P E O P L E . P E R F O R M A N C E . E X C E L L E N C E .
2011 ANNUAL REPORT
CO MPA N Y PR O FI L E
SYNALLOY CORPORATION, HEADQUARTERED
IN SPARTANBURG, SOUTH CAROLINA, HAS
BEEN IN BUSINESS SINCE 1945 AND EMPLOYS
APPROXI MATELY 440 PEOPLE WITH OPERATIONS
IN TENNESSEE, ARKANSAS AND GEORGIA.
The Company is a diverse manufacturer comprised
of two major operating segments:
Metals Segment
BRISMET—Stainless Steel and Special Alloy
Pipe Manufacturing
BristolFab and Ram-Fab—Stainless Steel and
Carbon Pipe Fabrication
Chemicals Segment
Manufacturers Chemicals, LLC—Specialty
Chemicals Manufacturing
While the two segments are significantly different
with regard to the type of manufacturing they
conduct, they serve many of the same industries.
Ou r CO m pa n i e s
Founded in 1945, Synalloy
Corporation has a rich history
supplying its customers with
quality products and service
while providing employees with
an excellent place to work.
Headquartered in Spartanburg,
South Carolina, Synalloy
and its affiliates currently
employ over 440 people with
operations in Tennessee,
Georgia and Arkansas.
BRISMET pipe division of Bristol Metals, LLC is
the largest domestic manufacturer of welded pipe,
from stainless steel and other alloys.
Established in 1946 and acquired by
Synalloy in 1964
190,000 square foot manufacturing
facility in Bristol, TN
Produces a diverse line of welded
pipe—stainless steel, nickel,
duplex, titanium and moly grades
Maintains advanced quality systems—
ISO, PED and ASME certifications,
including nuclear
Majority of sales generated
through the pipe, valve and fittings
distribution system
Additional sales generated from
Synalloy’s Fabrication Division
(BristolFab and Ram-Fab)
end use markets
inClude:
Energy
Water & Wastewater
Treatment
Chemical
Petro-Chemical
Power
Pulp & Paper
Brewery & Food
Processing
Marine
Mining
Pharmaceutical
BristolFab fabrication division of Bristol Metals,
LLC provides complete turnkey pipe fabrication
solutions across a wide variety of market segments.
70+ years in business—acquired
by Synalloy in 1964
Union shop on same property as
BRISMET in Bristol, TN
Fabricates stainless and nickel
alloy pipe
Contracts with engineering and
construction firms, as well as
directly with project owners
end use markets
inClude:
Energy
Water & Wastewater
Treatment
Chemical
Petro-Chemical
Power
Pulp & Paper
Brewery & Food
Processing
Marine
Mining
Liquefied Natural Gas
(LNG) and Liquefaction
Nuclear
Manufacturers Chemicals, LLC, located in Cleveland, Tennessee and
Dalton, Georgia, manufactures lubricants, surfactants, defoamers,
reaction intermediaries, colorants/dyes and sulfated fats and oils.
Established in 1919 and acquired by Synalloy in 1996
Cleveland, TN Operation:
120,000 square foot facility
Full service chemical manufacturing plant, including exten-
sive warehousing and distribution capacity
Dalton, GA Operation:
32,000 square foot facility
Formulates dye mixes and has a full service shade-matching
laboratory, and warehousing and distribution capacity
Low-cost regional contract manufacturer for medium and
large chemical companies (50% of business)
Proprietary product development and manufacturing for
end customers and resellers
end use markets
inClude:
Paper
Carpet & Textiles
Industrial Chemicals
Metals & Mining
Agriculture
Paint
Latex Additives
Automotive
Petroleum
Cosmetics
Ram-Fab has over 20 years’ experience servicing the critical demands
of the power, petroleum, chemical and other industrial markets with
high quality affordable pipe and is an industry leader in the fabrication
of carbon steel and stainless steel piping systems.
Acquired by Synalloy in September 2009
Non-Union shop located in Crossett, AR
Fabricates carbon, stainless steel and chrome pipe
Includes state-of-the-art 25,000 square foot, four bay,
climate-controlled painting facility
end use markets
inClude:
Energy
Water & Wastewater
Treatment
Chemical
Petro-Chemical
Power
Pulp & Paper
Brewery & Food
Processing
Marine
Mining
Liquefied Natural Gas
(LNG) and Liquefaction
Nuclear
F i na nc i a l H igH ligH t s
(dollar amounts in thousands except per share data)
2011
2010
2009
CONTINUING OPERATIONS
Net sales
Gross profit
Operating income
Net income
FINANCIAL POSITION
Total assets
Shareholders’ equity
FINANCIAL RATIOS
Gross profit to net sales
Return on average equity
PER SHARE DATA—DILUTED
Net income
STOCK PRICE
Price range of Common Stock
High
Low
Close
$ 170,575
$ 151,121
$ 103,640
21,090
8,805
5,797
98,916
68,619
15,916
6,192
4,034
9,489
702
219
81,375
63,875
78,252
62,721
12%
9%
11%
6%
9%
0%
$
0.91
$
0.64
$
0.03
$ 15.50
$ 12.25
$ 10.49
9.15
10.27
7.47
12.12
3.85
9.42
200
150
100
50
1.0
0.8
0.6
0.4
0.2
0
0.0
60
50
40
30
20
10
0
NET SALES
(in millions)
EARNINGS PER SHARE
(diluted)
WORKING CAPITA L
(in millions)
$171
$151
$104
$0.91
$56
$0.64
$44
$43
2009
2010
2011
2009
2010
2011
2009
2010
2011
$0.03
2011 ANNUAL REPORT—1
Dear Shareholders,
Customers and Employees:
Two thousand and eleven was an excellent year for Synalloy. Our business units
made solid progress on the many key initiatives that were addressed throughout the
year. These efforts were reflected in the Company’s strong financial performance.
Sales for the year topped $170 million, an increase of 13 percent over 2010. Net earnings
were $5.8 million, or $.91 per share, up 44 percent over 2010’s net earnings of
$4.0 million, or $.64 per share. These results were even more impressive when one
considers that in 2010, the Metals unit had inventory gains from rising nickel prices
that added approximately $.11 per share to net earnings, while inventory losses
from declining nickel prices in 2011 reduced net earnings by $.17 per share.
While we are certainly pleased with the Company’s
Here are some of the most important accomplishments
financial performance, we are particularly heartened by the
in 2011, none of which could have been achieved without
willingness of our people to embrace the many competitive
the hard work and dedication of all of our employees:
and organizational challenges that we have asked them to
respond to during the year. Their drive and renewed energy
Our Safety programs continue to produce impressive
results with reduced OSHA frequency rates at each of our
to focus on continuous improvement throughout the com-
business units.
pany has made this year’s accomplishments possible. That
being said, our people will be the first to tell you that we
have much more to do and our goals for 2012 continue to
raise the bar.
We experienced a major turnaround in our BRISMET Pipe
Manufacturing unit, going from a loss in 2010 to solid
profitability in 2011.
corporate Officers
From left to right:
Richard D. sieradzki
CFO and Vice President, Finance
craig c. Bram
CEO and President
cheryl c. carter
Corporate Secretary and
Director of Human Resources
2
Our Chemicals group expanded its manufacturing capacity
years of service to Synalloy. I know everyone joins me in
at our Cleveland facility, which positions that business unit
thanking Jim for all that he has done for our Company.
for substantial growth in 2012.
The financial strength that we enjoy today is a direct result
Each of our business units is now under new sales leadership
as we look to build on our sales growth in 2011.
The senior management team across the Company has
added new talent, and several individuals have stepped
into roles of increasing responsibility.
Our two Metals businesses are now under the leadership
of the same management team, as we look to realize
additional benefits from the integration of these related
business units.
of Jim’s stewardship over these many years, and we look
forward to the opportunity to build on his past success.
In closing, I continue to see many opportunities for
Synalloy. Our management team has never been stronger
and all of our people are passionate about growing the
Company and producing results for our customers and
shareholders. I want to thank everyone for making my first
year as CEO a memorable one. I appreciate all the support
and encouragement that I have received throughout the
year. Everyone here at the Company is excited and ready to
Our Board of Directors has added two new members to
tackle the opportunities and challenges of 2012.
the team: Henry Guy and Jim Terry.
During the latter part of 2011, we started work on our
Corporate Development efforts and hope to complete several
transactions in 2012 that meet our acquisition criteria, most
importantly being accretive to earnings in the first year.
Craig C. Bram
CHIEf ExECuTIvE OffICER AnD PRESIDEnT
At the Annual Meeting in April, Jim Lane will be retiring
February 13, 2012
from the Board of Directors. This Annual Report contains a
tribute to Jim and his many accomplishments during his
Board of Directors
Standing left to right:
James g. lane, Jr., Chairman
carroll D. Vinson
James W. terry, Jr.
craig c. Bram
Seated left to right:
Henry l. guy
Murray H. Wright
2011 ANNUAL REPORT—3
>> Maximizing Customer Service and
Manufacturing Excellence
A key initiative at Synalloy is to be a sales- and customer-driven organization. In
order to achieve our vision of financial strength and growth, which ultimately
increases shareholder value, we must reshape our culture from the top down to
focus on customer service and manufacturing excellence. Each Business Unit
has built its mission statement and business plans around this philosophy.
synalloy Metals is committed to providing superior
products and services to all of our customers. We have
adopted management principles that stress quality of product
and service to enhance our position as one of the leading
stainless steel producers and fabricators in the united States.
We are enlisting the active support and participation of all
our employees in the ongoing effort to improve the quality
of products and services we provide to our customers. We
are committed to promoting management practices that
encourage teamwork and cooperation among all employees
at Synalloy Metals.
Our goal is to exceed all customer expectations by offering
one-stop shopping and a full range of in-house and out-
sourced services.
PRODUCT LINE—We offer one of the most diverse product lines in
the industry including carbon, chrome, stainless and high nickel
alloy steel pipe manufacturing and fabrication services.
PRODUCTION CAPABILITIES—Our extensive production equipment
also allows us to offer the longest lengths available in north
America, up to 60 feet or more from our continuous production
lines and 48 feet from our batch mill lines.
TOTAL PRODUCTION SOLUTIONS—BRISMET offers a full range of
individual services including forming, welding, heat-treating, surface
treatment, end preparation, x-ray and testing services.
Q UALITy & TESTING —BRISMET maintains advanced quality
systems—ISO, PED and ASME certifications, including nuclear.
Bristolfab has the following certifications: ISO, ASME PP and nQA-1
compliant Quality Assurance program. Ram-fab has the ASME PP,
ASME S, ASME u and ASME R stamps.
TECHNICAL SALES AND SUPPORT—Technical sales, engineering
and estimating are key components of the services provided by
Synalloy Metals. Our technical sales team provides on-site trouble-
shooting and support while being on call for our customers.
FABRICATION CAPABILITIES—We offer a full range of fabrication
services from our Bristolfab and Ram-fab locations, supporting
customers’ projects from the customer side while also offering full-
contractual support to include insuring and bonding.
ExPERIENCE—With over 100 years’ experience in our engineering
and estimating groups, we offer creative cost-cutting solutions to
standard fabrication problems. Since the 1940s, Bristolfab has provided
pipe fabrication services on some of the most high-profile heavy
industrial, municipal and manufacturing projects around the globe.
FREIGHT/LOGISTICS—Synalloy Metals’ dedicated transportation
fleet can transport sections up to 120" in diameter and up to
60' long. In addition, we can also offer contracted transport services
to third parties in need of quick delivery anywhere within the
united States. Our 80-acre site offers customers the benefit of
pre-manufacturing piping needs, storage and delivery to the site
as needed.
Manufacturers chemicals’ senior Management team
From left to right: Greg Gibson, Chuck Stieg, Kevin Hrebenar and
Mike Junkins
Manufacturers chemicals sets itself apart by focus-
ing on meeting customers’ needs through fast turnaround of
projects, quick scale up, and commercialization. Our extensive
equipment list and capacity enables us to handle large as well
as small jobs quickly and efficiently. We pride ourselves in
offering individual service, tailored to customers’ specific
needs. We are committed to providing products that meet the
highest quality standards along with the service, support and
experience that customers have come to expect.
ExPERIENCE—We’ve been in the chemical problem-solving busi-
ness for over 93 years.
ISO—Manufacturers Chemicals is proud to have its quality system
certified under the rigid standards developed under ISO-9001.
Through the diligence of our Quality Management System, we serve
our customers with consistent high standards of excellence and a
continuing commitment to constant improvement.
R&D—We have over 4,000 square feet of research & development
and quality assurance laboratories including sample, pilot plant, and
instrumentation labs in our Cleveland and Dalton plants. Our labs
are fully equipped with access to the latest research technology.
T ECHNICAL SERvICE—Our technical specialists can not only
modify existing products to your particular specifications, but
can also design and develop specialty chemicals to meet your
company’s needs.
4
Photo courtesy of Eastman Chemical Company
A S t r a t e g i c F o c u s f o r G r o w t h
42%
Earnings per Share increased
42% from 2010
Our management team has never
been stronger and all of our people
are passionate about growing the
Company and producing results for
our customers and shareholders.
2011 ANNUAL REPORT—5
Bristol Metals’ senior Management team
Standing left to right: Kris Epperson, Mike Barry, Barry Newberry, Mark Monper
and John Tidlow; Seated left to right: Josh Ringley, Kyle Pennington and Jim Hertz
247%
2011 Metals Segment
Operating Income increased
247% from 2010
Our safety programs continue to
produce impressive results.
6
>>
Driving Sales Through
Manufacturing & Operations
Synalloy can become a much larger and more diversified Company over the
next three to five years. We have a strong financial position that will allow us
to pursue both organic growth and growth through acquisitions.
BRisMet
Maintain focus on safety
Increase market share across all pipe sizes
Increase international sales
utilize Mach alliance to target large diameter, heavy wall pipe
Emphasize equipment maintenance and general
housekeeping
Improve manufacturing efficiencies—assembly line,
welding controls
Manage to operating metrics each month; maintain
current standards
Manufacturers Chemicals’ Quality First Team led by
David Dupre, Vice President, Operations
BristolFab/Ram-Fab
Improve safety in each location
Key corporate initiatives implemented in 2011 that we believe
will continue to drive sales efforts:
Rebuild backlog
Overhaul sales team
foster a performance-driven culture
Be a sales- and customer-driven organization
Add estimating and drafting resources to support increased
quote activity
Instill a sense of urgency
Restore fabrication’s visibility and branding
focus on steady, continuous improvement in operating
metrics and bottom line results
upgrade equipment and facility appearance in
each location
Tie bonuses to achieving pre-tax income targets
Maximize performance of each Business unit
Continue integration of Metals Segment under
Division President
Manufacturers chemicals
Target niche markets
Emphasize new product development via expanded
lab capabilities and technical support
Added major expansion of hot oil reactor capacity in
December 2011
2011 ANNUAL REPORT—7
Reflections on a Proud Past
For over 25 years, Jim Lane has dedicated his working life to Synalloy. Next to his family,
nothing has been more important to Jim than the continued success of our Company. In
his roles as Chief Executive Officer and Chairman of our Board of Directors, he has
guided our Company for nearly forty percent of its 67-year history.
This is no small feat when you consider all of the challenges
that Synalloy faced during Jim’s tenure. Jim was appointed CEO in
January of 1987. for the five previous years, Synalloy and its largest
division, Bristol Metals, had lost money. At that time, Bristol Metals
had one of the highest cost structures in its industry and there was
a real question as to whether that business could survive in the long
term. In order to rationalize our cost structure, labor expenses had to
come down and discussions between management and the union
led to a strike at the Bristol plant. As Jim would later reflect, this
was the most difficult issue he dealt with in his entire business
career. The process was painful for everyone, but the outcome
provided the basis for today’s excellent relationship with our union
employees, where they participate directly in the profits of our
Metals business, while receiving competitive wages and benefits. In
subsequent years, Jim encouraged the exploration of new markets
for our Metals business and supported these activities with capital
investments which allowed Bristol Metals to achieve a leadership
position within the industry. These efforts produced substantial
profits for our Company and continue to pay dividends today.
Over in our chemical operations, Jim was dealing with a
different set of problems. Our roots in this business were firmly
planted in the domestic textile industry. As this industry relocated
overseas, our business began to shrink at a rapid pace. It was
Jim’s charge to maintain the profitability of our chemical business
during this turbulent period, while at the same time identifying
opportunities to reinvest our capital. He targeted the specialty
chemical market, and successfully completed the acquisition of
Manufacturers Chemicals, which is the foundation of our very
profitable Chemicals Segment today.
While Jim’s management skills are broad, his financial acu-
men is reflected in the strength of Synalloy’s balance sheet and
capital structure. His stewardship in this area has been second to
none and we enjoy a financial structure today that not only sup-
ports growth for our existing businesses, but positions us to pur-
sue acquisitions as well. Back in the late 1980s, Jim also
8
James G. Lane, Jr.
introduced the Company to a formal strategic planning process
that has driven much of our success in recent years.
Since 1987, the country has weathered three recessions
and several crashes in the stock market. Many companies have
disappeared during this time. Through it all, under Jim Lane’s
steady and capable hands, Synalloy has not only survived, but
prospered. His legacy will serve to motivate current and future
management teams as they attempt to and hopefully build on
his success. Jim has set the bar high and shown us all what can
be accomplished with hard work and determination.
Jim was certainly never one to toot his own horn. We sup-
pose that if questioned about his service to the Company he
might respond in a somewhat similar fashion as Ronald Reagan
did when he left the office of President, “We didn’t just mark
time, We made the Company stronger, We made the Company
better for everyone, We left the Company in good hands…All in
all, not bad, not bad at all.”
We wish Jim and his family the very best!
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011
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
(State of incorporation)
57-0426694
(I.R.S. Employer Identification No.)
