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 3, 1999
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 3, 1999
Common Stock, $1.00 Par Value 6,671,688
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Synalloy Corporation
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - April 3, 1999 and January
2, 1999
Condensed consolidated statements of income - Three months ended
April 3, 1999 and April 4, 1998
Condensed consolidated statements of cash flows - Three months
ended April 3, 1999 and April 4 1998
Notes to condensed consolidated financial statements - April 3,
1999
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
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PART 1. FINANCIAL STATEMENTS
Synalloy Corporation
Condensed Consolidated Balance Sheets
Apr 3, 1999 Jan 2, 1999
(Unaudited) (Note)
Assets
Current assets
Cash and cash equivalents $ 160,225 $ 117,658
Accounts receivable, less allowance
for doubtful accounts 15,614,850 12,596,592
Inventories
Raw materials 8,252,762 7,502,972
Work-in-process 3,992,701 3,755,147
Finished goods 13,499,043 14,842,842
---------- ----------
Total inventories 25,744,506 26,100,961
Deferred income taxes 192,000 192,000
Prepaid expenses and other current assets 625,076 646,342
---------- ----------
Total current assets 42,336,657 39,653,553
Cash value of life insurance 2,046,926 2,025,984
Investment 1,092,117 1,026,117
Property, plant & equipment, net of accumulated
depreciation of $33,433,000 and $32,498,000 25,999,003 25,495,020
Deferred charges and other assets 3,106,125 3,173,788
---------- ----------
Total assets $74,580,828 $71,374,462
========== ==========
Liabilities and Shareholders' Equity
Current liabilities
Notes payable $ 2,672,000 $ 665,000
Accounts payable 8,250,385 7,882,778
Income taxes 741,609 -
Accrued expenses 1,880,729 1,383,740
Current portion of environmental reserves 575,650 575,650
Current portion of long-term debt 200,000 200,000
---------- ----------
Total current liabilities 14,320,373 10,707,168
Long-term debt, less current portion 10,000,000 10,000,000
Environmental reserves 1,742,038 1,846,550
Deferred compensation 1,349,520 1,349,940
Deferred income taxes 1,646,000 1,623,000
Contingencies
Shareholders' equity
Common stock, par value $1 per share -
authorized and issued 8,000,000 shares 8,000,000 8,000,000
Capital in excess of par value 9,491 9,491
Retained earnings 49,687,736 49,687,391
Accumulated other comprehensive income 496,000 453,000
Less cost of Common Stock in treasury (12,670,330) (12,302,078)
---------- ----------
Total shareholders' equity 45,522,897 45,847,804
---------- ----------
Total liabilities and shareholders' equity $74,580,828 $71,374,462
========== ==========
Note: The balance sheet at January 2, 1999 has been derived from
the audited financial statements at that date. See accompanying
notes to condensed consolidated financial statements
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Synalloy Corporation
Condensed Consolidated Statements of Income
(Unaudited) Three Months Ended
Apr 3, 1999 Apr 4, 1998
Net sales $27,645,297 $30,605,926
Cost of sales 24,274,218 27,131,096
---------- ----------
Gross profit 3,371,079 3,474,830
Selling, general and administrative expense 2,689,530 2,407,979
---------- ----------
Operating income 681,549 1,066,851
Other (income) and expense
Interest expense 159,753 166,515
Other, net 3,171 (24,055)
---------- ----------
Income before taxes 518,625 924,391
Provision for income taxes 182,000 327,000
---------- ----------
Net income $ 336,625 $ 597,391
========== ==========
Net income per common share
Basic $.05 $.09
=== ===
Diluted $.05 $.09
=== ===
Dividends paid per common share $.05 $.10
=== ===
Average shares outstanding
Basic 6,722,468 6,836,474
========= =========
Diluted 6,722,468 6,868,700
========= =========
See accompanying notes to condensed consolidated financial statements
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Synalloy Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited) Three Months Ended
Apr 3, 1999 Apr 4, 1998
Operating activities
Net income $ 336,625 $ 597,391
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 993,883 853,993
Amortization of deferred charges 67,663 64,656
Deferred compensation (420) (420)
Provision for losses on accounts receivable 126,260 34,744
Loss (gain) on sale of property,
plant and equipment 7,981 (233)
Cash value of life insurance (20,942) (19,890)
Environmental reserves (104,512) (91,739)
Changes in operating assets and liabilities:
Accounts receivable (3,144,518) (2,178,187)
Inventories 356,455 1,047,397
Other assets (1,734) (6,983)
Accounts payable and accrued expenses 832,515 1,425,424
Income taxes payable 796,690 370,549
---------- ----------
Net cash provided by operating activities 245,946 2,096,702
Investing activities
Purchases of property, plant and equipment (1,515,347) (646,125)
Proceeds from sale of property,
plant and equipment 9,500 233
---------- ----------
Net cash used in investing activities (1,505,847) (645,892)
Financing activities
Proceeds from revolving lines of credit 7,643,000 152,000
Payments on revolving lines of credit (5,636,000) (152,000)
Proceeds from exercised stock options - 4,837
Purchases of treasury stock (368,251) (1,493,000)
Dividends paid (336,281) (684,893)
---------- ----------
Net cash provided by (used in)
financing activities 1,302,468 (2,173,056)
---------- ----------
Increase (decrease) in cash and cash equivalents 42,567 (722,246)
Cash and cash equivalents at beginning of year 117,658 1,602,543
---------- ----------
Cash and cash equivalents at end of period $ 160,225 $ 880,297
========== ==========
See accompanying notes to condensed consolidated financial statements
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Synalloy Corporation
Notes To Condensed Consolidated Financial Statements
(Unaudited)
April 3, 1999
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 3, 1999, are not necessarily indicative of the results that
may be expected for the year ending January 1, 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 2,
1999.
