What changed in this filing

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Item 9A. Controls and Procedures

2022-03-29 compared with 2021-03-09 · 96 added, 76 removed, 98 unchanged (64% of the section changed)

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended.

Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2020.

There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed the evaluation.

a) Evaluation of Disclosure Controls and Procedures

The Company conducted an evaluation, under the supervision and with the participation of its management, of the effectiveness of the design and operation of its disclosure controls and procedures.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms.

Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, the Company’s principal executive and principal financial officers concluded as of December 31, 2021 that its disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses in its internal control over financial reporting discussed below.

(b) Management's Report on Internal Control Over Financial Reporting.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.

The Company’s internal control over financial reporting is a process designed by, or under the supervision of, its CEO and CFO, or persons performing similar functions, and effected by its Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (GAAP).

The Company’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021.

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control-Integrated Framework .

Management has excluded the DanChem operations from its assessment of internal control over financial reporting as of December 31, 2021 because this material acquisition closed in the fourth quarter of 2021.

Total assets of $42.0 million and total revenue of $5.7 million associated with the DanChem operations represent approximately 58% and 2% respectively, of the related financial amounts of the Specialty Chemicals Segment as of, and for the year ended December 31, 2021.

Based on its evaluation, management has concluded that the Company’s internal control over financial reporting was not effective at the reasonable assurance level as of December 31, 2021.

Material Weaknesses in Internal Control over Financial Reporting

A material weakness, as defined in the standards established by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management has determined that the Company had the following material weaknesses in its internal control over financial reporting:

• Entity Level Activities - Management did not maintain appropriately designed entity-level controls impacting the control environment, risk assessment procedures, and effective monitoring activities to prevent or detect potential material misstatements to the financial statements.

These deficiencies were attributed to:

• Lack of structure and responsibility, insufficient number of qualified resources due to significant turnover in key personnel leading to insufficient oversight and accountability over the performance of controls;

• Insufficient identification and assessment of risks impacting the design and implementation of internal controls over financial reporting;

• Insufficient evaluation and determination as to whether the components of internal control were present and functioning based upon evidence maintained for certain management review controls and activity level controls across a significant portion of the Company's financial statement areas.

• Control Activities - Management did not have effective policies and procedures or adequate selection and development of effective control activities, which resulted in the following additional material weaknesses:

• Inventory - Management did not maintain effectively designed and implemented controls over the balances recorded within inventory, including controls over physical inventory counts performed during an interim period and the review for obsolescence of inventories.

• Revenue recognition – Management did not maintain effectively designed and implemented controls over recorded revenue and accounts receivable, including procedures over the existence and accuracy of data input for price and quantity as well as appropriate allocation of transaction price across identified performance obligations within the Company's contracts with customers.

• Period-end financial reporting, journal entries, reconciliations, and account analyses - Management did not maintain effectively designed and implemented controls to detect potential material misstatements to period-end financial statements and related footnote disclosures through review of account reconciliations and account analyses as well as other aspects of the financial statement preparation and review process.

Additionally, management did not maintain effectively designed and implemented controls over the review of journal entries.

While there were no material misstatements in 2021, these material weaknesses, individually or in the aggregate, could result in misstatements of accounts or disclosures in the consolidated financial statements that would not be prevented or detected on a timely basis.

Accordingly, management has concluded that these control deficiencies constitute material weaknesses.

Management’s Plan to Remediate the Material Weakness

Management plans to implement measures designed to ensure that we improve our internal controls over financial reporting and remediate the material weaknesses.

The remediation actions planned include development of policies and procedures and design and enhancement of internal controls over our financial reporting process as well as monitoring of the effectiveness of these controls.

