Synalloy Corporation
Form 10-K
For Period Ended January 1, 2011
Table of Contents
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Page #
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Part I
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3
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7
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10
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10
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10
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Part II
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11
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12
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13
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20
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21
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26
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36
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39
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40
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41
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41
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41
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Part III
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41
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42
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42
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42
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42
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Part IV
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43
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44
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45
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Location
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Principal Operations
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Building Square Feet
|
Land Acres
|
Cleveland, TN
|
Chemical manufacturing and warehousing facilities
|
118,000
|
8.6
|
Bristol, TN
|
Manufacturing of stainless steel pipe and stainless steel piping systems
|
275,000
|
73.1
|
Crossett, AR
|
Manufacturing carbon and chrome alloy piping systems
|
133,000
|
19.8
|
Dalton, GA
|
Dye blending and warehouse facilities
(1)
|
32,000
|
2.0
|
Spartanburg, SC
|
Corporate headquarters
(1)
|
6,000
|
-
|
Augusta, GA
|
Chemical manufacturing
(2)
|
-
|
46.0
|
2010
|
2009
|
|||||||
Quarter
|
High
|
Low
|
High
|
Low
|
||||
1st
|
$ 9.22
|
$ 7.47
|
$ 6.83
|
$ 3.85
|
||||
2nd
|
11.04
|
7.97
|
8.68
|
5.25
|
||||
3rd
|
10.15
|
8.25
|
10.49
|
7.88
|
||||
4th
|
12.25
|
8.40
|
9.98
|
7.75
|
Date Issued
|
Class of Purchasers
|
Number of Shares
Issued
|
Aggregate Exercise
Price
|
|||
2/27/2010
|
Officers and Employees
|
3,600
|
$16,740
|
|||
5/6/2010
|
Non-Employee Directors
|
1,500
|
$10,125
|
|||
9/23/2010
|
Officers and Employees
|
4,800
|
$22,320
|
|||
9,900
|
$49,185
|
Selected Financial Data and Other Financial Information
|
||||||||||||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||
Operations
|
||||||||||||||||||||
Net sales
|
$ | 151,121 | $ | 103,640 | $ | 167,269 | $ | 155,704 | $ | 131,404 | ||||||||||
Gross profit
|
15,916 | 9,489 | 18,552 | 25,564 | 20,163 | |||||||||||||||
Selling, general & administrative expense
|
9,724 | 8,787 | 9,729 | 10,079 | 8,835 | |||||||||||||||
Operating income
|
6,192 | 702 | 8,823 | 15,485 | 11,328 | |||||||||||||||
Net income continuing operations
|
4,034 | 219 | 5,631 | 9,481 | 6,699 | |||||||||||||||
Net (loss) income discontinued operations
|
- | (4 | ) | 352 | 644 | 909 | ||||||||||||||
Net income
|
4,034 | 215 | 5,983 | 10,125 | 7,608 | |||||||||||||||
Financial Position
|
||||||||||||||||||||
Total assets
|
81,375 | 78,252 | 94,666 | 96,621 | 89,810 | |||||||||||||||
Working capital
|
43,232 | 44,123 | 49,433 | 45,446 | 43,237 | |||||||||||||||
Long-term debt, less current portion
|
219 | - | 9,959 | 10,246 | 17,731 | |||||||||||||||
Shareholders' equity
|
63,875 | 62,721 | 62,867 | 58,140 | 47,127 | |||||||||||||||
Financial Ratios
|
||||||||||||||||||||
Current ratio
|
4.0 | 4.5 | 3.7 | 2.7 | 2.9 | |||||||||||||||
