0000095953-20-000133 | 10-Q | XBRL Viewer

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Cover Page - shares	9 Months Ended
Cover Page - shares	Sep. 30, 2020	Nov. 06, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	0-19687
Entity Registrant Name	Synalloy Corporation
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	57-0426694
Entity Address, Address Line One	4510 Cox Road,
Entity Address, Address Line Two	Suite 201,
Entity Address, City or Town	Richmond,
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	23060
City Area Code	(804)
Local Phone Number	822-3260
Title of 12(b) Security	Common Stock, par value $1.00 per share
Trading Symbol	SYNL
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Smaller Reporting Company	true
Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		9,108,691
Entity Central Index Key	0000095953
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current assets
Cash and cash equivalents	$ 163	$ 626
Accounts receivable, net of allowance for credit losses of $237 and $70, respectively	33,132	35,074
Inventories, net	89,007	98,186
Prepaid expenses and other current assets	13,453	13,229
Total current assets	135,755	147,115
Property, plant and equipment, net	36,331	40,690
Operating Lease, Right-of-Use Asset	32,090	35,772
Goodwill	6,810	17,558
Intangible assets, net	12,131	15,714
Deferred income taxes	1,327	0
Deferred charges, net	271	348
Total assets	224,715	257,197
Current liabilities
Accounts payable	19,514	21,150
Accrued expenses and other current liabilities	6,718	6,037
Current portion of long-term debt	4,000	4,000
Current portion of earn-out liability	3,959	5,576
Current portion of operating lease liabilities	835	3,562
Current portion of finance lease liabilities	26	253
Total current liabilities	35,052	40,578
Long-term debt	67,343	71,554
Long-term portion of earn-out liability	994	3,578
Deferred income taxes	0	790
Long-term portion of operating lease liabilities	33,000	33,723
Long-term portion of finance lease liabilities	41	336
Other long-term liabilities	92	127
Total non-current liabilities	101,470	110,108
Commitments and contingencies – See Note 11
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	37,664	37,407
Retained earnings	51,428	70,552
Shareholders' equity before treasury stock	99,392	118,259
Less cost of common stock in treasury - 1,191,309 and 1,257,784 shares, respectively	11,199	11,748
Total shareholders' equity	88,193	106,511
Total liabilities and shareholders' equity	$ 224,715	$ 257,197

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Assets [Abstract]
Allowance for credit loss	$ 237	$ 70
Stockholders' Equity Attributable to Parent [Abstract]
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	24,000,000	24,000,000
Common stock, shares issued (in shares)	10,300,000	10,300,000
Common stock in treasury, at cost (in shares)	1,191,309	1,257,784

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Net sales	$ 59,266	$ 73,640	$ 200,099	$ 237,222
Cost of sales	54,271	66,352	183,592	213,412
Gross profit	4,995	7,288	16,507	23,810
Selling, general and administrative expense	6,275	8,361	21,088	24,920
Acquisition costs and other	656	90	803	438
Proxy contest costs	207	0	3,105	0
Earn-out adjustments	(146)	(1,242)	(969)	(1,643)
Asset impairments	0	0	6,079	0
Goodwill impairment	10,748	0	10,748	0
Gain on lease modification	(171)	0	(171)	0
Operating (loss) income	(12,574)	79	(24,176)	95
Other expense (income)
Interest expense	452	944	1,703	2,977
Change in fair value of interest rate swaps	(16)	21	65	145
Other, net	59	180	(1,244)	(224)
Loss before income taxes	(13,069)	(1,066)	(24,700)	(2,803)
Income tax benefit	(2,530)	(112)	(6,026)	(660)
Net loss	$ (10,539)	$ (954)	$ (18,674)	$ (2,143)
Net loss per common share:
Basic (in dollars per share)	$ (1.16)	$ (0.11)	$ (2.06)	$ (0.24)
Diluted (in dollars per share)	$ (1.16)	$ (0.11)	$ (2.06)	$ (0.24)
Weighted average shares outstanding:
Basic (in shares)	9,105	8,995	9,079	8,969
Dilutive effect from stock options and grants (in shares)	0	0	0	0
Diluted (in shares)	9,105	8,995	9,079	8,969

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Operating activities
Net loss	$ (18,674)	$ (2,143)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation expense	5,752	5,806
Amortization expense	2,324	2,614
Asset impairments	6,079	0
Goodwill impairment	10,748	0
Amortization of debt issuance costs	129	120
Unrealized (gain) loss on equity securities	(208)	282
Deferred income taxes	(2,116)	(561)
Proceeds from business interruption insurance	1,040	0
Loss (gain) on sale of equity securities	38	(474)
Earn-out adjustments	(969)	(1,643)
Payments on earn-out liabilities in excess of acquisition date fair value	(292)	(448)
Provision for losses on accounts receivable	53	(92)
Provision for losses on inventories	874	1,392
Loss on sale of property, plant and equipment	237	(50)
Non-cash lease expense	385	432
Non-cash lease termination loss	24	0
Gain on lease modification	(171)	0
Change in fair value of interest rate swap	65	145
Issuance of treasury stock for director fees	405	304
Stock-based compensation expense	1,036	1,760
Changes in operating assets and liabilities:
Accounts receivable	1,438	2,779
Inventories	4,593	12,169
Other assets and liabilities	(1,902)	(1,035)
Accounts payable	(1,636)	(909)
Accrued expenses	681	(1,258)
Accrued income taxes	(3,963)	(1,263)
Net cash provided by operating activities	5,970	17,927
Investing activities
Purchases of property, plant and equipment	(2,824)	(2,841)
Proceeds from sale of property, plant and equipment	102	189
Proceeds from sale of equity securities	4,430	1,091
Purchase of equity securities	0	(543)
Acquisition of ASTI	0	(21,895)
Net cash provided by (used in) investing activities	1,708	(23,999)
Financing activities
Borrowings (repayments) from line of credit	(1,210)	(10,630)
Borrowings from term loan	0	20,000
Payments on long-term debt	(3,000)	(2,667)
Principal payments on finance lease obligations	(101)	(101)
Payments for finance lease terminations	(204)	0
Payments on earn-out liabilities	(2,939)	(2,497)
Repurchase of common stock	(635)	0
Payments for deferred financing costs	(52)	0
Net cash (used in) provided by financing activities	(8,141)	4,105
Decrease in cash and cash equivalents	(463)	(1,967)
Cash and cash equivalents at beginning of period	626	2,220
Cash and cash equivalents at end of period	163	253
Supplemental disclosure
Interest	1,573	2,780
Income taxes	$ 16	$ 1,174