775 Spartan Blvd, Suite 102, 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 Section 12(b) of the
Act:
Name of each exchange on which registered:
Common Stock, $1.00 Par Value
(Title of Class)
NASDAQ Global Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes __ No X
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes __ No X
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 has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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 ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and “smaller reporting company” in
Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated Filer __ Accelerated filer X Non-accelerated filer __ Smaller reporting company __
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes __ No X
Based on the closing price as of July 1, 2011 which was the last business day of the registrant's most recently completed
second fiscal quarter, the aggregate market value of the common stock held by non-affiliates of the registrant was $77.5
million. Based on the closing price as of February 27, 2012, the aggregate market value of common stock held by non-
affiliates of the registrant was $74.3 million. The registrant did not have any non-voting common equity outstanding at
either date.
The number of shares outstanding of the registrant's common stock as of February 27, 2012 was 6,325,844.
Documents Incorporated By Reference
Portions of the Proxy Statement for the 2012 annual shareholders' meeting are incorporated by reference into Part III of this
Form 10-K.
1
Synalloy Corporation
Form 10-K
For Period Ended December 31, 2011
Table of Contents
Page #
Part I
Part II
Part III
Part IV
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Business ........................................................................................
Risk Factors ..................................................................................
Unresolved Staff Comments .........................................................
Properties ......................................................................................
Legal Proceedings ........................................................................
Mine Safety Disclosures ...............................................................
Item 5
Market for Registrant's Common Equity, Related Stockholder
Item 6
Item 7
Matters and Issuer Purchases of Equity Security .....................
Selected Financial Data .................................................................
Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................................
Item 7A Quantitative and Qualitative Disclosures about Market Risks .......
Financial Statements and Supplementary Data ............................
Item 8
Notes to Consolidated Financial Statements .................................
Segment Information ......................................................................
Report of Management ..................................................................
Report of Independent Registered Public Accounting Firm .........
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ................................................................
Controls and Procedures ...............................................................
Item 9A
Item 9B Other Information ...........................................................................
Item 9
Item 10
Item 11
Item 12
Item 13
Item 14
Directors, Executive Officers and Corporate Governance .............
Executive Compensation ...............................................................
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters .......................
Certain Relationships and Related Transactions ...........................
Principal Accountant Fees and Services .......................................
Item 15
Exhibits and Financial Statement Schedules .................................
Signatures ................................................................................................................................
3
7
10
10
11
11
12
14
15
22
23
28
38
41
42
43
43
43
43
44
44
44
44
45
46
Index to Exhibits ...............................................................................................................................47
2
Forward-Looking Statements
This Annual Report on Form 10-K includes and incorporates by reference "forward-looking statements" within the
meaning of the securities laws. All statements that are not historical facts are "forward-looking statements." The
words "estimate," "project," "intend," "expect," "believe," "anticipate," "plan," “outlook,” “should,” “could,” “may” and
similar expressions identify 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. 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; raw materials availability;
employee relations; ability to maintain workforce by hiring trained employees; customer delays or difficulties in the
production of products; financial stability of our customers; environmental issues; unavailability of debt financing
on acceptable terms and exposure to increased market interest rate risk; inability to comply with covenants and
ratios required by our debt financing arrangements; ability to weather an economic downturn; loss of consumer or
investor confidence and other risks detailed from time-to-time in Synalloy's Securities and Exchange Commission
filings. Synalloy Corporation assumes no obligation to update any forward-looking information included in this
Annual Report on Form 10-K.
PART I
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 775 Spartan Boulevard, Suite 102,
Spartanburg, South Carolina.
The Company’s business is divided into two segments, the Metals Segment and the Specialty Chemicals
Segment. The Metals Segment operates as Bristol Metals, LLC (“Bristol”), a wholly-owned subsidiary of Synalloy
Metals, Inc., and Ram-Fab, LLC (“Ram-Fab”). Bristol manufactures pipe (“BRISMET”) and fabricates piping
systems (“BristolFab”) from stainless steel and other alloys, and Ram-Fab fabricates piping systems from carbon,
chrome, stainless steel and other alloys. The Metals Segment’s markets include the chemical, petrochemical,
pulp and paper, mining, power generation (including nuclear), water and wastewater treatment, liquid natural gas
(“LNG”), brewery, food processing, petroleum, pharmaceutical and other industries. The Specialty Chemicals
Segment operates as Manufacturers Chemicals, LLC (“MC”), a wholly-owned subsidiary of Manufacturers Soap
and Chemical Company, located in Cleveland, Tennessee and Dalton, Georgia. The Specialty Chemicals
Segment produces specialty chemicals and dyes for the carpet, chemical, paper, metals, mining, agricultural,
fiber, paint, textile, automotive, petroleum, cosmetics, mattress, furniture, janitorial and other industries.
General
Metals Segment – This Segment is comprised of two wholly-owned subsidiaries: Synalloy Metals, Inc. which
owns 100 percent of Bristol Metals, LLC, located in Bristol, Tennessee; and Ram-Fab, LLC, located in Crossett,
Arkansas.
BRISMET manufactures welded pipe, primarily from stainless steel, but also from other corrosion-resistant
metals. Pipe is produced in sizes from one-half inch to 120 inches in diameter and wall thickness up to one and
one-half inches. Sixteen-inch and smaller diameter pipe is made on equipment that forms and welds the pipe in a
continuous process. Pipe larger than 16 inches in diameter is formed on presses or rolls and welded on batch
welding equipment. Pipe is normally produced in standard 20-foot lengths. However, BRISMET 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 16 inches in diameter. In larger sizes
BRISMET has a unique ability among domestic producers to make 48-foot lengths in diameters up to 36 inches.
3
Over the past six years, Bristol has made substantial capital improvements to both BRISMET and BristolFab,
expanding and improving capabilities to service markets requiring large diameter pipe and specialty alloy pipe
such as water and waste water treatment, LNG, and scrubber applications for the power industry. These
improvements include expanding its x-ray facilities which allows simultaneous use of real time and film
examination; updating material handling equipment; expanding capabilities for forming large pipe on existing
batch equipment, giving BRISMET the capability to produce 36-inch diameter pipe in 48-foot lengths with wall
thicknesses of up to one inch; adding a shear that has the capacity of shearing stainless steel plate up to one-inch
thick; completing plant expansions that allow the manufacture of pipe up to 42 inches in diameter utilizing more
readily available raw materials at lower costs, provide additional manufacturing capacity, and provide improved
product handling and additional space for planned equipment additions; and installing automated hydro-testing
equipment for pipe up to 72 inches in diameter.
A portion 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
BristolFab rather than performing all of the welding at the construction site. BristolFab’s pipe fabrication shop can
make one and one-half inch diameter cold bends on one-half inch through eight-inch stainless pipe with
thicknesses up through schedule 40S. Most BristolFab’s piping systems are produced from pipe manufactured by
BRISMET.
Ram-Fab’s carbon and chrome alloy pipe fabrication enhances the stainless fabrication business of BristolFab,
giving the Segment the capability to quote on all types of pipe fabrication projects utilizing any combination of
these three material types. Ram-Fab, which was purchased by the Company in 2009, was established over 20
years ago in Crossett, Arkansas and provides affordable, quality pipe fabrication in carbon steel and high chrome
alloys. From power plants to refineries to chemical plants, Ram-Fab serves a broad range of customers, both
domestic and international. As a carbon steel and high chrome pipe fabrication facility, Ram-Fab is poised to take
advantage of the anticipated increase in the construction of power generation plants utilizing coal or natural gas,
as well as nuclear. Refinery upgrades and environmental work will also add to the requirements of quality shop-
fabricated carbon steel and high chrome systems. Since BRISMET does not manufacture carbon or chrome alloy
pipe, these materials are purchased from outside suppliers. During 2010, Ram-Fab completed a capital project to
add a temperature and humidity controlled paint facility. Since the majority of its carbon steel fabrication systems
requires painting, this increased their production throughput and improved quality.
In order to establish stronger business relationships, only a few raw material suppliers are used. Five suppliers
furnish about 84 percent of total dollar purchases of raw materials, with one supplier totaling about 37 percent.
However, the Company does not believe that the loss of any of these suppliers would have a materially adverse
effect on the Company as raw materials are readily available from a number of different sources, and the
Company anticipates no difficulties in fulfilling its requirements.
This Segment's stainless steel 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, pulp and paper,
waste water treatment and LNG industries, with some other important industry users being mining, power
generation (including nuclear), water treatment, brewery, food processing, petroleum, pharmaceutical and
alternative fuels. The Segment’s carbon and chrome alloy products are used primarily in the power generation
and chemical industries.
Specialty Chemicals Segment – This Segment consists of the Company’s wholly-owned subsidiary
Manufacturers Soap and Chemical Company (MS&C). MS&C owns 100 percent of MC which is located in
Cleveland, Tennessee and Dalton, Georgia and is fully licensed for chemical manufacture. The Segment
produces specialty chemicals and dyes for the carpet, chemical, paper, metals, mining, agricultural, fiber, paint,
textile, automotive, petroleum, cosmetics, mattress, furniture, janitorial and other industries.
MC, which was purchased by the Company in 1996, produces over 1,100 specialty formulations and
intermediates for use in a wide variety of applications and industries. MC’s primary product lines focus on the
areas of defoamers, surfactants and lubricating agents. Over 20 years ago, MC began diversifying its marketing
efforts and expanding beyond traditional textile chemical markets. These three fundamental product lines find
their way into a large number of manufacturing businesses. Over the years, the customer list has grown to include
end users and chemical companies that supply paper, metal working, surface coatings, water treatment, mining
4
and janitorial applications. MC’s capabilities also include the sulfation of fats and oils. These products are used in
a wide variety of applications and represent a renewable resource, animal and vegetable derivatives, as
alternatives to more expensive and non-renewable petroleum derivatives. In its Dalton, Georgia facility, MC
serves the carpet and rug markets and also focuses on processing aids for wire drawing. MC Dalton blends and
sells specialty dyestuffs and resells chemicals and specialty chemicals manufactured in MC’s Cleveland plant to
its markets out of its leased warehousing facility. The Dalton site also contains a shade matching laboratory and
sales offices for the group. Both MC sites have extensive chemical storage and blending capabilities.
MC’s strategy has been to focus on industries and markets that have good prospects for sustainability in the U.S.
in light of global trends. MC’s marketing strategy relies on sales to end users through its own sales force, but it
also sells chemical intermediates to other chemical companies and distributors. It also has close working
relationships with a significant number of major chemical companies that outsource their production for regional
manufacture and distribution to companies like MC. MC has been ISO (International Organization for
Standardization) registered since 1995.
The Specialty Chemicals Segment maintains four laboratories for applied research and quality control which are
staffed by ten employees.
Most raw materials used by the Segment are generally available from numerous independent suppliers and about
34 percent of total purchases are from its top five suppliers. While some raw material needs are met by a sole
supplier or only a few suppliers, the Company anticipates no difficulties in fulfilling its raw material requirements.
Please see Note 13 to the Consolidated Financial Statements, which are included in Item 8 of this Form 10-K, for
financial information about the Company's Segments.
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 at
warehouse locations throughout the country. In addition, large quantity orders are shipped directly from
BRISMET’s plant to end-user customers. Producing sales and providing service to the distributors and end-user
customers are BRISMET’s President, one outside sales employee, seven independent manufacturers'
representatives and nine inside sales employees. The Metals Segment has one domestic customer that
accounted for approximately ten and eleven percent of the Metals Segment’s revenues in 2011 and 2010,
respectively, and accounted for less than ten percent for 2009. The Segment also has one other domestic
customer that accounted for less than ten percent of the Segment’s revenues in 2011 and 2010 but was
approximately ten percent in 2009. Loss of either of these customers’ revenues would have a material adverse
effect on both the Metals Segment and the Company.
Fabrication systems are sold nationwide under the BristolFab, Bristol Piping Systems and Ram-Fab trade names
by two outside sales employees. They are under the direction of Bristol’s President and the Vice President of
Fabrication Sales. Fabrication 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.
Specialty Chemicals Segment – Specialty chemicals are sold directly to various industries nationwide by five
full-time outside sales employees and eleven manufacturers' representatives. In addition, the President and other
members of the management team of MC devote a substantial part of their time to sales. The Specialty
Chemicals Segment has one domestic customer that accounted for approximately 24 percent of the Segment’s
revenues in 2011 and 2010 and 2009. However, this customer is a large global company, and the purchases by
this customer are derived from several different business units that operate autonomously from each other. Even
so, loss of this customer’s revenues would have a material adverse effect on both the Specialty Chemicals
Segment and the Company.
5
Competition
Metals Segment – Welded stainless steel pipe is the largest sales volume product of the Metals Segment.
Although information is not publicly available regarding the sales of most other producers of this product,
management believes that the Company is one of the largest domestic producers of such pipe. This commodity
product is highly competitive with eight known domestic producers and imports from many different countries. The
largest sales volume among the non-commodity specialized products comes from fabricating stainless, nickel
alloys, chrome alloys and carbon piping systems. Management believes the Company is one of the largest
producers of such systems. There is also significant competition in the piping systems’ markets with 13 known
domestic suppliers with similar capabilities as BristolFab and Ram-Fab, along with many other smaller suppliers.
Specialty Chemicals Segment – The Company is the sole producer of certain specialty chemicals manufactured
for other companies under processing agreements and also produces proprietary specialty chemicals. 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. The market for dyes is highly competitive and the Company has less than ten
percent of the market for its products.
Environmental Matters
Environmental expenditures that relate to an existing condition caused by past operations and 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.
Changes to laws and environmental issues, including climate change, are made or proposed with some frequency
and some of the proposals, if adopted, might directly or indirectly result in a material reduction in the operating
results of one or more of our operating units. We are presently unable to foresee the future well enough to
quantify such risks. See Note 5 to Consolidated Financial Statements, which are included in Item 8 of this Form
10-K, for further discussion.
Research and Development Activities
The Company spent approximately $352,000 in 2011, $392,000 in 2010 and $289,000 in 2009 on research and
development activities that were expensed in its Specialty Chemicals Segment. Four individuals, all 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 Company’s businesses and products are not normally subject to any seasonal impact causing significant
variations from one quarter to another.
Backlogs
The Specialty 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 Metals Segment’s fabrication products because they are
produced only after orders are received, generally as the result of competitive bidding. Order backlogs for these
products were $22,700,000 at the end of 2011. Approximately 80 percent of the backlog should be completed in
2012. The backlog totaled $25,300,000 and $44,300,000 at the 2010 and 2009 respective year ends.
6
Employee Relations
As of December 31, 2011, the Company had 441 employees. The Company considers relations with employees
to be satisfactory. The number of employees of the Company represented by unions, all located at the Bristol,
Tennessee facility, is 224, or 51 percent of the Company’s employees. They are represented by two locals
affiliated with the AFL-CIO and one local affiliated with the Teamsters. Collective bargaining contracts will expire
in January 2015, February 2014 and March 2015.
Financial Information about Geographic Areas
Information about revenues derived from domestic and foreign customers is set forth in Note 13 to the
Consolidated Financial Statements.
Available information
The Company electronically files with the Securities and Exchange Commission (SEC) its annual reports on Form
10-K, its quarterly reports on Form 10-Q, its periodic reports on Form 8-K, amendments to those reports filed or
furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the “1934 Act”), and proxy materials
pursuant to Section 14 of the 1934 Act. The SEC maintains a site on the Internet, www.sec.gov, that contains
reports, proxy and information statements, and other information regarding issuers that file electronically with the
SEC. The Company also makes its filings available, free of charge, through its Web site, www.synalloy.com, as
soon as reasonably practical after the electronic filing of such material with the SEC.
Item 1A Risk Factors
There are inherent risks and uncertainties associated with our business that could adversely affect our operating
performance and financial condition. Set forth below are descriptions of those risks and uncertainties that we
believe to be material, but the risks and uncertainties described are not the only risks and uncertainties that could
affect our business. Reference should be made to “Forward-looking Statements” above, and “Management's
Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 below.
The cyclical nature of the industries in which our customers operate causes demand for our products to be
cyclical, creating uncertainty regarding future profitability. Various changes in general economic conditions affect
the industries in which our customers operate. These changes include decreases in the rate of consumption or
use of our customers’ products due to economic downturns. Other factors causing fluctuation in our customers’
positions are changes in market demand, capital spending, lower overall pricing due to domestic and international
overcapacity, lower priced imports, currency fluctuations, and increases in use or decreases in prices of substitute
materials. As a result of these factors, our profitability has been and may in the future be subject to significant
fluctuation.
Product pricing and raw material costs are subject to volatility, both of which may have an adverse effect on our
revenues. From time-to-time, intense competition and excess manufacturing capacity in the commodity stainless
steel industry have resulted in reduced prices, excluding raw material surcharges, for many of our stainless steel
products sold by the Metals Segment. These factors have had and may have an adverse impact on our revenues,
operating results and financial condition. Although inflationary trends in recent years have been moderate, during
the same period stainless steel raw material costs, including surcharges on stainless steel, have been volatile.
While we are able to mitigate some of the adverse impact of rising raw material costs, such as passing through
surcharges to customers, rapid increases in raw material costs may adversely affect our results of operations.
Surcharges on stainless steel are also subject to rapid declines which can result in similar declines in selling
prices causing a possible marketability problem on the related inventory as well as negatively impacting revenues
and profitability. While there has been ample availability of raw materials, there continues to be a significant
consolidation of stainless steel suppliers throughout the world which could have an impact on the cost and
availability of stainless steel in the future. The ability to implement price increases is dependent on market
conditions, economic factors, raw material costs, including surcharges on stainless steel, availability of raw
materials, competitive factors, operating costs and other factors, most of which are beyond our control. In
addition, to the extent that we have quoted prices to customers and accepted customer orders for products prior
to purchasing necessary raw materials, or have existing contracts, we may be unable to raise the price of
products to cover all or part of the increased cost of the raw materials.
