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 March 30, 1996
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 (864) 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 March 30, 1996
Common Stock, $1.00 Par Value 6,975,098
- - 1 -
Synalloy Corporation
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - March 30, 1996 and
December 30,1995
Condensed consolidated statements of income - Three months ended
March 30, 1996 and April 1, 1995
Condensed consolidated statements of cash flows - Three months
ended March 30, 1996 and April 1, 1995
Notes to condensed consolidated financial statements -
March 30, 1996
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
- - 2 -
PART 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Synalloy Corporation
Condensed Consolidated Balance Sheets
March 30, 1996 December 30, 1995
(Unaudited) (Note)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 60,308 $ 267,061
Accounts receivable, less allowance for
doubtful accounts 20,158,032 17,616,246
Inventories:
Raw materials 10,154,453 10,574,040
Work-in-process 6,239,691 6,095,136
Finished goods 18,044,605 21,860,833
Total inventories 34,438,749 38,530,009
Deferred income taxes 218,000 218,000
Prepaid expenses and other current assets 881,970 119,592
Total current assets 55,757,059 56,750,908
Cash value of life insurance 1,650,879 1,632,029
Investment 743,100 543,100
Property, plant & equipment, net of accumulated
depreciation of $22,649,936 and $21,950,069 21,397,664 20,341,645
Deferred charges and other assets 926,311 957,891
Total assets $80,475,013 $80,225,573
Liabilities and Shareholders' Equity
Current liabilities
Notes payable $ 7,760,000 $ 4,740,000
Accounts payable 6,046,251 4,833,405
Income taxes 1,636,877 233,977
Accrued expenses 2,903,455 5,082,212
Current portion of environmental reserves 336,707 486,521
Current portion of long-term debt 276,923 276,923
Total current liabilities 18,960,213 15,653,038
Long-term debt, less current portion 12,600,000 12,619,231
Environmental reserves 1,702,800 1,702,800
Deferred compensation 1,266,952 1,267,353
Deferred income taxes 620,000 620,000
Contingencies
Shareholders' equity
Common stock, par value $1 per share - authorized and
issued 8,000,000 shares 8,000,000 8,000,000
Capital in excess of par value 81,746 417,030
Retained earnings 46,124,354 43,774,332
Less Common Stock in treasury (8,881,052) (3,828,211)
Total shareholders' equity 45,325,048 48,363,151
Total liabilities and shareholders' equity $80,475,013 $80,225,573
Note: The balance sheet at December 30, 1995 has been derived from the audited financial statements at
that date. See accompanying notes to condensed consolidated financial statements
</TABLE>
<TABLE>
<CAPTION>
Synalloy Corporation
Condensed Consolidated Statements of Income
(Unaudited) Three Months Ended
March 30, 1996 April 1, 1995
<S> <C> <C>
Net sales $36,658,505 $34,575,967
Cost of sales 29,228,982 27,401,191
Gross profit 7,429,523 7,174,776
Selling, general and administrative expense 2,560,310 2,586,317
Operating income 4,869,213 4,588,459
Other (income) and expense
Interest expense 259,727 235,755
Other, net 7,456 3,947
Income before taxes 4,602,030 4,348,757
Provision for income taxes 1,680,000 1,587,000
Net income $ 2,922,030 $ 2,761,757
Net income per common share $.41 $.38
Dividends paid per common share $.08 $.07
Average shares outstanding 7,150,808 7,347,769
See accompanying notes to condensed consolidated financial statements
</TABLE>
<TABLE>
<CAPTION>
Synalloy Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited) Three Months Ended
March 30, 1996 April 1, 1995
<S> <C> <C>
Operating activities
Net income $ 2,922,030 $ 2,761,757
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 729,809 636,645
Deferred compensation (401) (245)
Provision for losses on accounts receivable (196,171) 255,971
Gain on sale of property, plant and equipment (650) (8,500)
Cash value of life insurance (18,850) (18,850)
Environmental reserves (149,814) (90,468)
Changes in operating assets and liabilities:
Accounts receivable (2,345,615) (5,169,576)
Inventories 4,091,260 (6,024,350)
Other assets (962,378) (802,673)
Accounts payable and accrued expenses (965,911) 5,049,774
Income taxes payable 1,402,900 1,535,534
Net cash provided by (used in) operating activities 4,506,209 (2,079,306)
Investing activities
Purchases of property, plant and equipment (1,755,886) (1,194,313)
Proceeds from sale of property, plant and equipment 650 8,500
Proceeds from notes receivable 1,638 1,482
Net cash (used in) investing activities (1,753,598) (1,184,331)
Financing activities
Proceeds from revolving lines of credit 19,060,000 21,847,231
Payments on revolving lines of credit (16,040,000) (17,299,231)
Principal payments on long-term debt (19,231) (33,654)
Proceeds from exercised stock options 234,008 71,076
Purchases of treasury stock (5,622,131) (1,050,979)
Dividends paid (572,010) (483,973)
Net cash (used in) provided by financing activities (2,959,364) 3,050,470
Decrease in cash and cash equivalents (206,753) (8,842)
Cash and cash equivalents at beginning of year 267,061 20,770
Cash and cash equivalents at end of period $ 60,308 $ 11,928
See accompanying notes to condensed consolidated financial statements
</TABLE>
Synalloy Corporation
Notes To Condensed Consolidated Financial Statements
(Unaudited)
March 30, 1996
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 March 30, 1996, are not necessarily indicative of the results
that may be expected for the year ending December 28, 1996. For comparative
purposes, certain amounts in the 1995 financial statements have been
reclassified to conform with the 1996 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 30,
1995.
