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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

 

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 27, 2003

[  ]

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              
(State or other jurisdiction of
incorporation or organization)

 

      57-0426694      
(IRS Employer
Identification Number)

 

 

 

2155 West Croft Circle
     Spartanburg, South Carolina     
(Address of principal executive offices)

 


    29302   
(Zip code)

                         (864) 585-3605                            
(Registrant's telephone number, including area code)

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 by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act. Yes____ No _x_

The number of shares outstanding of the registrant's common stock as of November 7, 2003 was 5,989,304.

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Synalloy Corporation

Index

 _______________________________________________________________________________________________________________

 

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

 

Condensed consolidated balance sheets - September 27, 2003 and December 28, 2002

 

Condensed consolidated statements of income - Three and nine months ended September 27, 2003 and September 28, 2002

 

Condensed consolidated statements of cash flows - Nine months ended September 27, 2003 and September 28, 2002

 

Notes to condensed consolidated financial statements - September 27, 2003

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 4.

Controls and Procedures

 

 

PART II. OTHER INFORMATION

Item 6.

Exhibits and Reports on Form 8-K

 

Signatures

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PART I

Item 1. FINANCIAL STATEMENTS

Synalloy Corporation

Condensed Consolidated Balance Sheets

Sep 27, 2003

Dec 28, 2002

(Unaudited)

(Note)

-------------------

-------------------

Assets

Current assets

Cash and cash equivalents

$

779

$

48,656

Accounts receivable, less allowance

for doubtful accounts

16,500,454

11,424,904

Inventories

Raw materials

8,000,893

7,053,787

Work-in-process

3,535,617

3,586,785

Finished goods

10,382,788

9,113,902

----------------

----------------

Total inventories

21,919,298

19,754,474

Deferred income taxes

479,000

479,000

Income taxes receivable

-

1,342,435

Prepaid expenses and other current assets

411,126

541,696

----------------

----------------

Total current assets

39,310,657

33,591,165

Cash value of life insurance

2,426,299

2,381,299

Property, plant & equipment, net of accumulated

depreciation of $37,666,000 and $35,520,000

19,870,673

21,206,419

Deferred charges and other assets

2,739,031

2,787,336

----------------

----------------

Total assets

$

64,346,660

$

59,966,219

=========

=========

Liabilities and Shareholders' Equity

Current liabilities

Notes payable

$

-

$

3,863,088

Accounts payable

7,296,363

7,039,179

Income taxes payable

1,171,009

-

Accrued expenses

2,742,663

1,612,794

Current portion of environmental reserves

861,779

1,016,454

----------------

----------------

Total current liabilities

12,071,814

13,531,515

Long-term debt, less current portion

16,503,952

10,000,000

Environmental reserves

44,780

567,696

Deferred compensation

543,420

814,662

Deferred income taxes

1,178,000

1,178,000

Minority interest in a subsidiary

176,924

-

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

Retained earnings

42,705,285

42,952,216

Less cost of Common Stock in treasury:

2,010,696 and 2,035,696 shares

(16,877,515)

(17,087,361)

----------------

----------------

Total shareholders' equity

33,827,770

33,874,346

----------------

----------------

Total liabilities and shareholders' equity

$

64,346,660

$

59,966,219

=========

=========

Note: The balance sheet at December 28, 2002 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 Operations

(Unaudited)

Three Months Ended

Nine Months Ended

Sep 27, 2003

 Sep 28, 2002

 Sep 27, 2003

 Sep 28, 2002

----------------

---------------

-----------------

----------------

Net sales

$

25,850,592

$

21,957,953

$

70,304,191

$

64,393,722

Cost of sales

Total cost of sales

22,741,292

19,276,350

61,938,241

60,620,082

------------------

-----------------

------------------

------------------

Gross profit

3,109,300

2,681,603

8,365,950

3,773,640

Selling, general and   administrative expense

3,221,540

2,435,023

8,249,702

8,095,115

Cost of writing down property   and equipment

-

-

-

2,267,643

------------------

-----------------

------------------

------------------

Operating (loss) income

(112,240)

246,580

116,248

(6,589,118)

Other (income) and expense

Gain on sale of investments

-

-

-

(89,016)

Interest expense

224,909

181,985

707,335

613,318

Other, net

(268,916)

491

(282,811)

25,497

------------------

-----------------

------------------

------------------

(Loss) income before taxes

(68,233)

64,104

(308,276)

(7,138,917)

Minority Interest

(73,076)

-

(73,076)

-

Provision (benefit) for income   taxes

1,000

22,000

(86,000)

(2,514,000)

------------------

-----------------

------------------

------------------

Income (loss) before   cumulative effect of a   change in accounting   principle

3,843

42,104

(149,200)

(4,624,917)

Cumulative effect, net of   income tax of $127,000, of   a change in accounting   principle

-

-

-

(235,473)

------------------

-----------------

------------------

------------------

Net income (loss)

$

3,843

$

42,104

$

(149,200)

$

(4,860,390)

==========

========

=========

==========

Net income (loss) per common share:

Basic and diluted

Before cumulative effect   of a change in   accounting principle

0.00

$

$ 0.01

$ (0.02)

$ (0.78)

Cumulative effect of a   change in accounting   principle

$ 0.00

$ 0.00

$ 0.00

$ (0.04)