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 $43,000, net of deferred income taxes of $23,000 for
the three months ended April 3, 1999. Comprehensive income consists of
unrealized gains and losses on the Company's foreign equity investment, and is
recorded in Shareholders' Equity.
NOTE 5--SEGMENT INFORMATION
(Dollar amounts are in thousands.) Three Months Ended
Apr 3, 1999 Apr 4, 1998
Net sales
Metals Segment $ 13,601 $ 17,426
Chemicals Segment 14,044 13,180
------- -------
$ 27,645 $ 30,606
======= =======
Operating income
Metals Segment $ 407 $ 750
Chemicals Segment 500 551
------- -------
907 1,301
Unallocated expenses
Corporate 225 235
Interest and debt expense,
net of interest income 163 142
------- -------
Income before income taxes $ 519 $ 924
======= =======
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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 3, 1999. (Dollar amounts
are in thousands except for per share data.)
Consolidated sales for the quarter were down, decreasing ten percent
compared to the same period one year ago. Consolidated net income
declined 44 percent to $337 for the quarter, or $.05 per share,
compared to the same period one year ago. However, on a sequential
basis sales were up 21 percent and net income showed improvement over the
modest loss, before an environmental charge, suffered in the last
quarter of 1998.
Chemicals Segment sales increased seven percent from a year earlier because of
the acquisition of Organic Pigments effective July 1, 1998. Without this
acquisition sales would have been down nine percent. Weak sales are directly
related to the continuing downsizing of the domestic textile industry because
of cheap imports. Operating income was down nine percent as the result of
intensely competitive conditions in markets for textile colors and chemicals.
Declining prices of these products generated inventory losses and weak demand
led to lower profit margins. Specialty chemicals performed well during the
quarter with improved sales and profits compared to the prior year. The
Company is pursuing several projects that have the potential to provide
momentum for the future. Management is hopeful that some of these
possibilities will materialize during 1999.
Metals Segment sales in the first quarter were down 22 percent from a year
earlier and operating income declined 46 percent. The sales decline resulted
from a four percent decrease in unit volumes, an 11 percent decline in
commodity pipe prices, and a change in product mix, with a lower percentage of
sales from piping systems and process equipment. The lower operating income
was caused by the sales decline, inventory losses suffered because of
declining prices and competitive conditions exacerbated by cheap imports. The
backlog for piping systems and process equipment ended the first quarter at
$23,400 which is up $17,000 from a year earlier. This product group has
operated at extremely low levels for the past year but should start to
generate much higher sales by the third quarter of this year.
Selling and administrative expense for the quarter was up 12 percent from the
same period last year because of the addition of the selling and
administrative expenses of Organic Pigments.
Cash flows from operations totaled $246 during the first three months of 1999
compared to $2,097 generated during the same period one year ago. The decline
came primarily from two factors. Accounts receivable increased $3,145 in the
first quarter from an unusually low level existing at January 2, 1999, due to
the increase in sales experienced in the quarter compared to the fourth
quarter of 1998. In 1998, the increase in accounts receivable for the quarter
totaled $2,178. In addition, inventories declined $356 during the quarter
compared to a decline of $1,047 occurring in the first quarter of 1998. The
Company purchased 53,925 shares of the Company's common stock for $368 during
the quarter. 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.
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Synalloy Corporation
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations - Continued
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.
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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 3, 1999
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Synalloy Corporation
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYNALLOY CORPORATION
(Registrant)
Date: May 7, 1999 /s/ James G. Lane, Jr.
James G. Lane, Jr., Chairman and
Chief Executive Officer
Date: May 7, 1999 /s/ Gregory M. Bowie
Gregory M. Bowie
Vice President, Finance
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