7
The Specialty Chemicals Segment uses significant quantities of a variety of specialty and commodity chemicals in
its manufacturing processes which are subject to price and availability fluctuations. Any significant variations in
the cost and availability of our specialty and commodity materials may negatively affect our business, financial
condition or results of operations. The raw materials we use are generally available from numerous independent
suppliers. However, some of our raw material needs are met by a sole supplier or only a few suppliers. If any
supplier that we rely on for raw materials ceases or limits production, we may incur significant additional costs,
including capital costs, in order to find alternate, reliable raw material suppliers. We may also experience
significant production delays while locating new supply sources. Purchase prices and availability of these critical
raw materials are subject to volatility. Some of the raw materials used by this Segment are derived from
petrochemical-based feedstock, such as crude oil and natural gas, which have been subject to historical periods
of rapid and significant movements in price. These fluctuations in price could be aggravated by factors beyond our
control such as political instability, and supply and demand factors, including OPEC production quotas and
increased global demand for petroleum-based products. At any given time we may be unable to obtain an
adequate supply of these critical raw materials on a timely basis, on price and other terms acceptable, or at all. If
suppliers increase the price of critical raw materials, we may not have alternative sources of supply. We
selectively pass changes in the prices of raw materials to our customers from time-to-time. However, we cannot
always do so, and any limitation on our ability to pass through any price increases could affect our financial
performance.
We rely upon third parties for our supply of energy resources consumed in the manufacture of our products in
both of our Segments. The prices for and availability of electricity, natural gas, oil and other energy resources are
subject to volatile market conditions. These market conditions often are affected by political and economic factors
beyond our control. Disruptions in the supply of energy resources could temporarily impair the ability to
manufacture products for customers. Further, increases in energy costs that cannot be passed on to customers,
or changes in costs relative to energy costs paid by competitors, has adversely affected, and may continue to
adversely affect, our profitability.
We encounter significant competition in all areas of our businesses and may be unable to compete effectively,
which could result in reduced profitability and loss of market share. We actively compete with companies
producing the same or similar products and, in some instances, with companies producing different products
designed for the same uses. We encounter competition from both domestic and foreign sources in price, delivery,
service, performance, product innovation and product recognition and quality, depending on the product involved.
For some of our products, our competitors are larger and have greater financial resources than we do. As a result,
these competitors may be better able to withstand a change in conditions within the industries in which we
operate, a change in the prices of raw materials or a change in the economy as a whole. Our competitors can be
expected to continue to develop and introduce new and enhanced products and more efficient production
capabilities, which could cause a decline in market acceptance of our products. Current and future consolidation
among our competitors and customers also may cause a loss of market share as well as put downward pressure
on pricing. Our competitors could cause a reduction in the prices for some of our products as a result of
intensified price competition. Competitive pressures can also result in the loss of major customers. If we cannot
compete successfully, our business, financial condition and consolidated results of operations could be adversely
affected.
The applicability of numerous environmental laws to our manufacturing facilities could cause us to incur material
costs and liabilities. We are subject to federal, state, and local environmental, safety and health laws and
regulations concerning, among other things, emissions to the air, discharges to land and water, climate changes
and the generation, handling, treatment and disposal of hazardous waste and other materials. Under certain
environmental laws, we can be held strictly liable for hazardous substance contamination of any real property we
have ever owned, operated or used as a disposal site. We are also required to maintain various environmental
permits and licenses, many of which require periodic modification and renewal. Our operations entail the risk of
violations of those laws and regulations, and we cannot assure you that we have been or will be at all times in
compliance with all of these requirements. In addition, these requirements and their enforcement may become
more stringent in the future. Although we cannot predict the ultimate cost of compliance with any such
requirements, the costs could be material. Non-compliance could subject us to material liabilities, such as
government fines, third-party lawsuits or the suspension of non-compliant operations. We also may be required to
make significant site or operational modifications at substantial cost. Future developments also could restrict or
eliminate the use of or require us to make modifications to our products, which could have a significant negative
impact on our results of operations and cash flows. At any given time, we are involved in claims, litigation,
8
administrative proceedings and investigations of various types involving potential environmental liabilities,
including cleanup costs associated with hazardous waste disposal sites at our facilities. We cannot assure you
that the resolution of these environmental matters will not have a material adverse effect on our results of
operations or cash flows. The ultimate costs and timing of environmental liabilities are difficult to predict. Liability
under environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several
basis. We could incur significant costs, including cleanup costs, civil or criminal fines and sanctions and third-
party claims, as a result of past or future violations of, or liabilities under, environmental laws. For additional
information related to environmental matters, see Note 5 to the Consolidated Financial Statements.
We are dependent upon the continued safe operation of our production facilities which are subject to a number of
hazards. In our Specialty Chemicals Segment, these production facilities are subject to hazards associated with
the manufacture, handling, storage and transportation of chemical materials and products, including leaks and
ruptures, explosions, fires, inclement weather and natural disasters, unscheduled downtime and environmental
hazards which could result in liability for workplace injuries and fatalities. In addition, some of our production
capabilities are highly specialized, which limits our ability to shift production to another facility in the event of an
incident at a particular facility. If a production facility, or a critical portion of a production facility, were temporarily
shut down, we likely would incur higher costs for alternate sources of supply for our products. We cannot assure
you that we will not experience these types of incidents in the future or that these incidents will not result in
production delays or otherwise have a material adverse effect on our business, financial condition or results of
operations.
Certain of our employees in the Metals Segment are covered by collective bargaining agreements, and the failure
to renew these agreements could result in labor disruptions and increased labor costs. We have 224 employees
represented by unions at the Bristol, Tennessee facility, which is 51 percent of our total employees. They are
represented by two locals affiliated with the AFL-CIO and one local affiliated with the Teamsters. Collective
bargaining contracts will expire in January 2015, February 2014 and March 2015. Although we believe that our
present labor relations are satisfactory, our failure to renew these agreements on reasonable terms as the current
agreements expire could result in labor disruptions and increased labor costs, which could adversely affect our
financial performance.
The limits imposed on us by the restrictive covenants contained in our credit facilities could prevent us from
obtaining adequate working capital, making acquisitions or capital improvements, or cause us to lose access to
our facilities. Our existing credit facilities contain restrictive covenants that limit our ability to, among other things,
borrow money or guarantee the debts of others, use assets as security in other transactions, make investments or
other restricted payments or distributions, change our business or enter into new lines of business, and sell or
acquire assets or merge with or into other companies. In addition, our credit facilities require us to meet financial
ratios which could limit our ability to plan for or react to market conditions or meet extraordinary capital needs and
could otherwise restrict our financing activities. Our ability to comply with the covenants and other terms of our
credit facilities will depend on our future operating performance. If we fail to comply with such covenants and
terms, we will be in default and the maturity of any then outstanding related debt could be accelerated and
become immediately due and payable. We may be required to obtain waivers from our lender in order to maintain
compliance under our credit facilities, including waivers with respect to our compliance with certain financial
covenants. If we are unable to obtain any necessary waivers and the debt under our credit facilities is
accelerated, our financial condition would be adversely affected.
We may not have access to capital in the future. We may need new or additional financing in the future to expand
our business or refinance existing indebtedness. If we are unable to access capital on satisfactory terms and
conditions, we may not be able to expand our business or meet our payment requirements under our existing
credit facilities. Our ability to obtain new or additional financing will depend on a variety of factors, many of which
are beyond our control. We may not be able to obtain new or additional financing because we may have
substantial debt or because we may not have sufficient cash flow to service or repay our existing or future debt. In
addition, depending on market conditions and our financial performance, equity financing may not be available on
satisfactory terms or at all.
Our existing property and liability insurance coverages contain exclusions and limitations on coverage. We have
maintained various forms of insurance, including insurance covering claims related to our properties and risks
associated with our operations. From time-to-time, in connection with renewals of insurance, we have
experienced additional exclusions and limitations on coverage, larger self-insured retentions and deductibles and
9
higher premiums, primarily from our Specialty Chemicals operations. As a result, in the future our insurance
coverage may not cover claims to the extent that it has in the past and the costs that we incur to procure
insurance may increase significantly, either of which could have an adverse effect on our results of operations.
We may not be able to make changes necessary to continue to be a market leader and an effective competitor.
We believe that we must continue to enhance our existing products and to develop and manufacture new
products with improved capabilities in order to continue to be a market leader. We also believe that we must
continue to make improvements in our productivity in order to maintain our competitive position. When we invest
in new technologies, processes, or production capabilities, we face risks related to construction delays, cost over-
runs and unanticipated technical difficulties. Our inability to anticipate, respond to or utilize changing technologies
could have a material adverse effect on our business and our consolidated results of operations.
Our strategy of using acquisitions and dispositions to position our businesses may not always be successful. We
have historically utilized acquisitions and dispositions in an effort to strategically position our businesses and
improve our ability to compete. We plan to continue to do this by seeking specialty niches, acquiring businesses
complementary to existing strengths and continually evaluating the performance and strategic fit of our existing
business units. We consider acquisition, joint ventures, and other business combination opportunities as well as
possible business unit dispositions. From time-to-time, management holds discussions with management of other
companies to explore such opportunities. As a result, the relative makeup of the businesses comprising our
Company is subject to change. Acquisitions, joint ventures, and other business combinations involve various
inherent risks, such as: assessing accurately the value, strengths, weaknesses, contingent and other liabilities
and potential profitability of acquisition or other transaction candidates; the potential loss of key personnel of an
acquired business; our ability to achieve identified financial and operating synergies anticipated to result from an
acquisition or other transaction; and unanticipated changes in business and economic conditions affecting an
acquisition or other transaction.
Our internal controls over financial reporting could fail to prevent or detect misstatements. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Item 1B Unresolved Staff Comments
None.
Item 2 Properties
The Company operates the major plants and facilities listed below, all of which are in adequate condition for their
current usage. All facilities throughout the Company are believed to be 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, except the dye blending and warehouse facilities located in Dalton, GA, and the corporate offices
located in Spartanburg, SC.
Location
Cleveland, TN
Bristol, TN
Crossett, AR
Dalton, GA
Spartanburg, SC
Augusta, GA
Principal Operations
Building Square Feet
Land Acres
Chemical manufacturing and warehousing facilities
Manufacturing of stainless steel pipe and stainless
steel piping systems
Manufacturing carbon and chrome alloy piping
systems
Dye blending and warehouse facilities (1)
Corporate headquarters (1)
Chemical manufacturing (2)
118,000
275,000
133,000
32,000
6,000
-
10.5
73.1
19.8
2.0
-
46.0
(1) Leased facility.
(2) Plant was closed in 2001 and all structures and manufacturing equipment have been removed.
10
Item 3 Legal Proceedings
For a discussion of legal proceedings, see Notes 5 and 11 to the Consolidated Financial Statements included in
Item 8 of this Form 10-K.
Item 4 Mine Safety Disclosures
Not applicable.
11
PART II
Item 5 Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
The Company had 686 common shareholders of record at February 27, 2012. The Company's common stock
trades on the NASDAQ Global Market under the trading symbol SYNL. The Company’s credit agreement only
restricts the payment of dividends through a minimum tangible net worth covenant. The Company paid a $0.25
cash dividend on December 5, 2011, a $0.25 cash dividend on December 8, 2010, a $0.25 cash dividend on
March 22, 2010 and a $0.10 cash dividend on March 10, 2009. The prices shown below are the high and low
sales prices for the common stock for each full quarterly period in the last two fiscal years as quoted on the
NASDAQ Global Market.
2011
2010
Quarter
1st
2nd
3rd
4th
High
Low
$ 15.50
$ 11.29
15.49
13.80
12.92
11.49
9.19
9.15
High
$ 9.22
11.04
10.15
12.25
Low
$ 7.47
7.97
8.25
8.40
The information required by Item 201(d) of Regulation S-K is set forth in Part III, item 12 of this Annual Report on
Form 10-K.
.
12/06
12/07
12/08
12/09
12/10
12/11
Synalloy Corporation
Russell 2000
NASDAQ Non-Financial
100.00
100.00
100.00
93.23
98.43
111.22
26.53
65.18
65.80
53.16
82.89
99.54
72.41
105.14
117.36
62.89
100.75
118.13
This graph and related information shall not be deemed to be “filed” with the Securities and Exchange
Commission or “soliciting material” or subject to Regulation 14A, or the liabilities of Section 18 of the Securities
Exchange Act of 1934, except to the extent the Company specifically requests that such information be treated as
12
soliciting material or specifically incorporates it by reference into a filing under the Securities Act of 1933 or the
Exchange Act.
Unregistered Sales of Equity Securities
Pursuant to the compensation arrangement with directors discussed under Item 12 "Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters" in this Form 10-K, on May 4,
2011, the Company issued to each of its non-employee directors 998 shares of its common stock (an aggregate
of 4,990 shares). Additionally, on August 11, 2011, the Company issued to each of its two newly elected non-
employee directors 1,124 shares of its common stock. Such shares were issued to the directors in lieu of
$15,000 of their annual cash retainer fees. Issuance of these shares was not registered under the Securities Act
of 1933 based on the exemption provided by Section 4(2) thereof because no public offering was involved. During
2011, two non-employee directors resigned/retired from the Board of Directors resulting in the forfeiture of 1,248
shares. The Company also issued 12,290 shares of common stock in 2011 to management and key employees
that vested pursuant to the 2005 Stock Awards Plan. Issuance of these shares was not registered under the
Securities Act of 1933 based on the exemption provided by Section 4(2) thereof because no public offering was
involved. Also during 2011, the Registrant issued shares of common stock to the following classes of persons
upon the exercise of options issued pursuant to the Registrant's 1998 Stock Option Plan. Issuance of these
shares was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 because the issuance
did not involve a public offering.
Date Issued
3/7/2011
5/26/2011
6/27/2011
Class of Purchasers
Non-Employee Directors
Officers and Employees
Officers and Employees
Number of Shares
Issued
Aggregate Exercise
Price
3,000
8,800
7,400
19,200
$14,490
87,648
73,704
$175,842
Neither the Company, nor any affiliated purchaser (as defined in Rule 10b-18(a)(3) of the Securities Exchange
Act of 1934) on behalf of the Company repurchased any of the Company’s securities during the fourth quarter of
2011.
13
Item 6 Selected Financial Data
Selected Financial Data and Other Financial Information
(Dollar amounts in thousands except for per share data)
2011
2010
2009
2008
2007
Operations
Net sales
Gross profit
Selling, general & administrative expense
Operating income
Net income continuing operations
Net (loss) income discontinued operations
Net income
Financial Position
Total assets
Working capital
Long-term debt, less current portion
Shareholders' equity
Financial Ratios
Current ratio
Gross profit to net sales
Long-term debt to capital
Return on average assets
Return on average equity
Per Share Data (income/(loss) – diluted)
Net income continuing operations
Net income (loss) discontinued operations
Net income
Dividends declared and paid
Book value
Other Data
Depreciation and amortization
Capital expenditures
Employees at year end
Shareholders of record at year end
Average shares outstanding - diluted
Stock Price
Price range of common stock
High
Low
Close
$
170,575 $
151,121 $
21,090
12,284
8,805
5,797
-
5,797
98,916
56,344
8,650
68,619
4.1:1
12%
11%
6%
9%
15,916
9,724
6,192
4,034
-
4,034
81,375
43,232
219
63,875
4.0:1
11%
0%
5%
6%
103,640 $ 167,269 $ 155,704
25,564
18,552
10,079
9,729
15,485
8,823
9,481
5,631
352
644
10,125
5,983
9,489
8,787
702
219
(4)
215
78,252
44,123
-
62,721
4.5:1
9%
0%
0%
0%
94,666
49,433
9,959
62,867
3.7:1
11%
14%
6%
9%
$
$
$
0.91 $
-
0.91
0.25
10.85
2,659 $
3,185 $
441
687
6,362
0.64 $
-
0.64
0.50
10.16
2,642 $
5,095 $
441
704
6,309
0.03 $
(0.00)
0.03
0.10
10.01
2,402 $
1,892 $
466
790
6,269
0.90 $
0.05
0.95
0.25
10.06
2,082 $
3,059 $
459
826
6,281
$
15.50 $
12.25 $
10.49 $
17.96 $
9.15
10.27
7.47
12.12
3.85
9.42
3.52
5.00
14
96,621
45,446
10,246
58,140
2.7:1
16%
15%
10%
18%
1.51
0.10
1.61
0.15
9.32
1,997
3,340
482
834
6,296
47.45
14.79
17.67
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the
Company's consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation of these financial statements
requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. On an on-going basis, management
evaluates its estimates and judgments based on historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions. Management believes the following
critical accounting policies, among others, affect its more significant judgments and estimates used in the
preparation of the Company's consolidated financial statements.
Allowance for Doubtful Accounts
The Company maintained allowances for doubtful accounts, $1,203,000 as of December 31, 2011, for estimated
losses resulting from the inability of its customers to make required payments and for disputed claims and quality
issues. The allowance is based upon a review of outstanding receivables, historical collection information and
existing economic conditions. 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.
Delinquent receivables are written off based on individual credit evaluations and specific circumstances of the
customer.
Inventory Reserves
The Company establishes a reserve for estimated obsolescence or unmarketable inventory in an amount equal to
the difference between the cost of inventory and the estimated market value based upon assumptions about
future demand and current market conditions. As of December 31, 2011, the Company has $2,699,000 accrued
for inventory obsolescence and market reserves. If actual market conditions are less favorable than those
estimated by management, additional inventory reserves may be required.
