows - Nine months ended
September 30, 1995 and October 1, 1994
Notes to condensed consolidated financial statements -
September 30, 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> 2
<TABLE>
PART 1. FINANCIAL STATEMENTS
SYNALLOY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1995 1994
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents 19,175 20,770
Accounts receivable, less allowance for
doubtful accounts 19,910,350 14,758,847
Inventories:
Raw materials 14,172,038 10,252,207
Work-in-process 7,186,330 3,765,329
Finished goods 20,207,030 13,958,918
Total inventories 41,565,398 27,976,454
Deferred income taxes 514,000 514,000
Prepaid expenses and other current assets 346,911 167,791
Total current assets 62,355,834 43,437,862
Cash surrender value of life insurance 1,591,681 1,535,131
Investment 543,100 543,100
Property, plant & equipment, net of accumulated
depreciation of $21,860,000 and $20,156,000 19,321,626 16,239,584
Deferred charges and other assets 667,196 676,748
Total assets 84,479,437 62,432,425
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable 6,295,000 4,455,000
Accounts payable 9,186,027 5,900,018
Income taxes 434,477 448,367
Accrued expenses 6,225,348 3,024,370
Current portion of environmental reserves 114,316 356,800
Current portion of long-term debt 276,923 334,615
Total current liabilities 22,532,091 14,519,170
Long-term debt, less current portion 12,838,461 7,910,577
Environmental compliance costs 2,182,200 2,182,200
Deferred compensation 553,501 554,236
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 September 30, 1995 and
6,000,000 shares year ended December 31, 1994 8,000,000 6,000,000
Capital in excess of par value 752,047 6,931,064
Retained earnings 40,803,085 31,373,461
Less treasury stock (3,558,948) (7,415,283)
Total shareholders' equity 45,996,184 36,889,242
Total liabilities and shareholders' equity 84,479,437 62,432,425
<f>
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> 3
SYNALLOY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, October 1, September 30, October 1,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales 37,858,626 29,871,906 113,815,369 87,421,282
Cost of sales 28,394,922 24,802,819 86,378,035 72,979,205
Gross profit 9,463,704 5,069,087 27,437,334 14,442,077
Selling, general and
administrative expense 2,852,482 2,119,108 8,577,754 6,270,560
Operating income 6,611,222 2,949,979 18,859,580 8,171,517
Other (income) and expense
Interest expense 254,119 149,245 787,119 422,961
Other, net (12,852) (7,080) (41,672) (29,035)
Income before taxes 6,369,955 2,807,814 18,114,133 7,777,591
Provision for income taxes 2,455,000 982,000 6,824,000 2,722,000
Net income 3,914,955 1,825,814 11,290,133 5,055,591
Net income per common share
Primary and fully diluted 0.53 0.25 1.54 0.69
Dividends paid per common
share 0.08 0.07 0.21 0.19
Average shares outstanding 7,372,808 7,363,434 7,349,784 7,350,524
<f>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 4
SYNALLOY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, October 1,
1995 1994
<S> <C> <C>
Operating activities
Net income 11,290,133 5,055,591
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 1,842,862 1,460,783
Deferred compensation (735) (1,320)
Provision for losses on accounts receivable 59,378 129,795
(Gain) loss on sale of property, plant and equipment (19,024) 50,154
Cash surrender value of life insurance (56,550) (56,550)
Environmental compliance costs (242,484) (307,440)
Changes in operating assets and liabilities:
Accounts receivable (5,210,881) (2,787,816)
Inventories (13,588,944) (4,062,222)
Other assets (229,832) (10,201)
Accounts payable and accrued expenses 6,486,987 4,748,806
Income taxes payable (13,890) 12,629
Net cash provided by operating activities 317,020 4,232,209
Investing activities
Purchases of property, plant and equipment (4,895,086) (3,542,144)
Proceeds from sale of property, plant and equipment 45,433 25,084
Proceeds from notes receivable 4,037 3,654
Acquisition costs (350,000)
Net cash (used in) investing activities (4,845,616) (3,863,406)
Financing activities
Proceeds from revolving lines of credit 55,591,231 20,731,000
Payments on revolving lines of credit (53,751,231) (19,986,000)
Addition to long-term debt 5,000,000
Principal payments on long-term debt (129,808) (256,730)
Proceeds from exercising stock options 105,678 77,632
Purchase of treasury stock (1,079,058) (18,008)
Dividends paid (1,541,955) (1,343,783)
Contributions to 401(k)/ESOP 332,144
Net cash provided by (used in) financing activities 4,527,001 (795,889)
Decrease in cash and cash equivalents (1,595) (427,086)
Cash and cash equivalents at beginning of year 20,770 451,471
Cash and cash equivalents at end of period 19,175 24,385
<f>
See accompanying notes to condensed consolidated financial statements
</TABLE>
<PAGE> 5
SYNALLOY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 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 nine-month
period ended September 30, 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
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> 6
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 September 30, 1995.
