UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 1, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 Identification No.)
incorporation or organization)
Croft Industrial Park, P.O. Box 5627, Spartanburg, South Carolina 29304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 585-3605
Securities registered pursuant to Name of each exchange on which
Section 12(b) of the Act: registered:
None Nasdaq National Market System
Title of Class
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
(Title of Class)
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 periods 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Based on the closing price of February 25, 2000, the aggregate market value
of common stock held by non-affiliates of the registrant was $47.2 million.
The number of common shares outstanding of the registrant's common stock as
of February 25, 2000 was 6,291,061.
Documents Incorporated By Reference
Portions of the proxy statement for the annual shareholders' meeting are
incorporated by reference into Part III.
PART 1
Item 1 Business
Synalloy Corporation, a Delaware Corporation ("the Company"), was
incorporated in 1958 as the successor to a chemical manufacturing business
founded in 1945. Its charter is perpetual. The name was changed on July 31,
1967 from Blackman Uhler Industries, Inc. On June 3, 1988, the state of
incorporation was changed from South Carolina to Delaware. The Company's
executive offices are located at Croft Industrial Park, Spartanburg, South
Carolina.
General
Metals Segment--This segment is comprised of two wholly-owned companies,
Bristol Metals, L.P., located in Bristol, Tennessee, and Whiting Metals,
Inc., located in Camden, South Carolina.
Bristol manufactures welded pipe, primarily from stainless steel, but also
from other corrosion-resistant metals. Pipe is produced in sizes from one-
half inch to 60 inches in diameter and wall thickness up to three-quarters
inch. Sixteen-inch and smaller pipe is made on equipment that forms and
welds the pipe in a continuous process. Pipe larger than sixteen inches is
formed on presses or rolls and welded on batch welding equipment. Pipe is
normally produced in standard 20-foot lengths. However, Bristol has unusual
capabilities in the production of long length pipe without circumferential
welds. This can reduce installation cost for the customer. Lengths up to 60
feet can be produced in sizes up to sixteen inches in diameter. In larger
sizes Bristol has a unique ability among domestic producers to make 48-foot
lengths in sizes up to 30 inches.
A significant amount of the pipe produced is further processed into piping
systems that conform to engineered drawings furnished by the customers.
This allows the customer to take advantage of the high quality and
efficiency of Bristol's fabrication shops instead of performing all of the
welding on the construction site. The pipe fabricating shop can make one
and one-half diameter cold bends on one-half inch through eight-inch
stainless pipe with thicknesses up through schedule 40. Most of the piping
systems are produced from pipe manufactured by Bristol.
In 1997 Bristol began producing carbon piping systems from pipe purchased
outside since Bristol does not manufacture carbon pipe. The Company entered
the carbon pipe fabrication business in order to enhance the stainless
fabrication business by quoting inquiries that require both types of piping
systems.
In order to establish stronger business relationships, only a few raw
material suppliers are used. Three suppliers furnish more than one-half of
total dollar purchases of raw materials. However, raw materials are readily
available from a number of different sources and the Company anticipates no
difficulties in obtaining its requirements.
This segment's products are used principally by customers requiring
materials that are corrosion-resistant or suitable for high-purity
processes. The largest users are the chemical, petrochemical and pulp and
paper industries with some other important industry users being mining,
power generation, waste water treatment, brewery, food processing,
petroleum and pharmaceutical.
In February 2000, management decided to close the Whiting Metals facility
which produced pressure vessels and reactors, tanks and other processing
equipment. Closure is expected to be completed before the end of the second
quarter of 2000. Management does not expect the closure to have a material
effect on the operations of the Company.
Chemicals Segment--This segment is comprised of three operating companies:
Blackman Uhler Chemical Company (BU), a division of the Company;
Manufacturers Chemicals, L.P. (MC) and Organic Pigments Corporation (OP),
wholly-owned by the Company. BU has two plants, one in Augusta, Georgia and
one in Spartanburg, South Carolina. Both locations are fully licensed for
chemical manufacture and each maintains a permitted waste treatment system.
MC is located in Cleveland, Tennessee and is fully licensed for chemical
manufacture. OP is located in Greensboro, North Carolina. This segment's
principal businesses are the manufacture and sale of dyes and pigments
("colors") to the textile industry, and specialty chemical products to
the textile, chemical, paper and metals industries. At the end of 1999, the
Chemicals Segment was reorganized into two product groups to generate
benefits from the natural synergy between the different plants within the
product groups. The colors group includes the Blackman Uhler dyes and pig-
ments at the Spartanburg plant and the pigments produced at Organic
Pigments in Greensboro. The chemicals group includes Manufacturers
Chemicals in Cleveland, Tennessee, the plant in Augusta, Georgia, and the
specialty chemicals produced in the Spartanburg plant.
The colors group produces dyes in both liquid and powder form, and pigments
primarily as a specially formulated paste. Dyes fix themselves to textile
fibers by a particular reaction or penetration into the yarn fiber, whereas
pigments are normally applied as a surface coating during a printing
operation. Dyeing of textile fabrics in solid colors is primarily
accomplished by the use of dyes. Pigment colors are uniquely suitable for
printing of multi-colored patterns. Raw materials used to manufacture
colors consist chiefly of organic intermediates and inorganic chemicals
which are purchased from manufacturers in the United States, Europe and
Asia. Currently, raw materials are readily available and management does
not anticipate any difficulty in obtaining adequate supplies.
In the mid 1980s, management decided to better utilize its excellent
reputation for sales and technical service by expanding its efforts to sell
reactive dyes. These dyes are used for coloring cotton and rayon. The
Company purchases finished and crude products that are either sold as is,
or converted to liquid form for the convenience of customers. These dyes
represented about 18 percent of the Chemicals Segment's sales in 1999. The
Company has a distributorship agreement expiring December 31, 2000 with the
company supplying about 91 percent of these products. The supplier has been
the principal source of these products since 1985. Although the Company
believes that this supplier will continue to be a source of these products
in the future, there is no assurance of this. Loss of this supplier would
have a materially adverse short-term effect on the Company's sales and net
income. However, management believes that if the agreement with this
supplier is not continued in the future, other suppliers could be found to
replace most of the products.
In 1994, BU acquired the sulphur dye business of Southern Dye and Chemical
Company, a manufacturer of sulphur dyes utilizing an environmentally
friendly chemical system. This process results in reduced environmental
costs and shorter processing cycles. Sulphur dyes are used to dye denim,
fleece garments, knits, work clothes, men's casual wear, and a variety of
cotton and cotton-polyester blends.
On August 21, 1998, the Company purchased the common stock of Organic
Pigments Corporation ("OP") with an effective date of July 1, 1998. OP
manufactures aqueous pigment dispersions sold to the textile industry and
used in printing inks for use on paper and in paints for the industrial
coatings industry. The combination of OP's and BU's pigment operations
makes the Company one of the largest suppliers of pigments to the domestic
textile market. The addition of OP also provides the ability to produce
higher solid and finer particle size dispersions allowing the Chemicals
Segment to diversify into non-textile applications.
The chemicals group is a producer of specialty chemicals for the chemical,
photographic, pharmaceutical, agricultural and fiber industries at its BU
plants. The Company has been focusing on specialty chemicals as a primary
growth area over the past several years. Facilities and equipment have
been added at both plants to provide toll and custom manufacturing of
organic chemicals using reactions that include nitrations, hydrogenation,
diazotizations, methylation and custom drying. These chemicals are used in
a wide array of products including sun screens, UV absorbers for plastics,
Cetane improver for diesel fuel, absorbers for gaseous pollutants,
herbicides and intermediates for colors.
In 1996, the Company purchased Manufacturers Chemicals which produces
defoamers, surfactants, dye assists, softening agents, polymers and
specialty lubricants for the textile, paper, chemical and metals
industries. The Company also manufactures chelating agents and water
treatment chemicals. Manufacturing capabilities include a wide range of
chemical reactions and mixing and blending applications. MC's products are
sold to direct users in a variety of manufacturing areas, directly to other
chemical companies in the form of intermediates or as finished products for
resale, and as contract manufacturing where the customer provides formula
specifications and, in some cases, raw materials. The addition of MC
complements the existing specialty chemicals area expanding its capacity
and capabilities.
The Chemicals Segment maintains nine laboratories for applied research and
quality control which are staffed by approximately 41 employees.
In March 2000, management made the decision to close the Augusta, Georgia
plant. It is anticipated that most of the products produced in Augusta
will be transferred to the Spartanburg facility. Management expects the
closure to reduce negative operating variances and, accordingly, enchance
future earnings. However, the company expects to take a restructuring charge
in the future, which has not yet been quantified.