Environmental Reserves
As noted in Note 5 to the Consolidated Financial Statements included in Item 8 of this Form 10-K, the Company
has accrued $640,000 as of December 31, 2011, in environmental remediation costs which, in management's
best estimate, are sufficient to satisfy anticipated costs of known remediation requirements as outlined in Note 5.
Expenditures related to costs currently accrued are not discounted to their present values and are expected to be
made over the next three to four years. However, as a result of the evolving nature of the environmental
regulations, the difficulty in estimating the extent and necessary remediation 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. Changes in information known to management or
in applicable regulations may require the Company to record additional remediation reserves.
Impairment of Long-Lived Assets
The Company continually reviews the recoverability of the carrying value of long-lived assets. Long-lived assets
are reviewed for impairment when events or changes in circumstances, also referred to as “triggering events”,
indicate that the carrying value of a long-lived asset or group of assets (the “Assets”) may no longer be
recoverable. Triggering events include: a significant decline in the market price of the Assets; a significant
adverse change in the operating use or physical condition of the Assets; a significant adverse change in legal
factors or in the business climate impacting the Assets’ value, including regulatory issues such as environmental
actions; the generation by the Assets of historical cash flow losses combined with projected future cash flow
losses; or the expectation that the Assets will be sold or disposed of significantly before the end of the useful life
of the Assets. The Company concluded that there were no indications of impairment requiring further testing
during the year ended December 31, 2011.
15
If the Company concluded that, based on its review of current facts and circumstances, there were indications of
impairment, testing of the applicable Assets would be performed. The recoverability of the Assets to be held and
used is tested by comparing the carrying amount of the Assets at the date of the test to the sum of the estimated
future undiscounted cash flows expected to be generated by those Assets over the remaining useful life of the
Assets. In estimating the future undiscounted cash flows, the Company uses projections of cash flows directly
associated with, and which are expected to arise as a direct result of, the use and eventual disposition of the
Assets. This approach requires significant judgments including the Company’s projected net cash flows, which
are derived using the most recent available estimate for the reporting unit containing the Assets tested. Several
key assumptions would include periods of operation, projections of product pricing, production levels, product
costs, market supply and demand, and inflation. If it is determined that the carrying amount of the Assets are not
recoverable, an impairment loss would be calculated equal to the excess of the carrying amount of the Assets
over their fair value. Assets classified as held for sale are recorded at the lower of their carrying amount or fair
value less cost to sell. Assets to be disposed of other than by sale are classified as held and used until the Assets
are disposed or use has ceased.
Goodwill
The Company has goodwill of $1,355,000 recorded as part of its 1996 acquisition of Manufacturers Soap and
Chemical Company, operating within the Chemicals Segment, and $1,000,000 recorded as part of its 2009
acquisition of Ram-Fab, Inc., operating within the Metals Segment. Goodwill, which represents the excess of
purchase price over fair value of net assets acquired, is tested for impairment at least on an annual basis. The
initial step of the goodwill impairment test involves a comparison of the fair value of the reporting unit in which the
goodwill is recorded, with its carrying amount. If the reporting unit’s fair value exceeds its carrying value, no
impairment loss is recognized and the second step, which is a calculation of the impairment, is not performed.
However, if the reporting unit’s carrying value exceeds its fair value, an impairment charge equal to the difference
in the carrying value of the goodwill and the implied fair value of the goodwill is recorded. Implied fair value of
goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That
is, the fair value of the reporting unit is allocated to the assets and liabilities of the reporting unit as if it had been
acquired in a business combination. The excess of the fair value of the reporting unit over the amounts allocated
to assets and liabilities is the implied fair value of goodwill.
In making our determination of fair value of the reporting unit, we rely on the discounted cash flow method. This
method uses projections of cash flows from the reporting unit. This approach requires significant judgments
including the Company’s projected net cash flows, the weighted average cost of capital (“WACC”) used to
discount the cash flows and terminal value assumptions. We derive these assumptions used in our testing from
several sources. Many of these assumptions are derived from our internal budgets, which would include existing
sales data based on current product lines and assumed production levels, manufacturing costs and product
pricing. We believe that our internal forecasts are consistent with those that would be used by a potential buyer in
valuing our reporting units.
The WACC rate is based on an average of the capital structure, cost of capital and inherent business risk profiles
of the Company. The assumptions used in our valuation are interrelated. The continuing degree of
interrelationship of these assumptions is, in and of itself a significant assumption. Because of the
interrelationships among the assumptions, we do not believe it would be meaningful to provide a sensitivity
analysis on any of the individual assumptions. However, one key assumption in our valuation model is the WACC.
If the WACC, which is used to discount the projected cash flows, were higher, the measure of the fair value of the
net assets of the reporting unit would decrease. Conversely, if the WACC were lower, the measure of the fair
value of the net assets of the reporting unit would increase. Changes in any of the Company’s other estimates
could also have a material effect on the estimated future undiscounted cash flows expected to be generated by
the reporting unit’s assets.
Based on the Company’s goodwill impairment test in the fourth quarter of 2011, each reporting unit’s fair value
exceeded its carrying value, therefore no further testing was required and no impairment loss was recognized.
Liquidity and Capital Resources
Cash flows used in operating activities during 2011 and 2010 totaled $3,858,000 and $6,048,000, an
improvement in cash flows of $2,190,000. Cash flows in 2011 were generated from net income totaling
16
$8,456,000 before depreciation and amortization expense of $2,659,000. Cash flows were adversely affected by
an $8,710,000 increase in inventories in 2011, as year-end balances increased, net of reserves, from
$34,353,000 at the end of 2010 to $43,063,000 at the end of 2011. Substantially all of the increase occurred in
the Metals Segment to support higher 2012 sales projections, a sales mix shift to higher cost special alloy
products along with the Company deciding to begin stocking select special alloy finished goods products to be
responsive to projected customer demands. Accounts receivable increased by $6,609,000 in 2011, net of
reserves, as a result of the higher Metals Segment sales activity during the fourth quarter of 2011 compared to
the same period of 2010, combined with an increased number of days sales outstanding for fabrication sales.
Higher priced special alloy inventory purchases made during the fourth quarter of 2011 increased the accounts
payable balance at the end of 2011 by $2,369,000 when compared to the 2010 year-end balance. Operating cash
flows were favorably affected by higher accrued expenses at the end of 2011 compared to the end of 2010 of
$1,806,000, as profit based incentives increased $1,019,000 reflecting higher profits earned and advances from
customers (prepayments from customers used to purchase raw materials required for piping systems projects)
increased $470,000 in 2011 compared to 2010.
Cash flows used in operating activities during 2010 totaled $6,048,000 compared to cash flows provided by
continuing operations during 2009 of $19,903,000, or a decline in cash flows of $25,951,0000 from 2009 to 2010.
Cash flows provided by discontinued operations for 2009 was $286,000. Cash flows in 2010 were generated from
net income totaling $6,676,000 before depreciation and amortization expense of $2,642,000. Cash flows were
adversely affected in 2010 by a $8,849,000 increase in the Company’s inventories as inventories increased, net
of reserves, from $25,504,000 at the end of 2009 to $34,353,000 at the end of 2010. Substantially all of the
increase occurred in the Metals Segment to support higher 2011 sales projections. Accounts receivable increased
by $5,932,000 in 2010, net of reserves, reflecting a 46 percent increase in sales in the fourth quarter of 2010 over
the fourth quarter of 2009. In addition, accounts payable increased $4,092,000 in 2010, resulting primarily from
the timing of the receipt of and payment for stainless steel raw materials by the Metals Segment at year end. Also
negatively impacting cash flows in 2010 was a decline in accrued expenses at the end of 2010 compared to the
end of 2009 of $2,514,000, as advances from customers (prepayments from customers used to purchase raw
materials required for piping systems projects) declined $1,679,000 and a customer product claim was paid
during 2010 for $1,900,000. These amounts were partially offset by higher accruals for profit based incentives of
$552,000 reflecting higher profits earned in 2010 compared to 2009.
In 2011, the Company’s current assets increased $17,132,000 and current liabilities increased $4,020,000, from
the year ended 2010 amounts, which caused working capital for 2011 to increase by $13,112,000 to $56,344,000
from the 2010 total of $43,232,000. The current ratio for the year ended December 31, 2011, increased to 4.1:1
from the 2010 year-end ratio of 4.0:1.
The Company also used cash during 2011 for investing activities to fund capital expenditures of $3,185,000.
Financing activities during 2011 generated $8,431,000 through net borrowings on long-term debt and the
Company paid a $0.25 dividend on December 5, 2011 amounting to $1,580,000. The Company expects that
along with the existing amount of cash on hand, cash flows from 2012 operations and available borrowings will be
sufficient to make debt payments (if any), fund estimated 2012 capital expenditures of $3,700,000 and have
sufficient resources to expand into other business opportunities.
On June 30, 2010, the Company entered into a Credit Agreement with a regional bank to provide a $20,000,000
line of credit that expires on June 30, 2013. This agreement was amended by the bank on August 19, 2011 to
extend the maturity date of the Credit Agreement by one additional year to June 30, 2014. None of the other
terms of the credit agreement were modified. The Company’s previous debt facility, with a different lender, was
going to expire at the end of 2010. Interest on the new Credit Agreement is calculated using the One Month
LIBOR Rate, plus a pre-defined spread, which is determined by the Company’s Total Funded Debt to EBITDA
ratio. Borrowings under the line of credit are limited to an amount equal to a borrowing base calculation that
includes eligible accounts receivable, inventories and cash surrender value of the Company’s life insurance.
Additionally, the credit facility requires an agreement not to pledge the fixed assets of the Company. Covenants
under the debt agreement include maintaining a certain Funded Debt to EBITDA ratio, a minimum tangible net
worth, and total liabilities to tangible net worth ratio. The Company is also limited to a maximum amount of capital
expenditures per year, which is sufficient for the Company’s projected needs. Management does not believe that
these covenants and restrictions will have an adverse effect on its operations.
17
Results of Operations
Comparison of 2011 to 2010 - Consolidated
For the fiscal year ending December 31, 2011, the Company generated net earnings of $5,797,000, or $0.91 per
share, on sales of $170,575,000, compared to net earnings of $4,034,000, or $0.64 per share, on sales of
$151,121,000 in the prior year. The Company generated net earnings of $1,017,000, or $0.16 per share, on sales
of $40,241,000 in the fourth quarter of 2011, compared to net earnings of $1,462,000, or $0.23 per share, on
sales of $37,639,000 in the fourth quarter of 2010.
Consolidated gross profits increased 33 percent to $21,090,000 in 2011, compared to $15,916,000 in 2010, and,
as a percent of sales, increased to twelve percent of sales in 2011 compared to eleven percent of sales in 2010.
For the fourth quarter of 2011, consolidated gross profits was $4,783,000, an increase of ten percent from the
fourth quarter of 2010 of $4,336,000. Consolidated gross profits were twelve percent of sales for the fourth
quarter of 2011 and 2010. The increases in dollars and in percentage of sales were attributable to the Metals
Segment as discussed in the Metals Segment Comparison of 2011 to 2010 below. Consolidated selling, general
and administrative expense for 2011 increased by $2,560,000, compared to 2010, and was seven percent of
sales for 2011, up from six percent for 2010. These costs increased $1,325,000 during the fourth quarter of 2011
compared to the same period of 2010 and increased to nine percent of sales from six percent of sales for the
fourth quarters of 2011 and 2010, respectively. The dollar increase for both the year and fourth quarter of 2011
when compared to the same periods of 2010 resulted primarily from an $850,000 increase in bad debt expense
for the Chemicals Segment, an increase in management performance based incentives, the loss of outsourcing
reimbursements and higher salaries and wages, employee benefits and contract labor. All of these items will be
discussed in greater detail in the respective sections below.
Comparison of 2010 to 2009 - Consolidated
For 2010, the Company generated net earnings from continuing operations of $4,034,000, or $0.64 per share, on
sales of $151,121,000, compared to net earnings from continuing operations of $219,000, or $0.03 per share, on
sales of $103,640,000 in the prior year. The Company generated net earnings from continuing operations of
$1,462,000, or $0.23 per share, on sales of $37,639,000 in the fourth quarter of 2010, compared to a net loss
from continuing operations of $143,000, or $0.02 loss per share, on sales of $25,843,000 in the fourth quarter of
2009. The Company did not have discontinued operations for 2010 but generated a net loss from discontinued
operations of $4,000 which had no effect of earnings per share, and a net loss of $144,000, or $0.03 loss per
share, for the fiscal year and fourth quarter of 2009, respectively. As a result, the Company earned $4,034,000, or
$0.64 per share, and $1,462,000, or $0.23 per share, for the fiscal year and fourth quarter of 2010, respectively,
compared to net earnings of $215,000, or $0.03 per share, and a net loss of $287,000, or $0.05 loss per share,
for the same periods in 2009.
Consolidated gross profits from continuing operations increased 68 percent to $15,916,000 in 2010, compared to
$9,489,000 in 2009, and as a percent of sales increased to eleven percent of sales in 2010 compared to nine
percent of sales in 2009. Most of the improvement in dollars and in percentage of sales was attributable to the
Metals Segment as discussed in the Metals Segment Comparison of 2010 to 2009 below. Consolidated selling,
general and administrative expense for 2010 increased by $937,000, compared to 2009, and was six percent and
nine percent of sales for 2010 and 2009, respectively. The dollar increase resulted primarily from including a full
year of selling and administrative costs for Ram-Fab in 2010 compared to four months in 2009. Also,
management incentive bonuses, which are based on profits, increased in 2010 compared to 2009.
18
Metals Segment–The following table summarizes operating results and backlogs for the three years indicated.
Reference should be made to Note 13 to the Consolidated Financial Statements included in Item 8 of this Form
10-K.
2011
2010
2009
(Amounts in thousands)
Net sales
Cost of goods sold
Gross profit
Selling, general and
administrative expense
Amount
$ 127,727
112,445
15,282
6,029
Operating income (loss)
$ 9,253
%
100.0%
88.0%
12.0%
Amount
$108,544
99,367
9,177
%
100.0%
91.5%
8.5%
Amount
$ 70,891
66,713
4,178
%
100.0%
94.1%
5.9%
4.7%
7.3%
5,403
$ 3,774
5.0%
3.5%
4,190
$ (12)
5.9%
0.0%
Year-end backlogs -
Piping systems
$ 22,743
$ 25,300
$ 44,300
Comparison of 2011 to 2010 – Metals Segment
The Metals Segment sales increased 18 percent for 2011 as compared to 2010 primarily as a result of a twelve
percent increase in average selling prices coupled with a five percent increase in unit volumes. Sales for the
fourth quarter of 2011 increased nine percent over 2010 results as a result of a 16 percent increase in unit
volumes partially offset by a six percent decrease in average selling prices. Gross profit for 2011 increased 67
percent to $15,282,000, or twelve percent of sales, compared to 2010’s year-end total of $9,177,000, or nine
percent of sales. For the fourth quarter of 2011, gross profit was $3,448,000, or twelve percent of sales, an
increase of 17 percent over the fourth quarter of 2010 of $2,936,000, or eleven percent of sales. The Segment
experienced operating income of $9,253,000, up 145 percent, and $1,863,000, up 29 percent, for the year and
fourth quarter of 2011 compared to $3,774,000 and $1,441,000, respectively, for same periods of 2010.
The Segment experienced a favorable product mix in 2011 with higher priced non-commodity unit volume
increasing 18 percent while commodity unit volume decreased two percent. The favorable product mix also
affected the fourth quarter shipments, with non-commodity unit volumes increasing 33 percent for the quarter
while commodity unit volumes increased eight percent. Special alloy product shipments surpassed prior year
levels as a result of increased customer projects and distributor restocking. The improved unit volumes for the
year and fourth quarter are also the result of increased market share in North America and strong increases in
international sales. Pipe manufacturing operating margins strengthened throughout the year due to the favorable
product mix while fabrication margins were under pressure from underutilized capacity in the market. Increased
fabrication quote activity could indicate a turnaround in their sales and profitability. Operating income increased
for the Segment despite nickel prices falling for most of the year. As nickel prices decrease, selling prices are
reduced accordingly while material costs reflect the higher priced inventory. Although there is no way to precisely
calculate the effect of price level changes on profits, the Company estimates that for the year and fourth quarter of
2011, the Segment experienced a negative effect of $1,637,000 and $870,000, respectively. Nickel prices rose in
the prior year which resulted in an increase to operating income of $1,031,000 and $348,000 for the year and
fourth quarter of 2010.
Selling, general and administrative expense increased $625,000, or twelve percent in 2011 when compared to
2010. This expense category was five percent of sales for both periods. The increase resulted from higher
performance-based bonuses for select segment employees combined with increased salaries and wages and
employee procurement expenses as additional sales executives were hired for the fabrication product line along
with wage increases for senior levels executives as their responsibilities expanded to include the entire metals
segment.
Comparison of 2010 to 2009 – Metals Segment
The Metals Segment sales increased 53 percent for the year ended 2010 compared to 2009 from a 50 percent
increase in unit volumes combined with a two percent increase in average selling prices. Gross profit for 2010
increased 120 percent to $9,177,000, or nine percent of sales, from 2009 year end’s total of $4,178,000, or six
19
percent of sales. Operating income for 2010 was $3,774,000 compared to an operating loss of $12,000 for 2009.
Sales for the fourth quarter of 2010 increased 60 percent to $27,573,000 from sales of $17,272,000 in the fourth
quarter of 2009, resulting from an 18 percent increase in unit volumes and a 35 percent increase in average
selling prices. The Segment had a gross profit of $2,936,000, or eleven percent of sales, for the fourth quarter of
2010 compared to a gross profit of $161,000, or one percent of sales, for the fourth quarter of 2009. The Segment
generated operating income of $1,441,000 in the fourth quarter of 2010 compared to an operating loss of
$985,000 for the fourth quarter of 2009.