Remediation Plan

In response to the identified deficiencies that aggregated to the aforementioned material weaknesses, management, with oversight from the Company's Audit Committee, is in the process of developing a detailed plan for remediation, including:

• Providing relevant training on internal controls over financial reporting to control owners and control preparers

• Hiring accounting and finance resources with public company experience

• Evaluating and realigning roles and responsibilities of management

• Enhancing/designing/implementing controls over physical inventory counts and inventory valuation

• Enhancing/designing/implementing controls over revenue recognition and accounts receivable

• Enhancing/designing/implementing controls over period-end financial reporting, account reconciliation and account analyses processes

As the Company continues to evaluate the control deficiencies that gave rise to the material weaknesses, the Company may determine additional remediation measures are necessary.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

A control system, no matter how well designed and operated can provide only reasonable, but not absolute, assurance that the control system’s objectives will be met.

The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their cost.

Pursuant to Regulation S-K Item 308(b), this Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.

c) Changes in Internal Control over Financial Reporting

Other than the material weaknesses described above, there were no changes in the Company’s internal controls over financial reporting during the fiscal quarter ended December 31, 2021 that materially affected, or are reasonably likely to have a materially affect, on our internal control over financial reporting.

Other Information

Not applicable.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Directors, Executive Officers and Corporate Governance

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The Company has a separately designated standing Audit Committee of the Board of Directors established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.

The members of the Audit Committee are Susan S.

Gayner, Jeffrey Kaczka and John P.

The members of the Audit Committee are Henry L.

Guy, Benjamin Rosenzweig and John P.

Audit Committee Financial Expert.

The Company's Board of Directors has determined that the Company has at least one "audit committee financial expert," as that term is defined by Item 407(d)(5) of Regulation S-K promulgated by the Securities and Exchange Commission, serving on its Audit Committee.

Jeffrey Kaczka meets the terms of the definition and is independent, as independence is defined for audit committee members in the rules of the NASDAQ Global Market.

Schauerman meets the terms of the definition and is independent, as independence is defined for audit committee members in the rules of the NASDAQ Global Market.

Pursuant to the terms of Item 407(d) of Regulation S-K, a person who is determined to be an "audit committee financial expert" will not be deemed an expert for any purpose as a result of being designated or identified as an "audit committee financial expert" pursuant to Item 407(d), and such designation or identification does not impose on such person any duties, obligations or liability that are greater than the duties, obligations or liability imposed on such person as a member of the Audit Committee and Board of Directors in the absence of such designation or identification.

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Total 143,828 $ 13.04 925,741

(1) Represents shares remaining available for issuance under the 2015 Stock Awards Plan and the 2011 Plan.

Non-employee directors are paid an annual retainer of $102,000, and each director has the opportunity to elect to receive 100 percent of the retainer in restricted stock.

For 2020, non-employee directors received an aggregate of $345,000 of the annual retainer in restricted stock.

1 Represents shares remaining available for issuance under the 2015 Stock Awards Plan

Non-employee directors are paid an annual retainer of $102,000, and each director has the opportunity to elect to receive 100% of the retainer in restricted stock, which vest quarterly over a one year period.

The number of restricted shares is determined by the average of the high and low sale price of the Company's stock on the day prior to the Annual Meeting of Shareholders.

For 2020, seven non-employee directors each received an aggregate of 43,063 shares.

On May 20, 2021, the Company issued an aggregate of 22,026 shares of restricted stock to non-employee directors in lieu of $214,000 of their annual cash retainer fees.

On May 25, 2021, the Company also issued an aggregate of 20,000 additional shares of restricted stock to the Company's new Chairman of the Board due to the increased responsibilities of the role.

Issuance of the shares granted to the directors is not registered under the Securities Act of 1933 and the shares are subject to forfeiture in whole or in part upon the occurrence of certain events.

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Principal Accounting Fees and Services

In accordance with General Instruction G(3), information called for by Part III, Item 14, is incorporated by reference from the information appearing under the caption "Independent Registered Public Accounting Firm - Fees Paid to Independent Registered Public Accounting Firm" and "– Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm" in the definitive Proxy Statement for the 2021 Annual Meeting of Shareholders, which definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation 14A.

Exhibits, Financial Statement Schedules

Independent Registered Public Accounting Firm" in the definitive Proxy Statement for the 2022 Annual Meeting of Shareholders, which definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation 14A.