Sales and Distribution
Metals Segment--The Metals Segment utilizes separate sales organizations
for its different product groups. Stainless steel pipe is sold nationwide
under the Brismet trade name through authorized stocking distributors with
over 200 warehouse locations throughout the country. In addition, large
quantity orders are shipped directly from Bristol's plant to end-user
customers. Producing sales and providing service to the distributors and
end-user customers are three outside sales employees, four independent
manufacturers' representatives, the manager of inside sales and five inside
sales employees. The President also spends about 50 percent of his time in
sales related matters.
Piping systems are sold nationwide under the Bristol Piping Systems trade
name by three outside sales employees. They are under the direction of the
Vice President in charge of piping systems who spends over half of his time
in sales and service to customers. Piping systems are marketed to
engineering firms and construction companies or directly to project owners.
Orders are normally received as a result of competitive bids submitted in
response to inquiries and bid proposals.
Chemicals Segment--Ten full-time outside sales employees and four
manufacturers' representatives market colors to the textile industry
nationwide. In addition, both the Presidents of BU and OP and the product
manager of BU devote a substantial part of their time to sales. Specialty
chemicals are sold directly to various industries nationwide by seven full-
time outside sales employees, five manufacturers' representatives and one
part-time consultant. In addition, the President, product manager and
another employee of MC and BU's Vice President of Research and Development
devote a substantial part of their time to sales.
Competition
Metals Segment--Welded stainless steel pipe is the largest sales volume
product of the Metals Segment. Although information is not publicly avail-
able regarding the sales of most other producers of this product,
management believes that the Company is the largest domestic producer of
such pipe. This commodity product is highly competitive with ten known
domestic producers and imports from many different countries. The largest
sales volume among the specialized products comes from fabricating light-
wall stainless piping systems. Management believes the Company is the
largest producer of such systems.
Chemicals Segment--About five percent of the colors sales represent niche
products for which the Company is the only producer. Another approximately
37 percent of these sales represent products of which the Company is an
important producer with an estimated 20 to 30 percent market share. The
Company has five percent or less of the market for the remainder of its dye
products. The Company is the sole producer of certain specialty chemicals
manufactured for other companies under processing agreements. However, the
Company's sales of specialty products are insignificant compared to the
overall market for specialty chemicals. The market for most of the products
is highly competitive and many competitors have substantially greater
resources than does the Company.
Environmental Matters
Environmental expenditures that relate to an existing condition caused by
past operations and that do not contribute to future revenue generation are
expensed. Liabilities are recorded when environmental assessments and/or
cleanups are probable and the costs of these assessments and/or cleanups
can be reasonably estimated. See Note H for further discussion.
Research and Development Activities
The Company spent approximately $798,000 in 1999, $882,000 in 1998 and
$833,000 in 1997 on research and development programs in its Chemicals
Segment. Sixteen individuals, 13 of whom are graduate chemists, are engaged
primarily in research and development of new products and processes, the
improvement of existing products and processes, and the development of new
applications for existing products.
Seasonal Nature of The Business
The annual requirements of certain specialty chemicals are produced over a
period of a few months as requested by the customers. Accordingly, the
sales of these products may vary significantly from one quarter to another.
The addition of MC has made quarterly sales of specialties more consistent.
However, in total, sales and net income in any given quarter may not be
representative of other quarters.
Backlogs
The Chemicals Segment operates primarily on the basis of delivering
products soon after orders are received. Accordingly, backlogs are not a
factor in this business. The same applies to commodity pipe sales in the
Metals Segment. However, backlogs are important in the piping systems
products because they are produced only after orders are received,
generally as the result of competitive bidding. Order backlogs for these
products were $15,900,000, $19,200,000 and $10,600,000 at the 1999, 1998
and 1997 respective year ends.
Employee Relations
As of January 1, 2000, the Company had 622 employees. The Company considers
relations with employees to be satisfactory. The number of employees of the
Company represented by unions at the Bristol, Tennessee facility is 252.
They are represented by two locals affiliated with the AFL-CIO and one
local affiliated with the Teamsters. Contracts will expire in
February 2004, December 2004 and March 2005.
Item 2 Properties
The Company operates the major plants and facilities described herein, all
of which are well maintained and in good condition. All facilities
throughout the Company are adequately insured. The buildings are of various
types of construction including brick, steel, concrete, concrete block and
sheet metal. All have adequate transportation facilities for both raw
materials and finished products. The Company owns all of these plants and
facilities.
<TABLE>
Building
Square Land
Location Principal Operations Feet Acres
<S> <C> <C> <C>
Spartanburg, SC Corporate Headquarters 211,000 60.90
manufacturing and
warehouse facilities
Augusta, GA Chemical manufacturing 52,500 46.00
Cleveland, TN Chemical manufacturing 90,000 7.50
Greensboro, NC Chemical manufacturing 57,000 3.70
Bristol, TN Manufacturing of 218,000 73.08
stainless steel pipe
and stainless steel
and carbon piping
systems
Camden, SC Manufacturing of 16,300 12.26
stainless steel
vessels
</TABLE>
Item 3 Legal Proceedings
For a discussion of legal proceedings, see Note N to Consolidated Financial
Statements.
Item 4 Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders through the
solicitation of proxies or otherwise.
PART II
Item 5 Market for the Registrant's Common Stock and Related Security Holder
Matters
The Company had 1,226 common shareholders of record at January 1, 2000. The
Company's common stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol SYNC. Future dividend payments are
dependent on earnings, capital requirements and financial conditions. The
prices shown below are the last reported sales prices on The Nasdaq
National Market System.
<TABLE>
1999 1998
Dividends Dividends
Quarter High Low Paid High Low Paid
<S> <C> <C> <C> <C> <C> <C>
1 10 3/4 6 5/8 $ 0.05 16 1/2 13 3/4 $ 0.10
2 8 5/8 6 3/4 0.05 14 7/8 12 0.10
3 8 3/4 6 1/2 0.05 13 1/4 7 3/4 0.10
4 8 6 1/4 0.05 12 3/4 6 0.10
</TABLE>
Item 6 Selected Financial Data
<TABLE>
(Dollars in thousands except for
per share data) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Operations
Net sales $ 116,884 $ 107,257 $ 126,741 $ 126,844 $ 147,298
Gross profit 16,574 12,203 19,715 21,108 35,323
Selling, general and
administrative expense 11,335 10,135 9,972 9,086 11,089
Environmental remediation costs - 1,439 - -
Operating income 5,239 629 9,744 12,022 24,234
Net income 2,947 63 5,841 7,686 14,521
Financial Position
Total assets 78,053 71,374 73,383 76,589 80,226
Working capital 28,001 28,946 35,499 34,141 41,098
Long-term debt
less current portion 10,000 10,000 10,200 11,200 12,619
Shareholders' equity 44,660 45,848 50,042 48,274 48,363
Financial Ratios
Current ratio 2.5:1 3.7:1 4.7:1 3.5:1 3.6:1
Gross profit to net sales 14% 11% 16% 17% 24%
Long-term debt to capital 18% 18% 17% 19% 21%
Return on average assets 4% ** 8% 10% 20%
Return on average equity 7% ** 12% 16% 34%
Per Share Data
Net income - diluted $ 0.45 0.01 $ .83 $ 1.09 $ 1.98
Dividends declared and paid .20 .40 .37 .34 .29
Book value 7.10 6.82 7.27 6.92 6.71
Other Data
Depreciation and amortization 3,732 3,513 3,485 2,700 2,316
Capital expenditures 4,214 3,686 2,854 3,833 6,455
Employees at year end 622 564 663 585 568
Shareholders of record
at year end 1,226 1,431 1,491 1,581 1,666
Average shares outstanding
- diluted 6,559 6,794 7,007 7,058 7,352
Stock Price
Price range of Common Stock
High 10 3/4 16 1/2 18 3/4 21 1/4 26 1/4
Low 6 1/4 6 13 3/4 12 11 7/8
Close 7 1/2 8 3/4 15 3/16 16 1/4 21 1/8
**Less than 1%
</TABLE>
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The current ratio at 1999 year end was 2.5:1 down from the previous year-
end ratios of 3.7:1 and 4.7:1 in 1998 and 1997, respectively. Working
capital decreased $945,000 to $28,001,000. Cash flows from operations
totaling $6,053,000, were derived primarily from earnings totaling
$6,679,000 before depreciation and amortization expense of $3,732,000, as
increases in accounts receivable of $4,471,000 and inventories of
$2,718,000 were offset by increases in accounts payable and accrued
expenses of $4,509,000 and income taxes payable of $1,265,000. The
increases in inventories and accounts receivables and payables resulted
from the increase in sales experienced in the fourth quarter of 1999
compared to the same quarter last year as discussed in the Results of
Operations. Cash flows were used, along with $2,419,000 proceeds from
short-term borrowings, to make capital expenditures of $4,214,000, purchase
434,568 shares of the Company's Common Stock for $2,834,000, and pay
dividends of $1,309,000. The Company expects that cash flows from 2000
operations and available borrowings will be sufficient to make debt and
dividend payments, and fund estimated capital expenditures of $4,400,000
and normal operating requirements.
