What changed in this filing

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Item 1. Business

2021-03-09 compared with 2020-03-06 · 68 added, 81 removed, 75 unchanged (67% of the section changed)

Item 1 Business

Synalloy Corporation, a Delaware corporation, was incorporated in 1958 as the successor to a chemical manufacturing business founded in 1945.

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("Specialty").

Welded Pipe & Tube Operations manufactures stainless steel, galvanized, ornamental stainless steel tubing, and other alloy pipe and tube.

Welded Pipe & Tube Operations manufactures stainless steel, galvanized, ornamental stainless steel pipe and tube, and other alloy pipe and tube.

Palmer manufactures liquid storage solutions and separation equipment.

Specialty is a master distributor of seamless carbon pipe and tube.

The Metals Segment's markets include the oil and gas, chemical, petrochemical, pulp and paper, mining, power generation (including nuclear), water and waste water treatment, liquid natural gas ("LNG"), brewery, food processing, petroleum, pharmaceutical, automotive & commercial transportation, appliance, architectural, and other heavy industries.

The Metals Segment serves markets through the master distribution of pipe and tube and customers in the appliance, architectural, automotive and commercial transportation, brewery, chemical, petrochemical, pulp and paper, mining, power generation (including nuclear), water and waste-water treatment, liquid natural gas ("LNG"), food processing, pharmaceutical, oil and gas and other heavy industries.

The Specialty Chemicals Segment operates as one reporting unit which includes Manufacturers Chemicals, LLC ("MC"), a wholly-owned subsidiary of Manufacturers Soap and Chemical Company ("MS&C"), and CRI Tolling, LLC ("CRI Tolling").

The Specialty Chemicals Segment produces specialty chemicals for the chemical, paper, metals, mining, agricultural, fiber, paint, textile, automotive, petroleum, cosmetics, mattress, furniture, janitorial and other industries.

MC manufactures lubricants, surfactants, defoamers, reaction intermediaries and sulfated fats and oils.

CRI Tolling provides chemical tolling manufacturing resources to global and regional chemical companies and contracts with other chemical companies to manufacture certain, pre-defined products.

Metals Segment – This segment is comprised of four wholly-owned subsidiaries:

The Specialty Chemicals Segment produces specialty chemicals for the chemical, pulp and paper, coatings, adhesives, sealants and elastomers (CASE), textile, automotive, household, industrial and institutional, water and waste-water treatment, construction, oil and gas and other industries.

Metals Segment – The segment is comprised of four wholly-owned subsidiaries:

Synalloy Metals, Inc., which owns 100 percent of the membership interests of BRISMET, located in Bristol, Tennessee and Munhall, Pennsylvania;

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BRISMET manufactures welded pipe and tube, primarily from stainless steel, duplex, and nickel alloys.

Pipe is produced in sizes from 3/8 inch to 120 inches in diameter and wall thickness up to one and one-half inches.

Eighteen-inch and smaller diameter pipe is made on equipment that forms and welds the pipe in a continuous process.

Pipe is produced in sizes from 3/8 inch outside diameter to 144 inches outside diameter and inner dimension wall thickness from 0.28 inches up to 1 and 3/8 inches.

Pipe smaller than 18 inches in diameter is made on equipment that forms and welds the pipe in a continuous process.

Pipe larger than 18 inches in diameter is formed on presses or rolls and welded on batch welding equipment.

Pipe is normally produced in standard 20-foot lengths.

However, BRISMET has unusual capabilities in the production of long length pipe without circumferential welds.

This can reduce the installation cost

for the customer.

BRISMET also has capabilities in the production of long length pipe without circumferential welds.

This can reduce the installation cost for the customer.

Lengths up to 60 feet can be produced in sizes up to 18 inches in diameter.

In larger sizes, BRISMET has a unique ability among domestic producers to make 48-foot lengths in diameters up to 36 inches.

Over the past four years, BRISMET has made substantial capital improvements, installing an energy efficient furnace to anneal pipe quicker while minimizing natural gas usage;

system improvements in pickling to maintain the proper chemical composition of the pickling acid;

and developing a heavy wall/quick turn welded pipe production shop by adding a 4,000 tonne press along with all necessary ancillary processes.

BRISMET's Munhall facility manufactures stainless welded pipe as well as new product offerings in welded tubing in diameters from 5/8 inch to eight inches and gauges from 0.028 inch to 1/4 inch.

Additionally, the Munhall facility produces galvanized carbon tubing in custom sizes.