Gross profit to net sales
|
11 | % | 9 | % | 11 | % | 16 | % | 15 | % | ||||||||||
Long-term debt to capital
|
0 | % | 0 | % | 14 | % | 15 | % | 27 | % | ||||||||||
Return on average assets
|
5 | % | 0 | % | 6 | % | 10 | % | 8 | % | ||||||||||
Return on average equity
|
6 | % | 0 | % | 9 | % | 18 | % | 16 | % | ||||||||||
Per Share Data (income/(loss) – diluted)
|
||||||||||||||||||||
Net income continuing operations
|
$ | 0.64 | $ | 0.03 | $ | 0.90 | $ | 1.51 | $ | 1.07 | ||||||||||
Net income (loss) discontinued operations
|
- | (0.00 | ) | 0.05 | 0.10 | 0.15 | ||||||||||||||
Net income
|
0.64 | 0.03 | 0.95 | 1.61 | 1.22 | |||||||||||||||
Dividends declared and paid
|
0.50 | 0.10 | 0.25 | 0.15 | - | |||||||||||||||
Book value
|
10.16 | 10.01 | 10.06 | 9.32 | 7.68 | |||||||||||||||
Other Data
|
||||||||||||||||||||
Depreciation and amortization
|
$ | 2,642 | $ | 2,402 | $ | 2,082 | $ | 1,997 | $ | 2,095 | ||||||||||
Capital expenditures
|
$ | 5,095 | $ | 1,892 | $ | 3,059 | $ | 3,340 | $ | 2,343 | ||||||||||
Employees at year end
|
441 | 466 | 459 | 482 | 437 | |||||||||||||||
Shareholders of record at year end
|
704 | 790 | 826 | 834 | 897 | |||||||||||||||
Average shares outstanding - diluted
|
6,309 | 6,269 | 6,281 | 6,296 | 6,234 | |||||||||||||||
Stock Price
|
||||||||||||||||||||
Price range of common stock
|
||||||||||||||||||||
High
|
$ | 12.25 | $ | 10.49 | $ | 17.96 | $ | 47.45 | $ | 18.90 | ||||||||||
Low
|
7.47 | 3.85 | 3.52 | 14.79 | 10.38 | |||||||||||||||
Close
|
12.12 | 9.42 | 5.00 | 17.67 | 18.54 |
2010
|
2009
|
2008
|
||||||||||||||||||||||
(Amounts in thousands)
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
||||||||||||||||||
Net sales
|
$ | 108,544 | 100.0 | % | $ | 70,891 | 100.0 | % | $ | 131,877 | 100.0 | % | ||||||||||||
Cost of goods sold
|
99,367 | 91.5 | % | 66,713 | 94.1 | % | 117,856 | 84.9 | % | |||||||||||||||
Gross profit
|
9,177 | 8.5 | % | 4,178 | 5.9 | % | 14,021 | 10.6 | % | |||||||||||||||
Selling, general and
|
||||||||||||||||||||||||
administrative expense
|
5,403 | 5.0 | % | 4,190 | 5.9 | % | 4,695 | 3.6 | % | |||||||||||||||
Operating income (loss)
|
$ | 3,774 | 3.5 | % | $ | (12 | ) | 0.0 | % | $ | 9,326 | 7.0 | % | |||||||||||
Year-end backlogs -
|
||||||||||||||||||||||||
Piping systems
|
$ | 25,300 | $ | 44,300 | $ | 45,500 |
2010
|
2009
|
2008
|
||||||||||||||||||||||
(Amounts in thousands)
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
||||||||||||||||||
Net sales
|
$ | 42,577 | 100.0 | % | $ | 32,749 | 100.0 | % | $ | 35,392 | 100.0 | % | ||||||||||||
Cost of goods sold
|
35,838 | 84.2 | % | 27,438 | 83.8 | % | 30,861 | 87.2 | % | |||||||||||||||
Gross profit
|
6,739 | 15.8 | % | 5,311 | 16.2 | % | 4,531 | 12.8 | % | |||||||||||||||
Selling, general and
|
||||||||||||||||||||||||
administrative expense
|
2,779 | 6.5 | % | 2,589 | 7.9 | % | 2,541 | 7.2 | % | |||||||||||||||
Operating income
|
$ | 3,960 | 9.3 | % | $ | 2,722 | 8.3 | % | $ | 1,990 | 5.6 | % | ||||||||||||
(Amounts in thousands)
|
Payment Obligations for the Year Ended
|
|||||||||||||||||||||||||||
Total
|
2011
|
2012
|
2013
|
2014
|
2015
|
Thereafter
|
||||||||||||||||||||||
Obligations:
|
||||||||||||||||||||||||||||
Revolving credit facility
|
$ | 219 | $ | - | $ | - | $ | 219 | $ | - | $ | - | $ | - | ||||||||||||||
Interest payments
|
20 | 8 | 8 | 4 | - | - | - | |||||||||||||||||||||
Operating leases
|
93 | 56 | 14 | 10 | 7 | 6 | - | |||||||||||||||||||||
Purchase obligations
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Deferred compensation
(1)
|
471 | 73 | 83 | 83 | 83 | 83 | 66 | |||||||||||||||||||||
Total
|
$ | 803 | $ | 137 | $ | 105 | $ | 316 | $ | 90 | $ | 89 | $ | 66 | ||||||||||||||
(1)
For a description of the deferred compensation obligation, see Note F to the Consolidated Financial Statements included in
|
||||||||||||||||||||||||||||
Item 8 of this Form 10-K.
|
Consolidated Statements of Operations | ||||||||||||
Years ended January 1, 2011, January 2, 2010 and January 3, 2009 | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Net sales
|
$ | 151,120,668 | $ | 103,639,587 | $ | 167,268,987 | ||||||
Cost of sales
|
