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 29, 1997
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 29, 1997
Common Stock, $1.00 Par Value 6,985,917
- - 1 -
Synalloy Corporation
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - March 29, 1997 and
December 28,1996
Condensed consolidated statements of income - Three months
ended March 29, 1997 and March 30, 1996
Condensed consolidated statements of cash flows - Three
months ended March 29, 1997 and March 30, 1996
Notes to condensed consolidated financial statements -
March 29, 1997
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>
Synalloy Corporation
Condensed Consolidated Balance Sheets
<CAPTION>
Mar 29, 1997 Dec 28, 1996
(Unaudited) (Note)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 163,417 $ 115,828
Accounts receivable, less allowance
for doubtful accounts 18,752,525 17,253,534
Inventories
Raw materials 8,309,610 8,357,884
Work-in-process 3,858,209 5,112,695
Finished goods 14,423,689 16,384,891
Total inventories 26,591,508 29,855,470
Deferred income taxes 130,000 130,000
Prepaid expenses and other current assets 921,590 278,276
Total current assets 46,559,040 47,633,108
Cash value of life insurance 1,753,301 1,733,801
Investment 329,117 329,117
Property, plant & equipment, net of accumulated
depreciation of $26,269,000 and $26,128,000 23,553,219 23,627,889
Deferred charges and other assets 3,202,395 3,265,211
Total assets $ 75,397,072 $ 76,589,126
Liabilities and Shareholders' Equity
Current liabilities
Notes payable $ 460,000 $ 1,500,000
Accounts payable 6,949,178 6,252,449
Income taxes 794,527 332,507
Accrued expenses 2,027,935 2,492,660
Current portion of environmental reserves 359,294 359,294
Current portion of long-term debt 1,400,000 1,400,000
Notes payable to an employee 1,154,805
Total current liabilities 11,990,934 13,491,715
Long-term debt, less current portion 11,200,000 11,200,000
Environmental reserves 1,185,921 1,300,100
Deferred compensation 1,297,001 1,299,176
Deferred income taxes 1,024,000 1,024,000
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 29,745 81,746
Retained earnings 49,457,541 49,074,919
Less cost of Common Stock in treasury (8,788,070) (8,882,530)
Total shareholders' equity 48,699,216 48,274,135
Total liabilities and shareholders' equity $ 75,397,072 $ 76,589,126
Note: The balance sheet at December 28, 1996 has been derived from
the audited financial statements at that date. See accompanying
notes to condensed consolidated financial statements
</TABLE>
- -3-
<TABLE>
Synalloy Corporation
Condensed Consolidated Statements of Income
<CAPTION>
(Unaudited) Three Months Ended
Mar 29, 1997 Mar 30, 1996
<S> <C> <C>
Net sales $ 30,903,356 $ 36,658,505
Cost of sales 26,657,262 29,228,982
Gross profit 4,246,094 7,429,523
Selling, general and administrative expense 2,461,877 2,560,310
Operating income 1,784,217 4,869,213
Other (income) and expense
Gain on sale of investment 0
Interest expense 213,127 259,727
Other, net 6,738 7,456
Income before taxes 1,564,352 4,602,030
Provision for income taxes 553,000 1,680,000
Net income $ 1,011,352 $ 2,922,030
Net income per common share $.14 $.41
Dividends paid per common share $.09 $.08
Average shares outstanding 7,023,142 7,150,808
See accompanying notes to condensed consolidated financial statements
</TABLE>
- -4-
<TABLE>
Synalloy Corporation
Condensed Consolidated Statements of Cash Flows
<CAPTION>
(Unaudited) Three Months Ended
Mar 29, 1997 Mar 30, 1996
<S> <C> <C>
Operating activities
Net income $ 1,011,352 $ 2,922,030
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 798,916 699,867
Amortization of deferred charges 62,816 29,942
Deferred compensation (2,175) (401)
Deferred income taxes 0 0
Provision for losses on accounts receivables 14,990 (196,171)
Loss (gain) on sale of property, plant and 13,157 (650)
Cash value of life insurance (19,500) (18,850)
Environmental reserves (114,179) (149,814)
Changes in operating assets and liabilities:
Accounts receivable (1,513,981) (2,345,615)
Inventories 3,263,962 4,091,260
Other assets (645,124) (962,378)
Accounts payable and accrued expenses 232,004 (965,911)
Income taxes payable 462,020 1,402,900
Net cash provided by operating activities 3,564,258 4,506,209
Investing activities
Purchases of property, plant and equipment (739,603) (1,755,886)
Proceeds from sale of property, plant and equipment 2,200 650
Proceeds from notes receivable 1,810 1,638
Net cash (used in) investing activities (735,593) (1,753,598)
Financing activities
Proceeds from revolving lines of credit 12,210,000 19,060,000
Payments on revolving lines of credit (13,250,000) (16,040,000)
Principal payments on long-term debt (19,231)
Payment of notes payable to employee (1,154,805)
Proceeds from exercised stock options 42,462 234,008
Purchases of treasury stock (5,622,131)
Dividends paid (628,733) (572,010)
Net cash (used in) financing activities (2,781,076) (2,959,364)
Increase (decrease) in cash and cash equivalents 47,589 (206,753)
Cash and cash equivalents at beginning of year 115,828 267,061
Cash and cash equivalents at end of period $ 163,417 $ 60,308
See accompanying notes to condensed consolidated financial statements
</TABLE>
- -5-
Synalloy Corporation
Notes To Condensed Consolidated Financial Statements
(Unaudited)
March 29, 1997
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 29, 1997, are not necessarily indicative of the results
that may be expected for the year ending January 3, 1998. For comparative
purposes, certain amounts in the 1996 financial statements have been
reclassified to conform with the 1997 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 28,
1996.
