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 July 1, 2000
OR
_______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-19687
SYNALLOY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 57-0426694
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Post Office Box 5627
Croft Industrial Park
Spartanburg, South Carolina 29304
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (864) 585-3605
Not Applicable
(Former name, former address and former fiscal year, if changed since last
year.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No____
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practical date.
Number of Shares Outstanding
Title of Class As of July 1, 2000
Common Stock, $1.00 Par Value 6,145,758
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Synalloy Corporation
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - July 1, 2000 and January
1, 2000
Condensed consolidated statements of income - Three and six months
ended July 1, 2000 and July 3, 1999
Condensed consolidated statements of cash flows - Six months ended
July 1, 2000 and July 3, 1999
Notes to condensed consolidated financial statements - July 1,
2000
Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
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PART 1. FINANCIAL STATEMENTS
Synalloy Corporation
Condensed Consolidated Balance Sheets
Jul 1, 2000 Jan 1, 2000
(Unaudited) (Note)
Assets
Current assets
Cash and cash equivalents $ 42,778 $ 120,549
Accounts receivable, less allowance
for doubtful accounts 17,551,577 16,354,165
Inventories
Raw materials 8,642,125 9,378,087
Work-in-process 5,958,723 6,033,389
Finished goods 15,210,069 13,407,243
Total inventories 29,810,917 28,818,719
Deferred income taxes 406,000 406,000
Prepaid expenses and other current assets 754,770 794,232
Total current assets 48,566,042 46,493,665
Cash value of life insurance 2,148,811 2,112,411
Investment 926,117 1,039,117
Property, plant & equipment, net of accumulated
depreciation of $36,665,000 and $34,887,000 26,175,958 25,985,725
Deferred charges and other assets 2,870,015 2,421,655
Total assets $80,686,943 $78,052,573
Liabilities and Shareholders' Equity
Current liabilities
Notes payable $ 5,031,000 $ 3,084,000
Accounts payable 10,378,945 10,867,711
Income taxes 1,196,632 1,209,874
Accrued expenses 3,735,757 2,957,728
Current portion of environmental reserves 373,500 373,500
Current portion of long-term debt 0 0
Total current liabilities 20,715,834 18,492,813
Long-term debt, less current portion 10,000,000 10,000,000
Environmental reserves 1,496,812 1,661,663
Deferred compensation 1,392,635 1,374,210
Deferred income taxes 1,824,000 1,864,000
Contingencies
Shareholders' equity
Common stock, par value $1 per share -
authorized 12,000,000 shares; issued
8,000,000 shares 8,000,000 8,000,000
Capital in excess of par value 9,491 9,491
Retained earnings 52,967,909 51,325,183
Accumulated other comprehensive income 388,000 461,000
Less cost of Common Stock in treasury (16,107,738) (15,135,787)
Total shareholders' equity 45,257,662 44,659,887
Total liabilities and shareholders' equity $80,686,943 $78,052,573
Note: The balance sheet at January 1, 2000 has been derived from
the audited financial statements at that date. See accompanying
notes to condensed consolidated financial statements
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Synalloy Corporation
Condensed Consolidated Statements of Income
(Unaudited) Three Months Ended Six Months Ended
Jul 1, 2000 Jul 3, 1999 Jul 1, 2000 Jul 3, 1999
Net sales $31,891,371 $28,291,775 $64,162,371 $55,937,072
Cost of sales 26,956,152 24,960,327 54,029,440 49,234,545
Gross profit 4,935,219 3,331,448 10,132,931 6,702,527
Selling, general and
administrative expense 2,797,533 2,718,925 6,082,108 5,408,455
Operating income 2,137,686 612,523 4,050,823 1,294,072
Other (income) and
expense
Interest expense 273,268 196,028 512,078 355,781
Other, net 4,360 (86,241) 11,663 (83,070)
Income before taxes 1,860,058 502,736 3,527,082 1,021,361
Provision for income tax 663,000 177,000 1,256,000 359,000
Net income $ 1,197,058 $ 325,736 $ 2,271,082 $ 662,361
Net income per
common share
Basic $.19 $.05 $.36 $.10
Diluted $.19 $.05 $.36 $.10
Dividends paid per
common share $.05 $.05 $.10 $.10
Average shares
outstanding
Basic 6,254,721 6,584,311 6,272,891 6,653,390
Diluted 6,254,919 6,589,950 6,273,603 6,662,217
See accompanying notes to condensed consolidated financial statements.