135,204,721 | 94,150,808 | 148,717,173 | |||||||||
Gross profit
|
15,915,947 | 9,488,779 | 18,551,814 | |||||||||
Selling, general and administrative expense
|
9,723,590 | 8,786,544 | 9,729,026 | |||||||||
Operating income
|
6,192,357 | 702,235 | 8,822,788 | |||||||||
Other (income) and expense | ||||||||||||
Interest expense
|
54,240 | 350,400 | 684,943 | |||||||||
Change in fair value of interest rate swap
|
- | (131,000 | ) | 181,000 | ||||||||
Other, net
|
(11,706 | ) | 131,210 | (256 | ) | |||||||
Income from continuing operations before income tax
|
6,149,823 | 351,625 | 7,957,101 | |||||||||
Provision for income taxes
|
2,116,000 | 133,000 | 2,326,000 | |||||||||
Net income from continuing operations
|
4,033,823 | 218,625 | 5,631,101 | |||||||||
Income from discontinued operations before income tax
|
- | 36,891 | 521,591 | |||||||||
Provision for income taxes
|
- | 41,000 | 170,000 | |||||||||
Net (loss) income from discontinued operations
|
- | (4,109 | ) | 351,591 | ||||||||
Net income
|
$ | 4,033,823 | $ | 214,516 | $ | 5,982,692 |
2010
|
2009
|
|||||||
Land
|
$ | 451,523 | $ | 191,523 | ||||
Land improvements
|
635,217 | 591,217 | ||||||
Buildings
|
11,938,434 | 9,282,636 | ||||||
Machinery, fixtures and equipment
|
42,366,519 | 41,615,632 | ||||||
Construction-in-progress
|
1,286,579 | 848,824 | ||||||
56,678,272 | 52,529,832 | |||||||
Less accumulated depreciation
|
38,486,325 | 36,732,950 | ||||||
Total property, plant and equipment
|
$ | 18,191,947 | $ | 15,796,882 |
2010
|
2009
|
|||||||
$ 20,000,000 Revolving line of credit, due June 30, 2013
|
$ | 219,275 | $ | - | ||||
$ 15,000,000 Revolving line of credit, terminated on June 30, 2010
|
- | - | ||||||
$ 7,000,000 Term loan, terminated on June 30, 2010
|
- | - | ||||||
219,275 | - | |||||||
Less current installments
|
- | - | ||||||
Total long-term debt
|
$ | 219,275 | $ | - |
2010
|
2009
|
|||||||
Salaries, wages and commissions
|
$ | 1,151,210 | $ | 969,316 | ||||
Advances from customers
|
676,729 | 2,355,639 | ||||||
Insurance
|
774,571 | 337,039 | ||||||
Taxes, other than income taxes
|
55,716 | 81,211 | ||||||
Benefit plans
|
159,783 | 161,343 | ||||||
Interest
|
13,014 | 6,870 | ||||||
Professional fees
|
141,750 | 113,400 | ||||||
Utilities
|
11,768 | 50,135 | ||||||
Customer claim
|
- | 1,400,000 | ||||||
Other accrued items
|
249,062 | 345,795 | ||||||
Total accrued expenses
|
$ | 3,306,291 | $ | 5,820,748 |
Weighted
|
Weighted
|
|||||||||||||||||||
Average
|
Average
|
Intrinsic
|
||||||||||||||||||
Exercise
|
Options
|
Contractual
|
Value of
|
Options
|
||||||||||||||||
Price
|
Outstanding
|
Term
|
Options
|
Available
|
||||||||||||||||
(in years)
|
||||||||||||||||||||
At December 29, 2007
|
$ | 8.51 | 130,743 | 4.6 | $ | 1,198,000 | 207,100 | |||||||||||||
Exercised
|
$ | 4.65 | (1,000 | ) | $ | 8,550 | ||||||||||||||
Cancelled / Expired
|
$ | 13.63 | (1,500 | ) | (207,100 | ) | ||||||||||||||
At January 3, 2009
|
$ | 8.48 | 128,243 | 3.7 | $ | 4,865 | - | |||||||||||||
Cancelled / Expired
|
$ | 7.67 | (45,250 | ) | ||||||||||||||||
At January 2, 2010
|
$ | 8.92 | 82,993 | 4.5 | $ | 76,923 | - | |||||||||||||
Exercised
|
$ | 4.97 | (9,900 | ) | ||||||||||||||||
Cancelled / Expired
|
$ | 9.96 | (29,093 | ) | ||||||||||||||||
At January 1, 2011
|
$ | 9.13 | 44,000 | 3.6 | $ | 131,670 | - | |||||||||||||
Exercisable options
|
$ | 9.13 | 44,000 | 3.6 | $ | 131,670 | ||||||||||||||
Grant Date
|
||||||||||||||||||||
Options expected to vest:
|
Fair Value
|
|||||||||||||||||||
At January 3, 2009
|
$ | 9.96 | 29,454 | 6.1 | $ | 6.77 | ||||||||||||||
Vested
|
$ | 9.96 | (14,000 | ) | ||||||||||||||||
At January 2, 2010
|
$ | 9.96 | 15,454 | 5.1 | $ | 6.77 | ||||||||||||||
Vested
|
$ | 9.96 | (15,454 | ) | ||||||||||||||||
At January 1, 2011
|
$ | - | - | $ | - |
Outstanding Stock Options
|
Exercisable Stock Options
|
||||||||
Weighted Average
|
Weighted
|
||||||||
Remaining
|
Average
|
||||||||
Range of
|
Exercise
|
Contractual
|
Exercise
|
||||||
Exercise Prices |
|
Shares
|
Price
|
Life in Years
|
Shares
|
Price
|
|||
$ 5.01
|
1,500
|
$ 5.01
|
0.31
|
1,500
|
$ 5.01
|
||||
$ 4.65
|
5,500
|
$ 4.65
|
1.30
|
5,500
|
$ 4.65
|
||||
$ 9.96
|
37,000
|
$ 9.96
|