Results of Operations
Metals Segment--The following table summarizes operating results and
backlogs for the three years indicated. Reference should be made to Note Q
to Consolidated Financial Statements.
<TABLE>
1999 1998 1997
(Amounts in thousands) Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C>
Net sales $ 66,055 100.0 $ 55,368 100.0 $ 71,192 100.0
Cost of goods sold 56,042 84.8 50,065 90.4 61,340 86.2
------- ------- ------- ------- ------- -------
Gross profit 10,013 15.2 5,303 9.6 9,852 13.8
Selling and administrative
expense 4,595 7.0 3,833 6.9 4,218 5.9
Environmental remediation
costs 0 61 0.2 0
------- ------- ------- ------- ------- -------
Operating income $ 5,418 8.2 $ 1,409 2.5 $ 5,634 7.9
Year-end backlogs
Piping systems $ 15,900 $ 19,200 $ 10,600
</TABLE>
Comparison of 1999 to 1998
Sales increased 19 percent producing the $4,009,000 increase in operating
income to $5,418,000. After six consecutive quarters of declines in unit
volume growth compared to the same quarter the previous year, the final
three quarters of 1999 experienced significant increases resulting in a 22
percent increase in unit volumes over 1998. The unit volume increase came
primarily from commodity stainless pipe sales resulting from improved
demand in the United States coupled with an increase in demand world-wide
and a reduction of imports following anti-dumping judgments on stainless
steel. The most important development in the metals segment during 1999 was
the reversal of the relentless downtrend in stainless commodity pipe prices
that had been evident since late 1995. When prices bottomed in the second
quarter, they were barely half of the level reached in 1995. Average prices
gained eight percent in the fourth quarter ending the year with a nine
percent decline for the year compared to last year. The fourth quarter
increase came from the Company's ability to pass along price increases
incurred from its stainless steel suppliers. Piping systems and process
equipment sales also improved significantly as unit volumes increased nine
percent in 1999 over the prior year. Gross profits in 1999 almost doubled
to $10,013,000 compared to 1998 as a result of the increase in unit volume
offset somewhat by the selling price decline.
Selling and administrative expenses were seven percent of sales, consistent
with last year. Higher sales commissions, profit-based incentives and an
increase in reserves for uncollectible accounts accounted for the 20
percent increase over the prior year.
For information related to environmental matters, see Note H to
Consolidated Financial Statements.
Comparison of 1998 to 1997
Sales declined 22 percent producing much lower operating income of
$1,409,000. After six years of noteworthy unit volume growth, 1998 showed a
21 percent decline because of lower demand and a surge in imports. The unit
volume decline came from lower commodity stainless pipe sales resulting
primarily from a surge in cheap imports coupled with significantly low
piping systems and process equipment sales. The Company chose not to
compete for business when pricing was driven solely by low-priced imports,
as average prices for commodity pipe declined eight percent for the year
compared to last year. Lower gross profits were caused by low plant
utilization rates, more competitive pricing for pipe, and a loss from
piping systems. Although the stainless steel fabrication shop about broke
even, a $418,000 loss was incurred in the carbon pipe fabrication shop
opened in 1997. Low demand in the pulp and paper industry resulting in
lower unit volumes caused the poor performance in piping systems.
Lower sales commissions and profit-based incentives accounted for the nine
percent decline in selling and administrative expenses.
For information related to environmental matters, see Note H to
Consolidated Financial Statements.
Chemicals Segment--The following table summarizes operating results for the
three years indicated. Reference should be made to Note Q to Consolidated
Financial Statements.
<TABLE>
1999 1998 1997
(Amounts in thousands) Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Net sales 50,829 100.0 $ 51,889 100.0 $ 55,549 100.0
Cost of goods sold 44,268 87.1 44,989 86.7 45,686 82.2
------- ------- ------- ------- ------- -------
Gross profit 6,561 12.9 6,900 13.3 9,863 17.8
Selling and administrative
expense 5,835 11.5 5,498 10.6 4,643 8.4
Environmental remediation
costs 0 1,378 2.7 0
------- ------- ------- ------- ------- -------
Operating income 726 1.4 $ 24 0.0 $ 5,220 9.4
</TABLE>
Comparison of 1999 to 1998
The Chemical Segment experienced a sales decline of two percent for the
year and operating income fell significantly to $726,000 from 1998's total
of $1,402,000 before deducting a $1,378,000 special charge for
environmental remediation costs. Colors sales were down six percent.
Without the acquisition of Organic Pigments on July 1, 1998, total
Chemicals Segment sales would have declined 11 percent and colors sales
would have been down 22 percent. The decline resulted from the continued
downsizing of the domestic textile industry, weak domestic demand and lower
selling prices. Sales of specialty chemicals improved three percent because
of higher demand from several toll projects during 1999 compared to 1998.
This modest increase is well below the growth rate that the company expects
from these products. Unprecedented problems with the start up of an
agricultural product under a processing agreement led to a significant
commitment of time and resources in 1999 with negligible related revenues.
The combination of weaker pricing and demand for color products, low level
of capacity utilization in both colors and specialty chemicals, and to a
lesser extent, the startup problems mentioned above contributed to the
decline in gross profits.
Selling and administrative expenses increased six percent over the prior
year because of having a full year of expense from the Organic acquisition
compared to six months last year, and an increase in reserves for
uncollectible accounts.
For information related to environmental matters, see Note H to
Consolidated Financial Statements.
Comparison of 1998 to 1997
The Chemicals Segment experienced a sales decline of seven percent for the
year and operating income fell significantly to $24,000, or $1,402,000
before the special charge for environmental remediation costs. Both colors
and specialty chemicals experienced a decline in sales from the prior year.
Colors sales were down two percent. Without the acquisition of Organic
Pigments on July 1, 1998, total Chemicals Segment sales would have declined
13 percent and colors sales would have been down 15 percent. The continued
downsizing of the domestic textile industry, because of low cost imports,
led to less unit volume demand for colors compared to a year earlier. Sales
prices were also lower continuing the deflationary trend that has been
evident for several years. Sales of specialty chemicals were down 12
percent because of lower demand for certain products and sales in 1997 from
a toll project that ended in December 1997. The combination of weaker
pricing for color products and low level of capacity utilization in both
colors and specialty chemicals contributed to the decline in gross profits.
Selling and administrative expenses increased 18 percent because of the
Organic acquisition and additions to the sales staff.
For information related to environmental matters, see Note H to
Consolidated Financial Statements.
Unallocated Income and Expense
Reference should be made to Note Q to Consolidated Financial Statements for
the schedule of these items.
Comparison of 1999 to 1998
The 13 percent increase in corporate expenses resulted from salary
increases and higher profit-based incentives. Interest expense offset by
interest income was higher in 1999, as borrowings increased under the line
of credit with a bank, and interest income declined. The Company had
borrowings under the line of credit throughout 1999 compared to having cash
invested most of 1998.
Comparison of 1998 to 1997
The 28 percent decrease in corporate expenses resulted from lower profit-
based incentives and professional fees. The Company benefited from lower
interest expense on reduced borrowings under the line of credit with a
bank, and higher interest income earned on cash invested during the year.
Current Conditions and Outlook
The Metals Segment delivered a sterling performance in the fourth quarter
with sales up 77 percent to $19,307,000 and operating income of $2,701,000,
up over fifteen times the depressed level of a year earlier. This resulted
from a combination of 39 percent higher unit volume and a 27 percent
increase in average selling price. The higher average price resulted from a
shift in product mix to a larger percentage of sales from piping systems
and process equipment. More significantly, on a sequential basis, sales
were up seven percent and operating income was 71 percent higher than in
the previous quarter when the earnings recovery began to gather momentum.
Prices for commodity pipe in December were about 20 percent above the 11-
year lows experienced in the second quarter of 1999, and recent increases
in stainless steel flat product prices make management optimistic that
stainless pipe prices will continue their upward trend. The outlook for
piping systems remains excellent. Although the backlog of $15,900,000 is
down 15 percent from a year earlier, management expects an increase in
profits from these products in 2000 compared to 1999. If the factors above
continue as expected, and if demand continues to be strong, the Metals
Segment should deliver excellent results in 2000.
