Document and Entity Information
Document and Entity Information - USD ($) | 9 Months Ended | ||
Sep. 30, 2017 | Nov. 03, 2017 | Jun. 30, 2017 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Synalloy Corporation | ||
Entity Central Index Key | 95,953 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 92,943,780 | ||
Entity Common Stock, Shares Outstanding | 8,728,498 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | Q3 | ||
Document Type | 10-Q | ||
Amendment Flag | false | ||
Document Period End Date | Sep. 30, 2017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 15,410 | $ 62,873 |
Accounts receivable, less allowance for doubtful accounts of $236,000 and $82,000, respectively | 30,312,586 | 18,028,946 |
Inventories, net | 70,506,055 | 60,799,509 |
Prepaid expenses and other current assets | 9,048,905 | 7,272,569 |
Indemnified contingencies - see Note 11 | 0 | 11,339,888 |
Total current assets | 109,882,956 | 97,503,785 |
Property, plant and equipment, net of accumulated depreciation of $49,135,440 and $45,219,309, respectively | 34,967,728 | 27,324,092 |
Goodwill | 6,003,525 | 1,354,730 |
Intangible assets, net of accumulated amortization of $9,885,902 and $8,148,162 | 11,490,767 | 12,308,838 |
Deferred charges, net and other non-current assets | 88,689 | 146,618 |
Total assets | 162,433,665 | 138,638,063 |
Current liabilities | ||
Accounts payable | 24,769,264 | 16,684,508 |
Accrued expenses | 9,779,911 | 16,087,434 |
Total current liabilities | 34,549,175 | 32,771,942 |
Long-term debt | 26,722,960 | 8,804,206 |
Deferred income taxes | 1,576,515 | 1,609,492 |
Long-term deferred gain, sale-leaseback | 6,016,918 | 6,267,623 |
Long-term portion of earn-out liability | 3,119,856 | 0 |
Other long-term liabilities | 756,806 | 592,245 |
Shareholders' equity | ||
Common stock, par value $1 per share - authorized 24,000,000 shares; issued 10,300,000 shares | 10,300,000 | 10,300,000 |
Capital in excess of par value | 35,069,410 | 34,714,206 |
Retained earnings | 58,261,200 | 57,936,533 |
Accumulated other comprehensive income | 0 | |
Shareholders' equity before treasury stock | 103,630,610 | 102,950,739 |
Less cost of common stock in treasury: 1,583,107 and 1,630,690 shares, respectively | 13,939,175 | 14,358,184 |
Total shareholders' equity | 89,691,435 | 88,592,555 |
Commitments and contingencies – See Note 11 | ||
Total liabilities and shareholders' equity | $ 162,433,665 | $ 138,638,063 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Assets | ||
Accounts receivable, allowance for doubtful accounts | $ 236,000 | $ 82,000 |
Property, plant and equipment, accumulated depreciation | 49,135,440 | 45,219,309 |
Intangible assets, accumulated amortization | $ 9,885,902 | $ 8,148,162 |
Shareholders' equity | ||
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) | 1,583,107 | 1,630,690 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Net sales | $ 54,595,924 | $ 34,297,231 | $ 148,310,548 | $ 105,515,911 |
Cost of sales | 49,759,304 | 29,792,812 | 127,892,423 | 92,295,722 |
Gross profit | 4,836,620 | 4,504,419 | 20,418,125 | 13,220,189 |
Selling, general and administrative expense | 6,587,791 | 5,814,655 | 18,925,593 | 17,041,216 |
Acquisition related costs | 37,402 | 1,034 | 782,397 | 76,091 |
(Gain) loss on sale-leaseback | 2,279 | 2,294,917 | ||
Operating (loss) income | (1,705,005) | (3,766,617) | 960,840 | (6,352,465) |
Other expense (income) | ||||
Interest expense | 279,598 | 272,987 | 715,131 | 822,426 |
Change in fair value of interest rate swaps | (8,497) | (115,328) | (33,000) | 276,512 |
Earn-out adjustment | 62,804 | 0 | 145,200 | 0 |
Other, net | (316,158) | 0 | (316,158) | 0 |
(Loss) income from continuing operations before income taxes | (1,722,752) | (3,924,276) | 449,667 | (7,451,403) |
(Benefit from) provision for income taxes | (516,000) | (1,316,000) | 125,000 | (1,893,000) |
Net (loss) income from continuing operations | (1,206,752) | (2,608,276) | 324,667 | (5,558,403) |
Net loss from discontinued operations, net of tax | 0 | 0 | 0 | (99,334) |
Net (loss) income | (1,206,752) | (2,608,276) | 324,667 | (5,657,737) |
Other comprehensive loss, net of tax: | ||||
Unrealized gains on available for sale securities, net of tax | 0 | 0 | 366,346 | 0 |
Reclassification adjustment for gains included in net income, net of tax | (366,346) | 0 | (366,346) | 0 |
Other comprehensive loss | (366,346) | 0 | 0 | 0 |
Comprehensive (loss) income | $ (1,573,098) | $ (2,608,276) | $ 324,667 | $ (5,657,737) |
Net (loss) income per common share from continuing operations: | ||||
Basic (in dollars shares) | $ (0.14) | $ (0.30) | $ 0.04 | $ (0.64) |
Diluted (in dollars shares) | (0.14) | (0.30) | 0.04 | (0.64) |
Net loss per common share from discontinued operations: | ||||
Basic (in dollars per share) | 0 | 0 | 0 | (0.01) |
Diluted (in dollars per share) | 0 | 0 | 0 | (0.01) |
Net (loss) income per common share: | ||||
Basic (in dollars per share) | (0.14) | (0.30) | 0.04 | (0.65) |
Diluted (in dollars per share) | $ (0.14) | $ (0.30) | $ 0.04 | $ (0.65) |
Weighted average shares outstanding: | ||||
Basic (in shares) | 8,716,893 | 8,658,361 | 8,696,884 | 8,644,437 |
Dilutive effect from stock options and grants (in shares) | 0 | 0 | 17,030 | 0 |
Diluted (in shares) | 8,716,893 | 8,658,361 | 8,713,914 | 8,644,437 |