The large unit volume improvement for 2010 compared to 2009 was essentially the result of increased commodity
pipe sales resulting from an aggressive effort to gain market share combined with a modest increase in non-
commodity products. Although sales prices per pound increased about 16 percent for both the commodity and
non-commodity products, the change in product mix to a much higher percentage of commodity pipe resulted in
the modest overall selling price increase. Operating income for 2010 also reflects a $500,000 charge during the
first quarter for a product claim made by a Metals Segment customer and $1,100,000 was expensed for this claim
in 2009, $343,000 of which was recorded in the fourth quarter of 2009. Fourth quarter 2010 unit volumes
increased as a result of the aforementioned aggressive marketing effort partially offset by lower non-commodity
unit sales. Fourth quarter’s selling prices, when compared to 2009’s fourth quarter, reflects primarily much higher
prices for non-commodity products resulting from selling more expensive special alloys. Higher stainless steel
prices and a change in product mix to a higher percent of lower-priced commodity pipe also impacted the average
selling price. The improvement in fourth quarter operating income came primarily from our fabrication operations.
Fabrication’s backlog was $25,300,000 at the end of the fourth quarter of 2010 compared to $44,300,000 at the
end of the fourth quarter of 2009.
Selling, general and administrative expense increased $1,214,000, or 29 percent in 2010 when compared to
2009, and was five percent of sales compared to six percent of sales for 2010 and 2009, respectively. The dollar
increase was attributable to including a full year of Ram-Fab’s selling, general and administrative expense during
2010 compared to only four months for 2009 since Ram-Fab was acquired by the Company on August 31, 2009.
Also, higher performance based bonuses were earned for 2010 resulting from higher profits for the current year.
Specialty Chemicals Segment–The following tables summarize operating results for the three years indicated.
Reference should be made to Note 13 to the Consolidated Financial Statements included in Item 8 of this Form
10-K.
(Amounts in thousands)
Net sales
Cost of goods sold
Gross profit
Selling, general and
administrative expense
Operating income
2011
2010
2009
Amount
$ 42,848
37,040
5,808
3,587
$ 2,221
%
100.0%
86.4%
13.6%
Amount
$ 42,577
35,838
6,739
8.4%
5.2%
2,779
$ 3,960
%
100.0%
84.2%
15.8%
6.5%
9.3%
Amount
$ 32,749
27,438
5,311
2,589
$ 2,722
%
100.0%
83.8%
16.2%
7.9%
8.3%
Comparison of 2011 to 2010 – Specialty Chemicals Segment
Sales for the Specialty Chemicals Segment increased one percent for 2011, ending the year at $42,848,000
compared to $42,577,000 in 2010. Pounds shipped for the year were eleven percent lower than the prior year.
For the fourth quarter of 2011, sales were $10,267,000, up two percent from 2010’s fourth quarter sales of
$10,066,000. Pounds shipped for the quarter were down ten percent from the prior year. The Segment
experienced a favorable product mix during the year and fourth quarter of 2011, with increased sales of higher
priced products combined with a slightly higher selling price as the Segment passed along a portion of its raw
material cost increases to its customers. Gross profit for the year was $5,808,000, down 14 percent from the prior
year amount of $6,739,000. As a percent of sales, 2011 gross profit was 14 percent of sales and 2010 was 16
percent of sales. The fourth quarter showed gross profit of $1,336,000, or 13 percent of sales, and $1,400,000, or
14 percent of sales, for 2011 and 2010, respectively. The reduction in gross profit for the year and fourth quarter
resulted from increased raw material costs and the Segment’s desire to maintain / increase market share by not
20
passing on all of the increased costs to its customers. Operating income for the year decreased 44 percent from
the prior year. Operating income for 2011 was $2,221,000, or five percent of sales, while 2010 recorded
$3,960,000, or nine percent of sales. The Segment showed an operating loss of $97,000, or one percent of
sales, for the fourth quarter of 2011. The fourth quarter of 2010 recorded operating income of $777,000, or eight
percent of sales. During December 2011, the Segment recorded an $817,000 charge to reserve for the potential
uncollectable receivable balances for four customers. The bulk of the charge was for a customer who
experienced financial difficulty during the last half of 2011. Management attempted to develop a long-term
payment strategy for the customer but was never able to develop a plan suitable to both parties.
Selling, general and administrative expense increased $808,000 or 29 percent in 2011 when compared to 2010,
and increased to eight percent of sales in 2011 compared to seven percent in 2010. For the fourth quarter, selling,
general and administrative expense was $1,433,000 in 2011, an increase of $809,000 when compared to the
same period of 2010. The increase in the reserve for potential uncollectable receivables in December, 2011, as
explained in the prior paragraph, resulted in the entire increase.
Comparison of 2010 to 2009 – Specialty Chemicals Segment
The Specialty Chemicals Segment sales increased 30 percent for the year ended 2010 compared to 2009. Gross
profit for the year ended 2010 increased 28 percent to $6,739,000, or 16 percent of sales, compared to a gross
profit of $5,311,000, or 16 percent of sales, for 2009. Operating income increased 46 percent to $3,960,000 for
the year ended 2010 compared to $2,722,000 earned in 2009. Sales increased 17 percent to $10,066,000 for the
fourth quarter of 2010 compared to $8,571,000 for the fourth quarter of 2009. Gross profit for the fourth quarter of
2010 was $1,400,000 or 14 percent of sales, which approximated the fourth quarter of 2009’s total of $1,406,000,
or 16 percent of sales. Operating income declined one percent to $777,000 for the fourth quarter of 2010
compared to $783,000 for the fourth quarter of 2009. The sales gain came from increases in the sulfated product
line and additives for dust control and agricultural chemicals. Contract manufacturing also contributed to the sales
growth. The declines in gross profit and operating income for the fourth quarter of 2010, when compared to the
same period in 2009, were caused primarily by our inability to pass on all of the increases in raw material costs,
especially from naturally occurring fats and oils and petroleum derivatives.
Selling, general and administrative expense increased $190,000 or seven percent in 2010 compared to the 2009
amount, and decreased to seven percent of sales in 2010 from eight percent of sales in 2009. The increase
resulted primarily from increased selling commissions from the increase in sales in 2010 compared to 2009 plus
higher performance based bonuses for the current year.
Unallocated Income and Expense
Reference should be made to Note 13 to the Consolidated Financial Statements, included in Item 8 of this Form
10-K, for the schedule that includes these items.
Comparison of 2011 to 2010 – Corporate
Corporate expenses for 2011 were $2,668,000 or two percent of sales, compared to $1,541,000 or one percent of
sales, for 2010. This represents an increase of $1,127,000 or 73 percent. The most significant contributor to the
increase was higher performance based bonuses for select corporate employees which increased $622,000
during 2011 compared to 2010. The Company also experienced higher stock option compensation costs and
consulting fees, partially offset by lower professional fees. During the second quarter of 2011, the Company
relocated its Corporate Office and the Company was no longer able to provide administrative services to the
Spartanburg manufacturing facility which the Company sold in 2009. This resulted in the loss of reimbursement
for the costs of providing these functions to the buyer of this facility during 2011 along with higher office rent
expense.
Comparison of 2010 to 2009 – Corporate
Corporate expense decreased $467,000, or 23 percent, to $1,541,000, or one percent of sales, for 2010,
compared to $2,008,000, or two percent of sales, in 2009. The decrease resulted primarily from a decrease in
environmental expenses that were eliminated by the sale of the Spartanburg manufacturing facility at the end of
the third quarter of 2009. There was no environmental expense during 2010, compared to $343,000 in 2009. The
remainder of the decrease resulted from lower performance based bonuses for 2010. Higher bonuses were
awarded in 2009 due to the Ram-Fab acquisition and manufacturing facility dispositions (See Note 16 and Note
17). Interest expense in 2010 decreased $165,000 from 2009 as a result of lower outstanding debt balances
21
during 2010 compared to 2009. Other expense for the prior year reflects a $150,000 medical settlement with a
former employee of the Company’s Augusta, Georgia chemical operation which was closed in 2001. No similar
charge occurred in the current year.
Contractual Obligations and Other Commitments
As of December 31, 2011, the Company’s contractual obligations and other commitments were as follows:
(Amounts in thousands)
Payment Obligations for the Year Ended
Total
2012
2013
2014
2015
2016
Thereafter
Obligations:
Revolving credit facility
$
8,650 $
-
$
-
$
8,650
$
Interest payments
Operating leases
Purchase obligations
Deferred compensation (1)
385
645
-
478
154
153
154
148
77
146
-
-
-
-
-
72
71
71
21
Total
$
10,158 $
379 $
373 $
8,944 $
165 $
- $
-
144
$
-
-
54
21
75
$
-
-
-
-
222
222
(1) For a description of the deferred compensation obligation, see Note 6 to the Consolidated Financial Statements included in
Item 8 of this Form 10-K.
Current Conditions and Outlook
The Metals Segment’s business is highly dependent on its customers’ capital expenditures which have begun to
show some improvement. Excess capacity in the pipe manufacturing industry continues to present a difficult
operating environment. Stainless steel surcharges, which affect the cost of raw materials and selling prices
declined in May 2011 through January 2012 but have been increasing for February and March of 2012. These
recent increases should generate customer interest to purchase inventory in the near-term. Rising surcharges
should also limit the Segment’s exposure to any further inventory losses. We believe we are the largest and most
capable domestic producer of non-commodity stainless steel pipe and an effective producer of commodity
stainless steel pipe which should serve us well in the long run. Our market position remains strong in the
commodity pipe market and we are experiencing a significant upswing in project and special alloy demand both
domestically and internationally. We also continue to be optimistic about the fabrication business over the long
term. There has been a noticeable increase in fabrication quote requests. Approximately 58 percent of the
fabrication current backlog comes from paper and wastewater treatment projects with chemical projects
accounting for an additional 21 percent. Fabrication’s backlog was $22,700,000 at December 31, 2011 and
$25,300,000 at January 1, 2011. We expect our fabrication backlog to continue to increase over the next quarter
or two as our sales force converts the previously mentioned new inquiries into firm orders. We estimate that
approximately 80 percent of the fabrication backlog should be completed over the next twelve months.
Specialty Chemicals Segment’s sales continue to show improvement into 2012, building on the trend started in
the fourth quarter of 2011. The Company expects sales volumes to continue to improve throughout 2012 as a
result of aggressive product pricing. Even though raw material costs have stabilized over the last several months,
management expects costs to start increasing beginning late in the first quarter of 2012. The Segment expects
that a major defoamer project will be implemented in 2012, which would have the potential for a significant impact
on sales and profitability for 2012. There can, however, be no assurance that this project will be implemented.
Item 7A Quantitative and Qualitative Disclosures about Market Risks
The Company is exposed to market risks from adverse changes in interest rates. 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. Except as described below, 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.
22
Fair value of the Company's debt obligations, which approximated the recorded value, consisted of:
At December 31, 2011
$8,650,000 under a $20,000,000 revolving line of credit expiring on June 30, 2014 with a variable
interest rate of 1.78 percent.
At January 1, 2011
$219,000 under a $20,000,000 revolving line of credit expiring on June 30, 2013 with a variable
interest rate of 1.76 percent.
Item 8 Financial Statements and Supplementary Data
The Company’s consolidated financial statements, related notes, report of management and report of the
independent registered public accounting firm follow on subsequent pages of this report.
23
Consolidated Balance Sheets
As of December 31, 2011 and January 1, 2011
Assets
Current assets
Cash and cash equivalents
Accounts receivable, less allowance for doubtful
accounts of $1,203,000 and $435,000, respectively
Inventories
Raw materials
Work-in-process
Finished goods
Total inventories
Deferred income taxes
Prepaid expenses and other current assets
Total current assets
Cash value of life insurance
Property, plant and equipment, net
Goodwill
Deferred charges, net and other non-current assets
2011
2010
$ 110,138
$ 108,902
26,582,279
19,972,900
10,120,408
12,632,301
20,310,029
43,062,738
2,632,145
2,250,735
74,638,035
3,092,430
18,713,524
2,354,730
117,645
12,660,670
9,571,811
12,120,276
34,352,757
2,257,000
814,185
57,505,744
3,029,566
18,191,947
2,354,730
293,372
Total assets
$ 98,916,364
$ 81,375,359
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable
Accrued expenses
Current portion of environmental reserves
Total current liabilities
Long-term debt
Environmental reserves
Deferred compensation
Deferred income taxes
Shareholders' equity
Common stock, par value $1 per share - authorized
12,000,000 shares; issued 8,000,000 shares
Capital in excess of par value
Retained earnings
Less cost of common stock in treasury: 1,674,156 and
1,710,591 shares, respectively
Total shareholders' equity
Commitments and contingencies – See Note 11
$ 13,043,153
5,112,662
138,000
18,293,815
8,650,431
502,000
293,555
2,557,662
8,000,000
1,153,889
74,198,151
83,352,040
14,733,139
68,618,901
$ 10,674,077
3,306,291
293,456
14,273,824
219,275
643,000
302,159
2,062,000
8,000,000
942,707
69,981,395
78,924,102
15,049,001
63,875,101
Total liabilities and shareholders' equity
$ 98,916,364
$ 81,375,359
See accompanying notes to consolidated financial statements.
24
Consolidated Statements of Operations
Years ended December 31, 2011, January 1, 2011 and January 2, 2010
Net sales
Cost of sales
Gross profit
2011
2010
2009
$ 170,575,298
$ 151,120,668
$ 103,639,587
149,485,455
135,204,721
94,150,808
21,089,843
15,915,947
9,488,779
Selling, general and administrative expense
12,284,478
9,723,590
8,786,544
Operating income
8,805,365
6,192,357
702,235
Other (income) and expense
Interest expense
Change in fair value of interest rate swap
Other, net
140,784
-
(85,579)
54,240
-
(11,706)
Income from continuing operations before income taxes
Provision for income taxes
8,750,160
2,953,000
6,149,823
2,116,000
350,400
(131,000)
131,210
351,625
133,000
Net income from continuing operations
5,797,160
4,033,823
218,625
Income from discontinued operations before income
taxes
Provision for income taxes
Net (loss) from discontinued operations
-
-
-
-
-
-
36,891
41,000
(4,109)
Net income
$ 5,797,160
$ 4,033,823
$ 214,516
Net income (loss) per basic common share:
Continuing operations
Discontinued operations
Net income
Net income (loss) per diluted common share:
Continuing operations
Discontinued operations
Net income
See accompanying notes to consolidated financial statements.
$ 0.92
-
$ 0.92
$ 0.64
-
$ 0.64
$ 0.03
( 0.00)
$ 0.03
$ 0.91
-
$ 0.91
$ 0.64
-
$ 0.64
$ 0.03
( 0.00)
$ 0.03
25
Consolidated Statements of Shareholders' Equity
Common
Stock
Capital in
Excess of
Par Value
Retained
Earnings
Cost of
Common
Stock in
Treasury
Total
Balance at January 3, 2009
$ 8,000,000
$ 752,765
$ 69,529,995
$ (15,416,192)
$ 62,866,568
Net income
Payment of dividends,
$0.10 per share
Issuance of 19,042 shares
of common stock
from the treasury
Employee stock option
and grant compensation
214,516
214,516
(631,108)
(631,108)
(106,219)
167,510
61,291
209,475
209,475
Balance at January 2, 2010
8,000,000
856,021
69,113,403
(15,248,682)
62,720,742
Net income
Payment of dividends,
$0.50 per share
Issuance of 13,949 shares
of common stock
from the treasury
Stock options exercised
for 8,884 shares, net
Employee stock option
and grant compensation
4,033,823
(3,165,831)
4,033,823
(3,165,831)
(55,220)
(37,908)
179,814
122,707
67,487
76,974
39,066
179,814
Balance at January 1, 2011
8,000,000
942,707
69,981,395
(15,049,001)
63,875,101
Net income
Payment of dividends,
$0.25 per share
Issuance of 18,280 shares
of common stock
from the treasury
Stock options exercised
for 18,155 shares, net
Employee stock option
and grant compensation
5,797,160
(1,580,404)
5,797,160
(1,580,404)
(72,247)
6,876
276,553
160,835
88,588
155,027
161,903
276,553
Balance at December 31, 2011
$ 8,000,000
$ 1,153,889
$ 74,198,151
$ (14,733,139)
$ 68,618,901
See accompanying notes to consolidated financial statements.
26
Consolidated Statements of Cash Flows
Years ended December 31, 2011, January 1, 2011 and January 2, 2010
Operating activities
Net income from continuing operations
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation expense
Amortization of deferred charges
Deferred income taxes
Provision for losses on accounts receivable
(Reduction of) provision for losses on inventories
Loss (gain) on sale of property, plant and equipment
Cash value of life insurance
Environmental reserves
Issuance of treasury stock for director fees
Employee stock option and grant compensation
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Other assets and liabilities
Accounts payable
Accrued expenses
Accrued income taxes
Net cash (used in) provided by continuing operating
activities
Net cash provided by discontinued operating
activities
Net cash (used in) provided by operating activities
Investing activities
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Acquisition of Ram-Fab, Inc.
Net cash used in continuing investing activities
Sale of Blackman Uhler Specialties, LLC assets, net
Sale of Organic Pigments, LLC assets, net
Purchases of property, plant and equipment
Net cash provided by discontinued investing
activities
Net cash (used in) provided by investing activities
Financing activities
Net borrowings from (payments on) long-term debt
Proceeds from exercised stock options
Dividends paid
Net cash provided by (used in) financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See accompanying notes to consolidated financial statements.