Condensed Consolidated Statement of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Common Stock	Capital in Excess of Par Value	Retained Earnings	Retained Earnings Cumulative Effect, Period of Adoption, Adjustment	Cost of Common Stock in Treasury
Beginning balance at Dec. 31, 2018	$ 102,484	$ 4,623	$ 10,300	$ 36,521	$ 68,965	$ 4,623	$ (13,302)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(2,143)				(2,143)
Issuance of shares of common stock from the treasury	304			(808)			1,112
Stock-based compensation	1,760			1,760
Ending balance at Sep. 30, 2019	$ 107,028		10,300	37,473	71,445		(12,190)
Accounting Standards Update [Extensible List]	us-gaap:AccountingStandardsUpdate201613Member
Beginning balance at Dec. 31, 2018	$ 102,484	4,623	10,300	36,521	68,965	4,623	(13,302)
Ending balance at Dec. 31, 2019	106,511	(450)	10,300	37,407	70,552	(450)	(11,748)
Beginning balance at Jun. 30, 2019	107,074		10,300	36,565	72,399		(12,190)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(954)				(954)
Stock-based compensation	908			908
Ending balance at Sep. 30, 2019	107,028		10,300	37,473	71,445		(12,190)
Beginning balance at Dec. 31, 2019	106,511	$ (450)	10,300	37,407	70,552	$ (450)	(11,748)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(18,674)				(18,674)
Issuance of shares of common stock from the treasury	405			(779)			1,184
Stock-based compensation	1,036			1,036
Purchase of common stock	(635)						(635)
Ending balance at Sep. 30, 2020	88,193		10,300	37,664	51,428		(11,199)
Beginning balance at Jun. 30, 2020	98,057		10,300	37,465	61,967		(11,675)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(10,539)				(10,539)
Issuance of shares of common stock from the treasury	405			(71)			476
Stock-based compensation	270			270
Ending balance at Sep. 30, 2020	$ 88,193		$ 10,300	$ 37,664	$ 51,428		$ (11,199)

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Reference 15: http://www.xbrl.org/2003/role/disclosureRef
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Reference 16: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

- Definition

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

+ References + Details

Condensed Consolidated Statement of Shareholders' Equity (Unaudited) (Parenthetical) - shares	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Sep. 30, 2019
Statement of Stockholders' Equity [Abstract]
Issuance of common stock from the treasury (in shares)	50,652	126,092	118,430

Basis of Presentation	9 Months Ended
Basis of Presentation	Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	Basis of Presentation Basis of Financial Statement Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included as required by Regulation S-X, Rule 10-01. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Synalloy Corporation (the Company) Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the Annual Report). The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year. Reclassifications Certain prior period amounts have been reclassified to conform to current period presentation. Recently Issued Accounting Standards - Adopted On January 1, 2020, the Company adopted ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The updated guidance removes disclosure requirements pertaining to the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. In addition, the amendment clarifies that the measurement uncertainty disclosure is to communicate information about uncertainty in measurement as of the reporting date. The guidance also adds disclosure requirements for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The adoption of this standard by the Company did not have a material impact on the unaudited condensed consolidated financial statements or footnote disclosures. See Note 2 for further discussion on the Company's fair value measurements. On January 1, 2020, the Company adopted ASU No. 2017-04 Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. The updated guidance eliminated step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. Additionally, the amount of goodwill allocated to a reporting unit with a zero or negative carrying amount of net assets should be disclosed. The adoption of this standard by the Company did not have a material impact on the unaudited condensed consolidated financial statements. On January 1, 2020, the Company adopted ASU No. 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The updated guidance amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions, and reasonable and supportable forecasts rather than the incurred loss model which reflects losses that are probable. Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company evaluated its financial instruments and determined that its trade accounts receivable are subject to the new current expected credit loss model. Based upon the application of the new current expected credit loss model, on January 1, 2020, we recorded a cumulative effect adjustment of $0.4 million to Retained Earnings. The adoption of this standard by the Company did not have a material impact on the unaudited condensed consolidated statement of operations or cash flows. On September 30, 2020, the Company early adopted ASU No. 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This ASU removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences as well as adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group. The most significant impact to the Company is the removal of a limit on the tax benefit recognized on pre-tax losses in interim periods. The adoption of this standard by the Company did not have a material effect on the unaudited condensed consolidated financial statements or footnote disclosures. Recently Issued Accounting Standards - Not Yet Adopted Recent accounting pronouncements pending adoption, other than those stated above, are not expected to have a material impact on the Company.

Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, we use a three-tier valuation hierarchy based upon observable and non-observable inputs:

Level 1 - Unadjusted quoted prices that are available in active markets for identical assets or liabilities at the measurement date.

Level 2 - Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

•Quoted prices for similar assets or liabilities in active markets;

•Quoted prices for identical or similar assets or liabilities in non-active markets;

•Inputs other than quoted prices that are observable for the asset or liability; and

•Inputs that are derived principally from or corroborated by other observable market data.

Level 3 - Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using model-based techniques, including option pricing models, discounted cash flow models, probability weighted models, and Monte Carlo simulations.

The Company's financial instruments include cash and cash equivalents, accounts receivable, derivative instruments, accounts payable, earn-out liabilities, a revolving line of credit, a term loan, and equity securities investments.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

Level 1: Equity securities

During the three and nine months ended September 30, 2020, the Company sold 494,074 and 1.2 million shares, respectively, of its equity securities investments, resulting in a realized loss of $69,375 and $37,954, respectively.

For the three months ended September 30, 2020, the Company recorded no net unrealized gains or losses on investments in equity securities. For the nine months ended September 30, 2020, the Company recorded net unrealized gains of $0.2 million on the investments in equity securities held, which is included in "Other expense (income)" on the accompanying unaudited condensed consolidated statements of operations.

The Company held no equity securities as of September 30, 2020. The fair value of equity securities held by the Company as of December 31, 2019 was $4.3 million and is included in “Prepaid expenses and other current assets” on the accompanying condensed consolidated balance sheets.

Level 2: Derivative Instruments

The Company has one interest rate swap contract, which is classified as a Level 2 financial instrument as it is not actively traded and is valued using pricing models that use observable market inputs. The fair value of the contract was a liability of $0.1 million at September 30, 2020 and an asset of $6,088 at December 31, 2019, respectively. The interest rate swap was priced using discounted cash flow techniques. Changes in its fair value were recorded to other expense (income) with corresponding offsetting entries to "Prepaid expenses and other current assets" or "Accrued Expenses", as appropriate. Significant inputs to the discounted cash flow model include projected future cash flows based on projected one-month LIBOR and the average margin for companies with similar credit ratings and similar maturities.

Level 3: Contingent consideration (earn-out) liabilities

The fair value of contingent consideration ("earn-out") liabilities resulting from the 2017 MUSA-Stainless acquisition, 2018 MUSA-Galvanized acquisition, and 2019 American Stainless acquisition are classified as Level 3. Each quarter-end, the Company re-evaluates its assumptions for all earn-out liabilities and adjusts to reflect the updated fair values. Changes in the estimated fair value of the earn-out liabilities are reflected in operating income in the periods in which they are identified. Changes in the fair value of the earn-out liabilities may materially impact and cause volatility in the Company's operating results. The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration (earn-out) liabilities are the discount rate, timing of the estimated payouts, and future revenue projections. Significant increases (decreases) in any of those inputs would not have resulted in a material difference in the fair value measurement of the earn-out liabilities for the three and nine months ended September 30, 2020.