4.08
|
37,000
|
$ 9.96
|
||||
44,000
|
44,000
|
Weighted Average
|
||||||||
Shares
|
Grant Date Fair Value
|
|||||||
Outstanding at December 29, 2007
|
22,180 | $ | 25.00 | |||||
Granted February 12, 2008
|
11,480 | $ | 16.35 | |||||
Vested
|
(4,436 | ) | $ | 25.00 | ||||
Forfeited or expired
|
(3,980 | ) | $ | 21.48 | ||||
Outstanding at January 3, 2009
|
25,244 | $ | 21.62 | |||||
Granted February 12, 2009
|
5,500 | $ | 5.22 | |||||
Vested
|
(6,382 | ) | $ | 21.97 | ||||
Forfeited or expired
|
(1,228 | ) | $ | 21.76 | ||||
Outstanding at January 2, 2010
|
23,134 | $ | 17.62 | |||||
Granted February 24, 2010
|
51,500 | $ | 7.88 | |||||
Vested
|
(7,059 | ) | $ | 19.30 | ||||
Forfeited or expired
|
(19,235 | ) | $ | 8.89 | ||||
Outstanding at January 1, 2011
|
48,340 | $ | 10.47 |
(Amounts in thousands)
|
2010
|
2009
|
||||||
Deferred tax assets:
|
||||||||
Inventory valuation reserves
|
$ | 1,181 | $ | 682 | ||||
Allowance for doubtful accounts
|
166 | 171 | ||||||
Inventory capitalization
|
1,039 | 922 | ||||||
Environmental reserves
|
335 | 419 | ||||||
Other
|
212 | 318 | ||||||
Total deferred tax assets
|
2,933 | 2,512 | ||||||
Deferred tax liabilities:
|
||||||||
Tax over book depreciation and amortization
|
2,555 | 2,183 | ||||||
Prepaid expenses
|
183 | 250 | ||||||
Total deferred tax liabilities
|
2,738 | 2,433 | ||||||
Net deferred tax assets
|
$ | 195 | $ | 79 |
(Amounts in thousands)
|
2010
|
2009
|
2008
|
|||||||||
Current:
|
||||||||||||
Federal
|
$ | 2,039 | $ | 100 | $ | 1,509 | ||||||
State
|
193 | 133 | 236 | |||||||||
Total current
|
2,232 | 233 | 1,745 | |||||||||
Deferred:
|
||||||||||||
Federal
|
(148 | ) | (16 | ) | 578 | |||||||
State
|
32 | (84 | ) | 3 | ||||||||
Total deferred
|
(116 | ) | (100 | ) | 581 | |||||||
Total
|
$ | 2,116 | $ | 133 | $ | 2,326 |
(Amounts in thousands)
|
2010
|
2009
|
2008
|
|||||||||||||||||||||
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
|||||||||||||||||||
Tax at U.S. statutory rates
|
$ | 2,091 | 34.0 | % | $ | 120 | 34.0 | % | $ | 2,705 | 34.0 | % | ||||||||||||
State income taxes, net of
|
||||||||||||||||||||||||
Federal tax benefit
|
148 | 2.4 | % | 14 | 4.0 | % | 158 | 2.0 | % | |||||||||||||||
Changes in contingent
|
||||||||||||||||||||||||
tax reserves
|
- | - | - | - | (199 | ) | (2.5 | %) | ||||||||||||||||
Manufacturing exemption
|
(160 | ) | (2.6 | %) | - | - | (123 | ) | (1.6 | %) | ||||||||||||||
General business credit
|
- | - | - | - | (46 | ) | (.6 | %) | ||||||||||||||||
Other, net
|
37 | 0.6 | % | (1 | ) | (0.1 | %) | (169 | ) | (2.1 | %) | |||||||||||||
Total
|
$ | 2,116 | 34.4 | % | $ | 133 | 37.9 | % | $ | 2,326 | 29.2 | % |
2010
|
2009
|
2008
|
||||||||||
Numerator:
|
||||||||||||
Net income from continuing operations
|
$ | 4,033,823 | $ | 218,625 | $ | 5,631,101 | ||||||
Denominator:
|
||||||||||||
Denominator for basic earnings per
|
||||||||||||
share - weighted average shares
|
6,282,497 | 6,261,805 | 6,245,344 | |||||||||
Effect of dilutive securities:
|
||||||||||||
Employee stock options and stock grants
|
26,701 | 7,625 | 35,780 | |||||||||
Denominator for diluted earnings per
|
||||||||||||
share - weighted average shares
|
6,309,198 | 6,269,430 | 6,281,124 | |||||||||
Income per share from continuing operations:
|
||||||||||||
Basic
|
$ | 0.64 | $ | 0.03 | $ | 0.90 | ||||||
Diluted
|
$ | 0.64 | $ | 0.03 | $ | 0.90 |
(Amounts in thousands)
|
2010
|
2009
|
2008
|
|||||||||
Net sales
|
||||||||||||
Metals Segment
|
$ | 108,544 | $ | 70,891 | $ | 131,877 | ||||||
Specialty Chemicals Segment
|
42,577 | 32,749 | 35,392 | |||||||||
$ | 151,121 | $ | 103,640 | $ | 167,269 | |||||||
Operating income (loss)
|
||||||||||||
Metals Segment
|
$ | 3,774 | $ | (12 | ) | $ | 9,326 | |||||
Specialty Chemicals Segment
|
3,960 | 2,722 | 1,990 | |||||||||
7,734 | 2,710 | 11,316 | ||||||||||
Less unallocated corporate expenses
|
1,541 | 2,008 | 2,493 | |||||||||
Operating income
|
6,193 | 702 | 8,823 | |||||||||
Other expense, net
|
43 | 350 | 866 | |||||||||
Pretax income from continuing operations
|
$ | 6,150 | $ | 352 | $ | 7,957 | ||||||
Identifiable assets
|
||||||||||||
Metals Segment
|
$ | 56,622 | $ | 41,757 | ||||||||