Although Chemicals Segment sales of $10,615,000 in the fourth quarter were
down 11 percent, modest operating income of $10,000 was an improvement over
the $214,000 loss suffered in the last quarter of 1998 before a $1,378,000
environmental charge. Colors sales were down five percent from the fourth
quarter of 1998. Factors causing the sales decline were identical to those
experienced throughout the year as discussed in the Chemicals Segment
analysis. Management hopes to arrest the slide in color sales and
reestablish growth by: introduction of vat dyes which are a promising new
product line for the company, technical improvements to its sulfur dyes
which should make them more competitive and sales of pigments to non-
textile users. New business from each of these initiatives has already been
booked and 2000 should reflect an increasing contribution from them as the
year progresses. Specialty chemicals produced five percent higher revenues
in the fourth quarter of 1999 compared to the same quarter last year, and
represented almost half of the segment's sales for the quarter. The timing
of production under certain toll contracts caused the increase. During
November 1999, the Chemicals Segment was reorganized into two product
groups to become effective January 2, 2000. The colors group includes the
Blackman Uhler dyes and pigments at the Spartanburg plant and the pigments
produced at Organic Pigments in Greensboro. The chemicals group includes
Manufacturers Chemicals in Cleveland, Tennessee, the plant in Augusta,
Georgia, and the specialty chemicals produced in the Spartanburg plant.
This realignment is expected to intensify management's focus and generate
benefits from the natural synergy between the different plants within the
product groups. See Note S to Consolidated Financial Statements.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995
The statements contained in this Annual Report on Form 10-K 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 in this Annual Report on Form
10-K.
Year 2000 Compliance
The Company experienced no significant disruptions in information
technology and non-information technology systems from the Year 2000 date
change. This resulted from the Company's planning and implementation
efforts, completed, tested and implemented during 1998. No significant
costs related to the Year 2000 issue were incurred other than normal
personnel costs during 1999. The Company continues to monitor its
applications and those of its suppliers and vendors to ensure that any
latent Year 2000 issues are addressed promptly. To date, the Company is not
aware of any Year 2000 issue that would materially impact the Company's
results of operations, liquidity, or capital resources.
Item 7a Quantitative and Qualitative Disclosures About Market Risks
The Company is exposed to market risks from adverse changes in interest
rates. In this regard, changes in U. S. interest rates affect the interest
earned on the Company's cash and cash equivalents as well as interest paid
on its indebtedness. As a policy, the Company does not engage in
speculative or leveraged transactions, nor does it hold or issue financial
instruments for trading purposes. The Company is exposed to changes in
interest rates primarily as a result of its borrowing activities used to
maintain liquidity and fund business operations. There have been no
significant changes in the Company's risk exposures from the prior year.
At January 1, 2000, fair value of the Company's debt obligation, which
approximated the recorded value, consisted of:
$3,084,000 notes payable under a $9,000,000 line of credit expiring on July
29, 2000 with an average variable interest rate of 6.23 percent.
$10,000,000 variable rate debt due July 31, 2002 with an average variable
interest rate of 6.17 percent.
At January 2, 1999, fair value of the Company's debt obligation, which
approximated the recorded value, consisted of:
$665,000 notes payable under a $9,000,000 line of credit expiring on
July 1, 1999 with an average variable interest rate of 5.56 percent.
$10,000,000 variable rate debt due May 1, 2002 with an average variable
interest rate of 6.26 percent.
In addition, the Company's investment in Ta Chen Stainless Pipe Company,
which is recorded at its fair value of $1,039,000 in 1999 and $1,026,000 in
1998, is subject to market risk related to equity pricing changes. Management
believes that substantial fluctuations in equity prices and the resulting
changes in the Company's investment would not have a material adverse impact
on the Company.
Item 8 Financial Statements and Supplementary Data
The Company's consolidated financial statements, related notes, report of
management and report of the independent auditors follow on subsequent
pages of this report.
<TABLE>
Consolidated Balance Sheets
January 1, 2000, January 2, 1999 and January 3, 1998
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 120,549 $ 117,658 $ 1,602,543
Accounts receivable, less allowance
for doubtful accounts of $1,075,000,
$362,000 and $219,000, respectively 16,354,165 12,596,592 15,201,783
Inventories
Raw materials 9,378,087 7,502,972 7,368,212
Work-in-process 6,033,389 3,755,147 4,791,379
Finished goods 13,407,243 14,842,842 15,287,431
---------- ---------- ----------
Total inventories 28,818,719 26,100,961 27,447,022
Deferred income taxes (Note L) 406,000 192,000 177,000
Prepaid expenses and
other current assets 794,232 646,342 633,709
---------- ---------- ----------
Total current assets 46,493,665 39,653,553 45,062,057
Cash value of life insurance 2,112,411 2,025,984 1,842,384
Investment (Note B) 1,039,117 1,026,117 329,117
Property, plant and
equipment, net (Note C) 25,985,725 25,495,020 23,112,324
Deferred charges, net and
other assets (Note D) 2,421,655 3,173,788 3,037,470
----------- ----------- -----------
Total assets $78,052,573 $71,374,462 $73,383,352
=========== =========== ===========
</TABLE>
<TABLE>
Consolidated Balance Sheets (Continued)
January 1, 2000, January 2, 1999 and January 3, 1998
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities
Notes payable (Note E) $ 3,084,000 $ 665,000 $ 0
Accounts payable 10,867,711 7,882,778 5,544,789
Income taxes 1,209,874 0 310,992
Accrued expenses (Note F) 2957728 1,383,740 3,018,850
Current portion of
environmental reserves (Note H) 373,500 575,650 487,980
Current portion of
long-term debt (Note G) 0 200,000 200,000
---------- ---------- ----------
Total current liabilities 18,492,813 10,707,168 9,562,611
Long-term debt, less
current portion (Note G) 10,000,000 10,000,000 10,200,000
Environmental reserves (Note H) 1,661,663 1,846,550 782,700
Deferred compensation (Note I) 1,374,210 1,349,940 1,323,388
Deferred income taxes (Note L) 1,864,000 1,623,000 1,473,000
Contingencies (Notes H and N)
Shareholders' equity (Notes G, J,
and K)
Common stock, par value $1 per share-
authorized 12,000,000 in 1999 and
8,000,000 shares in 1998 and 1997;
issued 8,000,000 shares 8,000,000 8,000,000 8,000,000
Capital in excess of par value 9,491 9,491 33,475
Retained earnings 51,325,183 49,687,391 52,339,857
Accumulated other
comprehensive income 461,000 453,000 0
---------- ---------- ----------
59,795,674 58,149,882 60,373,332
Less cost of Common Stock in treasury:
1,708,939, 1,274,371 and 1,114,179
shares, respectively 15,135,787 12,302,078 10,331,679
---------- ---------- ----------
Total shareholders' equity 44,659,887 45,847,804 50,041,653
----------- ----------- -----------
Total liabilities and
shareholders' equity $78,052,573 $71,374,462 $73,383,352
=========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Income
January 1, 2000, January 2, 1999 and January 3, 1998
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Net sales $116,883,845 $107,257,319 $126,740,641
Cost of sales 100,310,001 95,054,533 107,025,237
----------- ----------- -----------
Gross profit 16,573,844 12,202,786 19,715,404
Selling, general and
administrative expense 11,335,284 10,134,530 9,971,869
Environmental remediaton costs - 1,439,070 -
----------- ----------- -----------
Operating income 5,238,560 629,186 9,743,535
Other (income) and expense
Interest expense 773,499 673,932 741,340
Other, net (113,588) (141,423) (28,565)
----------- ----------- -----------
Income before taxes 4,578,649 96,677 9,030,760
Provision for income taxes 1,632,000 34,000 3,190,000
----------- ----------- -----------
Net income $ 2,946,649 $ 62,677 $ 5,840,760
=========== =========== ===========
Net income per common share
Basic $.45 $.01 $.84
==== ==== ====
Diluted $.45 $.01 $.83
==== ==== ====
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Shareholders' Equity
Accumulated Cost of
Capital in Other Common
Excess of Par Retained Comprehensive Stock in
Common Stock Value Earnings Income Treasury Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 28, 1996 $8,000,000 $ 81,746 $49,074,919 $(8,882,530) $48,274,135
Net income 5,840,760 5,840,760
Stock options exercised (48,271) 139,479 91,208
Purchase of common
stock for treasury (1,588,628) (1,588,628)
Cash dividends -
$.37 per share (2,575,822) (2,575,822)
---------- -------- ----------- ---------- ----------
Balance at
January 3, 1998 8,000,000 33,475 52,339,857 $ - (10,331,679) 50,041,653
Cumulative effect of
change in accounting
method, net of tax
(Notes A and B) 473,000 473,000
Comprehensive income:
Net income 62,677 62,677
Other comprehensive
income, net of tax
(Notes A and B) (20,000) (20,000)
Comprehensive income 42,677
Stock options exercised (23,984) 28,820 4,836
Purchase of common
stock for treasury (1,999,219) (1,999,219)
Cash dividends -
$.40 per share (2,715,143) (2,715,143)
---------- -------- ---------- ------- ---------- ----------
Balance at
January 2, 1999 8,000,000 9,491 49,687,391 453,000 (12,302,078) 45,847,804
Comprehensive income:
Net income 2,946,649 2,946,649
Other comprehensive
income, net of tax