The following table presents a summary of changes in fair value of the Company's Level 3 earn-out liabilities measured on a recurring basis for the nine months ended September 30, 2020:


(in thousands)	MUSA-Stainless		MUSA-Galvanized		American Stainless		Total
Balance at December 31, 2019	$	2,403	$	1,782	$	4,969	$	9,154
Earn-out payments during the period	(1,263)		(488)		(1,480)		(3,231)
Changes in fair value during the period	(415)		(38)		(516)		(969)
Balance at September 30, 2020	$	725	$	1,256	$	2,973	$	4,954

For the three and nine months ended September 30, 2020, the Company had no unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value instruments.

Quantitative Information about Significant Unobservable Inputs Used in Level 3 Fair Value Measurements

The following table summarizes the significant unobservable inputs in the fair value measurement of our contingent consideration (earn-out) liabilities as of September 30, 2020:

Instrument

Fair Value
September 30, 2020

Principal Valuation Technique

Significant Unobservable Inputs

Range

Weighted
Average

Contingent consideration (earn-out) liabilities

$4,954

Probability Weighted Expected Return

Discount rate

Timing of estimated payouts

2020 - 2022

Future revenue projections

$5.5M - 12.3M

$9.5M

The weighted average discount rate was calculated by applying an equal weighting to each contingent consideration's (earn-out liabilities) discount rate. The weighted average future revenue projection was calculated by applying an equal weighting of probabilities to each forecasted scenario within the valuation models to determine the probability weighted sales applicable to the contingent consideration (earn-out liabilities).

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

During the three and nine months ended September 30, 2020, the Company's only significant assets or liabilities measured at fair value on a non-recurring basis subsequent to their initial recognition were certain long-lived assets and goodwill.

The Company reviews the carrying amounts of long-lived assets whenever certain events or changes in circumstances indicate that the carrying amounts may not be recoverable. With input from executive management, the Company's accounting and finance personnel that organizationally report to the chief financial officer, assess performance quarterly against historical patterns, projections of future profitability, and whether it is more likely than not that the assets will be disposed of significantly prior to the end of their estimated useful life for evidence of possible impairment. An impairment loss is recognized when the carrying amount of the asset (disposal) group is not recoverable and exceeds fair value. The Company estimates the fair values of assets subject to long-lived asset impairment based on the Company's own judgments about the assumptions market participants would use in pricing the assets and observable market data, when available. The Company classifies these fair value measurements as Level 3.

During the quarter ended June 30, 2020, due to the continued curtailment of operations related to the COVID-19 pandemic, inventory of Palmer was written down to its net realizable value of $2.1 million and certain long-lived assets of Palmer, including tangible and intangible assets, were written down to their estimated fair value of $1.7 million, resulting in asset impairment charges of $6.1 million.

The Company evaluates goodwill for impairment annually and earlier if an event or other circumstances indicates that we may not recover the carrying value of the asset. During the third quarter of 2020, the Company determined potential indicators of impairment within the Welded Pipe & Tube reporting unit included in the Metals Segment existed. As a result of the goodwill impairment evaluation, it was concluded that the estimated fair value of the Welded Pipe and Tube reporting unit was below its carrying value by 9.7% resulting in a goodwill impairment charge of $10.7 million for the quarter ended September 30, 2020. See Note 5 - Goodwill and Intangible Assets for additional details. The Company classifies these fair value measurements as Level 3.

Fair Value of Financial Instruments

For short-term instruments, other than those required to be reported at fair value on a recurring and non-recurring basis and for which additional disclosures are included above, management concluded the historical carrying value is a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization. Therefore, as of September 30, 2020 and December 31, 2019, the carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, the Company's revolving line of credit, which is based on a variable interest rate, and term loan approximate their fair value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Inventories

9 Months Ended

Sep. 30, 2020

Inventory Disclosure [Abstract]

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined by either specific identification or weighted average methods. The components of inventories are as follows:


(in thousands)	September 30, 2020		December 31, 2019
Raw materials	$	39,843	$	42,896
Work-in-process	20,780		17,616
Finished goods	29,964		38,422
	$	90,587	$	98,934
Less inventory reserves	$	1,580	$	748
Inventories, net	$	89,007	$	98,186

Property, Plant and Equipment

9 Months Ended

Sep. 30, 2020

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, plant and equipment consist of the following:


(in thousands)	September 30, 2020	December 31, 2019
Land	63	63
Leasehold improvements	2,866	1,921
Buildings	84	214
Machinery, fixtures and equipment	100,097	100,300
Construction-in-progress	2,456	2,999
	105,566	105,497
Less accumulated depreciation and amortization	69,235	64,807
Property, plant and equipment, net	36,331	40,690

Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

During the second quarter of 2020, the Company determined potential indicators of impairment within the Welded Pipe & Tube reporting unit included in the Metals Segment, with an associated goodwill balance of $16.2 million, existed. Continued deterioration in macroeconomic conditions, continued risks within the stainless steel industrial business, reporting unit operating losses and a decline in the reporting unit's net sales compared to forecast, collectively, indicated that the reporting unit had experienced a triggering event. As a result, the Company quantitatively evaluated the Welded Pipe & Tube reporting unit for impairment. Fair value of the reporting unit was determined using an income approach. Determining the fair value of the reporting unit and allocation of that fair value to individual assets and liabilities within the reporting unit to determine the implied fair value of the goodwill is judgmental in nature and requires the use of significant management estimates and assumptions. These estimates and assumptions include the discount rate, terminal growth rate, tax rate, projected capital expenditures, and overall operational forecasts, including sales growth, gross margins, and operating margins. Any changes in the judgments, estimates, or assumptions could produce significantly different results. As a result of the goodwill impairment evaluation, it was concluded that the estimated fair value of the Welded Pipe and Tube reporting unit was greater than its carrying value by 1.7% and, as such, no goodwill impairment was necessary in the quarter ended June 30, 2020.

During the third quarter of 2020, the Company determined potential indicators of impairment within the Welded Pipe & Tube reporting unit included in the Metals Segment, with an associated goodwill balance of $16.2 million, existed. Continued declines in the Company's stock price, reporting unit operating losses, and continued declines in the reporting unit's net sales compared to forecast, collectively, indicated that the reporting unit had experienced a triggering event and the need to perform another quantitative interim evaluation of goodwill. As a result, the Company quantitatively evaluated the Welded Pipe & Tube reporting unit for impairment. Fair value of the reporting unit was determined using a combination of an income approach and a market-based approach with equal weighting applied to each approach. The income approach utilized the estimated discounted cash flows expected to be generated by the reporting unit's assets while the market-based approach utilized comparable company information. Determining the fair value of the reporting unit and allocation of that fair value to individual assets and liabilities within the reporting unit to determine the implied fair value of the goodwill is judgmental in nature and requires the use of significant management estimates and assumptions. These estimates and assumptions include the discount rate, terminal growth rate, tax rate, projected capital expenditures, and overall operational forecasts, including sales growth, gross margins, and operating margins. Any changes in the judgments, estimates, or assumptions could produce significantly different results. As a result of the goodwill impairment evaluation, it was concluded that the estimated fair value of the Welded Pipe and Tube reporting unit was below its carrying value by 9.7% resulting in a goodwill impairment charge of $10.7 million for the quarter ended September 30, 2020.