Munhall was designed for improved product flow and the latest technology including laser welding and in-line bright annealing.

ASTI is a leading manufacturer of high-end ornamental stainless steel tubing, supplying the automotive, commercial transportation, marine, food services, construction, furniture, healthcare, and other industries.

BRISMET's Munhall facility manufactures stainless welded pipe as well as new product offerings in welded tube in diameters from 5/8 inch to five inches and gauges from 0.028 inch to 1/4 inch.

Additionally, the Munhall facility produces galvanized carbon tube in custom sizes.

ASTI is a leading manufacturer of high-end ornamental stainless steel tube, supplying the automotive, commercial transportation, marine, food services, construction, furniture, healthcare, and other industries.

Operating facilities are located in Troutman and Statesville, North Carolina.

ASTI combines the use of superior metal quality with in-house capabilities in slitting and welding, along with patented and proprietary finishing capabilities and the highest levels of customer service and technical support to provide the customer with the highest quality ornamental product available in the market.

Product range includes ½” OD to 2-1/2” OD up to 5” OD, in a variety of shapes, including squares, rectangles and ellipticals.

ASTI combines the use of superior metal quality with in-house capabilities in slitting and welding, along with our proprietary finishing capabilities and the highest levels of customer service and technical support to provide the customer with the highest quality ornamental product available in the market.

Product range includes 1/2 inch outside diameter to 5 inch outside diameter, in a variety of shapes, including squares, rectangles and ellipticals.

Refer to Note 15 to the consolidated financial statements for further details.

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Finished steel tanks range in size predominantly from 50 to 1,500 barrels and are used to store extracted oil.

Specialty is a leading master distributor of hot finish, seamless, carbon steel pipe and tubing, with an emphasis on large outside diameters and exceptionally heavy wall thickness.

Specialty is a leading master distributor of hot finish, seamless, carbon steel pipe and tube, with an emphasis on large outside diameters and exceptionally heavy wall thickness.

Specialty's products are primarily used for mechanical and high-pressure applications in the oil and gas, capital goods manufacturing, heavy industrial, construction equipment, paper and chemical industries.

Operating from facilities located in Mineral Ridge, Ohio and Houston, Texas, Specialty is well-positioned to serve the major industrial and energy regions and successfully reach other target markets across the United States.

Specialty performs value-added processing on approximately 80 percent of products shipped, which would include cutting to length, heat treatment, testing, boring and end finishing and typically processes and ships orders in 24 hours or less.

Specialty performs value-added processing on approximately 80 percent of products shipped, which includes cutting to length, heat treatment, testing, boring and end finishing and typically processes and ships orders in 24 hours or less.

Based upon its short lead times, Specialty plays a critical role in the supply chain, supplying long lead-time items to markets that demand fast deliveries, custom lengths, and reliable execution of orders.

In order to maintain strong business relationships, the Metals Segment uses only a few raw material suppliers.

Ten suppliers furnish approximately 87 percent of total dollar purchases of raw materials, with one supplier furnishing 34 percent of material purchases.

However, the Company does not believe that the loss of this supplier would have a materially adverse effect on the Company as raw materials are readily available from a number of different sources, and the Company anticipates no difficulties in fulfilling its requirements.

Specialty Chemicals Segment – This segment consists of the Company's wholly-owned subsidiary MS&C.

The Metals Segment relies on 10 suppliers that furnish approximately 95 percent of total dollar purchases of raw materials and one supplier that furnishes 33 percent of material purchases.

The Company does not believe that the loss of this supplier would have a materially adverse effect on the Company as raw materials are readily available from a number of different sources, and the Company anticipates no difficulties in fulfilling its requirements.

Specialty Chemicals Segment – The segment consists of the Company's wholly-owned subsidiary MS&C.

MS&C owns 100 percent of the membership interests of MC, which has a production facility in Cleveland, Tennessee.

This segment also includes CRI Tolling which is located in Fountain Inn, South Carolina.

The segment also includes CRI Tolling which is located in Fountain Inn, South Carolina.

MC and CRI Tolling are aggregated as one reporting unit and comprise the Specialty Chemicals Segment.

Both facilities are fully licensed for chemical manufacture.

Both facilities are fully licensed for chemical manufacturing.

MC manufactures lubricants, surfactants, defoamers, reaction intermediaries, and sulfated fats and oils.