Exhibits and Financial Statement Schedules

(a) The following documents are filed as a part of this report:

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Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2020 and 2019

Consolidated Statements of Operations for the years ended December 31, 2021 and 2020

Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020

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Notes to Consolidated Financial Statements

Financial Statements Schedules:

Financial Statements Schedule:

The following consolidated financial statements schedule of Synalloy Corporation is included in Item 15:

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See "Exhibit Index"

Form 10-K Summary

Financial Statement Schedule

Schedule II Valuation and Qualifying Accounts

(in thousands) Balance at Beginning of Period Charged to (Reduction of) Cost and Expenses Charged to Other Accounts Deductions Balance at End of Period

(in thousands) Balance at Beginning of Period Charged to (Reduction of) Cost and Expenses Other Deductions Balance at End of Period

Year ended December 31, 2021

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$ ( 330 ) $ 216

Inventory reserves $ 747 $ 271 $ — $ ( 300 ) $ 718

Inventory reserves $ 718 $ 1,649 $ 216 (a)

$ ( 1,311 ) $ 1,272

Year ended December 31, 2020

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Allowance for credit losses $ 70 $ 440 $ 450 (b)

$ ( 464 ) $ 496

Inventory reserves $ 747 $ 271 $ — $ ( 300 ) $ 718

(a) Amount charged to retained earnings upon adoption of ASC 326 on January 1, 2020.

(b) ASTI acquired reserve on January 1, 2019.

Index to Exhibits

(a) DanChem acquired reserve on October 22, 2021

(b) Amount charged to retained earnings upon adoption of ASC 326 on January 1, 2020.

Exhibit Index

Regulation S-K

Restated Certificate of Incorporation of Registrant, as amended, incorporated by reference to Registrant's Form 10-Q for the period ended April 2, 2005

Restated Certificate of Incorporation of Registrant, as amended, incorporated by reference to Registrant's Form 8-K filed May 18, 2015

Bylaws of Registrant, incorporated by reference to Registrant's Form 10-Q for the period ended March 31, 2001, as amended, which amendments are incorporated by reference to Registrant's Form 8-K filed August 13, 2007

Stock Purchase Agreement, dated as of October 22, 2021, by and between the Company and DanChem Holdings, LLC, incorporated by reference to Registrant’s Form 8-K filed October 25, 2021†

Amended and Restated Certificate of Incorporation of Registrant

Amended and Restated Bylaws of Registrant, incorporated by reference to Registrant's Form 8-K filed March 21, 2022

Form of Common Stock Certificate, incorporated by reference to Registrant's Form 10-Q for the period ended March 31, 2001

Synalloy Corporation 2005 Stock Awards Plan, incorporated by reference to the Proxy Statement for the 2005 Annual Meeting of Shareholders

Amendment 1 to the Synalloy Corporation 2005 Stock Awards Plan, incorporated by reference to Registrant's Form 10-K for the year ended December 29, 2007

Amendment 2 to the Synalloy Corporation 2005 Stock Awards Plan, incorporated by reference to Registrant's Form 10-K for the year ended January 3, 2015

Synalloy Corporation 2015 Stock Awards Plan, incorporated by reference to the Proxy Statement for the 2015 Annual Meeting of Shareholders

Amended and Restated Synalloy Corporation 2015 Stock Awards Plan, incorporated by reference to Registrant's Form 10-Q for the period ended June 30, 2018

Description of Common Stock

Amended and Restated Synalloy Corporation 2015 Stock Awards Plan, incorporated by reference to Registrants's Form 10-Q for the period ended June 30, 2021

2011 Long-Term Incentive Stock Option Plan, incorporated by reference to Registrant's Proxy Statement for the 2011 Annual Meeting of Shareholders

2 unchanged sentences

Agreement between Registrant’s Specialty Pipe & Tube, Inc.

subsidiary and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union Local 1375-18, dated July 1, 2020