Sale-leaseback Transaction [Member] | ||||
(Gain) loss on sale-leaseback | $ (83,568) | $ 2,455,347 | $ (250,705) | $ 2,455,347 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Operating activities | ||
Net income (loss) | $ 324,667 | $ (5,657,737) |
Loss from discontinued operations, net of tax | 0 | 99,334 |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Depreciation expense | 3,916,131 | 3,322,115 |
Amortization expense | 1,827,171 | 1,844,840 |
Amortization of debt issuance costs | 40,829 | 58,681 |
Deferred income taxes | (32,978) | (1,124,386) |
Gain on sale of available for sale securities | (310,043) | 0 |
Provision for (reduction) of losses on accounts receivable | 192,892 | (51,531) |
Provision for losses on inventories | 500,338 | 460,726 |
Gain on sale of property, plant and equipment | 2,279 | 2,294,917 |
Amortization of deferred gain on sale-leaseback | (250,705) | 0 |
Straight line lease cost on sale-leaseback | 304,898 | 0 |
Change in cash value of life insurance | 0 | 1,502 |
Change in fair value of interest rate swaps | (33,000) | 276,512 |
Issuance of treasury stock for director fees | 287,475 | 330,000 |
Employee stock option and grant compensation | 486,740 | 291,262 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (12,476,532) | (2,130,955) |
Inventories | (4,772,884) | 4,198,000 |
Other assets and liabilities, net | 10,179,835 | (932,324) |
Accounts payable | 8,084,756 | 770,428 |
Accrued expenses | (7,900,999) | (142,533) |
Accrued income taxes | (2,392,073) | (1,605,714) |
Net cash (used in) provided by continuing operating activities | (2,021,203) | 2,303,137 |
Net cash used in discontinued operating activities | 0 | (3,943,137) |
Net cash used in operating activities | (2,021,203) | (1,640,000) |
Investing activities | ||
Purchases of property, plant and equipment | (3,692,571) | (2,115,577) |
Proceeds from sale of property, plant and equipment | 1,048 | 22,215,362 |
Purchases of available for sale securities | (3,831,521) | 0 |
Proceeds from sale of available for sale securities | 4,141,564 | 0 |
Acquisition of the stainless pipe and tube assets of Marcegaglia USA, Inc. | (11,953,513) | 0 |
Proceeds from life insurance policies | 0 | 1,502,283 |
Net cash (used in) provided by investing activities | (15,334,993) | 21,602,068 |
Financing activities | ||
Net borrowings from line of credit | 17,918,754 | 6,566,157 |
Payments on long-term debt | 0 | (26,068,228) |
Payments on capital lease obligation | (91,565) | (49,288) |
Settlement of CRI interest rate swap | 0 | 290,427 |
Payments on earn-out liability to MUSA sellers | (518,456) | 0 |
Purchase of common stock | 0 | (253,889) |
Net cash provided by (used in) financing activities | 17,308,733 | (20,095,675) |
Decrease in cash and cash equivalents | (47,463) | (133,607) |
Cash and cash equivalents at beginning of period | 62,873 | 391,424 |
Cash and cash equivalents at end of period | 15,410 | 257,817 |
Supplemental disclosure | ||
Interest | 617,606 | 711,916 |
Income taxes | $ 2,557,121 | $ 916,015 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | BASIS OF 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. Operating results for the three and nine-month periods ended September 30, 2017 , are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 . For further information, refer to the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2016 . |
RECENTLY ISSUED ACCOUNTING STAN
RECENTLY ISSUED ACCOUNTING STANDARDS | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Recently Issued Accounting Standards | RECENTLY ISSUED ACCOUNTING STANDARDS In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers (Topic 606)" , which changes the criteria for recognizing revenue. The standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires a five-step process for recognizing revenue including identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies a performance obligation. Two transition methods are available for implementing the requirements of ASU 2014-09: retrospectively for each prior reporting period presented or retrospectively with the cumulative effect of initial application recognized at the date of initial application. The FASB has issued several amendments to the standard, which are intended to promote a more consistent application of the principles outlined in the standard. The new standard is effective for the Company for annual periods in fiscal years beginning after December 15, 2017. The company will adopt the new guidance in the first quarter of 2018. The Company is currently assessing the impact the new standard will have on the consolidated financial statements as well as its business processes, internal controls, and accounting policies. As part of its assessment, the Company is reviewing its contract portfolio and identifying which attributes of its contracts are impacted by ASU 2014-09. Based on the preliminary assessment performed as of September 30, 2017, the company does not believe the standard will have a material impact on consolidated financial statements, other than for the disclosures required by the standard, as a result of the Company being a manufacturer that records revenue at a single point in time when control is transferred. The Company also has no significant long-term sales