Specialty Chemicals Segment
|
17,910 | 15,359 | ||||||||||
Corporate
|
6,843 | 21,136 | ||||||||||
$ | 81,375 | $ | 78,252 | |||||||||
Depreciation and amortization
|
||||||||||||
Metals Segment
|
$ | 2,067 | $ | 1,805 | $ | 1,605 | ||||||
Specialty Chemicals Segment
|
416 | 382 | 344 | |||||||||
Corporate
|
159 | 215 | 133 | |||||||||
$ | 2,642 | $ | 2,402 | $ | 2,082 | |||||||
Capital expenditures
|
||||||||||||
Metals Segment
|
$ | 3,995 | $ | 1,416 | $ | 2,472 | ||||||
Specialty Chemicals Segment
|
1,035 | 396 | 475 | |||||||||
Corporate
|
65 | 80 | 112 | |||||||||
$ | 5,095 | $ | 1,892 | $ | 3,059 | |||||||
Geographic sales
|
||||||||||||
United States
|
$ | 144,340 | $ | 101,814 | $ | 162,952 | ||||||
Elsewhere
|
6,781 | 1,826 | 4,317 | |||||||||
$ | 151,121 | $ | 103,640 | $ | 167,269 |
(Amounts in thousands except for per share data)
|
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
Quarter
|
Quarter
|
Quarter
|
Quarter
|
||||||||||||||
2010
|
|||||||||||||||||
Net sales
|
$ | 35,201 | $ | 36,349 | $ | 41,932 | $ | 37,639 | |||||||||
Gross profit
|
2,750 | 4,210 | 4,620 | 4,336 | |||||||||||||
Net income
|
`
|
82 | 1,078 | 1,412 | 1,462 | ||||||||||||
Per common share
|
|||||||||||||||||
Basic
|
0.01 | 0.17 | 0.22 | 0.23 | |||||||||||||
Diluted
|
0.01 | 0.17 | 0.22 | 0.23 | |||||||||||||
2009
|
|||||||||||||||||
Net sales
|
$ | 30,393 | $ | 21,692 | $ | 25,712 | $ | 25,843 | |||||||||
Gross profit
|
2,916 | 1,984 | 3,022 | 1,567 | |||||||||||||
Net income (loss)
|
340 | (259 | ) | 281 | (143 | ) | |||||||||||
Per common share
|
|||||||||||||||||
Basic
|
0.05 | (0.04 | ) | 0.04 | (0.02 | ) | |||||||||||
Diluted
|
0.05 | (0.04 | ) | 0.04 | (0.02 | ) |
Plan Category
|
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)
|
|||||||||
Equity compensation plans approved by security holders
|
44,000 | $ | 9.13 | 232,500 | ||||||||
Equity compensation plans not approved by security holders
|
- | - | - | |||||||||
Total
|
44,000 | $ | 9.13 | 232,500 |
(1)
|
Represents shares remaining available for issuance under the 2005 Stock Awards Plan.
|
(a)
|
The following documents are filed as a part of this report:
|
||
1.
|
Financial Statements: The following consolidated financial statements of Synalloy Corporation are included in Part II, Item 8:
|
||
Consolidated Balance Sheets at January 1, 2011 and January 2, 2010
|
|||
Consolidated Statements of Operations for the years ended January 1, 2011, January 2, 2010 and January 3, 2009
|
|||
Consolidated Statements of Shareholders' Equity for the years ended January 1, 2011, January 2, 2010 and January 3, 2009
|
|||
Consolidated Statements of Cash Flows for the years ended January 1, 2011, January 2, 2010 and January 3, 2009
|
|||
Notes to Consolidated Financial Statements
|
|||
2.
|
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 January 1, 2011, January 2, 2010 and January 3, 2009
|
|||
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.
|
|||
3.
|
Listing of Exhibits:
|
||
See "Exhibit Index"
|
Column A
|
Column B
|
Column C
|
Column D
|
Column E
|
||||||||||||
Balance at
|
Charged to
|
Balance at
|
||||||||||||||
Beginning
|
Cost and
|
Deductions
|
End of
|
|||||||||||||
Description
|
of Period
|
Expenses
|
(1) |
Period
|
||||||||||||
Year ended January 1, 2011
|
||||||||||||||||
Deducted from asset account:
|
||||||||||||||||
Allowance for doubtful accounts
|
$ | 355,000 | $ | 85,000 | $ | 5,000 | $ | 435,000 | ||||||||
Year ended January 2, 2010
|
||||||||||||||||
Deducted from asset account:
|
||||||||||||||||
Allowance for doubtful accounts
|
$ | 816,000 | $ | 498,000 | $ | 959,000 | $ | 355,000 | ||||||||
Year ended January 3, 2009
|
||||||||||||||||
Deducted from asset account:
|
||||||||||||||||
Allowance for doubtful accounts
|
$ | 1,004,000 | $ | 106,000 | $ | 294,000 | $ | 816,000 | ||||||||
(1)
Allowances, uncollected accounts and credit balances written off against reserve, net of recoveries.
|
By
/s/ Craig C. Bram
Craig C. Bram
Chief Executive Officer
|
March 25, 2011
Date
|
By
/s/ Richard D. Sieradzki
Richard D. Sieradzki
Chief Financial Officer and
Principal Accounting Officer
|
March 25, 2011
Date
|
By
/s/ James G. Lane, Jr.
James G. Lane, Jr.