(Notes A and B) 8,000 8,000
Comprehensive income 42,677
Purchase of common
stock for treasury (2,833,709) (2,833,709)
Cash dividends -
$.20 per share (1,308,857) (1,308,857)
---------- -------- ----------- -------- ----------- -----------
Balance at
January 1, 2000 $8,000,000 $ 9,491 $51,325,183 $461,000 $(15,135,787) $44,659,887
========== ========= =========== ======== ============ ===========
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Cash Flows
January 1, 2000, January 2, 1999 and January 3, 1998
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Operating activities
Net income $2,946,649 $ 62,677 $5,840,760
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation expense 3,473,352 3,258,075 3,221,069
Amortization of deferred charges 258,681 254,925 263,791
Deferred compensation 24,270 26,552 24,212
Deferred income taxes 22,000 (250,000) 402,000
Provision for losses on
accounts receivable 713,214 142,706 11,067
Loss on sale of property,
plant and equipment 180,394 25,162 117,586
Cash value of life insurance (86,427) (120,490) (108,583)
Environmental reserves (387,037) 1,151,520 (388,714)
Changes in operating assets
and liabilities:
Accounts receivable (4,470,787) 3,407,106 2,040,684
Inventories (2,717,758) 2,382,578 2,408,448
Other assets 322,562 105,116 (398,998)
Accounts payable and
accrued expenses 4,508,840 172,719 (181,470)
Income taxes payable 1,264,955 (478,395) (21,515)
---------- ---------- ----------
Net cash provided by
operating activities 6,052,908 10,140,251 13,230,337
Investing activities
Purchases of property,
plant and equipment (4,214,025) (3,685,847) (2,853,799)
Proceeds from sale of property,
plant and equipment 69,574 37,036 30,709
Decrease (Increase) in
notes receivable 18,000 (275,000) 7,515
Acquisition, net of cash (Note P) - (3,456,799) -
---------- ---------- ----------
Net cash used in
investing activities (4,126,451) (7,380,610) (2,815,575)
Financing activities
Proceeds from revolving
lines of credit 40,093,000 3,613,000 13,145,000
Payments on revolving
lines of credit (37,674,000) (2,948,000) (14,645,000)
Principal payments on
long-term debt (200,000) (200,000) (2,200,000)
Purchases of treasury stock (2,833,709) (1,999,219) (1,588,628)
Dividends paid (1,308,857) (2,715,143) (2,575,822)
Proceeds from exercised
stock options - 4,836 91,208
Payment of notes payable
to an employee - - (1,154,805)
---------- ---------- ----------
Net cash used in
financing activities (1,923,566) (4,244,526) (8,928,047)
---------- ---------- ----------
Increase (Decrease) in cash and
cash equivalents 2,891 (1,484,885) 1,486,715
Cash and cash equivalents at
beginning of year 117,658 1,602,543 115,828
---------- ---------- ----------
Cash and cash equivalents at
end of year $ 120,549 $ 117,658 $1,602,543
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
Note A Summary of Significant Accounting Policies
Principles of Consolidation.
The financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly-owned. All significant intercompany
transactions have been eliminated.
Use of Estimates. The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Accounting Period. The Company's fiscal year is the 52- or 53-week period
ending the Saturday nearest to December 31. Fiscal year 1999 ended on
January 1, 2000 and included 52 weeks. Fiscal year 1998 ended on January 2,
1999 and included 52 weeks. Fiscal year 1997 ended on January 3, 1998 and
included 53 weeks.
Revenue Recognition. Revenue from product sales is recognized at the time
ownership of goods transfers to the customer and the earnings process is
complete.
Inventories. Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method.
Property, Plant and Equipment. Property, plant and equipment are stated at
cost. Depreciation is provided on the straight-line method over the
estimated useful life of the assets.
Deferred Charges. Intangibles arising from acquisitions represent the
excess of cost over fair value of net assets of businesses acquired. The
excess cost is amortized using the straight-line method over periods of 15
to 40 years. The costs of software licenses are amortized over their
expected useful lives using the straight-line method. Debt expenses are
amortized over the periods of the underlying debt agreements using the
straight-line method.
Cash Equivalents. The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents.
Concentrations of Credit Risk. Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist
principally of trade accounts receivables and cash surrender value of life
insurance.
Substantially all of the Company's accounts receivable are due from
companies located throughout the United States. The Company performs
periodic credit evaluations of its customers' financial condition and
generally does not require collateral. Receivables are generally due within
30 to 45 days.
The cash surrender value of life insurance is maintained with one insurance
company. The Company performs a periodic evaluation of the relative credit
standing of this company as it relates to the insurance industry
Research and Development Expense. The Company incurred research and
development expense of approximately $798,000, $882,000 and $833,000 in the
1999, 1998 and 1997 fiscal years, respectively.
Fair Value of Financial Instruments. The carrying amounts reported in the
balance sheet for cash and cash equivalents, cash surrender value of life
insurance, investment and borrowings under the Company's short-term line of
credit and long-term debt approximate their fair values.
Stock Options. The Company accounts for and will continue to account for
stock options under Accounting Principles Board Opinion 25, "Accounting
for Stock Issued to Employees." See Note K.
Comprehensive Income. In June 1997, the FASB issued Statement No. 130,
"Reporting Comprehensive Income" which established standards for the
reporting and display of comprehensive income and its components in a full
set of comparative general-purpose financial statements. The statement
became effective for the Company as of January 4, 1998. Comprehensive
income is defined in this statement as net income plus other comprehensive
income which, under existing accounting standards, consists of unrealized
gains and losses on certain investments in equity securities. Comprehensive
income is reported by the Company in the Consolidated Statements of
Shareholders' Equity.
Investment In Equity Securities. In 1997 the Company's investment in Ta
Chen (Note B) was accounted for on the cost method of accounting due to
restrictions on trading. In 1998 the restrictions expired and in accordance
with FASB Statement No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," the investment is recorded at fair value.
Note B Investment in Ta Chen Stainless Pipe Company
The Company has an investment available for sale in a company incorporated
in the Republic of China. Ta Chen is a stainless steel pipe manufacturing
company that has been operating since 1987.
The Company holds a 1.1 percent ownership interest. The investment is
recorded at fair value as quoted on the Taiwanese stock exchange at January
1, 2000. The unrealized appreciation of the investment, totalling $710,000,
is recorded as other comprehensive income included in shareholders' equity,
net of deferred income taxes of $249,000.
Note C Property, Plant and Equipment
Property, plant and equipment consist of the following:
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Land $ 431,736 $ 431,736 $ 299,043
Land improvements 1,000,217 989,814 1,006,675
Buildings 13,813,142 13,970,501 12,103,534
Machinery, fixtures
and equipment 44,018,394 40,570,435 36,876,635
Construction-in-
progress 1,609,468 2,030,584 614,620
---------- ---------- ----------
60,872,957 57,993,070 50,900,507
Less accumulated
depreciation 34,887,232 32,498,050 27,788,183
---------- ---------- ----------
$ 25,985,725 $ 25,495,020 $ 23,112,324
</TABLE>
Note D Deferred Charges
Deferred charges consist of the following:
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Intangibles arising
from acquisitions $ 2,843,965 $ 2,843,965 $ 2,758,965
Software license
agreements 465,495 477,289 448,935
Debt expense 46,500 104,316 117,116
------------- ------------ -----------
3,355,960 3,425,570 3,325,016
Less accumulated
amortization 1,216,988 1,042,317 803,359
------------- ------------ -----------
$ 2,138,972 $ 2,383,253 $ 2,521,657
</TABLE>
Note E Notes Payable
The Company has available a line of credit totaling $9,000,000, of which
$3,084,000 was outstanding at year end. The line expires on July 29, 2000
and bears interest at the bank's overnight cost of funds plus .75 percent
(6.63 percent at January 1, 2000). The line has no compensating balance
requirement. Borrowings under the line of credit are subject to the deed of
trust and security agreement outlined in . Average short-term borrowings
outstanding during fiscal 1999, 1998 and 1997 were $2,546,000, $61,000 and
$261,000 with weighted average interest rates of 6.23 percent, 5.56 percent
and 6.11 percent, respectively.
Note F Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Salaries, wages
and commissions $ 884,910 $ 299,155 $ 895,526
Taxes, other than
income taxes 627,325 257,203 361,040
Insurance 355,411 276,894 213,465
Pension 110,771 134,977 158,063
Customer advances 388,388 88,028 887,498
Other accrued items 590,923 327,483 503,258
---------- ---------- ----------
$ 2,957,728 $ 1,383,740 $ 3,018,850
</TABLE>
Note G Long-Term Debt
Long-term debt consists of the following:
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Unsecured commercial
note payable with
interest payable on
the dates and at
rates provided by
credit agreement,
as amended $10,000,000 $10,000,000 $10,000,000
Variable percentage
(weekly tax exempt
interest rate)
Economic Development
Revenue Bond payable
in annual installments
of $200,000 through
November 1, 1999.