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These products are used in a wide variety of applications and represent a renewable resource, animal and vegetable derivatives, as alternatives to more expensive and non-renewable petroleum derivatives.

MC's strategy has been to focus on industries and markets that have good prospects for sustainability in the U.S.

MC's strategy has been to focus on industries and markets that have strong prospects for sustainability in the U.S.

in light of global trends.

MC's marketing strategy relies on sales to end users through its own sales force, but it also sells chemical intermediates to other chemical companies and distributors.

It also has close working relationships with a significant number of major chemical companies that outsource their production for regional manufacture and distribution to companies like MC.

MC also has close working relationships with a significant number of major chemical companies that outsource their production for regional manufacture and distribution to companies like MC.

MC has been ISO registered since 1995.

The Specialty Chemicals Segment maintains six laboratories for applied research and quality control which are staffed by eleven employees.

Most raw materials used by the segment are generally available from numerous independent suppliers and approximately 52 percent of total purchases are from its top 10 suppliers.

CRI Tolling's business and strategy has been focused in toll manufacturing and providing services to many different end markets, such as the agrochemical, automotive, urethane, water treatment and coatings industries.

CRI Tolling engages in sales efforts to other chemical companies in a wide array of markets through the use of its own sales force, manufacturer's representatives and through internal sales efforts involving staff interaction.

The Specialty Chemicals Segment maintains two laboratories for applied research and quality control which are staffed by 11 employees, including multiple chemists.

The majority of raw materials used by the segment are available from numerous independent suppliers and approximately 48 percent of total purchases are from its top 10 suppliers.

While some raw material needs are met by a sole supplier or only a few suppliers, the Company anticipates no difficulties in fulfilling its raw material requirements.

See Note 14 to the consolidated financial statements, which are included in Item 8 of this Form 10-K, for financial information about the Company's segments.

Sales and Distribution

Metals Segment – The Metals Segment utilizes separate sales organizations for its different product groups.

Welded Pipe & Tube Operations include stainless steel pipe and tube, sold worldwide under the BRISMET trade name and ornamental stainless tube, sold under the ASTI trade name in the U.S.

Welded Pipe & Tube Operations include stainless steel and galvanized pipe and tube, sold worldwide under the BRISMET trade name and ornamental stainless tube, sold under the ASTI trade name in the U.S.

and Canadian markets.

Producing sales and providing service to the distributors and end-user customers are three outside sales employees, 14 independent manufacturers' representative, and 12 inside sales employees.

Palmer employs three sales professionals that manage the relationship with customers and partnerships to identify and secure new sales.

Additionally, the Metals Segment President assists in account relationship management with large customers.

Specialty includes the distribution of hot finish, seamless, carbon steel pipe and tube, with approximately 80 percent of Specialty's pipe and tube sales to North American pipe and tube distributors.

Producing sales and providing service to distributors, OEM and end use customers are 44 sales representatives comprised of inside sales employees, outside sales employees and independent manufacturers' representatives.

Customer feedback and in-field experience generate product enhancements and new product development.

Approximately 80 percent of Specialty's pipe and tube sales are to North American pipe and tube distributors with the remainder comprised of sales to end use customers.

In addition to Specialty's President, Specialty utilizes two manufacturers' representatives and seven inside sales employees, whom are located at both locations, to obtain sales orders and service its customers.

There were no customers representing more than 10 percent of the Metals Segment's revenues for 2019, 2018 or 2017.

Specialty Chemicals Segment – Specialty chemicals are sold directly to various industries nationwide by five full-time outside sales employees and eleven manufacturers' representatives.

The Specialty Chemicals Segment has one customer that accounted for approximately 16 percent of the segment's revenues for 2019 and 2018, respectively, and 23 percent of the segment's revenues for 2017.

In 2018, the concentration of sales to this customer declined as a result of this customer moving production of certain products previously produced and sold by the Specialty Chemicals Segment in-house.

There were no customers representing more than 10 percent of the Metals Segment's revenues for 2020 or 2019, respectively.

Specialty Chemicals Segment – Specialty chemicals are sold directly to various industries nationwide by 10 sales representatives comprised of outside sales employees and independent manufacturers' representatives.

The Specialty Chemicals Segment has one customer that accounted for approximately 16 percent of the segment's revenues for 2020 and 2019, respectively.

Metals Segment – Welded Pipe & Tube Operations produce the largest sales volume group of products in the Metals Segment.

For stainless steel and galvanized pipe, although information is not publicly available regarding the sales of most other producers of these products, management believes that the Company is one of the largest domestic producers of such pipe.