Chairman of the Board
|
March 25, 2011
Date
|
By
/s/ Sibyl N. Fishburn
Sibyl N. Fishburn
Director
|
March 25, 2011
Date
|
By
/s/ Carroll D. Vinson
Carroll D. Vinson
Director
|
March 25, 2011
Date
|
By
/s/ Murray H. Wright
Murray H. Wright
Director
|
March 25, 2011
Date
|
By
/s/ Ronald H. Braam
Ronald H. Braam
Director
|
March 25, 2011
Date
|
By
/s/ Craig C. Bram
Craig C. Bram
Chief Executive Officer and Director
|
March 25, 2011
Date
|
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
|
Asset Purchase and Sale Agreement, dated as of August 31, 2009 between Registrant and Organic Pigment , LLC, as buyer and Ram-Fab, Inc. and Jones Resources Group, Inc., as seller
|
|
10.2
|
Synalloy Corporation Restated 1994 Non-Employee Directors' Stock Option Plan, incorporated by reference to the first quarter 2001 Form 10-Q
|
|
10.3
|
Synalloy Corporation 1998 Long-Term Incentive Stock Plan, incorporated by reference to the first quarter 2001 Form 10-Q
|
|
10.4
|
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
|
|
10.5
|
Synalloy Corporation 2005 Stock Awards Plan, incorporated by reference to the Proxy Statement for the 2005 Annual Meeting of Shareholders
|
|
10.6
|
Credit Agreement, dated as of December 13, 2005, between Registrant and Carolina First Bank, incorporated by reference to Registrant’s Form 10-K for the year ended December 30, 2006
|
|
10.7
|
Agreement for the purchase and sale of assets between Registrant and Blackman Uhler Specialties, LLC, as sellers and SantoLubes Manufacturing LLC and SantoLubes Spartanburg Holdings LLC, buyers, dated October 2, 2009
|
|
10.8
|
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
|
|
10.9
|
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
|
|
10.10
|
Agreement between Registrant’s Bristol Metals, LLC. subsidiary and the United Steelworkers of America Local 4586, dated December 10, 2010
|
|
10.11
|
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
|
|
10.12
|
Agreement between Registrant’s Bristol Metals, LLC subsidiary and the Teamsters Local Union No. 549, dated March 5, 2010
|
|
10.13
|
Loan Agreement, dated as of June 30, 2010, between Registrant and Branch Banking and Trust (“BB&T”)
|
|
10.14
|
Employment Agreement dated January 24, 2011, between Registrant and Craig C. Bram
|
|
21
|
Subsidiaries of the Registrant
|
|
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
|
|
Note(s):
The Note(s) evidencing the Loans(s) duly executed by the Borrowers.
|
|
Security Agreement(s):
Security Agreement(s) in which Borrowers and any other owner (a “Debtor”) of personal property collateral shall grant to Bank a first priority security interest in the personal property specified therein. (If Bank has or will have a security interest in any collateral which is inferior to the security interest of another creditor, Borrowers must fully disclose to Bank any and all prior security interests, and Bank must specifically approve any such security interest which will continue during the Loan.)
|
|
Negative Pledge Agreement:
No pledge agreement on all of the assets of the Borrowers, including the real estate.
|
|
UCC Financing Statements:
Copies of UCC Financing Statements duly filed in Borrowers’ or other owner’s state of incorporation, organization or residence, and in all jurisdictions necessary, or in the opinion of the Bank desirable, to perfect the security interests granted in the Security Agreement(s), and certified copies of Information Requests identifying all previous financing statements on record for the Borrowers or other owner, as appropriate from all jurisdictions indicating that no security interest has previously been granted in any of the collateral described in the Security Agreement(s), unless prior approval has been given by the Bank.
|
|
Authorization and Certificate:
An Authorization and Certificate executed by each Debtor under which such Debtor authorizes Bank to file a UCC Financing Statement describing collateral owned by such Debtor.
|
|
Commitment Fee:
A commitment fee (or balance thereof) of
$25,000
payable to the Bank on the date of execution of the Loan Documents.
|
|
Corporate Resolution:
A Corporate Resolution duly adopted by the Board of Directors of Synalloy, Metchem, Synalloy Metals and Manufacturers Soap authorizing the execution, delivery, and performance of the Loan Documents on or in a form provided by or acceptable to Bank.
|
|
Articles of Incorporation:
A copy of the Articles of Incorporation and all other charter documents of Synalloy, Metchem, Synalloy Metals and Manufacturers Soap all filed with and certified by the Secretary of State of the State of each corporations incorporation.
|
|
By-Laws:
A copy of the By-Laws of Synalloy, Metchem, Synalloy Metals and Manufacturers Soap, certified by the Secretary of each corporation as to their completeness and accuracy.
|
|
Declaration of Limited Liability Company
: A declaration or resolution from the members/managers of SFR, Ram-Fab, Bristol and Manufacturers Chemicals authorizing the execution, delivery, and performance of the Loan Documents on or in a form provided by or acceptable to Bank.
|
|
Articles of Organization
: A copy of the Articles of Organization and all other organizational documents of SFR, Ram-Fab, Bristol and Manufacturers Chemicals, all filed with and certified by the Secretary of State of each limited liability companies organization.
|
|
Operating Agreement
: A copy of the Operating Agreement of SFR, Ram-Fab, Bristol and Manufacturers Chemicals, certified by each limited liability companies members/managers as to its completeness and accuracy.
|
|
Certificate of Incumbency:
A certificate of the Secretary or members/managers of the Borrowers certifying the names and true signatures of the officers or members/managers of the Borrowers authorized to sign the Loan Documents.
|
|
Certificate of Existence:
A certification of the Secretary of State (or other government authority) of the State of the Borrowers’ Incorporation or Organization as to the existence or good standing of the Borrowers and their charter documents on file.
|
|
Opinion of Counsel:
An opinion of counsel for the Borrowers satisfactory to the Bank and the Bank’s counsel.
|
|
Assignment of Life Insurance Policy(ies):
An assignment of life insurance policy(ies) as collateral in the approximate amount of
$2,900,000
by an insurance company acceptable to the Bank.
|
|
Additional Documents:
Receipt by the Bank of other approvals, opinions, or documents as the Bank may reasonably request.