Interest is paid
quarterly. 200,000 400,000
----------- ----------- -----------
10,000,000 10,200,000 10,400,000
Less current portion - 200,000 200,000
----------- ----------- -----------
$ 10,000,000 $ 10,000,000 $ 10,200,000
</TABLE>
On July 31, 1997, the Company entered into an agreement to amend its 1995
Revolving Credit/ Term Loan Agreement and prepaid $800,000, reducing the
balance owed to $10,000,000. The amendment converted the debt from a five-
year term loan, payable in equal quarterly installments, to a $10,000,000
revolving line of credit expiring July 31, 2002. Interest is payable
quarterly on the outstanding balance at the lower of the bank's prime rate
less .25 percent or LIBOR plus .80 percent. The rate at January 1, 2000 was
6.30 percent. Borrowings are subject to the maintenance of certain
financial ratios and certain other restrictive covenants. At January 1,
2000, the Company was not in compliance with one of its covenants for which
the Company received a waiver.
The Company made interest payments of $678,000 in 1999, $664,000 in 1998
and $764,000 in 1997. Interest expense of approximately $27,000, was
capitalized in 1999. The approximate aggregate amount of all long-term debt
maturities for the next five years is as follows: 2002 - $10,000,000.
Note H Environmental Compliance Costs
At January 1, 2000, the Company has accrued $2,035,000 in remediation costs
which, in management's best estimate, will satisfy anticipated costs of
known remediation requirements as outlined below. Expenditures related to
costs currently accrued are not discounted to their present values and are
expected to be made over the next three to five years. As a result of the
evolving nature of the environmental regulations, the difficulty in
estimating the extent and remedy of environmental contamination, and the
availability and application of technology, the estimated costs for future
environmental compliance and remediation are subject to uncertainties and
it is not possible to predict the amount or timing of future costs of
environmental matters which may subsequently be determined. Subject to the
difficulty in estimating future environmental costs, the Company believes
that the likelihood of material losses in excess of the amounts recorded is
remote.
Prior to 1987, the Company utilized certain products at its chemical
facilities that are currently classified as hazardous waste. Testing of the
groundwater in the areas of the treatment impoundments at these facilities
disclosed the presence of certain contaminants. In addition, several solid
waste management units ("SWMUs") at the plant sites have been identified.
During the latter part of 1994, the Company completed a reevaluation of its
remediation plans including RCRA Facility Investigations which have been
submitted for regulatory approval. In 1998 the Company completed an RCRA
Facility Investigation at one of its plant sites and based on the results
is currently conducting a Corrective Measures Study to be completed in
2000. After completion of the Study, a Corrective Measures Plan specifying
remediation procedures to be performed will be submitted for regulatory
approval in 2000. At another plant site, the Company received approval for
a Phase II Monitoring Plan subject to completion of additional sampling.
Results of the sampling are expected to be submitted for regulatory
approval in 2000. Upon receiving approval, a Corrective Measures Plan will
be developed and submitted for regulatory approval. Based on the
anticipated results of the studies being performed at the two sites, the
Company recorded a special charge of $1,378,000 in the fourth quarter of
1998 to accrue for additional estimated future remedial, cleanup and
monitoring costs and $1,940,000 remains accrued at January 1, 2000.
The Company has identified and evaluated two SWMUs at its plant in Bristol,
Tennessee that revealed residual groundwater contamination. In 1994 the
Company submitted a Permit Application for Post Closure Care to the TDEC
outlining a plan to address the areas identified, and received the Permit
in the fourth quarter of 1994. Additional costs of $61,000 were accrued in
the fourth quarter of 1998 and $95,000 remains accrued at January 1, 2000
to provide for estimated future remedial, cleanup and monitoring costs as
required by the Permit.
The Company has been designated, along with others, as a potentially
responsible party under the Comprehensive Environmental Response,
Compensation, and Liability Act, or comparable state statutes, at three
waste disposal sites. It is impossible to determine the ultimate costs
related to these sites due to several factors such as the unknown magnitude
of possible contamination, the unknown timing and extent of the corrective
actions which may be required, and the determination of the Company's
liability in proportion to other responsible parties. However, in
management's opinion, these environmental matters should not have a
material adverse effect upon the consolidated results of operations or
financial position of the Company.
The Company does not anticipate any insurance recoveries to offset the
environmental remediation costs it has incurred. Due to the uncertainty
regarding court and regulatory decisions, and possible future legislation
or rulings regarding the environment, many insurers will not cover
environmental impairment risks, particularly in the chemical industry.
Hence, the Company has been unable to obtain this coverage at an affordable
price.
Note I Deferred Compensation
The Company has a deferred compensation agreement with an officer which
allows the officer to defer all or a portion of any annual incentive
payable to the officer. Amounts deferred are payable upon certain events
including retirement, death or termination of the officer, or a change in
control of the Company. Interest accrues on amounts deferred, net of
estimated income tax benefits deferred by the Company until payments are
made, at rates consistent with other invested retirement funds held by the
Company in accordance with the agreement. No incentive was deferred in
1999,1998 and 1997. At January 1, 2000, the amounts deferred totaled
$827,000, including accrued interest earned in 1999 of $26,000.
The Company has deferred compensation agreements with certain former
officers providing for payments for ten years in the event of pre-
retirement death or the longer of ten years or life beginning at age 65.
The present value of such vested future payments, $547,000 at January 1,
2000, has been accrued.
Note J Shareholders' Rights
On February 4, 1999, the Board of Directors adopted a new Shareholders'
Rights Plan (the "Plan") to succeed the Shareholders' Rights Plan which
expired on March 26, 1999. Under the terms of the Plan, which expires in
March 2009, the Company declared a dividend distribution of one right for
each outstanding share to holders of record at the close of business on
March 26, 1999. Each Right entitles holders to purchase 2/10 of one share
of Common Stock at a price of $25.00 per share. Initially, the Rights are
not exercisable and will automatically trade with the Common Stock. Each
right only becomes exercisable after a person or group acquires more than
22 percent of the Company's Common Stock, or announces a tender or exchange
offer for more than 22 percent of the stock. At that time, each right
holder, other than the acquiring person or group, may use the Right to
purchase $25.00 worth of the Company's Common Stock at one-half of the then
market price.
Note K Stock Options
A summary of activity in the Company's stock option plans is as follows:
<TABLE>
Weighted
Average
Option
Price Outstanding Available
<S> <C> <C> <C>
At December 28, 1996 $11.17 154,008 141,000
Granted $15.13 100,500 (100,500)
Exercised $ 5.74 (15,900)
---------- ---------- ----------
At January 3, 1998 $13.20 238,608 40,500
Authorized 380,000
Expired (27,000)
Granted $11.81 16,000 (16,000)
Exercised $ 1.56 (3,108)
---------- ---------- ----------
At January 2, 1999 $13.25 251,500 377,500
Granted $ 7.69 150,500 (150,500)
Exercised - -
--------- --------- ----------
At January 1, 2000 $11.17 402,000 227,000
</TABLE>
The following table summarizes information about stock options outstanding
at January 1, 2000:
<TABLE>
Exercisable
Outstanding Stock Options Stock Options
Weighted Average
Remaining Weighted
Contractual Average
Exercise Life in Exercise
Range of Prices Shares Price Years Shares Price
<S> <C> <C> <C> <C> <C>
$9.75 72,000 $ 9.75 4.83 72,000 $ 9.75
$11.88 to $14.83 42,000 $12.51 5.49 36,000 $12.56
$18.88 21,000 $18.88 7.32 12,000 $18.88
$15.13 100,500 $15.13 8.32 24,900 $15.13
$10.72 to $13.63 16,000 $11.81 9.52 6,000 $13.63
</TABLE>
The Company grants to non-employee directors, officers and key employees
options to purchase common stock of the Company under three Plans adopted
in 1988, 1994 and 1998. Options were granted through January 28, 1998 under
the 1988 Plan. Under the 1994 Plan options may be granted through April 29,
2004, and through April 30, 2008 under the 1998 Plan at a price not less
than the fair value on the date of grant. Under the 1988 and 1998 Plans,
options may be exercised beginning one year after date of grant at a rate
of 20 percent annually on a cumulative basis. Under the 1994 Non-Employee
Directors' Plan, options may be exercised at the date of grant. At January
1, 2000, 186,800 shares of the options outstanding were fully exercisable.
The Company has elected to apply the provisions of Accounting Principles
Board Opinion No. 25 "Accounting for Stock Issued to Employees," (APB No.