contracts, which would require revenue be recognized over a period of time in excess of one year. In addition, based on initial results of the preliminary assessment performed as of September 30, 2017, the company plans to apply the standard with the cumulative effect of initial application recognized at the date of initial application. In February 2016, the FASB issued ASU No. 2016-02, “ Leases (Topic 842) ,” to increase the transparency and comparability of lease recognition and disclosure. The update establishes a right of use ("ROU") model which requires lessees to recognize lease contracts with a term greater than one year on the balance sheet as ROU assets and lease liabilities. Leases will be classified as either financing or operating which will determine expense classification and recognition. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and must be applied using the modified retrospective approach. Early adoption is permitted. While the Company expects ASU 2016-02 to add material ROU assets and lease liabilities to the consolidated balance sheets related to its current land and building operating leases, it is evaluating other effects that the new standard will have on the consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting (Topic 718)." The amendments in this updated guidance include changes to simplify the Codification for several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows and was effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. The Company implemented this standard on January 1, 2017 and it did not have a material effect on the Company's consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business" which provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017. The Company does not believe its implementation will have a material effect on the Company's consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment," which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019. The Company elected to early adopt the provisions of this ASU in the quarterly period ending March 31, 2017. The implementation of this ASU did not have a material effect on the Company's consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting," which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017. The Company does not believe its implementation will have a material effect on the Company's consolidated financial statements. |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | 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: Sep 30, 2017 Dec 31, 2016 Raw materials $ 36,226,019 $ 31,973,073 Work-in-process 9,574,418 9,897,857 Finished goods 24,705,618 18,928,579 $ 70,506,055 $ 60,799,509 |
INTANGIBLE ASSETS AND DEFERRED
INTANGIBLE ASSETS AND DEFERRED CHARGES | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Deferred Charges | INTANGIBLE ASSETS AND DEFERRED CHARGES Deferred charges and intangible assets totaled $21,700,496 at September 30, 2017 and $20,708,496 at December 31, 2016. Accumulated amortization of deferred charges and intangible assets totaled $10,121,040 at September 30, 2017 and $8,253,040 at December 31, 2016. Estimated amortization expense for the next five years is: remainder of 2017 - $629,558 ; 2018 - $2,344,404 ; 2019 - $2,155,832 ; 2020 - $1,997,565 ; 2021 - $1,899,298 ; and thereafter - $2,552,799 . |
STOCK OPTIONS AND RESTRICTED ST
STOCK OPTIONS AND RESTRICTED STOCK | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options And Restricted Stock | STOCK OPTIONS AND RESTRICTED STOCK During the first nine months of 2017, no stock options were exercised by officers and employees of the Company. Stock compensation expense for the three and nine-month periods ended September 30, 2017 was $156,502 and $486,740 , respectively, while stock compensation expense for the three and nine-month periods ended September 30, 2016 was $102,004 and $291,262 , respectively. On February 8, 2017, the Compensation & Long-Term Incentive Committee (the "Committee") of the Company's Board of Directors approved stock grants under the Company's 2015 Stock Awards Plan to certain management employees of the Company where 44,686 shares with a market price of $12.30 per share were granted under the Plan. In connection with the stock awards amendment detailed in the following paragraph, these stock awards vest in 33 percent increments annually on a cumulative basis, beginning one year after the date of grant from shares held in treasury with the Company. In order for the awards to vest, the employee must be in the continuous employment of the Company since the date of the award. 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 2015 Stock Awards Plan. An employee is not entitled to any voting rights with respect to any shares not yet vested, and the shares are not transferable. Effective May 1, 2017, the Company's Board of Directors approved the First Amendment to the 2015 Stock Awards Plan. The amendment grants the Committee the authority to establish and amend vesting schedules for stock awards made pursuant to the 2015 Stock Awards Plan. On May 9, 2017, the Committee approved the amendment of the vesting schedules for the May 5, 2016 and February 8, 2017 stock grants reducing the vesting period from five years to three years. 