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. Stock options in the aggregate reduce earnings per share
by less than three percent in all years presented, therefore diluted per share
amounts are not disclosed.
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.
- - 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 March 30, 1996
Consolidated sales and net income were $36,659,000 and $2,922,000,
respectively, for the quarter reflecting 6 percent increases over the same
period one year ago. Earnings per share of $.41 increased eight percent over
the same period one year ago reflecting the impact of the purchase of 324,000
shares of the Company's common stock as discussed below.
Chemical Segment sales were $11,167,000 for the quarter reflecting a 15
percent decline compared to the same period one year ago. Operating income
declined 16 percent to $1,167,000 for the quarter compared to the same period
one year ago. Specialty chemicals showed good improvement in the first quarter
compared to last year contributing 41 percent of operating income compared to
29 percent for the same period one year ago. Conditions in the textile dye
market over the past two quarters, which represent the bulk of the chemical
business, have been the worst the Company has experienced in many years.
Sales and profits for the quarter from these products were down approximately
26 and 16 percent, respectively, from the same period one year ago. Under
these conditions, management is pleased with the solid profitability from dyes
and pigments, and believes the Company is well-positioned to benefit from the
inevitable cyclical recovery in this business. Several of the major dye
producers have recently gone through mergers and/or spin-offs that will
probably have the ultimate effect of reducing world-wide capacity. Many of
the larger producers are losing money or are marginally profitable in their
dyestuff businesses. This leads us to believe that the current low prices are
unsustainable and should show improvement in the future.
Metals Segment sales were $25,492,000 for the quarter reflecting a 19 percent
increase over the same period one year ago. Operating income increased 14
percent to $4,063,000 for the quarter over the same period one year ago. The
sales increase resulted from higher average selling prices while unit volume
was essentially unchanged from last year's record first quarter level. During
the first quarter, production was cut back in order to reduce intentionally
high inventory levels maintained in 1995. The Company chose not to have
temporary layoffs in connection with this planned decrease in production.
This necessarily led to negative volume variances that reduced operating
income. Demand continues to be very good from most of the industries using
these products. However, raw material costs and selling prices have been
trending downward for the past several months, and current selling prices are
below the level experienced in the second quarter of last year. In addition,
the Company will not benefit from the inventory profits experienced in the
second quarter of last year. Based on this, we do not expect sales and
profits in the second quarter to equal the levels obtained in the second
quarter of last year. The new 16-inch continuous pipe mill is now installed
and should be in routine production by May 1 enhancing the Company's already
leading position among stainless pipe producers.
Selling and administrative expense for the quarter was approximately seven
percent of consolidated sales which is consistent with prior year's amount.
Interest expense increased ten percent over last year's amount due to
increased borrowings needed for working capital requirements and to fund the
repurchase of the Company's common stock.
- -7-
Synalloy Corporation
Management's Discussion And Analysis Of The Financial
Condition And Results Of Operations - Continued
Cash flows from operations totaled $4,506,000 during the first quarter
compared to a $2,079,000 decrease in cash flows during the same period one
year ago. The increase reflects the Company's planned reduction of
inventories by $4,100,000 from year end levels. During the quarter, the
Company purchased 324,000 shares of its common stock for the treasury for
$5,622,000, including $4,980,000 for 289,000 shares purchased under a
previously announced $5,000,000 buyback program. 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.
- - 8 -
PART II: OTHER INFORMATION
Synalloy Corporation
Item 1. Legal Proceedings
None
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 March 30, 1996
- - 9 -
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, 1996 /s/ James G. Lane, Jr.
James G. Lane, Jr., Chairman and
Chief Executive Officer
Date: May 8, 1996 /s/ Gregory M. Bowie
Gregory M. Bowie
Vice President, Finance
- - 10 -
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<PERIOD-END> MAR-30-1996
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8000
0
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<CGS> 29229
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