Third Amended and Restated Loan Agreement, dated as of October 30, 2017, between Registrant and Branch Banking and Trust (now Truist) ("BB&T"), incorporated by reference to Registrant's Form 10-Q for the period ended September 30, 2017

First Amendment to Third Amended and Restated Loan Agreement, dated as of June 29, 2018, between Registrant and BB&T, incorporated by reference to Registrant's Form 10-Q for the period ended June 30, 2018

Second Amendment to Third Amended and Restated Loan Agreement, dated as of December 20, 2018, between Registrant and BB&T, incorporated by reference to Registrant's Form 10-K for the period ended December 31, 2018.

Third Amendment to Third Amended and Restated Loan Agreement, dated as of July 31, 2020, between Registrant and BB&T, incorporated by reference to Registrant’s Form 10-Q for the period ended June 30, 2020

Fourth Amendment to Third Amended and Restated Loan Agreement, dated as of August 13, 2020, between Registrant and BB&T, incorporated by reference to Registrant’s Form 10-Q for the period ended June 30, 2020

Fifth Amendment to Third Amended and Restated Loan Agreement, dated as of October 23, 2020, between Registrant and BB&T, incorporated by reference to Registrant’s Form 8-K filed on October 28, 2020

subsidiary and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union Local 1375-18, dated July 1, 2020, incorporated by reference to Registrant's Form 10-K for the year ended December 31, 2020

Credit Agreement, dated as of January 15, 2021, between Registrant and BMO Harris Bank N.A., incorporated by reference to Registrant’s Form 8-K filed on January 19, 2021

Employment Agreement, dated as of March 1, 2019, between Registrant and Craig C.

Bram, incorporated by reference to Registrant's Form 10-K for the period ended December 31, 2018.

Employment Agreement, dated as of March 1, 2019, between Registrant and Dennis M.

Loughran, incorporated by reference to Registrant's Form 10-K for the period ended December 31, 2018.

Employment Agreement, dated as of March 1, 2019, between Registrant and James G.

Gibson, incorporated by reference to Registrant's Form 10-K for the period ended December 31, 2018.

Joinder Agreement, dated November 5, 2021, between Registrant and BMO Harris Bank N.A., incorporated by reference to Registrant's Form 10-Q for the period ended September 30, 2021

Employment Agreement, dated as of October 26, 2020, between Registrant and Christopher G.

Hutter, incorporated by reference to Registrant’s Form 8-K filed on October 28, 2020

Confidential Separation and Release Agreement, dated as of October 26, 2020, between Registrant and Craig C.

Bram, incorporated by reference to Registrant’s Form 8-K filed on October 28, 2020

E mployment Agreement , dated as of February 5, 2021, between Re gistrant and Sally M.

Cunningham, inco rporat ed by reference to Registrant's F orm 8-K filed on February 5, 2021.

Stock Purchase Agreement, dated as of August 10, 2012, among Jimmie Dean Lee, James Varner, Steven C.

O'Brate and Registrant, incorporated by reference to Registrant's Form 8-K filed on August 24, 2012

Stock Purchase Agreement, dated as of November 21, 2014, between The Davidson Corporation and Registrant, incorporated by reference to Registrant's Form 8-K filed on November 25, 2014

Asset Purchase Agreement, dated as of December 9, 2016, between Marcegaglia USA, Inc.

and Registrant's Bristol Metals, LLC subsidiary, incorporated by reference to Registrant's Form 10-K for the year ended December 31, 2016

Amendment No.

1 to Asset Purchase Agreement, dated as of February 28, 2017, between Marcegaglia USA, Inc.

and Registrant's Bristol Metals, LLC subsidiary, amending the Asset Purchase Agreement between the parties dated December 9, 2016, incorporated by reference to Registrant's Form 10-K for the year ended December 31, 2016

Amendment No.