27
2011
2010
2009
$ 5,797,160
$ 4,033,823
$ 218,625
2,631,864
26,958
120,517
792,719
(599,981)
198
(62,864)
(296,456)
78,704
276,553
(7,402,098)
(8,110,000)
(973,550)
2,369,076
1,806,371
(312,951)
2,631,785
10,680
(116,000)
62,617
1,356,057
5,372
(69,929)
(188,544)
67,487
179,814
(5,994,387)
(10,204,490)
(17,103)
4,092,446
(2,514,456)
616,885
2,331,531
70,535
(100,000)
497,576
(1,604,000)
(4,973)
(91,662)
(239,000)
75,010
209,475
4,313,283
17,392,097
(618,415)
(2,053,358)
(748,568)
254,403
(3,857,780)
(6,047,943)
19,902,559
-
(3,857,780)
-
(6,047,943)
285,972
20,188,531
(3,185,129)
31,490
-
(3,153,639)
-
-
-
(5,095,254)
63,032
-
(5,032,222)
-
-
-
(1,892,195)
1,162,119
(5,707,773)
(6,437,849)
10,365,757
1,441,006
(501,346)
-
(3,153,639)
-
(5,032,222)
11,305,417
4,867,568
8,431,156
161,903
(1,580,404)
7,012,655
1,236
108,902
$ 110,138
219,275
39,066
(3,165,831)
(2,907,490)
(13,987,655)
14,096,557
$ 108,902
(10,425,649)
-
(631,108)
(11,056,757)
13,999,342
97,215
$ 14,096,557
Notes to Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Description of Business
Synalloy Corporation, a Delaware corporation, 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 775 Spartan Boulevard, Suite 102, Spartanburg, South
Carolina.
The Company’s business is divided into two segments, the Metals Segment and the Specialty Chemicals
Segment. The Metals Segment operates as BRISMET, BristolFab and Ram-Fab. BRISMET manufactures pipe,
BristolFab fabricates piping systems from stainless steel and other alloys, and Ram-Fab fabricates piping systems
from carbon, chrome, stainless steel and other alloys. The Specialty Chemicals Segment operates as
Manufacturers Chemicals, LLC and produces specialty chemicals and dyes.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are
wholly owned. The Metals Segment is comprised of two wholly-owned subsidiaries: Synalloy Metals, Inc. which
owns 100 percent of Bristol Metals, LLC, located in Bristol, Tennessee; and Ram-Fab, LLC, located in Crossett,
Arkansas. The Specialty Chemicals Segment consists of the Company’s wholly-owned subsidiary Manufacturers
Soap and Chemical Company which owns 100 percent of Manufacturers Chemicals, LLC, located in Cleveland,
Tennessee and Dalton, Georgia. All significant intercompany transactions have been eliminated.
Accounting Period
The Company’s fiscal year is the 52 or 53 week period ending the Saturday nearest to December 31. Fiscal year
2011 ended on December 31, 2011, fiscal year 2010 ended on January 1, 2011 and fiscal year 2009 ended on
January 2, 2010, each year having 52 weeks.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to
be cash equivalents. The Company maintains cash balances at financial institutions with strong credit ratings.
Accounts Receivable
Accounts receivable from the sale of products are recorded at net realizable value and the Company generally
grants credit to customers on an unsecured basis. Substantially all of the Company’s accounts receivables are
due from companies located throughout the United States. The Company provides an allowance for doubtful
collections and for disputed claims and quality issues. The allowance is based upon a review of outstanding
receivables, historical collection information and existing economic conditions. 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. Delinquent receivables are written off based on individual credit evaluations
and specific circumstances of the customer.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method.
The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the
difference between the cost of inventory and the estimated market value based upon assumptions about future
demand and current market conditions. As of December 31, 2011 and January 1, 2011, inventory has been
reduced by $2,699,000 and $3,299,000, respectively, for obsolescence and market reserves.
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. Land improvements and buildings are depreciated over a range of ten to 40
years, and machinery, fixtures and equipment are depreciated over a range of three to 20 years. The costs of
software licenses are amortized over five years using the straight-line method.
28
Goodwill
Goodwill, representing intangibles arising from the excess of purchase price over fair value of net assets of
businesses acquired, is not amortized but is reviewed annually in the fourth quarter for impairment. Deferred
charges represent other intangible assets that are amortized over their useful lives. Accumulated amortization of
deferred charges as of December 31, 2011 and January 1, 2011 totaled $27,000 and $11,000, respectively. The
Company continually reviews the recoverability of the carrying value of long-lived assets. The Company also
reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying
amount of such assets may not be recoverable. When the future undiscounted cash flows of the operation to
which the assets relate do not exceed the carrying value of the asset, the assets are written down to fair value.
Revenue Recognition
Revenue from product sales is recognized at the time ownership of goods transfers to the customer and the
earnings process is complete.
Shipping Costs
Shipping costs of approximately $3,088,000, $2,669,000 and $1,730,000 in 2011, 2010 and 2009, respectively,
are recorded in cost of goods sold.
Research and Development Expenses
The Company incurred research and development expense of approximately $352,000, $392,000 and $289,000
in 2011, 2010 and 2009, respectively.
Earnings Per Share of Common Stock
Earnings per share of common stock are computed based on the weight average number of shares outstanding
during each period. See Note 12.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash and cash equivalents, trade accounts receivable,
cash surrender value of life insurance, investments and borrowings under the Company’s line of credit
approximate their fair value.
Fair Value Disclosures
The Company determines the fair values of its financial instruments maximizing the use of observable inputs and
minimizing the use of unobservable inputs when measuring fair value. The Company utilizes three levels of inputs
when measuring fair value. Level-1 measurements utilize quoted prices in active markets for identical assets or
liabilities. The Company does not currently have any Level-1 financial assets or liabilities. Level-2 measurements
utilize observable inputs other than Level-1 prices, such as quoted prices for similar assets or liabilities, quoted
prices in markets that are not active, or other inputs observable or that can be corroborated by observable market
data for substantially the full term of the assets or liabilities. The Company has a level-2 asset from its cash value
of life insurance having a fair value of $3,092,000 and $3,030,000 at December 31, 2011 and January 1, 2011,
respectively. Changes in its fair value were recorded in non-current assets with corresponding offsetting entries
to selling, general and administrative expense. Level-3 measurements utilize unobservable inputs that are
supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The
Company does not currently have any material Level-3 financial assets or liabilities.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions, primarily for testing goodwill
for impairment and for establishing reserves on accounts receivable, inventories and environmental issues, that
affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from
those estimates.
29
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist
principally of cash deposits, trade accounts receivable and cash surrender value of life insurance. The cash
surrender value of life insurance is the contractual amount on policies 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. See Note 13.
Subsequent Events
Management has evaluated subsequent events through the date of filing this Form 10-K.
Note 2 Property, Plant and Equipment
Property, plant and equipment consist of the following:
Land
Land improvements
Buildings
Machinery, fixtures and equipment
Construction-in-progress
Less accumulated depreciation
2011
2010
$ 515,105
681,278
12,224,712
42,747,487
2,378,018
58,546,600
39,833,076
$ 451,523
635,217
11,938,434
42,366,519
1,286,579
56,678,272
38,486,325
Total property, plant and equipment
$18,713,524
$18,191,947
The Company recorded depreciation expense of $2,632,000 for both 2011 and 2010 and $2,332,000 in 2009,
respectively.
Note 3 Long-term Debt
$ 20,000,000 Revolving line of credit, due June 30, 2014
Less current installments
2011
$ 8,650,431
2010
$ 219,275
-
-
Total long-term debt
$ 8,650,431
$ 219,275
On June 30, 2010, the Company entered into a Credit Agreement with a regional bank to provide a $20,000,000
line of credit that was to expire on June 30, 2013. This agreement was amended by the bank on August 19, 2011
to extend the maturity date of the Credit Agreement by one additional year to June 30, 2014. None of the other
terms of the debt agreement were modified. The Company’s previous debt facility, with a different lender, was to
expire at the end of 2010. Interest on the Credit Agreement is calculated using the One Month LIBOR Rate, plus
a pre-defined spread, which is determined by the Company’s Total Funded Debt to EBITDA ratio. The interest
rate at December 31, 2011 and January 1, 2011 was 1.78 and 1.76 percent, respectively. Additionally, the
Company is required to pay a fee equal to 0.125 percent on the average daily unused amount of the line of credit
on a quarterly basis. Borrowings under the line of credit are limited to an amount equal to a borrowing base
calculation that includes eligible accounts receivable, inventories and cash surrender value of the Company’s life
insurance. Additionally, the credit facility requires an agreement not to pledge the fixed assets of the Company.
As of December 31, 2011, the amount available for borrowing was $20,000,000 of which $8,650,000 was
borrowed, leaving $11,350,000 of availability. Covenants under the agreement include maintaining a certain
Funded Debt to EBITDA ratio, a minimum tangible net worth, and total liabilities to tangible net worth ratio. In
addition, the Company is limited to a maximum amount of capital expenditures per year. At December 31, 2011,
the Company was in compliance with its debt covenants. Average borrowings outstanding during fiscal 2011,
2010 and 2009 were $5,663,000, $1,079,000 and $2,721,000 with weighted average interest rates of 1.73
percent, 1.82 percent and 1.95 percent, respectively. The Company made interest payments of $114,000 in 2011,
$37,000 in 2010 and $525,000 in 2009.
30
On February 23, 2006, the Company entered into an interest rate swap contract with its bank with a notional
amount of $4,500,000 pursuant to which the Company received interest at Libor and paid interest at a fixed
interest rate of 5.27 percent. The contract ran from March 1, 2006 to December 31, 2010, which equated to the
final payment amount and due date of the term loan. The Company paid $245,000 in December of 2009 and
eliminated the swap.
Note 4 Accrued Expenses
Accrued expenses consist of the following:
Salaries, wages and commissions
Advances from customers
Insurance
Taxes, other than income taxes
Benefit plans
Interest
Professional fees
Utilities
Other accrued items
2011
$2,176,495
1,146,559
958,615
68,377
175,943
4,928
225,000
6,000
350,745
2010
$1,151,210
676,729
774,571
55,716
159,783
13,014
141,750
11,768
321,750
Total accrued expenses
$5,112,662
$3,306,291
Note 5 Environmental Compliance Costs
At December 31, 2011, the Company had accrued $640,000 in remediation costs which, in management’s best
estimate, is sufficient to 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 four 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.
Prior to 1987, the Company utilized certain products at its chemical facilities that are currently classified as
hazardous materials. Testing of the groundwater in the areas of the former wastewater 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. In 1998 the Company completed a RCRA Facility
Investigation at its Spartanburg plant site, and based on the results, completed a Corrective Measures Study in
2000. A Corrective Measures Plan specifying remediation procedures to be performed was submitted in 2000 and
the Company received regulatory approval. In prior years remediation projects were completed to clean up ten of
14 SWMUs on the Spartanburg plant site at a cost of approximately $530,000. The Company completed the
cleanup of the remaining four SWMUs in the fourth quarter of 2009 for a cost of approximately $438,000. On
October 2, 2009, the Company entered into an Asset Purchase Agreement and sold the Spartanburg facilities as
discussed in Note 17. As part of the Agreement, the Company agreed to complete the SWMU cleanups described
above and several unrelated cleanup projects at the site. The purchaser agreed to assume any future unidentified
environmental liabilities at the site and pay all future annual monitoring and reporting costs required by the RCRA
permit covering the site. The Company has completed all of the RCRA-Permit required cleanup projects.
At the former Augusta plant site, the Company submitted a Baseline Risk Assessment and Corrective Measures
Plan for regulatory approval. A Closure and Post-Closure Care Plan was submitted and approved in 2001 for the
closure of the surface impoundment (former regulated unit). The Company completed and certified closure of the
surface impoundment during 2002. During 2005, the Company completed a preliminary analysis of remedial
alternatives to eliminate direct contact with surface soils based on the Baseline Risk Assessment. In 2011, the
Company identified a concentration of soil contamination. With the approval of the Georgia Department of
31
Natural Resources, Environmental Protection Division (“EPD”), the affected soil was removed and the section of
the property was backfilled with clean fill material plus selected chemicals to clean any impurities left behind.
Based upon the soil remediation performed, the Company filed a Site-Wide Corrective Action Plan with the EPD
in December 2011 to terminate the RCRA Permit. The Company has accrued $565,000 at December 31, 2011,
for estimated future remedial and cleanup costs. As part of Asset Purchase Agreement for the Spartanburg
facility, the purchaser also agreed to pay for all future annual monitoring and reporting costs at the Augusta facility
required by the EPD.
The Company has identified and evaluated two SWMUs at its plant in Bristol, Tennessee that revealed residual
groundwater contamination. An Interim Corrective Measures Plan to address the final area of contamination
identified was submitted for regulatory approval and was approved in March of 2005. The Company had $75,000
accrued at December 31, 2011, to provide for estimated future remedial and cleanup costs.
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 two
waste disposal sites. Notifications for these two sites were received by the Company in November 2007 and
February 2008. It is impossible to determine the ultimate costs related to the two sites due to several factors such
as the unknown possible 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 the other parties.
At the present time, the Company does not have sufficient information to form an opinion as to whether it has any
liability, or the amount of such liability, if any. However, it is reasonably possible that some liability exists.
The Company was also named as one of many potentially responsible parties in a Superfund Site brought by the
United States Environmental Protection Agency. Notification for this site was received on September 13, 2010.
The Company qualified for a special de minimis party settlement at this Site and upon payment of approximately
$2,000, was able to be released from further consideration.
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 6 Deferred Compensation
The Company has deferred compensation agreements with certain former officers providing for payments for the
longer of ten years or life from age 65. The present value of such vested future payments, $294,000 at December
31, 2011, has been accrued.
32
Note 7 Stock Options, Stock Grants and New Stock Issues
A summary of activity in the Company’s stock option plans is as follows:
Weighted
Average
Exercise
Price
Options
Outstanding
Weighted
Average
Contractual
Term
(in years)
3.7
4.5
$
$
Intrinsic
Value of
Options
4,865
76,923
Options
Available
-
-
3.6
$
131,670
-
350,000
(100,000)
8.0
3.1
6,448
6,448
250,000
128,243
(45,250)
82,993
(9,900)
(29,093)
44,000
100,000
(19,200)
(4,000)
120,800
20,800
15,454
5.1
(15,454)
-
100,000
9.1
-
100,000
$
$
$
$
Grant Date
Fair Value
6.77
-
7.93
-
-
At January 3, 2009
Cancelled / Expired
At January 2, 2010
Exercised
Cancelled / Expired
At January 1, 2011
2011 option plan
Granted
Exercised
Expired
At December 31, 2011
Exercisable options
Options expected to vest:
At January 2, 2010
Vested
At January 1, 2011
Granted
Vested
At December 31, 2011
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
8.48
7.67
8.92
4.97
9.96
9.13
11.55
9.15
9.96
11.28
9.96
9.96
9.96
-
11.55
-
11.55
The following table summarizes information about stock options outstanding at December 31, 2011:
Range of
Exercise Prices
$ 9.96
$ 11.55
Outstanding Stock Options
Weighted Average
Exercise
Price
$ 9.96
Remaining
Contractual
Life in Years
3.09
Shares
20,800
100,000
$ 11.55
9.07
120,800
Exercisable Stock Options
Weighted
Average
Exercise
Price
$ 9.96
-
Shares
20,800
-
20,800
On January 21, 2011, the Board of Directors of the Company adopted the 2011 Long-Term Incentive Stock
Option Plan (the “2011 Plan”) which was approved by the Shareholders at the April 28, 2011 Annual Meeting. The
2011 Plan authorizes the issuance of incentive options for up to 350,000 shares of the Company’s common stock.
The Company granted options to purchase 100,000 shares of its common stock at an exercise price of $11.55 to
its CEO on January 24, 2011, which may be exercised beginning one year after the date of grant at a rate of 20
percent annually on a cumulative basis, and unexercised options expire ten years from the grant date. The per
33
share weighted-average fair value of the stock options granted during 2011 was $7.93. The fair value of the
option grant was estimated using the Black-Scholes option-pricing model based on a risk-free interest rate of 3.34
percent, an expected life of ten years, an expected volatility of 0.49 and a dividend yield of 2.10 percent. Prior to
the 2011 Plan, the Company had two stock option plans, neither of which have options available for future
issuance after April 30, 2008. Under the 1998 Plan covering officers and key employees, options may be
exercised beginning one year after date of grant at a rate of 20 percent annually on a cumulative basis, and
unexercised options expire ten years from the grant date. Under the 1994 Non-Employee Directors’ Plan, options
were exercisable at the date of grant. Shares issued under both stock option plans come from shares held in
Treasury. The 1998 Plan is an incentive stock option plan, therefore there are no income tax consequences to the
Company when an option is granted or exercised. No options were exercised in 2009. In 2011 and 2010, options
for 19,200 and 9,900 shares were exercised by employees and directors for an aggregate exercise price of
$176,000 and $49,000 respectively. The proceeds were generated from cash received of $162,000 and from the
repurchase of 1,045 shares from employees and directors totaling $14,000 in 2011 and from cash received of
$39,000 and from the repurchase of 1,016 shares from employees and directors totaling $10,000 in 2010. At the
2011, 2010 and 2009 respective year ends, options to purchase 20,800, 44,000 and 67,539 shares with weighted
average exercise prices of $9.96, $9.13 and $8.69, respectively, were fully exercisable. Compensation cost
charged against income before taxes for the options was approximately $111,000 for 2011, $7,000 for 2010 and
$76,000 for 2009. As of December 31, 2011, there was $682,000 of unrecognized compensation cost related to
unvested stock options granted under the Company's stock option plans.