|
|
Unused Fee Penalty:
Client shall pay the Bank, quarterly in arrears on the last day of each calendar quarter, an unused fee equal to
.125%
per annum on the average daily unused amount of the Credit Commitment for such calendar quarter calculated on the basis of a year of 360 days for the actual number of days elapsed. “Unused Amount of the Credit Commitment” means the maximum commitment amount less any outstanding principal under the Line of Credit.
|
|
Section 2 Representations and Warranties
|
|
The Borrowers represent and warrant to Bank that:
|
|
Section 3 Affirmative Covenants
|
3.09.
|
Deposit Accounts
. Maintain substantially all of its primary operating accounts and treasury management accounts with the Bank.
|
3.10.
|
Affirmative Covenants from other Loan Documents
. All affirmative covenants contained in any Mortgage, Security Agreement, Assignment of Leases and Rents, or other security document executed by the Borrowers which are described in Section 1 hereof are hereby incorporated by reference herein.
|
|
Section 5 Financial Covenants
|
|
(a) Liens and security interests in favor of the Bank;
|
|
(b) Liens for taxes not yet due and payable or otherwise being contested in good faith and for which appropriate reserves are maintained;
|
|
(c) Other liens imposed by law not yet due and payable, or otherwise being contested in good faith and for which appropriate reserves are maintained;
|
6.02.
|
Debt.
Create, incur, assume, or suffer to exist any debt, except:
|
(a)
|
Debt to the Bank;
|
(b)
|
Debt outstanding on the date hereof and shown on the most recent financial statements submitted to the Bank;
|
(c)
|
Accounts payable to trade creditors incurred in the ordinary course of business;
|
(d)
|
Debt secured by purchase money security interests as outlined above in Section 6.01 (e);
|
(e)
|
Additional debt not to exceed $500,000 in the aggregate at any time.
|
6.04.
|
Change of Legal Form of Business; Purchase of Assets.
Change Borrowers’ name or the legal form of Borrowers’ business as shown above, whether by merger, consolidation, conversion or otherwise and, subject to the following sentence, the Borrowers shall not purchase all or substantially all of the assets or business of any Person. Notwithstanding the preceding sentence (but subject to Sections 6.01 through 6.03 and any other applicable provisions of this Agreement), the Borrowers shall be permitted to acquire the assets or business of any Person, provided that such acquisition is for use and purposes consistent with the operations of the Borrowers as of the date of this Agreement, and that the aggregate amount of all such expenditures (as to all Borrowers and acquisitions in the aggregate) shall not exceed $2,000,000 in dollar amount (in terms of aggregate expenditures by the Borrowers or aggregate values of the assets acquired, whichever is the greater measure respectively as to each such acquisition) in any fiscal year.
|
6.05.
|
Guaranties.
Assume, guarantee, endorse, or otherwise be or become directly or contingently liable for obligations of any Person, except the obligations of Synalloy Corporation pursuant to its letter of credit (not to exceed $2,400,000) issued for the benefit of the South Carolina Department of Health and Environmental Control in connection with the former Blackman Uhler plant site in Spartanburg County, South Carolina, and all renewals and modifications of such letter of credit or guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business.
|
6.06.
|
Disposition of Assets.
Except as provided herein, no Borrower shall sell, lease, or otherwise dispose of any of its assets or properties except where the sale, lease or disposition is in the ordinary and usual course of such Borrower’s business. Provided, however, a Borrower may sell, lease or otherwise dispose of an asset outside the ordinary and usual course of such Borrower’s business so long as the Disposition Proceeds for such sales, leases or dispositions of all Borrowers do not exceed an aggregate of $1,000,000 during any calendar year. As used herein, “Disposition Proceeds” means (a) in the case of a sale, the gross sales price of the asset received by the Borrower, and (b) in the case of a lease, all the rental to be received by the Borrower during the term of the lease.
|
6.07.
|
Transfer of Ownership.
As to each Borrower, (a) issue, transfer or sell any new class of stock or LLC or other equity interest, or (b) issue, transfer or sell, in the aggregate, from its treasury stock and/or currently authorized but unissued shares of any class of stock or LLC or other equity interest, more than 10% of the total number of all such issued and outstanding shares or the equivalent of comparable equity interests as of the date of this Agreement.
|
6.08.
|
Negative Covenants from other Loan Documents.
All negative covenants contained in any Security Agreement, or other security document executed by the Borrowers which are described in Section 1 hereof are hereby incorporated by reference herein.
|
Date:
|
6/30/2010
|
|||||||||||
2155 West Croft Circle
|
Period ending:
|
5/29/2010
|
||||||||||
Spartanburg, SC 29302
|
||||||||||||
Net Collateral
|
||||||||||||
Revolving Credit Line Limit
|
(1 | ) | $ | 20,000,000 | ||||||||
Accounts Receivable
|
$ | 20,684,739 | ||||||||||
Less Non-Primes
|
(1,974,436 | ) | ||||||||||
Reserve Against A/R From Advance Rate
|
(2,806,545 | ) | ||||||||||
A/R Collateral
|
$ | 15,903,757 | $ | 15,903,757 | ||||||||
Inventory
|
$ | 36,638,342 | ||||||||||
Less Non-Primes
|
(3,983,277 | ) | ||||||||||
Reserve Against Inventory From Advance Rate
|
(16,922,887 | ) | ||||||||||
Inventory Collateral
|
(2 | ) | $ | 15,732,178 | ||||||||
Inventory Cap Amount = 50% of (1)
|
(3 | ) | $ | 10,000,000 | ||||||||
Inventory Availability (Lower of 2 or 3)
|
10,000,000 | |||||||||||
Cash Surrender Value of Life Insurance
|
$ | 2,809,500 | ||||||||||
Advance Rate
|
90 | % | ||||||||||
CSVLI Collateral
|
$ | 2,528,550 | 2,528,550 | |||||||||
Total Collateral As Adjusted
|
(4 | ) | $ | 28,432,307 | ||||||||
Total Available = Lessor of (1) or (4)
|
$ | 20,000,000 | ||||||||||
The undersigned represents and warrants that the foregoing information is true, complete and correct,
|
||||||||||||
and that the collateral and reserves reflected comply with the terms, conditions, covenants and
|
||||||||||||
representations as set forth in the Credit Agreement.