The carrying amounts of goodwill are as follows:


(in thousands)	Metals Segment		Chemicals Segment
Balance at December 31, 2019	$	16,203	$	1,355
Impairment charges	(10,748)		—
Balance at September 30, 2020	$	5,455	$	1,355

During the second quarter of 2020, due to the continued curtailment of operations related to the COVID-19 pandemic and managements decision to pursue a sale and exit of the Palmer business, the intangible customer list related to Palmer was written down to its estimated fair market value of zero, resulting in an impairment charge of $1.3 million, which is included in "Asset impairments" on the accompanying unaudited condensed consolidated statements of operations.

The balance of intangible assets subject to amortization are as follows:


(in thousands)	September 30, 2020		December 31, 2019
Intangible assets, gross	$	30,866	$	32,126
Accumulated amortization of intangible assets	(18,735)		(16,412)
Intangible assets, net	$	12,131	$	15,714

Estimated amortization expense related to intangible assets for the next five years are as follows (in thousands):


Remainder of 2020	$	705
2021	2,721
2022	2,501
2023	1,050
2024	952
2025	855
Thereafter	3,347

Long-term Debt

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Long-term Debt

Long-term debt consists of the following:


(in thousands)	September 30, 2020		December 31, 2019
$100 million Revolving line of credit, due December 20, 2021	$	58,010	$	59,221
$20 million Term loan, due February 1, 2024	$	13,333	$	16,333
	$	71,343	$	75,554

On December 20, 2018, the Company amended its Credit Agreement with its bank to refinance and increase its Line of Credit (the "Line") from $80,000,000 to $100,000,000 and to create a new 5-year term loan in the principal amount of $20,000,000 (the “Term Loan”). The Term Loan was used to finance the purchase of substantially all of the assets of American Stainless (see Note 13). The Term Loan’s maturity date is February 1, 2024 and shall be repaid in 60 consecutive monthly installments. Interest on the Term Loan is calculated using the One Month LIBOR Rate (as defined in the Credit Agreement), plus 1.90 percent. The Line will be used for working capital needs and as a source for funding future acquisitions. The maturity date of the Line has been extended to December 20, 2021. Interest on the Line remains unchanged and is calculated using the One Month LIBOR Rate, plus 1.65%. Borrowings under the Line are limited to an amount equal to a Borrowing Base calculation that includes eligible accounts receivable and inventory. As of September 30, 2020, the Company had $7.5 million of remaining available capacity under the Line.

Pursuant to the Credit Agreement, the Company is subject to certain covenants including maintaining a minimum fixed charge coverage ratio of not less than 1.25, maintaining a minimum tangible net worth of not less than $60.0 million, and a limitation on the Company’s maximum amount of capital expenditures per year, which is in line with currently projected needs.

The Company notified its bank of a technical default of the fixed charge coverage ratio in its Credit Agreement at the quarter ended June 30, 2020. To address the technical default, the Company entered into two amendments to its Credit Agreement with its bank subsequent to the end of the second quarter. On July 31, 2020, the Company entered into the Third Amendment to the Third Amended and Restated Loan Agreement (the "Third Amendment") with its bank. The Third Amendment amended the definition of the fixed charge coverage ratio to include the proxy contest costs in the numerator of the ratio calculation. Additionally, on August 13, 2020, the Company entered into the Fourth Amendment to the Third Amended and Restated Loan Agreement (the "Fourth Amendment") with its bank. The Fourth Amendment amended the definition of the fixed charge

coverage ratio to include the lesser of the actual non-cash asset impairment charge related to Palmer, or $6.0 million in the numerator of the ratio calculation. The amendments are effective for the quarter ended June 30, 2020 and the directly following three quarters after June 30, 2020.

The Company notified its bank of a technical default of the fixed charge coverage ratio in its Credit Agreement at the quarter ended September 30, 2020. To address the technical default, the Company entered into an amendment to its Credit Agreement with its bank subsequent to the end of the third quarter. On October 23, 2020, the Company entered into the Fifth Amendment to the Third Amended and Restated Loan Agreement (the "Fifth Amendment") with its bank. The Fifth Amendment amended the definition of the fixed charge coverage ratio to include in the numerator (i) the calculation of losses from the suspended operations of Palmer in the amount of $1,560,000, which is effective for the quarter ended June 30, 2020 and for the directly following three quarters after June 30, 2020, (ii) the calculation of losses from the suspended operations of Palmer in the amount of $740,000, which is effective for the quarter ended September 30, 2020 and for the directly following three quarters after September 30, 2020, and (iii) the extraordinary expenses related to the investigation of a whistleblower complaint in the amount of $636,000, which is effective for the quarter ended September 30, 2020 and for the directly following three quarters after September 30, 2020.

At September 30, 2020, the Company had a minimum fixed charge coverage ratio of 1.47 and a minimum tangible net worth of $67.7 million.

Stock-Based Compensation	9 Months Ended
Stock-Based Compensation	Sep. 30, 2020
Share-based Payment Arrangement [Abstract]
Stock-Based Compensation	Stock-Based Compensation Stock-based compensation expense for the three and nine months ended September 30, 2020 was $0.3 million and $1.0 million, respectively. Stock-based compensation expense for the three and nine months ended September 30, 2019 was $0.9 million and $1.8 million, respectively. Stock Options During the three and nine months ended September 30, 2020 and September 30, 2019, no stock options were exercised by officers or employees of the Company. 2011 Long-Term Incentive Stock Option Plan On February 5, 2020 the Compensation & Long-Term Incentive Committee of the Company's Board of Directors ("Compensation Committee") approved stock option grants under the 2011 Long-Term Incentive Stock Option Plan ("the 2011 Plan"). Options for a total of 123,500 shares, with an exercise price of $12.995 per share, were granted under the 2011 Plan to certain management employees of the Company. The stock options will vest in 33 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. Except for death, disability, or qualifying retirement, 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 2011 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. The per share weighted-average fair value of this stock option grant was $4.53. The Black-Scholes model for this grant was based on a risk-free interest rate of 1.66 percent, an expected life of ten years, an expected volatility of 35.1 percent and a dividend yield of 1.79 percent. On June 30, 2020 the Compensation Committee approved stock option grants under the 2011 Plan. Options for a total of 20,000 shares, with an exercise price of $7.329 per share, were granted under the 2011 Plan to certain management employees of the Company. The stock options will vest in 33 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. Except for death, disability, or qualifying retirement, 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 2011 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. The per share weighted-average fair value of this stock option grant was $2.59. The Black-Scholes model for this grant was based on a risk-free interest rate of 0.64 percent, an expected life of ten years, an expected volatility of 38.7 percent and a dividend yield of 1.89 percent. Restricted Stock Awards 2015 Stock Awards Plan On February 5, 2020, the Compensation Committee approved stock grants under the Company's 2015 Stock Awards Plan (the "Plan") to certain management employees of the Company where 45,418 shares with a market price of $12.995 per share were granted under the Plan. The stock awards vest in either 20 percent or 33 percent increments annually on a cumulative basis, beginning one year after the date of grant. In order for the awards to vest, the employee must be in the continuous employment of the Company since the date of the award. Except for death, disability, or qualifying retirement, 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. Performance-Based Restricted Stock Awards In 2017, the Compensation Committee granted performance restricted stock awards (“2017 Performance Based Incentive Award”) to officers and certain key management-level employees. The 2017 Performance Based Incentive Award vested three years from the grant date based on continuous service, with the number of shares earned (0 percent to 150 percent of the target award) depending on the extent to which the Company achieved certain financial performance targets measured over the period from January 1, 2017 to December 31, 2019. On February 5, 2020, the Compensation Committee approved the vesting of the 2017 Performance Based Incentive Award for a total of 28,481 restricted shares at a grant date market price of $12.30. On February 5, 2020, the Compensation Committee approved performance-based restricted stock awards to certain management employees of the Company where 36,647 shares with a market price of $12.995 per share were granted under the Plan. The Company's performance-based restricted stock awards are classified as equity and contain performance and service conditions that must be satisfied for an employee to earn the right to benefit from the award. The performance condition is based on the achievement of the Company's Adjusted EBITDA targets. The fair value of the performance-based restricted stock awards are determined based on the closing market price of our stock on the date of grant. In general, 0 percent to 150 percent of the Company's performance-based restricted stock awards vest at the end of a three year service period from the date of grant based upon achievement of the performance condition specified. Except for death, disability, or qualifying retirement, 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. An employee is not entitled to any voting rights with respect to any shares not yet vested, and the shares are not transferable.

