synl-20210630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the Transition Period from _____ to _____

COMMISSION FILE NUMBER 0-19687

Synalloy Corporation

(Exact name of registrant as specified in its charter)

Delaware

57-0426694

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

4510 Cox Road,

Suite 201,

Richmond,

Virginia

23060

(Address of principal executive offices)

(Zip Code)

(804)

822-3260

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, par value $1.00 per share	SYNL	NASDAQ Global Market

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 every Interactive Data File required to be submitted 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 such files).

Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x

The number of shares outstanding of the registrant's common stock as of August 6, 2021 was 9,268,854

Synalloy Corporation

Table of Contents



PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020	4
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)	5
	Condensed Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (unaudited)	6
	Condensed Consolidated Statements of Shareholders' Equity for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
	Note 1: Basis of Presentation	9
	Note 2: Revenue Recognition	9
	Note 3: Fair Value of Financial Instruments	10
	Note 4: Inventories	12
	Note 5: Property, Plant and Equipment	12
	Note 6: Intangible Assets and Deferred Charges	12
	Note 7: Long-term Debt	13
	Note 8: Leases	14
	Note 9: Shareholders' Equity	15
	Note 10: Exit Activities	15
	Note 11: Earnings (Loss) Per Share	15
	Note 12: Income Taxes	16
	Note 13: Commitments and Contingencies	16
	Note 14: Industry Segments	17
	Note 15: Proxy Contest Costs and Recoveries	17
	Note 16: Related Party Transactions	18
	Note 17: Subsequent Events	18
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29

	Signatures	30

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes and incorporates by reference "forward-looking statements" within the meaning of the federal securities laws. All statements that are not historical facts are "forward-looking statements." The words "estimate," "project," "intend," "expect," "believe," "should," "anticipate," "hope," "optimistic," "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, which reflect opinions only as of the date hereof. The following factors, among others, could cause actual results to differ materially from historical results or those anticipated: adverse economic conditions, including risks relating to the impact and spread of and the government’s response to COVID-19; inability to weather an economic downturn; a prolonged decrease in nickel and oil prices; the impact of competitive products and pricing; product demand and acceptance risks; raw material and other increased costs; raw materials availability; financial stability of our customers; customer delays or difficulties in the production of products; loss of consumer or investor confidence; employee relations; ability to maintain workforce by hiring trained employees; labor efficiencies; risks associated with mergers, acquisitions, dispositions and other expansion activities; environmental issues; negative or unexpected results from tax law changes; inability to comply with covenants and ratios required by our debt financing arrangements; and other risks detailed in the Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission ("SEC") on March 9, 2021, particularly under the heading "Risk Factors" and from time-to-time in the Company's SEC filings. The Company assumes no obligation to update the information included in this Quarterly Report on Form 10-Q.

Part I - Financial Information

Item 1. Financial Statements

SYNALLOY CORPORATION

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)


	(Unaudited)
	June 30, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	761	$	236
Accounts receivable, net of allowance for credit losses of $134 and $496, respectively	41,081		28,183
Inventories, net	90,195		85,080
Prepaid expenses and other current assets	10,358		13,384

Total current assets	142,395		126,883

Property, plant and equipment, net	31,777		35,096
Right-of-use assets, operating leases, net	31,092		31,769
Goodwill	1,355		1,355
Intangible assets, net	10,066		11,426

Deferred charges, net	352		455

Total assets	$	217,037	$	206,984

Liabilities and Shareholders' Equity
Current liabilities
Accounts payable	$	25,307	$	19,732
Accounts payable - related parties	632		—
Accrued expenses and other current liabilities	8,547		6,123
Current portion of long-term debt	1,750		875
Current portion of earn-out liability	3,047		3,434
Current portion of operating lease liabilities	927		867
Current portion of finance lease liabilities	45		19

Total current liabilities	40,255		31,050

Long-term debt	57,750		60,495
Long-term portion of earn-out liability	—		287
Long-term portion of operating lease liabilities	32,281		32,771
Long-term portion of finance lease liabilities	53		37
Deferred income taxes	1,881		1,957
Other long-term liabilities	86		92
Total non-current liabilities	92,051		95,639
Commitments and contingencies – See Note 13

Shareholders' equity
Common stock, par value $1 per share; authorized 24,000,000 shares; issued 10,300,000 shares	10,300		10,300
Capital in excess of par value	37,309		37,719
Retained earnings	46,815		42,835
	94,424		90,854
Less: cost of common stock in treasury - 1,031,147 and 1,123,319 shares, respectively	9,693		10,559
Total shareholders' equity	84,731		80,295
Total liabilities and shareholders' equity	$	217,037	$	206,984

Note: The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date. See accompanying notes to condensed consolidated financial statements.

SYNALLOY CORPORATION

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net sales	$	83,087	$	66,136	$	152,865	$	140,833
Cost of sales	69,000		61,775		130,043		129,321
Gross profit	14,087		4,361		22,822		11,512
Expenses
Selling, general and administrative	8,124		7,043		14,993		14,814
Acquisition costs and other	—		6		—		135
Proxy contest costs and recoveries	632		2,734		168		2,909
Earn-out adjustments	1,044		(827)		1,270		(823)
Asset impairments	233		6,079		233		6,079


Operating income (loss)	4,054		(10,674)		6,158		(11,602)
Other expense (income)
Interest expense	353		532		739		1,251
Loss on extinguishment of debt	—		—

SEC Form 10-Q filed by Synalloy Corporation