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, 2000
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 April 1, 2000
Common Stock, $1.00 Par Value 6,291,061
- 1 -
Synalloy Corporation
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - April 1, 2000 and January
1, 2000
Condensed consolidated statements of income - Three months ended
April 1, 2000 and April 3, 1999
Condensed consolidated statements of cash flows - Three months
ended April 1, 2000 and April 3, 1999
Notes to condensed consolidated financial statements - April 1,
2000
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
Apr 1, 2000 Jan 1, 2000
(Unaudited) (Note)
----------- -----------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 70,632 $ 120,549
Accounts receivable, less allowance
for doubtful accounts 18,282,346 16,354,165
Inventories
Raw materials 10,366,438 9,378,087
Work-in-process 4,674,438 6,033,389
Finished goods 14,800,238 13,407,243
---------- ----------
Total inventories 29,841,114 28,818,719
Deferred income taxes 406,000 406,000
Prepaid expenses and other current assets 753,635 794,232
---------- ----------
Total current assets 49,353,727 46,493,665
Cash value of life insurance 2,130,611 2,112,411
Investment 1,157,117 1,039,117
Property, plant & equipment, net of accumulated
depreciation of $35,128,000 and $32,498,000 26,026,640 25,985,725
Deferred charges and other assets 2,340,267 2,421,655
---------- ----------
Total assets $81,008,362 $78,052,573
========== ==========
Liabilities and Shareholders' Equity
Current liabilities
Notes payable $ 3,418,000 $ 3,084,000
Accounts payable 11,707,984 10,867,711
Income taxes 1,667,052 1,209,874
Accrued expenses 3,490,406 2,957,728
Current portion of environmental reserves 373,500 373,500
---------- ----------
Total current liabilities 20,656,942 18,492,813
Long-term debt, less current portion 10,000,000 10,000,000
Environmental reserves 1,576,503 1,661,663
Deferred compensation 1,373,582 1,374,210
Deferred income taxes 1,905,000 1,864,000
Contingencies
Shareholders' equity
Common stock, par value $1 per share - authorized
12,000,000 at July 3,1999 and 8,000,000 shares
at January 2, 1999; issued 8,000,000 shares 8,000,000 8,000,000
Capital in excess of par value 9,491 9,491
Retained earnings 52,084,654 51,325,183
Accumulated other comprehensive income 538,000 461,000
Less cost of Common Stock in treasury (15,135,810) (15,135,787)
---------- ----------
Total shareholders' equity 45,496,335 44,659,887
---------- ----------
Total liabilities and shareholders' equity $81,008,362 $78,052,573
Note: The balance sheet at January 1, 2000 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
(Unaudited) Three Months Ended
Apr 1, 2000 Apr 3, 1999
----------- -----------
<S> c> <C>
Net sales $32,271,000 $27,645,297
Cost of sales 27,073,288 24,274,218
---------- ----------
Gross profit 5,197,712 3,371,079
Selling, general and administrative expense 3,284,575 2,689,530
---------- ----------
Operating income 1,913,137 681,549
Other (income) and expense
Interest expense 238,810 159,753
Other, net 7,303 3,171
---------- ----------
Income before taxes 1,667,024 518,625
Provision for income taxes 593,000 182,000
---------- ----------
Net income $ 1,074,024 $ 336,625
========== ==========
Net income per common share
Basic $.17 $.05
==== ====
Diluted $.17 $.05
==== ====
Dividends paid per common share $.05 $.05
==== ====
Average shares outstanding
Basic 6,291,061 6,722,468
========= =========
Diluted 6,292,257 6,722,468
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
- 4 -
<TABLE>
Synalloy Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited) Three Months Ended
Apr 1, 2000 Apr 3, 1999
----------- -----------
<S> <C> <C>
Operating activities
Net income $1,074,024 $ 336,625
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 990,876 993,883
Amortization of deferred charges 81,386 67,663
Deferred compensation (628) (420)
Provision for losses on accounts receivables 54,009 126,260
(Gain) loss on sale of property,