Loss Per Share

9 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

Loss Per Share

The following table sets forth the computation of basic and diluted loss per share:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	2020		2019		2020		2019
Numerator:
Net loss	(10,539)		(954)		(18,674)		(2,143)
Denominator:
Denominator for basic earnings per share - weighted average shares	9,105		8,995		9,079		8,969
Effect of dilutive securities:
Employee stock options and stock grants	—		—		—		—
Denominator for diluted earnings per share - weighted average shares	9,105		8,995		9,079		8,969









Net loss per share:
Basic	$	(1.16)	$	(0.11)	$	(2.06)	$	(0.24)
Diluted	$	(1.16)	$	(0.11)	$	(2.06)	$	(0.24)

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 0.3 million and 0.2 million shares of common stock that were anti-dilutive for the three and nine months ended September 30, 2020, respectively. The Company had no shares of common stock that were anti-dilutive for the three and nine months ended September 30, 2019, respectively.

Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company is no longer subject to U.S. federal examinations for years before 2015 or state examinations for years before 2014. During the first nine months of 2020 and 2019, the Company did not identify nor reserve for any unrecognized tax benefits.

Our income tax provision and overall effective tax rates for the periods presented are as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2020			2019			2020			2019
Income tax benefit	$	(2,530)		$	(112)		$	(6,026)		$	(660)
Effective income tax rate	19.4		%	10.6		%	24.4		%	23.6		%

The effective tax rate was 19.4% and 10.6% for the three months ended September 30, 2020 and 2019, respectively. The September 30, 2020 effective tax rate was approximately equal to the U.S. statutory rate of 21.0%. The September 30, 2019 effective tax rate was lower than the statutory rate of 21.0% due to state taxes, net of the federal benefit, and discrete tax benefits on our stock compensation plan.

The effective tax rate was 24.4% and 23.6% for the nine months ended September 30, 2020 and 2019, respectively. The September 30, 2020 effective tax rate was higher than the statutory rate of 21.0% due to discrete tax benefits over the costs associated with our public proxy contest, asset impairments at our Palmer facility, goodwill impairment over our Metals Segment and benefits from our stock compensation plan. Additionally, we recognized estimated tax benefits associated with the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") which was signed into law on March 27, 2020. The CARES Act includes various income and payroll tax provisions, notably enabling the Company to carry back net operating losses and recover taxes paid in prior years. The September 30, 2019 effective tax rate was approximately equal to the U.S. statutory tax rate of 21%.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Leases

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Leases

On September 10, 2020, Store Master Funding XII, LLC, a Delaware limited liability company (“Store”) and the Company's sale-leaseback partner, closed on a transaction pursuant to which Store sold to a third party approximately 12.5 acres of unimproved land and immaterial improvements located at Synalloy’s facility in Munhall, Pennsylvania. Synalloy subleases the Munhall facility to Bristol Metals, LLC.

As a result of the sale, on September 10, 2020, Synalloy and Store entered into a Third Amended and Restated Master Lease Agreement (the “Master Lease”) to reduce Synalloy’s rent at the Munhall facility pursuant to the terms and conditions of the Second Amended and Restated Master Lease Agreement between the parties dated January 2, 2019. The Master Lease amendment was determined to be a lease modification that qualified for a change of accounting on the existing lease and not a separate contract. Upon modification of the Master Lease Agreement, the right-of-use asset and operating lease liability were remeasured using an incremental borrowing rate determined on the date of modification. As such, the Company recognized a reduction in the right-of-use asset and operating lease liability related to the Master Lease of $3.2 million and $3.4 million, respectively, and recognized a gain on the modification of $0.2 million, which is reported within operating expenses on the unaudited condensed consolidated statement of operations.

Balance Sheet Presentation

Operating and finance lease amounts included in the unaudited condensed consolidated balance sheet are as follows (in thousands):

Classification

Financial Statement Line Item

September 30, 2020

Assets

Right-of-use assets, operating leases

32,090

Assets

Property, plant and equipment

Current liabilities

Current portion of lease liabilities, operating leases

835

Current liabilities

Current portion of lease liabilities, finance leases

Non-current liabilities

Non-current portion of lease liabilities, operating leases

33,000

Non-current liabilities

Non-current portion of lease liabilities, finance leases

Total Lease Cost

Individual components of the total lease cost incurred by the Company are as follows:


(in thousands)	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Operating lease cost	$	1,032	$	3,101
Finance lease cost:
Amortization of right-of-use assets	9		84
Interest on finance lease liabilities	—		24
Total lease cost	$	1,041	$	3,209

Reduction in carrying amounts of right-of-use assets held under finance leases is included in depreciation expense. Minimum rental payments under operating leases are recognized on a straight-line method over the term of the lease including any periods of free rent and are included in selling, general, and administrative expense on the unaudited condensed consolidated statement of operations.

Maturity of Leases

The amounts of undiscounted future minimum lease payments under leases as of September 30, 2020 are as follows:


(in thousands)	Operating		Finance
Remainder of 2020	$	899	$	9
2021	3,610		22
2022	3,665		15
2023	3,699		15
2024	3,549		8
Thereafter	47,159		—
Total undiscounted minimum future lease payments	62,581		69
Imputed Interest	28,746		2
Present value of lease liabilities	$	33,835	$	67

Lease Term and Discount Rate


Weighted-average remaining lease term	September 30, 2020
Operating Leases	15.70 years
Finance Leases	2.91 years
Weighted-average discount rate
Operating Leases	8.33	%
Finance Leases	2.56	%

During the three and nine months ended September 30, 2020, no right-of-use assets were recognized in exchange for new operating lease liabilities.