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.
- - 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 29, 1997.
Consolidated sales and net income were $30,903,000 and $1,011,000,
respectively, for the quarter. Net income declined 65 percent on a sales
decline of 16 percent compared to the first quarter of 1996. On a sequential
basis, however, sales for the quarter increased 6 percent over the fourth
quarter of 1996, and removing the effect on net income of an after tax gain on
the sale of an investment of $431,000 in the fourth quarter of 1996, net
income in the first quarter increased 4 percent. The Company continues to
experience the effects of the unusual condition of cyclical weakness that has
been occurring at the same time in both the Metals and Chemicals Segments
since the second quarter of 1996.
Chemicals Segment sales were $14,355,000 for the quarter reflecting a 29
percent increase compared to the same period one year ago. Operating income
increased 27 percent to $1,477,000 for the quarter compared to the same period
one year ago. Improvement in sales and operating income in the quarter
compared to the same quarter last year essentially resulted from the
acquisition of Manufacturers Chemicals in the last quarter of 1996. Excluding
the acquisition, sales were off slightly and operating income was up 4
percent. Textile dye and pigment demand continues to be weak and conditions in
the market are intensely competitive. Weak denim markets and continued
softness in pigment demand from textile printers more than offset increased
sales of other dyes. Chemical specialties, bolstered by the acquisition,
contributed 47 percent of sales and a substantially greater percent of
operating income. The Company is positioned to benefit from any recovery in
the textile dye and pigment demand. It will also continue its focus on
growing non-dye specialties.
Metals Segment sales were $16,548,000 for the quarter reflecting a 35 percent
decline over the same period one year ago. Operating income decreased 86
percent to $589,000 for the quarter over the same period one year ago. The
sales decline compared to the first quarter of 1996 was primarily the result
of 28 percent lower selling prices for stainless steel pipe. Market dynamics
were completely different during these periods. Prices to date in 1997 appear
to be at a cyclical low, while last year's first quarter benefited from prices
only moderately below the cyclical peaks reached in the last half of 1995.
Unit volume of loose pipe was up moderately, but overall unit volume was down
6 percent due to decreases in piping systems and process equipment. The
decrease in operating income reflects the cyclically depressed condition of
the pipe market and the modest loss incurred from piping systems and process
equipment. After rescinding a November 11, 1996 price increase because of
lack of support from other pipe producers, the Company announced an 8 percent
price increase on April 7, 1997. Poor operating results throughout the
industry should motivate other producers to support this increase. If this
price increase holds in the marketplace, sales and operating income from
stainless pipe should show better results on a sequential basis in the second
quarter. The backlog for piping systems is at a good level. However, the
first quarter was negatively impacted by customer delays in providing drawings
- -7-
Synalloy Corporation
Management's Discussion And Analysis Of The Financial
Condition And Results Of Operations - Continued
necessary for the fabrication of pipe spool pieces. The Company currently
expects the volume of drawings received to increase beginning in April which
should lead to an increased level of sales and income from these products.
Selling and administrative expense for the quarter was down approximately four
percent from the same quarter last year, but totaled eight percent of
consolidated sales compared to last year's seven percent. The increase
reflects adding selling and administrative costs from Manufacturers Chemical,
offset by lower profit-based incentives.
Cash flows from operations totaled $3,564,000 during the first quarter
compared to $4,506,000 generated during the same period one year ago. The
decrease reflects the reduction of net income experienced in the first quarter
of 1997 compared to the same period in 1996. 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.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995
The statements contained in this management discussion and analysis that are
not historical facts may be forward looking statements. The forward looking
statements are subject to certain risks and uncertainties, including without
limitation those identified below, which could cause actual results to differ
materially from historical results or those anticipated. Readers are
cautioned not to place undue reliance on these forward looking statements,
which speak only as of their dates. The following factors could cause actual
results to differ materially from historical results or those anticipated:
adverse economic conditions, the impact of competitive products and pricing,
product demand and acceptance risks, raw material and other increased costs,
customer delays or difficulties in the production of products, and other risks
detailed from time to time in Synalloy's Securities and Exchange Commission
filings. Synalloy Corporation assumes no obligation to update the information
included herein.
- - 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 29, 1997
- - 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 7, 1997 /s/ James G. Lane, Jr.
James G. Lane, Jr., Chairman and
Chief Executive Officer
Date: May 7, 1997 /s/ Gregory M. Bowie
Gregory M. Bowie
Vice President, Finance
- - 10 -
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<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> MAR-29-1997
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8000
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