2 to Asset Purchase Agreement, dated as of July 1, 2018, between Marcegaglia USA, Inc.

and Registrant's Bristol Metals, LLC subsidiary, further amending the Asset Purchase Agreement between the parties dated December 9, 2016, incorporated by reference to Registrant's Form 10-Q for the period ended June 30, 2018

Employment Agreement, dated as of February 5, 2021, between Registrant and Sally M.

Cunningham, incorporated by reference to Registrant's Form 8-K filed on February 5, 2021

Offer Letter, dated as of August 1, 2021, between Registrant and Aaron Tam, incorporated by reference to Registrant’s Form 8-K filed on August 30, 2021

Confidential Separation and Release Agreement, dated as of May 14, 2021, between Registrant and J.

Greg Gibson, incorporated by reference to Registrant's Form 10-Q for the period ended June 30, 2020

Confidential Separation and Release Agreement, dated as of August 27, 2021, between Registrant and Sally M.

Asset Purchase Agreement, dated as of June 29, 2018, but with a closing effective date of July 1, 2018, between Marcegaglia USA, Inc.

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(now HLM Legacy Group, Inc.) and Registrant's ASTI Acquisition, LLC (now American Stainless Tubing, LLC) subsidiary, incorporated by reference to Registrant's Form 10-K for the period ended December 31, 2018.

Purchase and Sale Agreement, dated as of September 1, 2016, between Store Capital Acquisition, LLC and Registrant's Bristol Metals, LLC, Specialty Pipe & Tube, Inc., Palmer of Texas Tanks, Inc., Manufacturers Soap & Chemical Company, Manufacturers Chemicals, LLC subsidiaries, and Registrant, incorporated by reference to Registrant's Form 10-Q for the period ended September 30, 2016

Master Lease Agreement, dated as of September 30, 2016 between Registrant and Store Master Funding XII, LLC, incorporated by reference to Registrant's Form 10-K for the year ended December 31, 2016

Purchase and Sale Agreement, dated as of May 25, 2018, between Marcegaglia USA, Inc.

and Registrant's Bristol Metals, LLC subsidiary, incorporated by reference to Registrant's Form 10-Q for the period ended June 30, 2018

Agreement to Designate and Lease, dated as of June 29, 2018, between Registrant and Store Capital Acquisitions, LLC, incorporated by reference to Registrant's Form 10-Q for the period ended June 30, 2018

Amended and Restated Master Lease Agreement, dated as of June 29, 2018, between Registrant and Store Master Funding XII, LLC, incorporated by reference to Registrant's Form 10-Q for the period ended June 30, 2018

Purchase and Sale Agreement, dated as of November 30, 2018, between American Stainless Tubing, Inc.

Amended and Restated Master Lease Agreement, dated as of January 1, 2019, between Registrant and Store Master Funding XII, LLC, incorporated by reference to Registrant's Form 10-K for the period ended December 31, 2018.

Third Amended and Restated Master Lease Agreement, dated as of September 10, 2020, between Registrant and Store Master Funding XII, LLC, incorporated by reference to Registrant’s Form 10-Q for the period ending September 30, 2020

Subsidiaries of the Registrant

Consent of BDO USA LLP, independent registered public accounting firm

Consent of KPMG LLP, independent registered public accounting firm

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* In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Annual Report on Form 10-K shall be deemed "furnished" and not "filed."

† Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

Form 10-K Summary

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

2 unchanged sentences

Christopher G.

Interim President and Chief Executive Officer

President and Chief Executive Officer

(principal executive officer)

1 unchanged sentence

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Chairman of the Board

March 9, 2021

/s/ Jeffrey Kaczka

Jeffrey Kaczka

March 9, 2021

/s/ Benjamin Rosenzweig

Benjamin Rosenzweig

Executive Chairman of the Board

March 29, 2022

Mazzaferro, Jr.

March 29, 2022

/s/ Christopher G.

Christopher G.

Interim Chief Executive Officer and Director

Chief Executive Officer and Director

March 29, 2022

Senior Vice President and Chief Financial Officer

Chief Financial Officer

(Principal Financial and Accounting Officer)

1 unchanged sentence

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 9A. Controls and Procedures