Leases

Balance Sheet Presentation

Operating and finance lease amounts included in the unaudited condensed consolidated balance sheet are as follows (in thousands):

Classification

Financial Statement Line Item

September 30, 2020

Assets

Right-of-use assets, operating leases

32,090

Assets

Property, plant and equipment

Current liabilities

Current portion of lease liabilities, operating leases

835

Current liabilities

Current portion of lease liabilities, finance leases

Non-current liabilities

Non-current portion of lease liabilities, operating leases

33,000

Non-current liabilities

Non-current portion of lease liabilities, finance leases

Total Lease Cost

Individual components of the total lease cost incurred by the Company are as follows:


(in thousands)	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Operating lease cost	$	1,032	$	3,101
Finance lease cost:
Amortization of right-of-use assets	9		84
Interest on finance lease liabilities	—		24
Total lease cost	$	1,041	$	3,209

Maturity of Leases

The amounts of undiscounted future minimum lease payments under leases as of September 30, 2020 are as follows:


(in thousands)	Operating		Finance
Remainder of 2020	$	899	$	9
2021	3,610		22
2022	3,665		15
2023	3,699		15
2024	3,549		8
Thereafter	47,159		—
Total undiscounted minimum future lease payments	62,581		69
Imputed Interest	28,746		2
Present value of lease liabilities	$	33,835	$	67

Lease Term and Discount Rate


Weighted-average remaining lease term	September 30, 2020
Operating Leases	15.70 years
Finance Leases	2.91 years
Weighted-average discount rate
Operating Leases	8.33	%
Finance Leases	2.56	%

During the three and nine months ended September 30, 2020, no right-of-use assets were recognized in exchange for new operating lease liabilities.

Commitments and Contingencies	9 Months Ended
Commitments and Contingencies	Sep. 30, 2020
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies The Company is from time-to-time subject to various claims, possible legal actions for product liability and other damages, and other matters arising out of the normal conduct of the Company's business. Management is not currently aware of any asserted or unasserted matters which could have a material effect on the financial condition or results of operations of the Company.

Industry Segments

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Industry Segments

The following table summarizes certain information regarding segments of the Company's operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2019		2020		2019
Net sales
Metals Segment	$	47,079	$	60,121	$	159,761	$	195,728
Specialty Chemicals Segment	12,187		13,519		40,338		41,494
	$	59,266	$	73,640	$	200,099	$	237,222
Operating (loss) income
Metals Segment	$	(11,563)	$	450	$	(19,784)	$	3,125
Specialty Chemicals Segment	1,061		846		3,508		2,387

Unallocated corporate expenses	1,526		2,369		5,132		6,622
Acquisition related costs and other	656		90		803		438
Proxy contest costs	207		—		3,105		—
Earn-out adjustments	(146)		(1,242)		(969)		(1,643)
Gain on lease modification	(171)		—		(171)		—
Operating (loss) income	(12,574)		79		(24,176)		95
Interest expense	452		944		1,703		2,977
Change in fair value of interest rate swap	(16)		21		65		145

Other (income) expense, net	59		180		(1,244)		(224)

Loss before income taxes	$	(13,069)	$	(1,066)	$	(24,700)	$	(2,803)

	As of
(in thousands)	September 30, 2020		December 31, 2019
Identifiable assets
Metals Segment	$	157,974	$	186,758
Specialty Chemicals Segment	25,004		25,428
Corporate	41,737		45,011

	$	224,715	$	257,197

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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+ Details

Acquisitions

9 Months Ended

Sep. 30, 2020

Business Combinations [Abstract]

Acquisitions

Acquisition of the Assets and Operations of American Stainless Tubing, Inc.

On January 1, 2019, the Company's wholly-owned subsidiary, ASTI Acquisition, LLC (now American Stainless Tubing, LLC) ("ASTI"), completed the acquisition of substantially all of the assets of American Stainless Tubing, Inc. ("American Stainless"). The purchase price for the all-cash acquisition was $21.9 million, subject to a post-closing working capital adjustment. The Company funded the acquisition with a new five-year $20 million term note and a draw against its asset-based line of credit (see Note 6).

The transaction is accounted for using the acquisition method of accounting for business combinations. Under this method, the total consideration transferred to consummate the acquisition is allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the closing date of the acquisition. The acquisition method of accounting requires extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets acquired and liabilities assumed. During the third quarter of 2019, the Company finalized the purchase price allocation for the American Stainless acquisition.

The excess of the consideration transferred over the fair value of the net tangible and identifiable intangible assets is reflected as goodwill. Goodwill consists of manufacturing cost synergies expected from combining American Stainless' production capabilities with the Metals Segment current operations. All of the goodwill recognized was assigned to the Company's Metals Segment and is expected to be deductible for income tax purposes.

American Stainless will receive quarterly earn-out payments for a period of three years following closing. Pursuant to the asset purchase agreement between ASTI and American Stainless, earn-out payments will equate to six and one-half percent (6.5 percent) of ASTI’s revenue over the three-year earn-out period. In determining the appropriate discount rate to apply to the contingent payments, the risk associated with the functional form of the earn-out, and the credit risk associated with the payment of the earn-out were all considered. The fair value of the contingent consideration was estimated by applying the probability weighted expected return method using management's estimates of pounds to be shipped and future price per unit.

During the second quarter of 2019, management identified circumstances that existed on the date of acquisition and as a result, revised the purchase price allocation of certain acquired assets and liabilities as allowable during the measurement period.

The following table shows the initial estimate of value and revisions made during 2019:


(in thousands)	Initial estimate		Revisions		Final
Inventories	$	5,564	$	—	$	5,564
Accounts receivable	3,534		—		3,534
Other current assets - production and maintenance supplies	605		—		605
Property, plant and equipment	2,793		—		2,793
Customer list intangible	10,000		(496)		9,504
Goodwill	7,044		714		7,758
Contingent consideration (earn-out liability)	(6,148)		(218)		(6,366)
Accounts payable	(1,400)		—		(1,400)
Other liabilities	(97)		—		(97)
	$	21,895	$	—	$	21,895

ASTI's results of operations are reflected in the Company's Condensed Consolidated Statements of Operations as follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
(in thousands)		2020		2019		2020		2019
Net sales		$	8,020	$	8,469	$	22,920	$	26,539
Income before taxes		$	(4,233)	$	902	$	(2,515)	$	2,001