The Company has a Stock Awards Plan in effect at December 31, 2011. A summary of plan activity for 2009,
2010 and 2011 is as follows:
Outstanding at January 3, 2009
Granted February 12, 2009
Vested
Forfeited or expired
Outstanding at January 2, 2010
Granted February 24, 2010
Vested
Forfeited or expired
Outstanding at January 1, 2011
Granted January 24, 2011
Granted February 09, 2011
Vested
Forfeited or expired
Outstanding at December 31, 2011
Weighted Average
Shares
Grant Date Fair Value
25,244
5,500
(6,382)
(1,228)
23,134
51,500
(7,059)
(19,235)
48,340
13,420
13,300
(12,290)
(19,198)
43,572
$ 21.62
5.22
21.97
21.76
17.62
7.88
19.30
8.89
10.47
11.55
13.34
12.81
9.62
11.39
The Compensation & Long-Term Incentive Committee of the Board of Directors of the Company approves stock
grants under the Company’s 2005 Stock Awards Plan to certain management employees of the Company. The
stock awards vest in 20 percent increments annually on a cumulative basis, beginning one year after the date of
grant from shares held in Treasury. In order for the awards to vest, the employee must be in the continuous
employment of the Company since the date of the award. Any portion of an award that has not vested is forfeited
upon termination of employment. The Company may terminate any portion of the award that has not vested upon
an employee’s failure to comply with all conditions of the award or the Plan. An employee is not entitled to any
voting rights with respect to any shares not yet vested, and the shares are not transferable. Compensation
expense totaling $332,000, $406,000 and $29,000 on the grants issued in 2011, 2010 and 2009, respectively, is
being charged against earnings equally net of forfeitures, if any, over a period of 60 months from the dates of the
grants, with the offset recorded in Shareholders’ Equity. Compensation cost charged against income for the
awards was approximately $165,000, $105,000 net of income taxes, or $0.02 per share for 2011, $174,000,
$110,000 net of income taxes, or $0.02 per share for 2010 and $134,000, $85,000 net of income taxes, or $0.01
34
per share, for 2009. As of December 31, 2011, there was $372,000 of total unrecognized compensation cost
related to unvested stock grants under the 2005 Stock Awards Plan.
On May 4, 2011, the Company issued to each of its non-employee directors 998 shares of its common stock from
shares held in Treasury (an aggregate of 4,990 shares). Additionally, on August 11, 2011, the Company issued to
each of two newly elected non-employee directors 1,124 shares of its common stock from shares held in
Treasury. The Company issued 1,531 shares and 2,532 shares to non-employee directors in 2010 and 2009,
respectively. Such shares were issued to the directors in lieu of $15,000 of their annual cash retainer fees.
During 2011, two non-employee directors resigned/retired from the Board of Directors resulting in the forfeiture of
1,248 shares.
Note 8 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:
(Amounts in thousands)
2011
2010
Deferred tax assets:
Inventory valuation reserves
Allowance for doubtful accounts
Inventory capitalization
Environmental reserves
Other
Total deferred tax assets
Deferred tax liabilities:
Tax over book depreciation and amortization
Prepaid expenses
Other
Total deferred tax liabilities
$ 966
382
1,601
229
430
3,608
$ 1,181
166
1,039
335
212
2,933
2,908
582
44
3,534
2,555
183
-
2,738
Net deferred tax assets
$ 74
$ 195
Significant components of the provision for (benefit from) income taxes for continuing operations are as follows:
(Amounts in thousands)
Current:
Federal
State
Total current
Deferred:
Federal
State
Total deferred
Total
2011
2010
2009
$ 2,670
162
2,832
$ 2,039
193
2,232
108
13
121
(148)
32
(116)
$ 100
133
233
(16)
(84)
(100)
$ 2,953
$ 2,116
$ 133
The reconciliation of income tax computed at the U. S. federal statutory tax rates to income tax expense for
continuing operations is:
35
(Amounts in thousands)
2011
2010
Tax at U.S. statutory rates
State income taxes, net of
Federal tax benefit
Manufacturing exemption
Other, net
Total
Amount
$ 2,975
%
34.0%
Amount
$ 2,091
133
(162)
7
$ 2,953
1.5%
(1.9%)
0.1%
33.7%
148
(160)
37
$ 2,116
%
34.0%
2.4%
(2.6%)
0.6%
34.4%
2009
Amount
$ 120
14
-
(1)
$ 133
%
34.0%
4.0%
-
(0.1%)
37.9%
Income tax payments of approximately $3,143,000, $1,659,000 and $2,039,000 were made in 2011, 2010 and
2009, respectively. The Company had South Carolina state net operating loss carryforwards of approximately
$39,423,000 at December 31, 2011, which will expire between the years 2017 to 2030, and $39,179,000 at
January 1, 2011. Since the likelihood of recognizing these carryforwards is remote, they have been fully reserved
in the financial statements.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state
jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through
2007 and substantially all material state and local income tax matters for years through 2005. The Company’s
federal income tax return for 2007 was examined by the Internal Revenue Service in 2009 and federal income tax
and interest liabilities resulting from this examination were not material. The Company’s continuing practice is to
recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no
accruals for uncertain tax positions including interest and penalties at the end of 2011 or 2010.
Note 9 Benefit Plans and Collective Bargaining Agreements
The Company has a 401(k) Employee Stock Ownership Plan covering all non-union employees. Employees may
contribute to the Plan up to 100 percent of their salary with a maximum of $16,500 for 2011. Under the Economic
Growth and Tax Relief Reconciliation Act, employees who are age 50 or older may contribute an additional
$5,500 per year for a maximum of $22,000 for 2011. 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 in cash and then used by the Plan Trustee to purchase Synalloy stock.
The Company contributes on behalf of each eligible participant a matching contribution equal to a percentage
which is determined each year by the Board of Directors. For 2011, 2010 and 2009 the maximum was four
percent. The matching contribution is allocated weekly. Matching contributions of approximately $345,000,
$364,000 and $330,000 were made for 2011, 2010 and 2009, respectively. The Company may also make a
discretionary contribution, which if made, would be distributed to all eligible participants regardless of whether
they contribute to the Plan. No discretionary contributions were made to the Plan in 2011, 2010 or 2009 The
Company also contributes to union-sponsored defined contribution retirement plans. Contributions relating to
these plans were approximately $688,000, $607,000 and $474,000 for 2011, 2010 and 2009, respectively.
The Company has three collective bargaining agreements at its Bristol, Tennessee facility. The number of
employees of the Company represented by these unions is 224, or 51 percent of the Company’s total employees.
They are represented by two locals affiliated with the AFL-CIO and one local affiliated with the Teamsters. The
Company considers relationships with its union employees to be satisfactory. Collective bargaining contracts will
expire in January 2015, February 2014 and March 2015.
Note 10 Leases
The Specialty Chemicals Segment leases a warehouse facility in Dalton Georgia, Corporate leases office space
in Spartanburg South Carolina and various manufacturing and office equipment at each of its locations, all under
operating leases. The amount of future minimum lease payments under the operating leases are as follows: 2012
- $153,000; 2013 - $148,000; 2014 - $146,000; 2015 - $144,000; and 2016 - $54,000. Rent expense related to
operating leases was $140,000, $257,000, $202,000 in 2011, 2010 and 2009, respectively. The Company does
not have any leases that are classified as capital leases for any of the periods presented in the financial
statements.
36
Note 11 Commitments and 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. The Metals
Segment recorded claim expense of $100,000, $500,000 and $1,100,000 for 2011, 2010 and 2009, respectively,
for specific customers’ product claims. Other than the environmental contingencies discussed in Note 5,
management is not currently aware of any other asserted or unasserted matters which could have a significant
effect on the financial condition or results of operations of the Company.
Note 12 Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share from continuing operations:
Numerator:
Net income from continuing operations
Denominator:
Denominator for basic earnings per
share - weighted average shares
Effect of dilutive securities:
Employee stock options and stock grants
Denominator for diluted earnings per
share - weighted average shares
Income per share from continuing operations:
Basic
Diluted
2011
2010
2009
$ 5,797,160
$ 4,033,823
$ 218,625
6,313,418
6,282,497
6,261,805
48,670
26,701
7,625
6,362,088
6,309,198
6,269,430
$ 0.92
$ 0.64
$ 0.03
$ 0.91
$ 0.64
$ 0.03
The diluted earnings per share calculations exclude the effect of potentially dilutive shares when the inclusion of
those shares in the calculation would have an anti-dilutive effect. The Company had weighted average shares of
common stock of 139,484 in 2011, 63,184 in 2010 and 98,502 in 2009, which were not included in the diluted
earnings per share calculation as their effect was anti-dilutive.
Note 13 Industry Segments
The Company operates in two principal industry segments: metals and specialty chemicals. The Company
identifies such segments based on products and services. The Metals Segment consists of Synalloy Metals, Inc.
a wholly-owned subsidiary which owns 100 percent of Bristol Metals, LLC, and Ram-Fab, LLC, a wholly-owned
subsidiary of the Company. The Metals Segment manufactures pipe from stainless steel and other alloys and
fabricates piping systems from carbon, chrome, stainless steel and other alloys. The Segment’s products, many
of which are custom-produced to individual orders and required for corrosive and high-purity processes, are used
principally by the chemical, petrochemical, pulp and paper, mining, power generation (including nuclear), water
and wastewater treatment, liquid natural gas, brewery, food processing, petroleum, pharmaceutical and other
industries. Products include pipe, piping systems and a variety of other components. The Specialty Chemicals
Segment consists of Manufacturers Soap and Chemical Company, a wholly owned subsidiary of the Company
which owns 100 percent of Manufacturers Chemicals, LLC. The Specialty Chemicals Segment manufactures a
wide variety of specialty chemicals and dyes for the carpet, chemical, paper, metals, mining, agricultural, fiber,
paint, textile, automotive, petroleum, cosmetics, mattress, furniture, janitorial and other industries.
Segment operating income is the Segment’s total revenue less operating expenses, excluding interest expense
and income taxes. Identifiable assets, all of which are located in the United States, are those assets used in
operations by each Segment. The Metals Segment’s identifiable assets include goodwill of $1,000,000 in 2011
and 2010, and the Chemicals Segment’s identifiable assets include goodwill of $1,355,000 in 2011 and 2010.
Centralized data processing and accounting expenses are allocated to the two Segments based upon estimates
37
of their percentage of usage. Unallocated corporate expenses include environmental charges of $8,000 and
$343,000 for 2011 and 2009, respectively. There were no environmental charges during 2010. Corporate assets
consist principally of cash, certain investments, and equipment.
The Metals Segment has one domestic customer that accounted for approximately ten and eleven percent of the
Metals Segment’s revenues in 2011 and 2010, respectively, and less than ten percent for 2009. The Segment
also has one other domestic customer that accounted for less than ten percent of the Segment’s revenues in
2011 and 2010, respectively, but accounted for approximately ten percent in 2009. Loss of either of these
customers’ revenues would have a material adverse effect on both the Metals Segment and the Company. The
Specialty Chemicals Segment has one domestic customer that accounted for approximately 24 percent of
revenues in 2011, 2010 and 2009, respectively. However, this customer is a large global company, and the
purchases by this customer are derived from several different business units that operate autonomously from
each other. Even so, loss of this customer’s revenues would have a material adverse effect on the Specialty
Chemicals Segment and the Company.
In order to establish stronger business relationships, the Metals Segment uses only a few raw material suppliers.
Five suppliers furnish about 84 percent of total dollar purchases of raw materials, with one supplier totaling about
37 percent. However, the Company does not believe that the loss of any of these suppliers would have a
materially adverse effect on the Company as raw materials are readily available from a number of different
sources, and the Company anticipates no difficulties in fulfilling its requirements. For the Specialty Chemicals
Segment, most raw materials are generally available from numerous independent suppliers and about 34 percent
of total purchases are from its top five suppliers. While some raw material needs are met by a sole supplier or
only a few suppliers, the Company anticipates no difficulties in fulfilling its raw material requirements.
Segment Information:
(Amounts in thousands)
Net sales
Metals Segment
Specialty Chemicals Segment
Operating income (loss)
Metals Segment
Specialty Chemicals Segment
Less unallocated corporate expenses
Operating income
Other expense, net
2011
2010
2009
$ 127,727
42,848
$ 108,544
42,577
$ 170,575
$ 151,121
$ 70,891
32,749
$ 103,640
$ 9,253
2,221
11,474
2,668
8,806
56
$ 3,774
3,960
7,734
1,541
6,193
43
$ (12)
2,722
2,710
2,008
702
350
$ 352
Pretax income from continuing operations
$ 8,750
$ 6,150
Identifiable assets
Metals Segment
Specialty Chemicals Segment
Corporate
Depreciation and amortization
Metals Segment
Specialty Chemicals Segment
Corporate
Capital expenditures
Metals Segment
Specialty Chemicals Segment
$ 72,722
18,465
7,729
$ 56,622
17,910
6,843
$ 98,916
$ 81,375
$ 2,073
419
167
$ 2,067
416
159
$ 2,659
$ 2,642
$ 1,805
382
215
$ 2,402
$ 2,097
930
$ 3,995
1,035
$ 1,416
396
38
Corporate
Geographic sales
United States
Elsewhere
158
65
80
$ 3,185
$ 5,095
$ 1,892
$ 159,820
10,755
$ 170,575
$ 144,340
6,781
$ 151,121
$ 101,814
1,826
$ 103,640
Note 14 Quarterly Results (Unaudited)
The following is a summary of continuing quarterly operations for 2011 and 2010:
(Amounts in thousands except for per share data)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
2011
Net sales
Gross profit
Net income
Per common share
Basic
Diluted
2010
Net sales
Gross profit
Net income
Per common share
Basic
Diluted
Note 15 Interest Rate Swap
$ 42,742
7,098
2,500
$ 41,399
5,579
1,709
0.40
0.39
0.27
0.27
$ 35,201
2,750
82
$ 36,349
4,210
1,078
0.01
0.01
0.17
0.17
$ 46,193
3,630
571
0.09
0.09
$ 41,932
4,620
1,412
0.22
0.22
$ 40,241
4,783
1,017
0.16
0.16
$ 37,639
4,336
1,462
0.23
0.23
The Company used an interest rate swap in which it paid a fixed rate of interest while receiving a variable rate of
interest to change the cash flow profile of its variable-rate borrowing to match a fixed rate profile. In 2006, the
Company entered into a long-term debt agreement with its bank and paid interest based on a variable interest
rate. To mitigate the variability of the interest rate risk, the Company entered into an interest rate swap contract in
February of 2006 with the bank, coupled with a third party who paid a variable rate of interest. The interest rate
swap had a notional amount of $4,500,000 pursuant to which the Company received interest at LIBOR and paid
interest at a fixed interest rate of 5.27 percent, and ran from March 1, 2006 to December 31, 2010, which equated
to the final payment amount and due date of the term loan. Although the swap was expected to effectively offset
variable interest in the borrowing, hedge accounting was not utilized. Therefore, changes in its fair value were
recorded in current assets or liabilities, as appropriate, with corresponding offsetting entries to other expense. The
swap liability was settled in December 2009 with a $245,000 payment and the contract was terminated.
Note 16 Purchase of Ram-Fab, Inc.
On August 31, 2009, the Company entered into an Asset Purchase Agreement with Ram-Fab, Inc. to acquire
certain assets and assume certain liabilities of its business for a purchase price of $5,708,000. Ram-Fab, Inc. was
a pipe fabricator located in Crossett, Arkansas. The acquisition was for cash and was paid from currently
available funds. The purchase price of Ram-Fab, Inc. has been allocated to the assets acquired and liabilities
assumed according to their estimated fair values at the time of acquisition. This allocation included accounts
receivable of $1,093,000, inventories of $2,334,000, other assets of $33,000, machinery and equipment of
$1,707,000, tax-deductible goodwill of $1,000,000, and current liabilities of $459,000. The Company also entered
into a Lease Agreement to lease Ram-Fab, Inc.’s property and plant buildings with an option to purchase the
property and plant buildings for a purchase price of approximately $2,000,000 on or before June 1, 2010. The
39
Company exercised the option and purchased the property and plant on June 1, 2010. Ram-Fab, Inc. had annual
sales of approximately $18,000,000 over the 12 months prior to the acquisition date and was profitable.
Historically, its primary business was to fabricate both carbon and stainless steel piping systems. Management’s
focus has been to expand the carbon fabrication business which is a product line that is strategically important for
future growth. Goodwill represents expected synergies as the carbon business complements our stainless steel
piping systems’ operations generating new opportunities for stainless steel piping systems since many projects
require that bidders quote both carbon and stainless steel fabrication. This business operates as Ram-Fab, LLC
and has been assigned to our Metals Segment.
Note 17 Asset Sale of Certain Specialty Chemicals Segment’s Assets and Discontinued Operations
On October 2, 2009, the Company entered into an Asset Purchase Agreement with SantoLubes Manufacturing,
LLC (“SM”) to sell the specialty chemical business of Blackman Uhler Specialties, LLC (“BU”) for a purchase price
of $10,366,000, along with certain property, plant and equipment held by Synalloy Corporation for a purchase
price of $1,130,000, all located at the Spartanburg, SC location. The purchase price of approximately
$11,496,000, paid in cash, was equal to the approximate net book values of the assets sold as of October 3,
2009, the effective date of the sale, and the Company recorded a loss of approximately $250,000 resulting
primarily from transaction fees and other costs related to the transaction. Divesting BU’s specialty chemicals
business freed up resources and working capital to allow further expansion into the Company’s metals
businesses. The Company entered into a lease agreement with SM to lease office space in Spartanburg for
corporate operations and had also entered into an outsourcing agreement with SM to provide SM with certain
accounting and administration functions. During 2011, the Company terminated this office space lease agreement
and the outsourcing agreement with SM. BU, along with Organic Pigment, LLC’s pigment dispersion business
(“OP”), which was sold on March 6, 2009, were both physically located at the Spartanburg facility. OP completed
all operating activities at the end of the third quarter. As a result, these two operations, which were included in the
Specialty Chemicals Segment, are being reported as discontinued operations. Sales of the two businesses
totaled $3,967,000 for the third quarter of 2009 and $13,042,000 for the nine months of 2009. The Company has
reclassified the operations of these disposed businesses to reflect discontinued operations in the financial
statements for each of the years presented.