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Synalloy Corporation
Condensed Consolidated Statements of Cash Flows
Jul 1, 2000 Jul 3, 1999
Operating activities
Net income $2,271,082 $ 662,361
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 1,974,141 1,954,095
Amortization of deferred charges 162,700 136,301
Deferred compensation 18,425 11,319
Provision for losses on
accounts receivable (9,091) 291,885
(Gain) loss on sale of property,
plant and equipment (5,426) 5,864
Cash value of life insurance (36,400) (3,856)
Environmental reserves (164,851) (227,082)
Changes in operating assets and liabilities:
Accounts receivable (1,188,321) (2,217,609)
Inventories (992,198) (482,098)
Other assets (239,598) 59,496
Accounts payable and accrued expenses 249,263 3,544,226
Income taxes payable (13,242) 652,790
Net cash provided by operating activities 2,026,484 4,387,692
Investing activities
Purchases of property, plant and equipment (2,164,374) (1,896,989)
Proceeds from sale of property,
plant and equipment 5,426 22,624
Increase in note receivables (292,000) (272,000)
Net cash used in investing activities (2,450,948) (2,146,365)
Financing activities
Proceeds from revolving lines of credit 23,684,000 15,949,000
Payments on revolving lines of credit (21,737,000) (16,614,000)
Purchases of treasury stock (971,951) (1,023,562)
Dividends paid (628,356) (665,116)
Net cash provided by (used in) financing
activities 346,693 (2,353,678)
Decrease in cash and cash equivalents (77,771) (112,351)
Cash and cash equivalents at beginning of year 120,549 117,658
Cash and cash equivalents at end of period $ 42,778 $ 5,307
See accompanying notes to condensed consolidated financial statements.
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Synalloy Corporation
Notes To Condensed Consolidated Financial Statements
(Unaudited)
July 1, 2000
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three- and
six-month periods ended July 1, 2000, are not necessarily indicative of the
results that may be expected for the year ending December 30, 2000. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
period ended January 1, 2000.
NOTE 2--INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
NOTE 3--LEGAL MATTERS
The Company is from time-to-time subject to various claims, other possible
legal actions for product liability and other damages, and other matters
arising out of the normal conduct of the Company's business. Management
believes that based on present information, it is unlikely that liability, if
any, exists that would have a materially adverse effect on the consolidated
operating results or financial position of the Company.
NOTE 4--COMPREHENSIVE INCOME
Comprehensive income was $1,047,000 and $2,198,000 for the three and six
months ended July 1, 2000, respectively. Comprehensive income consists of net
income less unrealized losses on the Company's foreign equity investment, of
$150,000 and $73,000, net of deferred income taxes of $81,000 and $40,000 for
the three and six months ended July 1, 2000, respectively, and is recorded in
Shareholders' Equity.
NOTE 5--SEGMENT INFORMATION
During the first quarter of 2000, the Company completed the reorganization of
its Chemicals Segment changing the Segment into two separately managed product
groups - Colors and Specialty Chemicals. Previously, the Segment had been
managed by geographic location. The amounts presented for the second quarter
and six months of 1999 have been restated to reflect the reorganization.
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Synalloy Corporation
Notes To Condensed Consolidated Financial Statements - Continued
(Unaudited)
July 1, 2000
NOTE 5--SEGMENT INFORMATION (Continued)
(Dollar amounts are in thousands.)
Three Months Ended Six Months Ended
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
Net sales
Colors Group $ 7,341 $ 7,943 $ 13,950 $ 15,565
Specialty Chemicals Group 5,059 5,187 11,184 11,609
Chemicals Segment 12,400 13,130 25,134 27,174
Metals Segment 19,491 15,162 39,028 28,763
$ 31,891 $ 28,292 $ 64,162 $ 55,937
Operating income
Colors Group $ 90 $ 268 $ 130 $ 325
Specialty Chemicals Group (596) (138) (472) 305
Chemicals Segment (506) 130 (342) 630
Metals Segment 2,948 735 5,131 1,142
Unallocated expenses
Corporate 304 278 738 503
Interest and debt expense,
net of interest income 278 85 524 248
Income before income taxes $ 1,860 $ 502 $ 3,527 $ 1,021
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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 July 1, 2000. (Dollar amounts
are in thousands except for per share data.)