------------------

-----------------

------------------

------------------

$ 0.00

$ 0.01

$ (0.02)

$ (0.82)

==========

========

=========

==========

Average shares outstanding

Basic

5,988,755

5,964,304

5,972,454

5,964,304

==========

========

=========

==========

Diluted

6,021,351

5,964,304

5,980,528

5,964,304

==========

========

=========

==========

See accompanying notes to condensed consolidated financial statements

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Synalloy Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended

Sep 27, 2003

Sep 28, 2002

Operating activities

Net loss

$

(149,200)

$

(4,860,390)

Adjustments to reconcile net loss to net cash

(Used in) provided by operating activities:

Depreciation expense

2,210,560

2,477,264

Amortization of deferred charges

256,855

118,374

Deferred compensation

(271,242)

(260,552)

Deferred income taxes

-

(26,000)

Provision for losses on accounts receivable

247,845

138,865

Provision for write down of inventories

-

2,470,565

Provision for write down of plant and equipment

-

2,267,643

(Gain) loss on sale of property, plant and equipment

(4,446)

13,276

Write-off of goodwill

-

362,473

Cash value of life insurance

(45,000)

41,189

Environmental reserves

(677,591)

(459,690)

Issuance of treasury stock for director fees

102,625

-

Minority interests in operations of subsidiary

(73,076)

-

Changes in operating assets and liabilities:

Accounts receivable

(5,323,395)

(1,889,840)

Inventories

(2,164,824)

3,897,568

Other assets

(424,671)

(264,609)

Accounts payable

257,184

1,845,801

Accrued expenses

1,129,869

196,491

Income taxes payable

2,513,444

(1,469,491)

------------------

------------------

Net cash (used in) provided by operating activities

(2,415,063)

4,598,937

Investing activities

Purchases of property, plant and equipment

(1,350,581)

(1,767,437)

Proceeds from sale of property, plant and equipment

480,213

568,202

Decrease in note receivables

346,690

375,000

Proceeds from sale of interest in subsidiary

250,000

-

Proceeds from sale of investments

-

584,088

-----------------

------------------

Net cash used in investing activities

(273,678)

(240,147)

Financing activities

Net proceeds (payments) from revolving lines of credit

2,640,864

(4,358,994)

-----------------

------------------

Net cash provided by (used in) financing activities

2,640,864

(4,358,994)

-----------------

------------------

(Decrease) in cash and cash equivalents

(47,877)

(204)

Cash and cash equivalents at beginning of year

48,656

4,989

-----------------

------------------

Cash and cash equivalents at end of period

$

779

$

4,785

========

==========

See accompanying notes to condensed consolidated financial statements.

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Synalloy Corporation

Notes To Condensed Consolidated Financial Statements

(Unaudited)

September 27, 2003

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 nine-month period ended September 27, 2003, are not necessarily indicative of the results that may be expected for the year ending January 3, 2004. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the period ended December 28, 2002.

CHANGE IN ACCOUNTING PRINCIPLE: In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets ("Statements") effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives are no longer being amortized but are be subject to annual impairment tests in accordance with the Statements. Other intangible assets continue to be amortized over their useful lives. The Company applied the new standards on accounting for goodwill and other intangible assets during the second quarter of 2002, which resulted in a one-time charge of $235,000, or $.04 per share, representing the cumulative effect of a change in accounting principle, recorded as a restatement in the first quarter and included in the year-to-date numbers.

NOTE 2--INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or market.

NOTE 3--STOCK OPTIONS

The Company accounts for its stock-based compensation plans under the recognition and measurement principles of Accounting Standards Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Statement of Financial Accounting Standards No. 123 requires the Company to disclose pro forma net income and income per share data as if a fair value based accounting method had been used in the computation of compensation expense. Under APB No. 25, because the exercise price of the Company's employee stock options at least equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized. For purposes of the following pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period:

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Synalloy Corporation

Notes To Condensed Consolidated Financial Statements

(Unaudited)

September 27, 2003

Three Months Ended

Nine Months Ended

Sep 27, 2003

Sep 28, 2002

Sep 27, 2003

Sep 28, 2002

-------------------

-------------------

-------------------

-------------------

Net income (loss) reported

$

4,000

$

42,000

$

(149,000)

$

(4,860,000)

Compensation expense, net of   tax

(44,000)

(51,000)

(90,000)

(139,000)

----------------

----------------

----------------

----------------

Pro forma net loss

$

(40,000)

$

(9,000)

$

(239,000)

$

(4,999,000)

=========

=========

=========

=========

Basic and diluted income (loss)   per share

$.00

$.01

($.02)

($.82)

Compensation expense, net of   tax

($.01)

($.01)

($.02)

($.02)

----------------

----------------

----------------

----------------

Pro forma basic and diluted loss per share

($.01)

$.00

($.04)

($.84)

=========

=========

=========

=========

NOTE 4--SEGMENT INFORMATION

(Dollar amount in thousands)

Three Months Ended

Nine Months Ended

Sep 27, 2003

Sep 28, 2002

Sep 27, 2003

Sep 28, 2002

-------------------

-------------------

-------------------

-------------------

Net sales

Colors Segment

$

8,535

$

4,966

$