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. For the nine months ended September 30, 2017 and September 30, 2016 the Company had weighted average shares of common stock, in the form of stock grants and options, of 144,064 and 311,537 , respectively, which were not included in the diluted earnings per share calculation as their effect was anti-dilutive. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 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 2014 or state income tax examinations for years before 2012. The effective tax rate was 30 percent and 28 percent for the three and nine-month periods ended September 30, 2017 , respectively. The 2017 effective tax rate was lower than the statutory rate of 34 percent primarily due to state tax expense and other permanent differences, mainly the manufacturer's exemption. The effective tax rate was 34 percent and 25 percent for the three and nine- month periods ended September 30, 2016 , respectively. The nine-month effective tax rate was lower than the 34 percent statutory rate primarily due to state tax expense and a one-time permanent difference relating to cash surrender proceeds on certain life insurance policies reducing the amount of tax benefit of the pre-tax loss for that period. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Segment Information | SEGMENT INFORMATION The following table summarizes certain information regarding segments of the Company's operations: Three Months Ended Nine Months Ended Sep 30, 2017 Sep 30, 2016 Sep 30, 2017 Sep 30, 2016 Net sales Metals Segment $ 43,022,833 $ 22,290,752 $ 111,821,115 $ 68,331,389 Specialty Chemicals Segment 11,573,091 12,006,479 36,489,433 37,184,522 $ 54,595,924 $ 34,297,231 $ 148,310,548 $ 105,515,911 Operating (loss) income Metals Segment $ (1,323,801 ) $ (1,013,669 ) $ 2,479,963 $ (3,434,725 ) Gain (loss) on sale-leaseback 59,901 (2,226,037 ) 179,703 (2,226,037 ) Total Metals segment (1,263,900 ) (3,239,706 ) 2,659,666 (5,660,762 ) Specialty Chemicals Segment 1,126,994 1,417,116 3,725,030 3,949,453 Gain (loss) on sale-leaseback 23,667 (229,309 ) 71,002 (229,309 ) Total Specialty Chemicals segment 1,150,661 1,187,807 3,796,032 3,720,144 Unallocated straight line lease cost 101,633 — 304,898 — Unallocated corporate expenses 1,452,731 1,713,684 4,407,563 4,335,756 Acquisition related costs 37,402 1,034 782,397 76,091 Operating (loss) income (1,705,005 ) (3,766,617 ) 960,840 (6,352,465 ) Interest expense 279,598 272,987 715,131 822,426 Change in fair value of interest rate swaps (8,497 ) (115,328 ) (33,000 ) 276,512 Earn-out adjustment 62,804 — 145,200 — Other income, net (316,158 ) — (316,158 ) — (Loss) income from continuing operations before income taxes $ (1,722,752 ) $ (3,924,276 ) $ 449,667 $ (7,451,403 ) As of Sep 30, 2017 Dec 31, 2016 Identifiable assets Metals Segment $ 130,500,181 $ 109,689,477 Specialty Chemicals Segment 25,957,147 22,907,672 Corporate 5,976,337 6,040,914 $ 162,433,665 $ 138,638,063 Goodwill Metals Segment $ 4,648,795 $ — Specialty Chemicals Segment 1,354,730 1,354,730 $ 6,003,525 $ 1,354,730 |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS The Company makes estimates of fair value in accounting for certain transactions, in testing and measuring impairment and in providing disclosures of fair value in its condensed consolidated financial instruments. The Company determines the fair values of its financial instruments for disclosure purposes by maximizing the use of observable inputs and minimizing the use of unobservable inputs when measuring fair value. Fair value disclosures for assets and liabilities are grouped into three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - Inputs other than quoted prices that are observable for assets and liabilities, either directly or indirectly. These inputs include quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are less active. Level 3 - Unobservable inputs that are supported by little or no market activity for assets or liabilities and includes certain pricing models, discounted cash flow methodologies and similar techniques. As of September 30, 2017 and December 31, 2016 , the carrying amounts for cash and cash equivalents, accounts receivable, accounts payable and borrowings under the Company's bank debt, which are based on variable interest rates, approximate their fair value. During the third quarter of 2017, the Company sold all of its shares of Level 1 available for sales securities. Proceeds from the sale totaled $4,141,564 which resulted in a realized gain of $310,043 which is included in other income on the accompanying condensed consolidated statements of operations. As a result of the sale, unrealized gains, net of tax, of $366,346 were reclassified out of accumulated other comprehensive income ("AOCI") with the realized gain on sale included in earnings which reduced the balance of AOCI to zero at September 30, 2017 . The Company used the average cost method to determine the realized gain or loss for each transaction. Estimates of fair value using levels 2 and 3 may require judgments as to the timing and amount of cash flows, discount rates, and other factors requiring significant judgment, and the outcomes may vary widely depending on the selection of these assumptions. The Company's most significant fair value estimates as