|
||||||||||||
SYNALLOY CORPORATION
|
||||||||||||
For itself and as Administraive
|
||||||||||||
Borrower
|
||||||||||||
By:_____________________________
|
||||||||||||
Name: Richard D. Sieradzki
|
||||||||||||
Title: Vice President, Finance
|
Date:
|
6/30/2010
|
|||||||||||||||||||||||
2155 West Croft Circle
|
Period ending:
|
5/29/2010
|
||||||||||||||||||||||
Spartanburg, SC 29302
|
||||||||||||||||||||||||
SEGMENT:
|
Bristol Metals
|
Bristol Metals
|
RAM-FAB
|
RAM-FAB
|
Chemicals
|
TOTALS
|
||||||||||||||||||
Accounts Receivable
|
||||||||||||||||||||||||
Gross AR per Aging
|
$ | 11,733,648 | $ | 1,455,869 | $ | 7,495,222 | $ | 20,684,739 | ||||||||||||||||
Less Non-Primes:
|
||||||||||||||||||||||||
Excess Aging (> 90days)
|
528,183 | 19,189 | 848,037 | 1,395,409 | ||||||||||||||||||||
Credits in Excess Aging
|
56,490 | 0 | 18,503 | 74,994 | ||||||||||||||||||||
Intercompany
|
|
504,033 | 504,033 | |||||||||||||||||||||
Unapplied Cash
|
- | - | ||||||||||||||||||||||
Total Non-Primes
|
584,673 | 19,189 | 1,370,574 | 1,974,436 | ||||||||||||||||||||
Eligible AR
|
11,148,975 | 1,436,680 | 6,124,647 | 18,710,303 | ||||||||||||||||||||
Advance Rate
|
85.00 | % | 85.00 | % | 85.00 | % | ||||||||||||||||||
Available A/R
|
$ | 9,476,629 | $ | 1,221,178 | $ | 5,205,950 | $ | 15,903,757 | ||||||||||||||||
Raw Materials &
|
Work in
|
Raw Materials &
|
Work in
|
Raw Materials &
|
||||||||||||||||||||
Inventories
|
Finished Goods
|
Process
|
Finished Goods
|
Process
|
Finished Goods
|
|||||||||||||||||||
Per Perpetual
|
$ | 16,152,293 | $ | 11,940,346 | $ | 1,018,598 | $ | 739,714 | $ | 6,787,392 | $ | 36,638,342 | ||||||||||||
Less Non-Primes:
|
||||||||||||||||||||||||
Market Reserves
|
20,000 | 1,584,000 | - | - | 347,933 | 1,951,933 | ||||||||||||||||||
Other Reserves
|
- | - | - | - | - | - | ||||||||||||||||||
Consigned
|
- | - | - | - | - | - | ||||||||||||||||||
Paid By Customer
|
- | 2,031,344 | - | - | - | 2,031,344 | ||||||||||||||||||
Total Non-Primes
|
20,000 | 3,615,344 | - | - | 347,933 | 3,983,277 | ||||||||||||||||||
Eligible Inventory
|
16,132,293 | 8,325,002 | 1,018,598 | 739,714 | 6,439,459 | 32,655,065 | ||||||||||||||||||
Advance Rate
|
60.00 | % | 30.00 | % | 60.00 | % | 30.00 | % | 50.00 | % | ||||||||||||||
$ | 2,497,501 | $ | 221,914 | |||||||||||||||||||||
SS WIP Limitation
|
$ | 2,000,000 | $ | 2,000,000 | ||||||||||||||||||||
Available Inventory
|
$ | 9,679,376 | $ | 2,000,000 | $ | 611,159 | $ | 221,914 | $ | 3,219,729 | $ | 15,732,178 |
WITNESS:
|
BRANCH BANKING AND TRUST COMPANY
|
|||||
By:
|
/s/ Stan Parker
|
|||||
Stan Parker
|
||||||
Title:
|
Senior Vice President
|
WITNESSES
|
SYNALLOY CORPORATION
|
|
______________________ | ||
As to Synalloy Corporation
|
By
Its:
|
/s/ James G. Lane, Jr.
James G. Lane, Jr.
Chairman of the Board of Directors
Dated:
January 24, 2011
|
EMPLOYEE
|
||
______________________
As to Employee
|
/s/ Craig C. Bram
Craig C. Bram
Dated:
January 24, 2011
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
March 25, 2011
|
/s/ Craig C. Bram
|
Craig C. Bram
|
||
Chief Executive Officer
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
March 25, 2011
|
/s/ Richard D. Sieradzki
|
Richard D. Sieradzki
|
||
Chief Financial Officer and Principal Accounting Officer
|
Date:
|
March 25, 2011
|
/s/ Craig C. Bram
|
Craig C. Bram
|
||
Chief Executive Officer
|
||
/s/ Richard D. Sieradzki
|
||
Richard D. Sieradzki
|
||
Chief Financial Officer and Principal Accounting Officer
|