plant and equipment (576) 7,981
Cash value of life insurance (18,200) (20,942)
Environmental reserves (85,160) (104,512)
Changes in operating assets and liabilities:
Accounts receivable (1,982,190) (3,144,518)
Inventories (1,022,395) 356,455
Other assets (401) (1,734)
Accounts payable and accrued expenses 1,413,951 832,515
Income taxes payable 457,178 796,690
--------- ---------
Net cash provided by operating activities 961,874 245,946
Investing activities
Purchases of property, plant and equipment (1,031,791) (1,515,347)
Proceeds from sale of property,
plant and equipment 576 9,500
--------- ---------
Net cash used in investing activities (1,031,215) (1,505,847)
Financing activities
Proceeds from revolving lines of credit 11,175,000 7,643,000
Payments on revolving lines of credit (10,841,000) (5,636,000)
Purchases of treasury stock (23) (368,251)
Dividends paid (314,553) (336,281)
---------- ----------
Net cash provided by financing activities 19,424 1,302,468
---------- ----------
(Decrease) increase in cash and cash equivalents (49,917) 42,567
Cash and cash equivalents at beginning of year 120,549 117,658
---------- ----------
Cash and cash equivalents at end of period $ 70,632 $ 160,225
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- 5 -
Synalloy Corporation
Notes To Condensed Consolidated Financial Statements (Unaudited)
April 1, 2000
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, 2000, are not necessarily indicative of the results that
may be expected for the year ending December 30, 2000. 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 January 1, 2000.
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--COMPREHENSIVE INCOME
Comprehensive income was $1,151,000 for the three months ended April 1, 2000.
Comprehensive income consists of net income plus unrealized gains and losses
on the Company's foreign equity investment of $77,000, net of deferred income
taxes of $41,000 for the three months ended April 1, 2000, and is recorded in
Shareholders' Equity.
<TABLE>
NOTE 5--SEGMENT INFORMATION
(Dollar amounts are in thousands.)
Three Months Ended
Apr 1, 2000 Apr 3, 1999
<S> <C> <C>
Net sales
Colors Group $ 6,608 $ 7,622
Specialty Chemicals Group 6,126 6,422
Chemicals Segment 12,734 14,044
------ ------
Metals Segment 19,537 13,601
------ ------
$32,271 $27,645
====== ======
Operating income
Colors Group $ 40 $ 58
Specialty Chemicals Group 124 442
------ ------
Chemicals Segment 164 500
Metals Segment 2,182 407
------ ------
2,346 907
Unallocated expenses
Corporate 433 225
Interest, net 246 163
------ ------
Income before income taxes $ 1,667 $ 519
====== ======
</TABLE>
-6-
Synalloy Corporation
Notes To Condensed Consolidated Financial Statements - Continued
(Unaudited)
April 1, 2000
NOTE 5--SEGMENT INFORMATION (Continued)
During the first quarter of 2000, the Company completed the reorganization of
its Chemicals Segment changing the Segment into two separately managed product
groups - Colors and Specialty Chemicals. Previously, the Segment had been
managed by geographic location. The amounts for the first quarter of 1999
have been restated to reflect the reorganization.
-7-
Synalloy Corporation
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations
The following is management's discussion of certain significant factors that
affected the Company during the quarter ended April 1, 2000. (Dollar amounts
are in thousands except for per share data.)
Consolidated sales for the quarter were up, increasing 17 percent compared to
the same period one year ago. Consolidated net income also increased 219
percent to $1,074 for the quarter, or $.17 per share, compared to $337, or
$.05 per share, reported the same period one year ago. On a sequential basis,
sales were up eight percent, however, net income declined 26 percent resulting
from special charges of $576, or $.06 per share, incurred in the quarter. Per
share income before the special charges was the same as the $.23 reported in
the fourth quarter of 1999.