25) in the computation of compensation expense. Under APB No. 25's
intrinsic value method, compensation expense is determined by computing the
excess of the market price of the shares over the exercise price on the
measurement date. For the Company's options, the intrinsic value on the
measurement date (or grant date) is zero, and no compensation expense is
recognized. FASB Statement No. 123 requires the Company to disclose pro
forma net income and income per share as if a fair value based accounting
method had been used in the computation of compensation expense. The fair
value of the options computed under Statement 123 would be recognized over
the vesting period of the options. The fair value for the Company's options
granted subsequent to December 31, 1994 was estimated at the time the
options were granted using the Black Scholes option pricing model with the
following weighted-average assumptions for 1999, 1998 and 1997,
respectively: risk-free interest rate of five percent; dividend yield of
two percent; volatility factors of the expected market price of the
Company's Common Shares of .728, .747 and .487; and an expected life of the
option of seven years. The weighted average fair values on the date of
grant were $4.65, $7.26 and $6.99 in 1999, 1998 and 1997, respectively. The
Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price
volatility. Because the Company's options have characteristics
significantly different from those of traded options, and because changes
in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its options. The
effects of applying Statement 123 may not be representative of the effects
on reported net income in future years.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
following is the pro forma information for 1999, 1998 and 1997:
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Pro forma net (loss) income $2,757,000 $ (65,000) $ 5,750,000
Pro forma diluted earnings
per share $.42 $(0.01) $ 0.82
</TABLE>
Note L Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
are as follows at the respective year ends:
<TABLE>
(Amount in thousands) 1999 1998 1997
<S> <C> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 390 $ 128 $ 77
Deferred compensation 498 476 467
Inventory capitalization 231 203 194
Accrued group insurance 120 93 53
Environmental reserves 590 652 449
Other 55 147 98
------- ------- -------
Total deferred tax assets 1,884 1,699 1,338
Deferred tax liabilities:
Tax over book depreciation 2,703 2,507 2,216
Prepaid expenses 390 379 418
Unrealized gain on investment 249 244
------- ------- -------
Total deferred tax liabilities 3,342 3,130 2,634
------- ------- -------
Net deferred tax liabilities $ (1,458) $ (1,431) $ (1,296)
Significant components of the provision for income taxes attributable
to continuing operations are as follows:
Amount in thousands 1999 1998 1997
Current:
Federal $ 1,452 $ 271 $ 2632
State 158 13 156
------- ------- -------
Total current 1,610 284 2788
Deferred:
Federal 21 (236) 379
State 1 (14) 23
------- ------- -------
Total deferred 22 (250) 402
------- ------- -------
Total $ 1,632 $ 34 $ 3190
</TABLE>
The reconciliation of income tax attributable to continuing operations
computed at the U. S. federal statutory tax rates to income tax expense is:
<TABLE>
(Amount in thousands) 1999 1998 1997
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. Statutory rates $ 1,557 0.3 $33 34.0 $ 3,070 34.0
State income taxes, net of
federal tax benefit 106 0.0 1 1.2 119 1.3
Other, net (31) (0.0) (8) 1
------ ------ ------ ------ ----- -----
Total $ 1,632 35.6 $34 35.2 $ 3,190 35.3
</TABLE>
Income tax payments of approximately $1,011,000, $729,000 and $2,756,000
were made in 1999, 1998 and 1997, respectively.
Note M Benefit Plans
The Company has a 401(k) Employee Stock Ownership Plan covering all non-
union employees. Employees may contribute to the Plan up to 20 percent of
their salary with a maximum of $10,000 for 1999. Contributions by the
employees are invested in one or more funds at the direction of the
employee; however, employee contributions cannot be invested in Company
stock.
Contributions by the Company are made primarily in Synalloy stock. The
Company contributes on behalf of each participant who is eligible a
matching contribution equal to a percentage which is determined each year
by the Board of Directors. For 1999 the maximum was four percent. The
matching contribution is allocated monthly. Matching contributions of
approximately $357,000, $354,000 and $294,000 were made for 1999, 1998 and
1997, respectively. The Company may also make a discretionary contribution,
which shall be distributed to all eligible participants regardless of
whether they contribute to the Plan. No discretionary contributions were
made to the Plan in 1999, 1998 or 1997.
The Company also contributes to union-sponsored defined contribution
retirement plans. Contributions relating to these plans were approximately
$512,000, $484,000 and $428,000 for 1999, 1998 and 1997, respectively.
Note N Contingencies
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 O Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Numerator:
Net income $ 2,946,648 $ 62,677 $ 5,840,760
Denominator:
Denominator for basic earnings
per share-weighted average
shares 6,558,705 6,779,349 6,959,628
Effect of dilutive securities:
Employee stock options 396 14,528 47,088
--------- --------- ---------
Denominator for diluted
earnings per share 6,559,101 6,793,877 7,006,716
Basic earnings per share $0.45 $0.01 $0.84
Diluted earnings per share $0.45 $0.01 $0.83
</TABLE>
Note P Acquisitions
On August 21, 1998, the Company purchased the common stock of Organic
Pigments Corporation with an effective date of July 1, 1998. Organic,
located in Greensboro, North Carolina, manufactures aqueous pigment
dispersions sold to the textile industry and used in printing inks for use
on paper. Total cost of the acquisition was $3,472,000 including retirement
of $1,095,000 in bank debt and certain acquisition costs related to the
transaction. The Company funded the acquisition with available cash. The
acquisition was accounted for by the purchase method of accounting with the
purchase price allocated to the underlying assets based on their respective
fair values at the date of acquisition. Since the purchase price was
approximately equal to the fair value of the net assets acquired, no
goodwill was recorded. The Company's consolidated financial statements
include the results of Organic from the July 1 effective date. The
acquisition did not have a material impact on 1998 operations; therefore,
no pro forma data has been presented.
The purchase agreement includes a contingent payment provision that
provides for additional payments to be made to Organic's shareholders over
a three-year period. The provision calls for payments to Organic's
shareholders up to $875,000, payable one-third per year for three years,
for a joint venture investment in a manufacturing plant in the Republic of
China based on the equity value of the investment after the three-year
period. Each payment is calculated for a one year period ending June 30 and
payable August 30 for each of the next three years. The Company made the
first payment of $292,000 in August 1999.
Note Q Industry Segments
Synalloy Corporation operates in two principal industry segments: metals
and chemicals. The Company identifies such segments based on products and
services. The Metals Segment consists of Bristol Metals and Whiting Metals,
both wholly-owned subsidiaries. The Chemicals Segment consists of Blackman
Uhler Chemical Company, a division of the Company, Manufacturers Chemicals
and Organic Pigments Corporation, wholly-owned subsidiaries.
The Chemicals Segment manufactures dyes, pigments and auxiliaries for the
textile industry and a wide variety of specialty chemicals for the textile,
chemical, paper, metals, petroleum and pharmaceutical industries. The
Metals Segment manufactures welded stainless steel pipe and highly
specialized products, most of which are custom-produced to individual
orders, required for corrosive and high-purity processes used principally
by the chemical, petrochemical and pulp and paper industries. Products
include piping systems, fittings, tanks, pressure vessels and a variety of
other components.
Operating profit is total revenue less operating expenses, excluding
interest expense and income taxes. Identifiable assets (all of which are in
the United States) are those assets used in operations by each segment.
Centralized data processing and accounting expenses are allocated to the
Metals Segment and Chemicals Segment based upon estimates of their
percentage of usage. Corporate assets consist principally of cash, certain
investments, and property and equipment. No single customer or agency
(domestic or foreign) accounted for more than ten percent of revenues in
1999, 1998 or 1997.
The Company has a distributorship agreement expiring December 31, 2000 with
the company supplying about 91 percent of the products that produced about
18 percent of the Chemicals Segment's sales in 1999. The supplier has been
the principal source of these products since 1985. Although the Company
believes that this supplier will continue to be a source of these products
in the future, there is no assurance of this. Loss of this supplier would
have a materially adverse short-term effect on the Company's sales and net
income. However, management believes that if the agreement with this
supplier is not continued in the future, other suppliers could be found to
replace most of the products.
In June 1997, the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which the Company
adopted in 1998. The adoption of Statement 131 did not affect results of
operations or financial position.