Stockholders' Equity	9 Months Ended
Stockholders' Equity	Sep. 30, 2020
Equity [Abstract]
Stockholders' Equity	Shareholders' Equity Stock Repurchase Program On February 21, 2019, the Board of Directors authorized a stock repurchase program for up to 850,000 shares of its outstanding common stock over 24 months. The shares will be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. Under the program, the purchases will be funded from available working capital, and the repurchased shares will be returned to the status of authorized, but unissued shares of common stock or held in treasury. There is no guarantee as to the exact number of shares that will be repurchased by the Company, and the Company may discontinue purchases at any time that management determines additional purchases are not warranted. During the three months ended September 30, 2020, the Company purchased no shares under the stock repurchase program. During the nine months ended September 30, 2020, the Company purchased 59,617 shares under the stock repurchase program at an average price of approximately $10.65 per share for an aggregate amount of $0.6 million. During the three and nine months ended September 30, 2019, the Company purchased no shares under the stock repurchase program. As of September 30, 2020, the Company has 790,383 shares of its share repurchase authorization remaining. Shareholder Rights Plan On March 31, 2020, the Board of Directors unanimously authorized the adoption of a limited duration shareholder rights plan expiring on March 31, 2021 and an ownership trigger threshold of 15%. In connection with the shareholder rights plan, the Board of Directors authorized and declared a dividend of one right (each, a "Right") for each outstanding share of the Company's common stock, par value $1.00 per share ("Common Stock") to stockholders of record at the close of business on April 10, 2020 (the "Record Date"). The complete terms of the Rights are set forth in a Rights Agreement dated March 31, 2020 (the "Rights Agreement"), by and between the Company and American Stock Transfer & Trust Company, LLC, as rights agent. The Rights will become exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company's outstanding Common Stock or announces a tender or exchange offer that would result in beneficial ownership of 15% or more of the Company's Common Stock. Each Right would entitle the holder to purchase from the Company one half of one share of Common Stock at a purchase price of $22.50 per right, subject to adjustments (equivalent to $45.00 for each whole share of Common Stock). On June 27, 2020, the Company entered into Amendment 1 to the Rights Agreement (the "Amendment"). The Amendment terminated the Rights Agreement by accelerating the expiration of the Rights to June 28, 2020. At the time of the termination of the Rights Agreement, all of the Rights, which were distributed to holders of the Company's common stock, par value, $1.00, pursuant to the Rights Agreement, expired.

Revenues

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenues

Revenues are recognized when control of the promised goods is transferred to our customers or when a service is rendered, in an amount that reflects the consideration we are to receive in exchange for those goods or services.

The following table presents the Company's revenues, disaggregated by product group. Substantially all of the Company's revenues are derived from contracts with customers where performance obligations are satisfied at a point-in-time.


	Three Months Ended September 30,			Nine Months Ended September 30,
(in thousands)		2020		2019		2020		2019
Fiberglass and steel liquid storage tanks and separation equipment		538		5,552		4,994		25,628
Heavy wall seamless carbon steel pipe and tube		5,436		7,963		18,408		23,252
Stainless steel pipe and tube		37,231		40,993		120,265		128,299
Galvanized pipe and tube		3,875		5,613		16,094		18,549
Specialty chemicals		12,186		13,519		40,338		41,494
Net sales		$	59,266	$	73,640	$	200,099	$	237,222

Arrangements with Multiple Performance Obligations

Our contracts with customers may include multiple performance obligations. For such arrangements, revenue for each performance obligation is based on its stand-alone selling price and revenue is recognized as each performance obligation is satisfied. The Company generally determines stand-alone selling prices based on the prices charged to customers using the adjusted market assessment approach or expected cost plus margin.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Proxy Contest and Related Costs	9 Months Ended
Proxy Contest and Related Costs	Sep. 30, 2020
Other Income and Expenses [Abstract]
Proxy Contest and Related Costs	Proxy Contest and Related Costs During the six months ended June 30, 2020, the Company engaged in a proxy contest with Privet Fund Management, LLC ("Privet") and UPG Enterprises, LLC ("UPG"), which parties acted as a group during the proxy contest. At the Company’s Annual Meeting of Shareholders held on June 30, 2020 (the “Annual Meeting”), the Company’s independent shareholders voted the Company’s proxy card, resulting in five (of eight) incumbent Board members being re-elected to the Board of Directors. Due to cumulative voting, a unique voting method permitted by the Company’s Certificate of Incorporation, Privet and UPG were able to cumulate their group-owned shares to elect three (of eight) new directors at the Annual Meeting. During the three and nine months ended September 30, 2020, total costs incurred by the Company relating to the proxy contest were $0.2 million and $3.1 million, respectively.

Subsequent Events	9 Months Ended
Subsequent Events	Sep. 30, 2020
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events The Company notified its bank of a technical default of the fixed charge coverage ratio in its Credit Agreement at the quarter ended September 30, 2020. To address the technical default, the Company entered into an amendment to its Credit Agreement with its bank subsequent to the end of the third quarter. On October 23, 2020, the Company entered into the Fifth Amendment to the Third Amended and Restated Loan Agreement (the "Fifth Amendment") with its bank. The Fifth Amendment amended the definition of the fixed charge coverage ratio to include in the numerator (i) the calculation of losses from the suspended operations of Palmer in the amount of $1,560,000, which is effective for the quarter ended June 30, 2020 and for the directly following three quarters after June 30, 2020, (ii) the calculation of losses from the suspended operations of Palmer in the amount of $740,000, which is effective for the quarter ended September 30, 2020 and for the directly following three quarters after September 30, 2020, and (iii) the extraordinary expenses related to the investigation of a whistleblower complaint in the amount of $636,000, which is effective for the quarter ended September 30, 2020 and for the directly following three quarters after September 30, 2020. On October 27, 2020, the Company announced the retirement of Craig C. Bram, the Company's President and Chief Executive Officer and member of the Company's Board of Directors, effective November 9, 2020. On October 27, 2020, the Company announced the appointment of Christopher G. Hutter, a member of the Company's Board of Directors, as interim President and Chief Executive Officer, effective November 9, 2020.

Basis of Presentation (Policies)	9 Months Ended
Basis of Presentation (Policies)	Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Financial Statement Presentation	The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included as required by Regulation S-X, Rule 10-01. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Synalloy Corporation (the Company) Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the Annual Report). The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year.
Reclassifications	Certain prior period amounts have been reclassified to conform to current period presentation.
Recently Issued Accounting Standards - Adopted and Not Yet Adopted	Recently Issued Accounting Standards - Adopted On January 1, 2020, the Company adopted ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The updated guidance removes disclosure requirements pertaining to the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. In addition, the amendment clarifies that the measurement uncertainty disclosure is to communicate information about uncertainty in measurement as of the reporting date. The guidance also adds disclosure requirements for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The adoption of this standard by the Company did not have a material impact on the unaudited condensed consolidated financial statements or footnote disclosures. See Note 2 for further discussion on the Company's fair value measurements. On January 1, 2020, the Company adopted ASU No. 2017-04 Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. The updated guidance eliminated step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. Additionally, the amount of goodwill allocated to a reporting unit with a zero or negative carrying amount of net assets should be disclosed. The adoption of this standard by the Company did not have a material impact on the unaudited condensed consolidated financial statements. On January 1, 2020, the Company adopted ASU No. 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The updated guidance amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions, and reasonable and supportable forecasts rather than the incurred loss model which reflects losses that are probable. Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company evaluated its financial instruments and determined that its trade accounts receivable are subject to the new current expected credit loss model. Based upon the application of the new current expected credit loss model, on January 1, 2020, we recorded a cumulative effect adjustment of $0.4 million to Retained Earnings. The adoption of this standard by the Company did not have a material impact on the unaudited condensed consolidated statement of operations or cash flows. On September 30, 2020, the Company early adopted ASU No. 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This ASU removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences as well as adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group. The most significant impact to the Company is the removal of a limit on the tax benefit recognized on pre-tax losses in interim periods. The adoption of this standard by the Company did not have a material effect on the unaudited condensed consolidated financial statements or footnote disclosures. Recently Issued Accounting Standards - Not Yet Adopted Recent accounting pronouncements pending adoption, other than those stated above, are not expected to have a material impact on the Company.
Revenues	Revenues are recognized when control of the promised goods is transferred to our customers or when a service is rendered, in an amount that reflects the consideration we are to receive in exchange for those goods or services.