Sales in the Colors Group were down 13 percent in the first quarter, which is
a continuation of the downward trend that has been evident in the domestic
textile color business since 1995. Factors leading to this industry-wide
malaise have been discussed in earlier press releases and periodic filings
with the SEC. Management is not pleased with the modest level of operating
profit but believes it is acceptable under current conditions. The Company
has added vat dyes to its product line and is developing color sales outside
the textile industry in an attempt to arrest the slide in color sales.
The Chemicals Group had a more modest decline in sales of five percent but
operating income was down 72 percent in the first quarter. The declines were
essentially attributable to results from the Augusta, Georgia plant. This
plant suffered an operating loss of $583 in the quarter, including a $65
special charge for clean up of a chemical spill, compared to a $285 loss a
year earlier. As previously announced, the Company plans to close the Augusta
plant and move most of the equipment and production to its plant in
Spartanburg, S.C. by the end of this year. Management expects the closure to
reduce negative operating variances and, accordingly, enhance future earnings.
However, the Company expects to take a restructuring charge in the future,
which has not been quantified.
The Metals Segment had a sterling performance in the first quarter with a 44
percent increase in sales producing operating income more than five times the
level of 1999's comparable quarter. The sales increase resulted from 22
percent more unit volume coupled with an 18 percent increase in average
selling prices. The dramatic increase in income was after a $353 special
charge related to the closure of the Company's process equipment plant in
Camden, S. C. The plant incurred an operating loss, before the special
charge, of $127 in the quarter on sales of $581. In 1999, the plant had
operating losses of $473 on sales of $2,477. Closure of the plant has now
been completed and no losses are anticipated from this plant after the first
quarter.
After four years of steady erosion of stainless steel pipe prices, the trend
reversed in the third quarter of 1999 and prices are now about one-third
higher than their lows. Most industry sources believe this trend will continue
during 2000 and take prices even higher. If this occurs and demand remains
strong the Metals Segment should produce excellent results for the rest of the
year.
Selling and administrative expense for the quarter was negatively impacted by
a $158 special charge for an unanticipated payment made under a contract
related to a pre 1973 employment matter. Management does not believe this
contract represents any significant financial exposure to the Company in the
future. Without the special charge, selling and administrative expense was 10
percent of sales for both the first quarter of 2000 and 1999.
- 8 -
Synalloy Corporation
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations - Continued
Cash flows from operations totaled $962 during the first three months of 2000
compared to $246 generated during the same period one year ago. The increase
came primarily from net income. Accounts receivable increased $1,982 in the
first quarter compared to a $3,145 increase last year which resulted from an
usually low level existing at January 2, 1999, due to the increase in sales
experienced in the quarter compared to the fourth quarter of 1998.
Inventories increased $1,022 during the quarter compared to a decline of $356
occurring in the first quarter of 1999, offsetting the accounts receivable
change. 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.
- 9 -
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 April 1, 2000
- 10 -
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 5, 2000 /s/ James G. Lane, Jr.
James G. Lane, Jr., Chairman and
Chief Executive Officer
Date: May 5, 2000 /s/ Gregory M. Bowie
Gregory M. Bowie
Vice President, Finance
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> APR-01-2000
<CASH> 71
<SECURITIES> 0
<RECEIVABLES> 18282
<ALLOWANCES> 0
<INVENTORY> 29841
<CURRENT-ASSETS> 49354
<PP&E> 61709
<DEPRECIATION> 35682
<TOTAL-ASSETS> 81008
<CURRENT-LIABILITIES> 20657
<BONDS> 0
0
0
<COMMON> 8000
<OTHER-SE> 37496
<TOTAL-LIABILITY-AND-EQUITY> 81008
<SALES> 32271
<TOTAL-REVENUES> 32271
<CGS> 27073
<TOTAL-COSTS> 27073
<OTHER-EXPENSES> 3285
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 239
<INCOME-PRETAX> 1667
<INCOME-TAX> 593
<INCOME-CONTINUING> 1074
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1074
<EPS-BASIC> .17
<EPS-DILUTED> .17
</TABLE>