<TABLE>
Segment information:
(Amounts in thousands) 1999 1998 1997
<S> <C> <C> <C>
Net sales
Metals $ 66,055 $ 55,368 $ 71,192
Chemicals 50,829 51,889 55,549
---------- ---------- ----------
Total net sales $ 116,884 $ 107,257 $ 126,741
Operating income
Metals $ 5,418 $ 1,409 $ 5,634
Chemicals 726 24 5,220
---------- ---------- ----------
6,144 1,433 10,854
Less unallocated corporate expense 905 804 1,110
---------- ---------- ----------
Operating income 5,239 629 9,744
Other expense, net 660 532 713
---------- ---------- ----------
Income before taxes $ 4,579 $ 97 $ 9,031
Identifiable assets
Metals $ 37,295 $ 32,275 $ 37,838
Chemicals 36,140 35,002 30,211
Corporate 4,618 4,097 5,334
---------- ---------- ----------
$ 78,053 $ 71,374 $ 73,383
Depreciation and amortization
Metals $ 1,469 $ 1,515 $ 1,504
Chemicals 2,112 1,843 1,807
Corporate 151 155 174
---------- ---------- ----------
$ 3,732 $ 3,513 $ 3,485
Capital expenditures
Metals $ 914 $ 956 $ 1,163
Chemicals 2,733 2,661 1,653
Corporate 567 69 38
---------- ---------- ----------
$ 4,214 $ 3,686 $ 2,854
Geographic sales
United States $ 113,443 $ 101,776 $ 118,445
Elsewhere 3,441 5,481 8,296
---------- ---------- ----------
$ 116,884 $ 107,257 $ 126,741
</TABLE>
Note R Quarterly results (unaudited)
The following is a summary of quarterly operations for 1999, 1998 and 1997:
<TABLE>
Net Net Income Per
Net Gross Income Common Share
(Thousands, except Sales Profit (Loss) Diluted Basic
per share data)
<S> <C> <C> <C> <C> <C>
1999
First Quarter $ 27,645 $ 3,371 $ 337 $ .05 $ .05
Second Quarter 28,292 3,331 326 .05 .05
Third Quarter 31,024 4,600 831 .13 .13
Fourth Quarter 29,923 5,272 1,454 .23 .23
1998
First Quarter $ 30,606 $ 3,475 $ 597 $ .09 $ .09
Second Quarter 25,813 2,927 110 .02 .02
Third Quarter 28,040 3,467 455 .07 .07
Fourth Quarter 22,798 2,334 (1,100) (0.16) (0.16)
1997
First Quarter $ 30,903 $ 4,246 $ 1,011 $ .14 $ .14
Second Quarter 31,205 4,832 1,386 .20 .20
Third Quarter 31,371 4,875 1,543 .22 .22
Fourth Quarter 33,262 5,762 1,901 .27 .28
</TABLE>
The Company recorded a special charge of $1,439,000 for environmental
remediation costs in the fourth quarter of 1998 which reduced net income by
$931,000 or $.14 per share. See Note H for further discussion.
Note S Subsequent Event
In February 2000, management decided to close the Whiting Metals facility.
Closure is expected to be completed before the end of the second quarter of
2000. Management does not expect the closure to have a material effect on
the operations of the Company.
In March 2000, management made the decision to close the Augusta, Georgia
plant. It is anticipated that most of the products produced in Augusta will
be transferred to the Spartanburg facility. 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 yet been quantified.
Report of Management
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles and have been audited by Ernst &
Young LLP, Independent Auditors. Management of the Company assumes
responsibility for the accuracy and reliability of the financial
statements. In discharging such responsibility, management has established
certain standards which are subject to continuous review and are monitored
through the Company's financial management. The Board of Directors pursues
its oversight role for the financial statements through its Audit Committee
which consists of outside directors. The Audit Committee meets on a regular
basis with representatives of management and Ernst & Young LLP.
Report Of Independent Auditors
Shareholders and Board of Directors
Synalloy Corporation
We have audited the accompanying consolidated balance sheets of Synalloy
Corporation and subsidiaries as of January 1, 2000, January 2, 1999 and
January 3, 1998, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the
period ended January 1, 2000. Our audits also included the financial state-
ment schedule listed in the index at Item 14(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Synalloy Corporation at January 1, 2000, January 2, 1999 and
January 3, 1998 and the consolidated results of its operations and its cash
flows for each of the three years in the period ended January 1, 2000, in
conformity with generally accepted accounting principles in the United
States. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
Ernst & Young LLP
Greenville, South Carolina
February 5, 2000,
except for Note S, as to which the date is March 15, 2000
Item 9 Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None
PART III
A definitive proxy statement, which will be filed with the Securities and
Exchange Commission pursuant to regulation 14A of the Securities Exchange
Act of 1934 within 120 days of the end of the registrant's fiscal year
ended January 1, 2000, is incorporated herein by reference.
Item 10 Directors and Executive Officers of the Registrant
Such information as required by the Securities and Exchange Commission in
Regulation S-K is contained in the Company's definitive Proxy Statement in
connection with its Annual Meeting to be held May 18, 2000.
Item 11 Executive Compensation
The information with respect to executive compensation and transactions is
hereby incorporated by reference from the Company's definitive proxy state-
ment to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A of the Securities Exchange Act of 1934.
Item 12 Security Ownership of Certain Beneficial Owners and Management
The information with respect to security ownership of certain beneficial
owners and management is hereby incorporated by reference from the
Company's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A of the Securities Exchange
Act of 1934.
Item 13 Certain Relationships and Related Transactions
None
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
a. The following documents are filed as a part of this report:
1. Financial Statements: The following consolidated financial
statements of Synalloy Corporation are included in Item 8:
Consolidated Balance Sheets at January 1, 2000, January 2, 1999 and
January 3, 1998
Consolidated Statements of Income for the years ended January 1,
2000, January 2, 1999 and January 3, 1998
Consolidated Statements of Shareholders' Equity for the years ended
January 1, 2000, January 2, 1999 and January 3, 1998
Consolidated Statements of Cash Flows for the years ended January 1,
2000, January 2, 1999 and January 3, 1998
Notes to Consolidated Financial Statements
2. Financial Statements Schedules: The following consolidated
financial statements schedule of Synalloy Corporation is included in
Item 14(d).
Schedule II - Valuation and Qualifying Accounts for the years ended
January 1, 2000, January 2, 1999 and January 3, 1998
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
3. Listing of Exhibits:
Exhibit 22 - Subsidiaries of the Registrant
b. Reports on Form 8-K: There were no reports on Form 8-K filed during the
fourth quarter of the 1999 fiscal year.
c. Exhibits: The response to this portion of Item 14 is submitted in a
separate section of this report.
d. Financial Statements Schedules: The response to this portion of Item 14
is submitted as a separate section of this report.
Schedule II Valuation and Qualifying Accounts
<TABLE>
Column A Column B Column C Column D Column E
Balance at Charged to Deductions Balance
Beginning Cost and Describe at End of
Description of Period Expenses (1) Period
<S> <C> <C> <C> <C>
Year ended January 1, 2000
Deducted from asset account:
Allowance for doubtful accounts $362,000 $820,000 $107,000 $1,075,000
Year ended January 2, 1999
Deducted from asset account:
Allowance for doubtful accounts $219,000 $394,000 (2 $206,000 $ 362,000
Year ended January 3, 1998
Deducted from asset account:
Allowance for doubtful accounts $208,000 $279,000 $268,000 $ 219,000
(1) Allowances, uncollected accounts and credit balances written off against
reserve, net of recoveries.
(2) Includes a $25,000 of allowance from the acquisition of Organic Pigments
Corporation in 1998.
</TABLE>
Exhibit 21 Subsidiaries of the Registrant
The Company has six wholly-owned subsidiaries. All subsidiaries are
included in the Company's consolidated financial statements. The
subsidiaries are as follows:
Synalloy Metals, Inc., formerly Bristol Metals, Inc., a Tennessee
corporation
Whiting Metals, Inc., a South Carolina corporation
Manufacturers Soap and Chemical Company, a Tennessee corporation
Organic Pigments Corporation, a North Carolina corporation
Metchem, Inc., a Delaware corporation
Synco International, Inc., a Virgin Islands corporation
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ Cheryl C. Carter March 28,2000
Cheryl C. Carter Date
Corporate Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
By /s/ James G. Lane, Jr. March 28, 2000
James G. Lane, Jr. Date
Chief Executive Officer and
Chairman of the Board
By /s/ Gregory M. Bowie March 28, 2000
Gregory M. Bowie Date
Vice President, Finance
By /s/ Glenn R. Oxner March 28, 2000
Glenn R. Oxner Date
Director
By /s/ Sibyl N. Fishburn March 28, 2000
Sibyl N. Fishburn Date
Director
By /s/ Carroll D. Vinson March 28, 2000
Carroll D. Vinson Date
Director
By /s/ Richard E. Ingram March 28, 2000
Richard E. Ingram Date
Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-1-2000
<PERIOD-END> JAN-1-2000
<CASH> 121
<SECURITIES> 0
<RECEIVABLES> 16354
<ALLOWANCES> 0
<INVENTORY> 28819
<CURRENT-ASSETS> 46494
<PP&E> 60873
<DEPRECIATION> 34887
<TOTAL-ASSETS> 78053
<CURRENT-LIABILITIES> 18493
<BONDS> 0
0
0
<COMMON> 8000
<OTHER-SE> 36660
<TOTAL-LIABILITY-AND-EQUITY> 78053
<SALES> 116884
<TOTAL-REVENUES> 116884
<CGS> 100310
<TOTAL-COSTS> 100310
<OTHER-EXPENSES> 11335
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 773
<INCOME-PRETAX> 4579
<INCOME-TAX> 1632
<INCOME-CONTINUING> 2947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2947
<EPS-BASIC> .45
<EPS-DILUTED> .45
</TABLE>