These commodity products are highly competitive with twelve known domestic producers, including the Company, and imports from many different countries.

ASTI combines the use of superior metal quality with in-house capabilities in slitting and welding, along with patented and proprietary finishing capabilities and the highest levels of customer service and technical support to provide customers with the highest quality ornamental product available in the market.

There are three known significant U.S.

ornamental tubing manufacturers competing in the markets in which ASTI participates.

Due to the size of the tanks produced and shipped to its customers, the majority of Palmer's products is sold within a 300-mile radius from its plant in Andrews, Texas.

There are currently 18 tank producers, with similar capabilities, servicing that same area.

For stainless steel and galvanized pipe and tube, although information is not publicly available regarding the sales of the majority of other producers of these products, management believes that the Company is one of the largest domestic producers of such pipe and tube.

ASTI is a leading manufacturer of high-end ornamental stainless steel tube, combining the use of superior metal quality with in-house capabilities in slitting and welding, along with our proprietary finishing capabilities and the highest levels of customer service and technical support to provide customers with the highest quality ornamental product available in the market.

Specialty is a leader in the specialized products segment of the pipe and tube market by offering an industry leading in-stock inventory of a broad range of high quality products, including specialized products with limited availability.

Specialty's dual branches have both common and regional-specific products and capabilities.

There are four known significant pipe and tube distributors with similar capabilities to Specialty.

Specialty Chemicals Segment – The Company is the sole producer of certain specialty chemicals manufactured for other companies under processing agreements and also produces proprietary specialty chemicals.

The Company's sales of specialty

products are insignificant compared to the overall market for specialty chemicals.

The Company's sales of specialty products are insignificant compared to the overall market for specialty chemicals.

The market for most of the products is highly competitive and many competitors have substantially more resources than the Company.

Mergers, Acquisitions and Dispositions

The Company is committed to a long-term strategy of (a) reinvesting capital in our current business segments to foster their organic growth, (b) disposing of underperforming business units, and (c) completing acquisitions that expand our current business segments or establish new manufacturing platforms.

Targeted acquisitions are priced to be economically feasible and focus on achieving positive long-term benefits.

These acquisitions may be paid for in the form of cash, stock, debt or a combination thereof.

On July 1, 2018, BRISMET acquired Marcegaglia USA, Inc.'s ("MUSA") galvanized tube assets and operations ("MUSA-Galvanized") located in Munhall, PA.

The purpose of the transaction was to enhance the Company's on-going business with additional capacity and technological advantages.

The transaction was funded through an increase to the Company's credit facility (refer to Note 5 to the Consolidated Financial Statements).

The purchase price for the transaction totaled $10.4 million .

In connection with the MUSA-Galvanized acquisition, the Company is required to make quarterly earn-out payments for a period of four years following closing, based on actual sales levels of galvanized pipe and tube.

The tangible assets purchased and liabilities assumed from MUSA include accounts receivable, inventory, equipment, and accounts payable.

The Company is committed to a long-term strategy of (a) reinvesting capital in our current business segments to foster their organic growth, (b) disposing of underperforming business units, and (c) completing acquisitions that expand our business segments and geographic footprint or establish new manufacturing capabilities.

On January 1, 2019, ASTI completed the American Stainless acquisition.

The purpose of the transaction was to extend and enhance the Company's on-going business with additional capacity and new technological advantages in the production of stainless ornamental tubing.

The purpose of the transaction was to extend and enhance the Company's on-going business with additional capacity and new technological advantages in the production of stainless ornamental tube.

The purchase price was $21.9 million.

American Stainless will also receive quarterly earn-out payments for a period of three years following closing.

Synalloy funded the acquisition with a new five-year $20 million term note and a draw against its $100 million asset based line of credit, both with Synalloy’s current lender (see Note 5 to the Consolidated Financial Statements).

The tangible assets purchased and liabilities assumed from American Stainless include accounts receivable, inventory, equipment, and accounts payable.

American Stainless will also receive quarterly earn-out payments based on ASTI's revenue for a period of three years following closing.

The tangible assets purchased and liabilities assumed from American Stainless included accounts receivable, inventory, equipment, and accounts payable.

Environmental Matters

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We are presently unable to quantify this risk due to such uncertainties.

Seasonal Nature of the Business

With the exception of Palmer and Specialty's Houston location, which primarily serves the oil and gas industry, the Company’s businesses and products are generally not subject to any seasonal impact that results in significant variations in revenues from one quarter to another.