of September 30, 2017 and December 31, 2016 relate to the purchase price allocation relating to the acquisition of the stainless steel operations of Marcegaglia USA, Inc. ("MUSA"), contingent consideration liability, testing goodwill for impairment, the interest rate swap, the nickel forward option contracts and disclosures of the fair values of financial 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 an asset of $64,285 and $31,285 at September 30, 2017 and December 31, 2016 , respectively. The interest rate swap was priced using discounted cash flow techniques which are corroborated by using non-binding market prices. Changes in its fair value were recorded to other income (expense) with corresponding offsetting entries to long-term assets or liabilities, 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. The fair value of this interest rate swap contract approximates its carrying value. To manage the impact on earnings of fluctuating nickel prices, the Company enters into six-month forward option contracts, which are classified as Level 2. At September 30, 2017, the Company had contracts in place with notional quantities totaling approximately 2,100,000 pounds with strike prices ranging from $3.49 to $4.57 per pound. At December 31, 2016, the Company had contracts in place with notional quantities totaling approximately 340,000 pounds with strike prices ranging from $3.92 to $5.30 per pound. The fair value of the option contracts were an asset of $172,030 and $87,283 at September 30, 2017 and December 31, 2016, respectively. The fair value of the contracts was priced using discounted cash flows techniques based on forward curves and volatility levels by asset class determined on the basis of observable market inputs, when available. Changes in their fair value were recorded to cost of goods sold with corresponding offsetting entries to other current assets. The fair value of the forward option contracts approximates their carrying value. The fair value of contingent consideration liabilities ("earn-out") resulting from the MUSA acquisition discussed in Note 9 is classified as Level 3. The fair value was estimated by applying the Monte Carlo Simulation approach using management's projection of pounds shipped and price per unit. Each quarter-end the Company re-evaluates its assumptions and adjusts to the estimated present value of the expected payments to be made. The following table presents a summary of changes in fair value of the Company's Level 3 liability during the period: Level 3 Inputs Balance at December 31, 2016 $ — Fair value of the earn-out liability from the MUSA acquisition 4,663,783 Earn-out payments to MUSA sellers (518,456 ) Change in fair value during the period 145,200 Balance at September 30, 2017 $ 4,290,527 There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 in the nine-month period ended September 30, 2017 or year ended December 31, 2016 . During the first nine months of 2017, there have been no changes in the fair value methodologies used by the Company. |
ACQUISITIONS
ACQUISITIONS | 9 Months Ended |
Sep. 30, 2017 | |
Business Combinations [Abstract] | |
Acquisitions | ACQUISITIONS Acquisition of the Stainless Pipe and Tube Assets of Marcegaglia USA, Inc. On December 9, 2016, the Company's subsidiary Bristol Metals, LLC ("BRISMET"), entered into a definitive agreement to acquire the stainless steel pipe and tube assets of MUSA located in Munhall, PA (the "Bristol Metals-Munhall") to enhance its on-going business with additional capacity and technological advantages. The transaction closed on February 28, 2017 and was funded through an increase to the Company's current credit facility (See Note 10). The purchase price for the transaction, which excludes real estate and certain other assets, totaled $14,953,513 . The assets purchased from MUSA include inventory, production and maintenance supplies and equipment. In accordance with the agreement, on December 9, 2016, BRISMET entered into an escrow agreement and deposited $3,000,000 into the escrow fund. The deposit was remitted to MUSA at the close of the transaction and was reflected as a credit against the purchase price. The transaction was 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, if any, acquired and liabilities assumed. Since the acquisition closed on February 28, 2017, the allocation of the consideration transferred in the consolidated financial statements is preliminary and will be adjusted upon completion of the final valuation of the assets acquired and liabilities assumed. Such adjustments could be significant. The final valuation is expected to be completed as soon as practicable but no later than twelve months after the closing date of the acquisition ("measurement period"). MUSA will receive quarterly earn-out payments for a period of four years following closing. Aggregate earn-out payments will be at least $3,000,000 , with no maximum. Actual payouts will equate to three percent of BRISMET’s incremental revenue, if any, from the amount of small diameter stainless steel pipe and tube (outside diameter of ten inches or less) sold. At February 28, 2017, the acquisition date, the Company forecasted earn out payments to be $4,063,204 , which was discounted to a present value of $3,604,330 using a discount