- Definition

Disclosure of accounting policy for revenue from contract with customer.

+ References

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+ Details

Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Summary of Changes in Fair Value of Company's Earn-Out Liability

The following table presents a summary of changes in fair value of the Company's Level 3 earn-out liabilities measured on a recurring basis for the nine months ended September 30, 2020:


(in thousands)	MUSA-Stainless		MUSA-Galvanized		American Stainless		Total
Balance at December 31, 2019	$	2,403	$	1,782	$	4,969	$	9,154
Earn-out payments during the period	(1,263)		(488)		(1,480)		(3,231)
Changes in fair value during the period	(415)		(38)		(516)		(969)
Balance at September 30, 2020	$	725	$	1,256	$	2,973	$	4,954

Summary of Level 3 Assets and the Valuation Techniques Used to Measure Fair Value

The following table summarizes the significant unobservable inputs in the fair value measurement of our contingent consideration (earn-out) liabilities as of September 30, 2020:

Instrument

Fair Value
September 30, 2020

Principal Valuation Technique

Significant Unobservable Inputs

Range

Weighted
Average

Contingent consideration (earn-out) liabilities

$4,954

Probability Weighted Expected Return

Discount rate

Timing of estimated payouts

2020 - 2022

Future revenue projections

$5.5M - 12.3M

$9.5M

Inventories (Tables)

9 Months Ended

Sep. 30, 2020

Inventory Disclosure [Abstract]

Schedule of Components of Inventories

The components of inventories are as follows:


(in thousands)	September 30, 2020		December 31, 2019
Raw materials	$	39,843	$	42,896
Work-in-process	20,780		17,616
Finished goods	29,964		38,422
	$	90,587	$	98,934
Less inventory reserves	$	1,580	$	748
Inventories, net	$	89,007	$	98,186

Property, Plant and Equipment (Tables)

9 Months Ended

Sep. 30, 2020

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, plant and equipment consist of the following:


(in thousands)	September 30, 2020	December 31, 2019
Land	63	63
Leasehold improvements	2,866	1,921
Buildings	84	214
Machinery, fixtures and equipment	100,097	100,300
Construction-in-progress	2,456	2,999
	105,566	105,497
Less accumulated depreciation and amortization	69,235	64,807
Property, plant and equipment, net	36,331	40,690

Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The carrying amounts of goodwill are as follows:


(in thousands)	Metals Segment		Chemicals Segment
Balance at December 31, 2019	$	16,203	$	1,355
Impairment charges	(10,748)		—
Balance at September 30, 2020	$	5,455	$	1,355

Schedule of Intangible Assets Subject to Amortization

The balance of intangible assets subject to amortization are as follows:


(in thousands)	September 30, 2020		December 31, 2019
Intangible assets, gross	$	30,866	$	32,126
Accumulated amortization of intangible assets	(18,735)		(16,412)
Intangible assets, net	$	12,131	$	15,714

Schedule of Estimated Amortization Expense

Estimated amortization expense related to intangible assets for the next five years are as follows (in thousands):


Remainder of 2020	$	705
2021	2,721
2022	2,501
2023	1,050
2024	952
2025	855
Thereafter	3,347

Long-term Debt (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Schedule of Long-term Debt

Long-term debt consists of the following:


(in thousands)	September 30, 2020		December 31, 2019
$100 million Revolving line of credit, due December 20, 2021	$	58,010	$	59,221
$20 million Term loan, due February 1, 2024	$	13,333	$	16,333
	$	71,343	$	75,554

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

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+ Details

Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

Summary of the Computation of Basic and Diluted Loss Per Share

The following table sets forth the computation of basic and diluted loss per share:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	2020		2019		2020		2019
Numerator:
Net loss	(10,539)		(954)		(18,674)		(2,143)
Denominator:
Denominator for basic earnings per share - weighted average shares	9,105		8,995		9,079		8,969
Effect of dilutive securities:
Employee stock options and stock grants	—		—		—		—
Denominator for diluted earnings per share - weighted average shares	9,105		8,995		9,079		8,969









Net loss per share:
Basic	$	(1.16)	$	(0.11)	$	(2.06)	$	(0.24)
Diluted	$	(1.16)	$	(0.11)	$	(2.06)	$	(0.24)

Income Taxes (Tables)

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Schedule of Components of Provision for Income Taxes and Effective Tax Rates

Our income tax provision and overall effective tax rates for the periods presented are as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2020			2019			2020			2019
Income tax benefit	$	(2,530)		$	(112)		$	(6,026)		$	(660)
Effective income tax rate	19.4		%	10.6		%	24.4		%	23.6		%

Leases (Tables)

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Schedule of Operating and Finance Leases Recorded in Consolidated Balance Sheet

Operating and finance lease amounts included in the unaudited condensed consolidated balance sheet are as follows (in thousands):

Classification

Financial Statement Line Item

September 30, 2020

Assets

Right-of-use assets, operating leases

32,090

Assets

Property, plant and equipment

Current liabilities

Current portion of lease liabilities, operating leases

835

Current liabilities

Current portion of lease liabilities, finance leases

Non-current liabilities

Non-current portion of lease liabilities, operating leases

33,000

Non-current liabilities

Non-current portion of lease liabilities, finance leases

Schedule of Operating and Finance Leases Discount Rates, Total Lease Cost and Weighted Average Remaining Lease Terms

Individual components of the total lease cost incurred by the Company are as follows:


(in thousands)	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Operating lease cost	$	1,032	$	3,101
Finance lease cost:
Amortization of right-of-use assets	9		84
Interest on finance lease liabilities	—		24
Total lease cost	$	1,041	$	3,209


Weighted-average remaining lease term	September 30, 2020
Operating Leases	15.70 years
Finance Leases	2.91 years
Weighted-average discount rate
Operating Leases	8.33	%
Finance Leases	2.56	%

Schedule of Maturities For Operating Leases After Adoption of 842

The amounts of undiscounted future minimum lease payments under leases as of September 30, 2020 are as follows:


(in thousands)	Operating		Finance
Remainder of 2020	$	899	$	9
2021	3,610		22
2022	3,665		15
2023	3,699		15
2024	3,549		8
Thereafter	47,159		—
Total undiscounted minimum future lease payments	62,581		69
Imputed Interest	28,746		2
Present value of lease liabilities	$	33,835	$	67

Schedule of Maturities For Finance Leases After Adoption of 842

The amounts of undiscounted future minimum lease payments under leases as of September 30, 2020 are as follows:


(in thousands)	Operating		Finance
Remainder of 2020	$	899	$	9
2021	3,610		22
2022	3,665		15
2023	3,699		15
2024	3,549		8
Thereafter	47,159		—
Total undiscounted minimum future lease payments	62,581		69
Imputed Interest	28,746		2
Present value of lease liabilities	$	33,835	$	67

Industry Segments (Tables)

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Schedule of Segment Information

The following table summarizes certain information regarding segments of the Company's operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2019		2020		2019
Net sales
Metals Segment	$	47,079	$	60,121	$	159,761