Consolidated sales were $37,858,000 for the quarter and $113,815,000 year-to-
date reflecting 27 and 30 percent increases, respectively, over the same
periods one year ago. Consolidated net income increased 114 percent to
$3,915,000 for the quarter, or $.53 per share, and increased 123 percent to
$11,290,000 year-to-date, or $1.54 per share, over the same periods one year
ago.
Chemical Segment sales were $11,005,000 for the quarter and $38,629,000 year-
to-date reflecting 15 and two percent declines, respectively, compared to the
same periods one year ago. Operating income declined 29 percent to $1,084,000
for the quarter and increased slightly by one percent to $4,905,000 year-to-
date, compared to the same periods one year ago. About one-half of the
expected decline in sales and operating income for the quarter resulted from
the timing of production of certain non-dye specialty chemicals. Last year's
third quarter reflected the highest production level of these products in
1994, while this quarter represented the lowest level scheduled for 1995. For
the nine months, higher profits from specialty chemicals offset lower profits
from textile dyestuffs. Demand for textile dyestuffs, which represent the
bulk of the chemical business, continued to decline during the quarter
resulting primarily from weak apparel demand. The decline is consistent with
the trends experienced in the first two quarters and in 1994. Sales and
profits for the quarter from these products were down approximately 15 and 19
percent, respectively, Specialty chemicals should show good improvement in the
fourth quarter compared to the third quarter and last year's fourth quarter.
However, demand for dyes has recently been at its weakest level which makes
the overall outlook uncertain.
Metals Segment sales were $26,853,000 for the quarter and $75,186,000 year-to-
date reflecting 58 and 57 percent increases, respectively, over the same
periods one year ago. Operating income increased 248 percent to $6,022,000 for
the quarter and 269 percent to $15,446,000 year-to-date, over the same periods
one year ago. Third quarter operating income soared to a new record while
sales were about the same as the record set in the second quarter of this
year. The bulk of the sales gain came from higher prices that passed on the
increased cost of stainless steel raw material. A change in product mix with
more sales of high priced super alloy pipe also contributed to the increase.
The surge in income resulted from strong stainless pipe markets that led to
better profitability industry wide, increased volume which produced lower unit
production cost, and rising prices that generated profits from a large
inventory. Raw material costs and selling prices have been reasonably stable
during the past few months and will have a negative impact on inventory
profits in the future. For this reason, fourth quarter operating income will
probably be below the level achieved in the third quarter. However, demand
<PAGE> 7
SYNALLOY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
continues to be strong from most of the industries using these products and
current prices are much higher than they were a year ago. Based on this, the
Company expects sales and profits in the fourth quarter 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 increased $317,000 during the first nine months of
the year compared to a $4,232,000 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 $15,514,000 from December 31, 1994. 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> 7
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 September 30,1995.
<PAGE> 8
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: November 8, 1995 /s/ James G. Lane, Jr.
James G. Lane, Jr., Chairman and
Chief Executive Officer
Date: November 8, 1995 /s/ Gregory M. Bowie
Gregory M. Bowie
Vice President, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 19
<SECURITIES> 0
<RECEIVABLES> 19910
<ALLOWANCES> 0
<INVENTORY> 41565
<CURRENT-ASSETS> 62356
<PP&E> 41182
<DEPRECIATION> 21860
<TOTAL-ASSETS> 84479
<CURRENT-LIABILITIES> 22532
<BONDS> 0
<COMMON> 8000
0
0
<OTHER-SE> 37996
<TOTAL-LIABILITY-AND-EQUITY> 84479
<SALES> 113815
<TOTAL-REVENUES> 113815
<CGS> 86378
<TOTAL-COSTS> 86378
<OTHER-EXPENSES> 8578
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 787
<INCOME-PRETAX> 18114
<INCOME-TAX> 6824
<INCOME-CONTINUING> 11290
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11290
<EPS-PRIMARY> 1.54
<EPS-DILUTED> 1.54
</TABLE>