Consolidated sales increased 13 and 15 percent, respectively, for the quarter
and year-to-date compared to the same periods one year ago. Consolidated net
income increased to $1,197 from $326 for the quarter and increased to $2,271
from $662 year-to-date, respectively, compared to the same periods one year
ago.
Metals Segment sales increased 29 percent and 36 percent in the quarter and
year-to-date, respectively. Operating income for the quarter and year-to-date
increased over four times the levels of the prior year. The increase in sales
came from eight percent higher unit volumes coupled with a 19 percent increase
in average selling prices. Improvement in our principal product, commodity
stainless pipe, was even more pronounced with unit volume up 14 percent and
average selling price 38 percent higher than last year's second quarter. The
commodity pipe percentage gains were moderated by the change in product mix
that resulted from the closure in the first quarter of the Whiting Metals
process equipment facility and 11 percent lower sales from piping systems.
Assuming that market conditions for commodity pipe continue to be strong, the
third quarter should produce a continuation of excellent results.
Chemicals Segment sales decreased six and eight percent in the quarter and
year-to-date, respectively, with both Colors and Specialty Chemicals
contributing to the decline. In spite of the well-chronicled negative
conditions in the domestic textile color industry, the Colors Group managed to
operate profitably during the second quarter as operating income for the Group
declined 66 and 60 percent in the quarter and year-to- date, respectively. On
the other hand, the Specialty Chemicals Group incurred an operating loss for
the quarter, over half of which resulted from $308,000 in losses at the
Augusta plant. The balance of the loss resulted from very low volumes at the
Spartanburg plant because of normal quarterly fluctuations that occur in these
products. Present schedules call for over twice as much volume in the third
quarter when demand is expected to be closer to the quarterly average. Site
preparation is underway in Spartanburg for the move of equipment from Augusta.
The move should be completed by year-end after which the Augusta plant losses
will be eliminated and profits in Spartanburg should be enhanced by improved
utilization. However, the Company expects to take a restructuring charge in
the future, which has not been quantified. Management is confident that
initiatives underway in the Chemicals Segment will return it to acceptable
profitability by the end of this year.
Selling and administrative expense for the quarter and year-to-date were nine
percent of consolidated sales, respectively, compared to last year's 10
percent.
Cash flows from operations totaled $2,026 during the first six months of 2000
compared to $4,388 generated during the same period one year ago. The decrease
in cash flows came primarily from increases in accounts receivable and
inventories, offset by an increase in accounts payable and income taxes
payable totaling $1,944 in 2000, compared to a net decline of $1,497 from the
same accounts in 1999. The decrease was offset by the $1,609 increase in net
income from 1999 to 2000. The Company used part of the cash flows generated
in 2000 to purchase 145,300 shares of the Company's common stock for $972.
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:
A The Annual Meeting of Shareholders was held May 18, 2000 at
the offices of the Company.
B. The following individuals were elected as directors at the
Annual Meeting:
Votes For Votes Withheld
1. James G. Lane, Jr. 5,727,346 72,023
2. Sibyl N. Fishburn 5,727,346 72,023
3. Richard E. Ingram 5,727,346 72,023
4. Glenn R. Oxner 5,727,346 72,023
5. Carroll D. Vinson 5,727,346 72,023
C. Ernst & Young LLP, independent certified accountants, were
selected as independent auditors for the fiscal year ending
December 30, 2000 by a vote of 5,770,510 for, 12,979 against
and 15,880 abstentions.
Item 5. Other Information
None
Item 6. Exhibits And Reports On Form 8-K
The following exhibits are included herein:
Financial Data Schedule
A Form 8-K, dated May 18, 2000, was filed May 19, 2000 pursuant to
Item 5 of that form.
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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: August 8, 2000 /s/ James G. Lane, Jr.
James G. Lane, Jr., Chairman and
Chief Executive Officer
Date: August 8, 2000 /s/ Gregory M. Bowie
Gregory M. Bowie
Vice President, Finance
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