rate applicable to future revenue of five percent. In determining the appropriate discount rate to apply to the contingent payments, the risk associated with the functional form of the earn-out, the credit risk associated with the payment of the earn-out and the methodology to quantify the earn-out were all considered. The fair value of the contingent consideration was estimated by applying the Monte Carlo Simulation approach using management's estimates of pounds shipped. In the second quarter of 2017, Management adjusted the selling price used in the earn-out calculation associated with the MUSA Stainless Acquisition. Since this adjustment was determined within the measurement period, the beginning earn-out liability and goodwill were increased by $1,059,453 . Goodwill related to Bristol Metals-Munhall increased from $3,589,342 to $4,648,795 and the fair value on contingent consideration was increased from $3,604,330 to $4,663,783 . The total purchase price was allocated to BRISMET's Munhall facility's net tangible and identifiable intangible assets based on their estimated fair values as of February 28, 2017. The finalization of these allocations is subject to change based on the results of the final review and acceptance of the independent appraiser’s valuation report, which is expected to be completed within the measurement period. The fair value assigned to the customer list intangible will be amortized on an accelerated basis over 15 years. The excess of the consideration transferred over the fair value of the net tangible and identifiable intangible assets and liabilities is reflected as goodwill. Goodwill consists of manufacturing cost synergies expected from combining MUSA's laser mill capabilities acquired as part of Bristol Metals-Munhall with BRISMET's 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. The following table shows the initial estimate of value as reported at March 31, 2017 and revisions made during the second quarter of 2017: Initial Revised estimate Revisions estimate Inventories $ 5,434,000 $ — $ 5,434,000 Other current assets - production and maintenance supplies 1,548,701 — 1,548,701 Equipment 7,576,733 — 7,576,733 Customer list intangible 992,000 — 992,000 Goodwill 3,589,342 1,059,453 4,648,795 Contingent consideration (3,604,330 ) (1,059,453 ) (4,663,783 ) Other liabilities assumed (582,933 ) — (582,933 ) $ 14,953,513 $ — $ 14,953,513 Bristol Metals-Munhall's results of operations since acquisition are reflected in the Company's consolidated statements of operations. The amount of Bristol Metals-Munhall's revenues and pre-tax loss included in the consolidated statements of operations for the three months ended September 30, 2017 was $8,675,104 and $621,881 , respectively. For the nine-month period ended September 30, 2017 , Bristol Metals-Munhall's revenues and pre-tax loss were $17,087,030 and $259,801 , respectively. The following unaudited pro-forma information is provided to present a summary of the combined results of the Company's operations with Bristol Metals-Munhall as if the acquisition had occurred on January 1, 2016. The unaudited pro-forma financial information is for information purposes only and is not necessarily indicative of what the results would have been had the acquisition been completed on the date indicated above. The three months ended September 30, 2017 are not presented as those results already include Bristol Metal-Munhall's results. Pro-Forma (Unaudited) Three Months Ended Sep 30, 2016 Pro-forma revenues $ 40,172,000 Pro-forma net loss (3,573,000 ) Loss per share: Basic $ (0.41 ) Diluted $ (0.41 ) Nine Months Ended Sep 30, 2017 Sep 30, 2016 Pro-forma revenues $ 153,235,000 $ 122,117,000 Pro-forma net income (loss) 368,000 (7,347,000 ) Earnings (loss) per share: Basic $ 0.04 $ (0.85 ) Diluted $ 0.04 $ (0.85 ) The pro-forma calculation excludes non-recurring acquisition costs of $698,587 which were incurred by the Company during 2017. The stainless steel operations of MUSA's historical financial results were adjusted for both years to eliminate interest expense charged by the prior owner. Pro-forma net income was reduced for both years for the amount of amortization on MUSA's customer list intangible and an estimated amount of interest expense associated with the additional line of credit borrowings. |
LONG-TERM DEBT
LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Long-term Debt | LONG-TERM DEBT Pursuant to the Credit Agreement in place with the Company's bank, the Company is subject to certain covenants including maintaining a minimum fixed charge coverage ratio and a limitation on the Company’s maximum amount of capital expenditures per year, which is in line with currently projected needs. At September 30, 2017, the Company was in compliance with all debt covenants. |
CONTINGENCIES