Note 18 Payment of Dividends
On November 10, 2011, the Board of Directors of the Company voted to pay an annual dividend of $0.25 per
share which was paid on December 5, 2011, to holders of record on November 25, 2011 for a total of $1,580,000.
In 2010, the Company paid a $0.25 cash dividend on December 8, 2010 and a $0.25 cash dividend on March 22,
2010 for a total of $3,166,000. Also, in 2009, a $0.10 cash dividend was paid on March 10, 2009 for a total of
$631,000. The Board presently plans to review at the end of each fiscal year the financial performance and capital
needed to support future growth to determine the amount of cash dividend, if any, which is appropriate.
Note 19 Subsequent Events
February 9, 2012, the Compensation & Long-Term Incentive Committee of the Board of Directors of the Company
approved stock option grants under the Company’s 2011 Plan. A total of 36,740 options, with a market price of
$11.35 per share, were granted under the Plan to certain management employees of the Company. The stock
options will vest in 20 percent increments annually on a cumulative basis, beginning one year after the date of
grant. In order for the options to vest, the employee must be in the continuous employment of the Company since
the date of the grant. Any portion of the grant that has not vested will be forfeited upon termination of
employment. The Company may terminate any portion of the grant that has not vested upon an employee’s
failure to comply with all conditions of the award or the Plan. Shares representing grants that have not yet vested
will be held in escrow by the Company. An employee will not be entitled to any voting rights with respect to any
shares not yet vested, and the shares are not transferable. Compensation expense totaling $185,000 will be
recorded against earnings equally over the following 60 months from the date of grant with the offset recorded in
Shareholders’ Equity.
40
Report of Management
The accompanying financial statements have been prepared in conformity with accounting principles generally
accepted in the United States of America and the financial statements for the years ended December 31, 2011,
January 1, 2011 and January 2, 2010 have been audited by Dixon Hughes Goodman LLP, Independent
Registered Public Accounting Firm. 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 independent directors. The Audit Committee meets on a regular basis with
representatives of management and Dixon Hughes Goodman LLP.
Management’s Annual Report On Internal Control Over Financial Reporting
Management of the Company is responsible for preparing the Company’s annual consolidated financial
statements and for establishing and maintaining adequate internal control over financial reporting for the
Company. Management has evaluated the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2011 based on criteria established in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment,
management believes that the Company’s internal control over financial reporting as of December 31, 2011 was
effective.
The Company’s independent registered public accounting firm that audited the Company’s consolidated financial
statements included in this annual report has issued an attestation report on the effectiveness of the Company’s
internal control over financial reporting.
41
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
of Synalloy Corporation
We have audited the accompanying consolidated balance sheets of Synalloy Corporation and subsidiaries as of
December 31, 2011 and January 1, 2011, and the related consolidated statements of operations, shareholders’
equity and cash flows for each of the years in the three-year period ended December 31, 2011. Our audit also
included the financial statement schedule listed in Item 15(a)2 of Synalloy Corporation and subsidiaries’ Annual
Report on Form 10-K. We also have audited Synalloy Corporation and subsidiaries’ internal control over financial
reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Synalloy
Corporation and subsidiaries’ management is responsible for these financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the
company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement and whether effective internal control
over financial reporting was maintained in all material respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Synalloy Corporation and subsidiaries as of December 31, 2011 and January 1, 2011, and the
results of their operations and their cash flows for each of the years in the three-year period ended December 31,
2011 in conformity with accounting principles generally accepted in the United States of America. Also in our
opinion, Synalloy Corporation and subsidiaries maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in
our opinion, the related financial statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
Charlotte, North Carolina
March 14, 2012
42
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A Controls and Procedures
Disclosure Controls and Procedures
Based on the evaluation required by 17 C.F.R. Section 240.13a-15(b) or 240.15d-15(b) of the Company's
disclosure controls and procedures (as defined in 17 C.F.R. Sections 240.13a-15(e) and 240.15d-15(e)), the
Company's chief executive officer and chief financial officer concluded that such controls and procedures, as of
the end of the period covered by this annual report, were effective.
Internal Control over Financial Reporting
Management’s Annual Report on Internal Control over Financial Reporting is set forth at the conclusion of the
Company’s consolidated statements set forth in Item 8 of this Form 10-K.
The Attestation Report of the Company’s independent registered public accounting firm on the Company’s
internal control over financial reporting is included in the Report of Independent Registered Public Accounting
Firm set forth in Item 8 of this Form 10-K.
There has been no change in the Company's internal control over financial reporting during the last fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the Company's internal control over
financial reporting.
Item 9B Other Information
Not applicable
PART III
Item 10 Directors, Executive Officers and Corporate Governance
The information set forth under the captions "Proposal 1 - Election of Directors," "Executive Officers,” and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive proxy statement to be
used in connection with its Annual Meeting of Shareholder to be held April 26, 2012 (the "Proxy Statement") is
incorporated herein by reference.
Code of Ethics. The Company's Board of Directors has adopted a Code of Ethics that applies to the Company's
Chief Executive Officer, Chief Financial Officer and corporate and divisional controllers. The Code of Ethics is
available on the Company's website at www.synalloy.com. Any amendment to, or waiver from, this Code of
Ethics will be posted on the Company's website.
Audit Committee. The Company has a separately designated standing Audit Committee of the Board of Directors
established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the
Audit Committee are Carroll D. Vinson, Murray H. Wright and James W. Terry.
Audit Committee Financial Expert. The Company's Board of Directors has determined that the Company has at
least one "audit committee financial expert," as that term is defined by Item 407(d)(5) of Regulation S-K
promulgated by the Securities and Exchange Commission, serving on its Audit Committee. Mr. Carroll D. Vinson
meets the terms of the definition and is independent, as independence is defined for audit committee members in
the rules of the NASDAQ Global Market. Pursuant to the terms of Item 407(d) of Regulation S-K, a person who is
determined to be an "audit committee financial expert" will not be deemed an expert for any purpose as a result of
being designated or identified as an "audit committee financial expert" pursuant to Item 407(d), and such
43
designation or identification does not impose on such person any duties, obligations or liability that are greater
than the duties, obligations or liability imposed on such person as a member of the Audit Committee and Board of
Directors in the absence of such designation or identification. Further, the designation or identification of a person
as an "audit committee financial expert" pursuant to Item 407(d) does not affect the duties, obligations or liability
of any other member of the Audit Committee or Board of Directors.
Item 11 Executive Compensation
The information set forth under the captions “Board of Directors and Committees - Compensation Committee
Interlocks and Insider Participation,” “Discussion of Executive Compensation,” “Corporate Governance – Director
Compensation” and "Compensation Committee Report" in the Proxy Statement is incorporated herein by
reference.
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information set forth under the captions "Beneficial Owners of More Than Five Percent of the Company's
Common Stock" and "Security Ownership of Management" in the Proxy Statement is incorporated by reference.
Equity Compensation Plan Information. The following table sets forth aggregated information as of December 31,
2011 about all of the Company's equity compensation plans.
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities remaining available
for future issuance under equity
compensation plans (excluding securities
reflected in column (a)) (1)
(c)
120,800
-
120,800
$11.28
-
$11.28
476,300
-
476,300
(1) Represents shares remaining available for issuance under the 2005 Stock Awards Plan and the 2011 Stock Option Plan.
Non-employee directors are paid an annual retainer of $35,000, and each director has the opportunity to elect to
receive $15,000 of the retainer in restricted stock. For 2011, each director elected to receive $15,000 of the
annual retainer in restricted stock. The number of restricted shares is determined by the average of the high and
low stock price on the day prior to the Annual Meeting of Shareholders. For 2011, five non-employee directors
each received 998 shares of restricted stock and two newly elected non-employee directors each received 1,124
shares of restricted stock (an aggregate of 7,238 shares). Issuance of the shares granted to the directors is not
registered under the Securities Act of 1933 and the shares are subject to forfeiture in whole or in part upon the
occurrence of certain events. During 2011, two non-employee directors resigned/retired from the Board of
Directors resulting in the forfeiture of 1,248 shares. The above table does not reflect these shares issued to non-
employee directors.
Item 13 Certain Relationships and Related Transactions
The information set forth under the captions “Board of Directors and Committees – Related Party
Transactions” and “– Director Independence” in the Proxy Statement is incorporated therein by reference.
Item 14 Principal Accountant Fees and Services
The information set forth under the captions "Independent Registered Public Accounting Firm - Fees Paid to
Independent Registered Public Accounting Firm" and "– Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services of Independent Registered Public Accounting Firm" in the Proxy Statement is
incorporated herein by reference.
44
PART IV
Item 15 Exhibits and Financial Statement Schedules
(a) The following documents are filed as a part of this report:
1.
2.
3.
Financial Statements: The following consolidated financial statements of Synalloy
Corporation are included in Part II, Item 8:
Consolidated Balance Sheets at December 31, 2011 and January 1, 2011
Consolidated Statements of Operations for the years ended December 31, 2011, January
1, 2011 and January 2, 2010
Consolidated Statements of Shareholders' Equity for the years ended December 31,
2011, January 1, 2011 and January 2, 2010
Consolidated Statements of Cash Flows for the years ended December 31, 2011,
January 1, 2011 and January 2, 2010
Notes to Consolidated Financial Statements
Financial Statements Schedules: The following consolidated financial statements
schedule of Synalloy Corporation is included in Item 15:
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2011,
January 1, 2011 and January 2, 2010
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.
Listing of Exhibits:
See "Exhibit Index"
Schedule II Valuation and Qualifying Accounts
Column A
Description
Year ended December 31, 2011
Deducted from asset account:
Allowance for doubtful accounts
Year ended January 1, 2011
Deducted from asset account:
Allowance for doubtful accounts
Year ended January 2, 2010
Deducted from asset account:
Allowance for doubtful accounts
Column B
Balance at
Beginning
of Period
Column C
Charged to
Cost and
Expenses
Column D
Deductions
Column E
Balance at
End of
Period
$ 435,000
$ 793,000
$ 25,000
$ 1,203,000
$ 355,000
$ 85,000
$ 5,000
$ 435,000
$ 816,000
$ 498,000
$ 959,000
$ 355,000
Deductions represent uncollected accounts and credit balances written off against reserve, net of recoveries.
45
Signatures
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.
By /s/ Craig C. Bram
Craig C. Bram
Chief Executive Officer
By /s/ Richard D. Sieradzki
Richard D. Sieradzki
Chief Financial Officer and
Principal Accounting Officer
March 13, 2012
Date
March 13, 2012
Date
SYNALLOY CORPORATION
Registrant
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.
James G. Lane, Jr.
Chairman of the Board
By /s/ Carroll D. Vinson
Carroll D. Vinson
Director
By /s/ Murray H. Wright
Murray H. Wright
Director
By /s/ James W. Terry, Jr.
James W. Terry, Jr.
Director
By /s/ Henry L. Guy
Henry L. Guy
Director
By /s/ Craig C. Bram
Craig C. Bram
Chief Executive Officer and Director
46
March 13, 2012
Date
March 13, 2012
Date
March 13, 2012
Date
March 13, 2012
Date
March 13, 2012
Date
March 13, 2012
Date
Index to Exhibits
Exhibit No.
from
Item 601 of
Regulation
S-K
Description
3.1
Restated Certificate of Incorporation of Registrant, as amended, incorporated by reference to Registrant's
Form 10-Q for the period ended April 2, 2005
3.2 Bylaws of Registrant, as amended, incorporated by reference to Registrant's Form 10-Q for the period ended
March 31, 2001 (the "first quarter 2001 Form 10-Q")
4.1 Form of Common Stock Certificate, incorporated by reference to the first quarter 2001 Form 10-Q
10.1
Synalloy Corporation 1998 Long-Term Incentive Stock Plan, incorporated by reference to the first quarter 2001
Form 10-Q
10.2 2011 Long-Term Incentive Stock Option Plan, incorporated by reference to Registrant’s Proxy Statement for
the 2011 Annual Meeting of Shareholders
10.3
Registrant's Subsidiary and Divisional Management Incentive Plan, as restated, effective January 2, 2006,
incorporated by reference to Registrant’s Form 10-K for the year ended December 30, 2006
10.4
Synalloy Corporation 2005 Stock Awards Plan, incorporated by reference to the Proxy Statement for the 2005
Annual Meeting of Shareholders
10.5 Employment Agreement, dated January 1, 2006, between Registrant and Ronald H. Braam, incorporated by
reference to Registrant’s Form 10-K for the year ended December 30, 2006
10.6 Amendment 1 to the Synalloy Corporation 2005 Stock Awards Plan incorporated by reference to Registrant’s
Form 10-K for the year ended December 29, 2007
10.7 Agreement between Registrant’s Bristol Metals, LLC. subsidiary and the United Steelworkers of America Local
4586, dated December 10, 2010, incorporated by reference to Registrant’s Form 10-K for the year ended
January 1, 2011
10.8 Agreement between Registrant’s Bristol Metals, LLC subsidiary and the United Association of Journeymen and
Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada Local Union No. 538,
dated February 16, 2009, incorporated by reference to Registrant’s Form 10-K for the year ended January 1,
2011
10.9 Agreement between Registrant’s Bristol Metals, LLC subsidiary and the Teamsters Local Union No. 549, dated
March 5, 2010, incorporated by reference to Registrant’s Form 10-K for the year ended January 1, 2011
10.10 Loan Agreement, dated as of June 30, 2010, between Registrant and Branch Banking and Trust (“BB&T”),
incorporated by reference to Registrant’s Form 10-K for the year ended January 1, 2011
10.11 Employment Agreement dated January 24, 2011, between Registrant and Craig C. Bram, incorporated by
reference to Registrant’s Form 10-K for the year ended January 1, 2011
10.12 Amended Employment Agreement dated January 24, 2012, between Registrant and Craig C. Bram
10.13 2011 Short-Term Cash Incentive and Options Plan
21 Subsidiaries of the Registrant, incorporated by reference to Registrant’s Form 10-K for the year ended January
1, 2011
31.1 Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer
31.2 Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
32 Certifications Pursuant to 18 U.S.C. Section 1350
47
shareholder information
Corporate offiCers
Craig C. Bram
Chief Executive Officer and President
Richard D. Sieradzki
Chief Financial Officer and Vice President, Finance
Cheryl C. Carter
Corporate Secretary and Director of Human Resources
Metals segMent offiCers
Bristol Metals, llC
J. Kyle Pennington
President
John C. Tidlow
Executive Vice President
Kristopher T. Epperson
Vice President, Sales, BRISMET
Mark E. Monper
Vice President, Sales, BristolFab/Ram-Fab
CheMiCals segMent offiCers
ManufaCturers CheMiCals, llC
Charles E. Stieg
President
Kevin R. Hrebenar
Vice President, R&D and Operations
J. Greg Gibson
Vice President, Sales & Administration
G. Michael Junkins
Vice President, The Dalton Group
operating CoMpanies
Bristol Metals, llC
BrisMet
Mailing: PO Box 1589, Bristol, TN 37621
Street: 390 Bristol Metals Road, Bristol, TN 37620
Telephone: (423) 989-4700
Website: www.brismet.com
BristolfaB
Mailing: PO Box 1589, Bristol, TN 37621
Street: 390 Bristol Metals Road, Bristol, TN 37620
Telephone: (423) 989-4700
Website: www.bristolfab.com
raM-faB, llC
Mailing: PO Box 797, Crossett, AR 71635
Street: 150 Hwy 133S, Crossett, AR 71635
Telephone: (870) 364-7473
Website: www.ramfab.com
ManufaCturers CheMiCals, llC
Mailing: PO Box 2788, Cleveland, TN 37320
Street: 4325 Old Tasso Road, Cleveland, TN 37312
Telephone: (423) 476-6666
Website: www.manufacturerschemicals.com
Designed by Curran & Connors, Inc. / www.curran-connors.com
Board of direCtors
Craig C. Bram
Chief Executive Officer and President
Director since 2004
Committee: Executive
Henry L. Guy
President & CEO of Modern Holdings Incorporated
Director since 2011
Committees: Compensation & Long-Term Incentive and
Nominating/Corporate Governance
James G. Lane, Jr.
Chairman of the Board, Synalloy Corporation
Director since 1986
Committees: Executive
Carroll D. Vinson
Director since 1987
Committees: Audit, Executive and
Nominating/Corporate Governance
Murray H. Wright
Partner at the law firm of VanDeventer Black LLP
Director since 2001
Committees: Audit, Compensation & Long-Term Incentive and
Nominating/Corporate Governance
James W. Terry, Jr.
Chief Executive Officer and President, Hollingsworth Funds, Inc.
Director since 2011
Committees: Audit and Compensation & Long-Term Incentive
annual Meeting
The 2012 Annual Meeting of Shareholders will be held Thursday,
April 26, 2012, at 10:00 a.m., local time, at the Summit Pointe
Conference Center, 801 Spartan Blvd., Spartanburg, SC 29301
transfer agent & registrar
American Stock Transfer & Trust Company
Telephone: (800) 937-5449
Address: 6201 15th Avenue, Brooklyn, NY 11219
Attention: Shareholder Services
Annual Reports, incorporating the Form 10-K, will be provided free
of charge and may be obtained by calling Investor Relations at
(864) 585-3605, e-mail at invrel@synalloy.com or on our website at
www.synalloy.com. The Form 10-K is also available from the Securi-
ties and Exchange Commission’s website at www.sec.gov
independent registered puBliC
aCCounting firM
Dixon Hughes Goodman LLP, Charlotte, NC
general Counsel
Haynsworth Sinkler Boyd, P.A., Greenville, SC