Fourth quarter revenue and profit for Palmer and Specialty Houston can be as much as 25 percent below the other three quarters due to vacation schedules for customer field crews working at the drill sites.

The Specialty Chemicals Segment operates primarily on the basis of delivering products soon after orders are received.

Accordingly, backlogs are not a factor in this business.

The same applies to seamless, carbon steel pipe and tubing sales in the Metals Segment.

However, backlogs are important in the Metals Segment's welded pipe & tube and tank manufacturing operations, where both businesses incur significant dollar value of committed orders in advance of production.

Its backlog of open orders for welded stainless steel pipe were $35.4 million and $31.2 million and for tanks were $5.8 million and $20.7 million at the end of 2019 and 2018 , respectively.

Employee Relations

At December 31, 2019 , the Company had 606 employees.

The Company's businesses and products are generally not subject to seasonal impacts that result in significant variations in revenues from one quarter to another.

The Metals Segment's Welded Pipe & Tube Operations and the Specialty Chemicals Segment incur a significant dollar value of committed orders in advance of production.

The backlog of open orders for the Welded Pipe & Tube Operations were $40.8 million and $35.4 million at the end of 2020 and 2019, respectively.

The backlog of open orders for the Specialty Chemicals Segment were $3.9 million and $1.5 million at the end of 2020 and 2019, respectively.

Our backlog may not be indicative of actual sales and, therefore, should not be used as a direct measure of future revenue.

Human Capital

Safety and Wellness

The health and safety of our workforce is fundamental to the success of our business.

We provide our employees upfront and ongoing safety training to ensure that safety policies and procedures are effectively communicated and implemented.

Personal protective equipment is provided to employees to safely perform their job responsibilities.

Because our business involves the manufacturing of physical products, many of our employees are unable to work from home.

In an effort to keep our employees safe and maintain operations during the COVID-19 pandemic, we have implemented new health-related measures, including social distancing, restrictions on visitors to our facilities, limiting in-person meetings and other gatherings, limiting company travel, increasing cleanings of our facilities and providing personal protective equipment and disinfecting agents to employees.

Talent Management

Our approach to human capital management is one that seeks to foster an inclusive and respectful work environment where employees are empowered at all levels to implement new ideas, to better serve our customers and continuously improve our processes and operations.

Our business results depend on our ability to manage our human capital resources, including attracting, identifying, and retaining key talent.

Factors that may affect our ability to attract and retain qualified employees include competition from other employers, availability of qualified individuals and opportunities for employee growth.

As of December 31, 2020, the Company had 526 employees.

The Company considers relations with employees to be strong.

The number of employees of the Company represented by unions, located at the Bristol, Tennessee, Mineral Ridge, Ohio, and Munhall, Pennsylvania facilities, is 247, or 41 percent of the Company's employees.

They are represented by three locals affiliated with the United Steelworkers.

Collective bargaining contracts for the Steelworkers expire in July 2024 (Bristol, TN), June 2020 (Mineral Ridge, OH), and January 2023 (Munhall, PA).

Financial Information about Geographic Areas

Information about revenues derived from domestic and foreign customers are set forth in Note 13 to the Consolidated Financial Statements.

The number of employees of the Company represented by unions, located at the Munhall, Pennsylvania, Mineral Ridge, Ohio, and Bristol, Tennessee facilities, is 232, or 44 percent of the Company's employees.

They are represented by three locals affiliated with the United Steelworkers (the "USW").

Collective bargaining contracts for the USW locals expire at various dates between 2023 and 2024.

Our voluntary turnover rate in 2020 was approximately three percent.

We monitor employee turnover rates by plant and the Company as a whole.

The average tenure of our employees is approximately 10 years and we believe is driven by our competitive total rewards package offered to employees and development opportunities which promotes longer employee tenure and reduces voluntary turnover.

Total Rewards

We invest in our workforce by offering a competitive total rewards package that includes a combination of salaries and wages, health and wellness benefits, retirement benefits and educational benefits.

We strive to offer competitive total rewards packages and benefits for eligible employees.

Diversity and Inclusion

We are an Equal Opportunity Employer and all qualified applicants for positions with the Company receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender, identity, national origin, disability, or veteran status.

We strive to provide an equitable and inclusive environment for all our employees with representation across all levels of our workforce that reflects the diversity of the communities in which we live and work.

Available information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business