CONTINGENCIES | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | 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. In January 2014, a Metals Segment customer filed suit against Palmer and Synalloy and another unrelated defendant in Texas state court alleging breach of warranty, among other claims. The plaintiff’s claim for damages did not state a dollar amount. This matter arose out of products manufactured and sold by Palmer prior to Synalloy’s acquisition of all of Palmer's outstanding stock in August 2012. In August and September 2016, the parties to the lawsuit tried the matter in a bench trial in the District Court of Harris County, Texas, 333rd Judicial District (the “Court”). On December 31, 2016 (but made available to the parties to the lawsuit on January 3, 2017), the Court entered final judgment in favor of the Plaintiff and Synalloy and against Palmer. The Court ordered Palmer to pay the plaintiff approximately $8,600,000 in damages, plus pre- and post-judgment interest, and approximately $1,040,000 in attorneys’ fees. The Court ruled Synalloy had no liability to the plaintiff. At December 31, 2016, the Company recorded $11,000,000 in accrued expenses and current assets to reflect the legal liability and corresponding indemnified receivable due from the former shareholders of Palmer. Palmer filed a motion for a new trial with the Court at the end of January 2017, which the court denied. On June 30, 2017, the plaintiff entered into settlement agreements with Palmer/Synalloy and the former shareholders of Palmer, respectively, pursuant to which, the parties agreed to settle and release the judgment in full. On August 31, 2017, the former shareholders of Palmer satisfied the financial conditions specified in their settlement agreement with the plaintiff, and the plaintiff filed a Release of Final Judgment with the Court. Because the former shareholders of Palmer were contractually bound, pursuant to the Stock Purchase Agreement by and among Synalloy and the former shareholders dated August 10, 2012, to hold harmless and indemnify Synalloy and Palmer from any and all costs and damages, including the judgment described above and all associated attorneys' fees, arising out of this matter, neither Synalloy nor Palmer contributed to the payments required by the settlement agreements. The legal liability and corresponding indemnified receivable due from the former shareholders of Palmer were reduced to zero at August 31, 2017. On March 11, 2016, in a suit filed by a Metals Segment customer against Synalloy Fabrication, LLC (discontinued operation), the United States District Court of Maryland (Baltimore Division) granted summary judgment regarding liability in favor of the plaintiff by ruling that an enforceable contract existed between the parties and the Company breached the agreement. As a result of this ruling, the remaining issue in the case was the amount of the plaintiff's damages. Consequently, the Company increased the facility closing liability to a level of $3,000,000 for the estimated costs associated with this claim for the year ended December 31, 2015. In June 2016, the matter was settled for damages totaling $3,100,000 . As a result, the Company increased the facility closing liability and made a payment of $2,500,000 in June 2016. The remaining balance of $600,000 was paid in September 2016. The amount required to adjust the facility closing reserve as a result of the settlement is included in discontinued operations on the accompanying consolidated statements of operations. Other than the matters discussed in this note, management is not currently aware of any other asserted or unasserted matters which could have a material effect on the financial condition or results of operations of the Company. |
SALE LEASEBACK TRANSACTION (Not
SALE LEASEBACK TRANSACTION (Notes) | 9 Months Ended |
Sep. 30, 2017 | |
SALE LEASEBACK TRANSACTION [Abstract] | |
Sale Leaseback Transaction Disclosure [Text Block] | SALE LEASEBACK TRANSACTION Rent expense for the sale-leaseback transaction entered into on September 30, 2016 totaled $574,633 and $1,723,898 for the three and nine-month periods ended September 30, 2017, respectively. Rent expense began in October 2016 and therefore no rent expense was recognized for the three and nine-month periods ended September 30, 2016. The amount of future minimum lease payments under the sale-leaseback transaction are as follows: remainder of 2017 - $482,460 ; 2018 - $1,939,489 ; 2019 - $1,978,279 ; 2020 - $2,017,845 ; 2021 - $2,058,201 ; and thereafter - $35,602,349 . In accordance with the agreement, the amount of future lease payments as of September 30, 2017 includes a rent escalator equal to two percent. Losses on the sale-leaseback transaction of $2,455,347 were recognized and reflected in the accompanying condensed statement of operations for the three and nine-month periods ended September 30, 2016. In addition, transaction closing costs of $102,000 were included in "Selling, general, and administrative expense" on the condensed statement of operations for the third quarter and nine months ended September 30, 2016. The deferred gain recognized on the sale-leaseback transaction is amortized on the straight-line method over the life of the lease of 20 years . Deferred gain amortization began in October 2016 and totaled $83,568 and $250,705 for the three and nine-month periods ended September 30, 2017. The current portion of the deferred gain of $334,273 is included in "Accrued expenses" and the long-term portion of the deferred gain of $6,016,918 is included in "Long-term portion of deferred gain on sale-leaseback" in the accompanying condensed consolidated balance sheets. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | SUBSEQUENT EVENTS On October 4, 2017, the Company declared a $0.13 cash dividend. The dividend totaling approximately $1,100,000 was paid on November 6, 2017. On October 30, 2017, the Company amended its Credit Agreement with its bank to increase the limit of the asset-based revolving line of credit by $20,000,000 to a maximum of $65,000,000 and extended the maturity date to October 30, 2020. None of the other provisions of the Credit Agreement were changed as a result of this amendment. |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | BASIS OF 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. Operating results for the three and nine-month periods ended September 30, 2017 , are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 . For further information, refer to the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2016 . |
Recently Issued Accounting Standards | RECENTLY ISSUED ACCOUNTING STANDARDS In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers (Topic 606)" , which changes the criteria for recognizing revenue. The standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires a five-step process for recognizing revenue including identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies a performance obligation. Two transition methods are available for implementing the requirements of ASU 2014-09: retrospectively for each prior reporting period presented or retrospectively with the cumulative effect of initial application recognized at the date of initial application. The FASB has issued several amendments to the standard, which are intended to promote a more consistent application of the principles outlined in the standard. The new standard is effective for the Company for annual periods in fiscal years beginning after December 15, 2017. The company will adopt the new guidance in the first quarter of 2018. The Company is currently assessing the impact the new standard will have on the consolidated financial statements as well as its business processes, internal controls, and accounting policies. As part of its assessment, the Company is reviewing its contract portfolio and identifying which attributes of its contracts are impacted by ASU 2014-09. Based on the preliminary assessment performed as of September 30, 2017, the company does not believe the standard will have a material impact on consolidated financial statements, other than for the disclosures required by the standard, as a result of the Company being a manufacturer that records revenue at a single point in time when control is transferred. The Company also has no significant long-term sales contracts, which would require revenue be recognized over a period of time in excess of one year. In addition, based on initial results of the preliminary assessment performed as of September 30, 2017, the company plans to apply the standard with the cumulative effect of initial application recognized at the date of initial application. In February 2016, the FASB issued ASU No. 2016-02, “ Leases (Topic 842) ,” to increase the transparency and comparability of lease recognition and disclosure. The update establishes a right of use ("ROU") model which requires lessees to recognize lease contracts with a term greater than one year on the balance sheet as ROU assets and lease liabilities. Leases will be classified as either financing or operating which will determine expense classification and recognition. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and must be applied using the modified retrospective approach. Early adoption is permitted. While the Company expects ASU 2016-02 to add material ROU assets and lease liabilities to the consolidated balance sheets related to its current land and building operating leases, it is evaluating other effects that the new standard will have on the consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting (Topic 718)." The amendments in this updated guidance include changes to simplify the Codification for several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows and was effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. The Company implemented this standard on January 1, 2017 and it did not have a material effect on the Company's consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business" which provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017. The Company does not believe its implementation will have a material effect on the Company's consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment," which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019. The Company elected to early adopt the provisions of this ASU in the quarterly period ending March 31, 2017. The implementation of this ASU did not have a material effect on the Company's consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting," which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017. The Company does not believe its implementation will have a material effect on the Company's consolidated financial statements. |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of components of 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: Sep 30, 2017 Dec 31, 2016 Raw materials $ 36,226,019 $ 31,973,073 Work-in-process 9,574,418 9,897,857 Finished goods 24,705,618 18,928,579 $ 70,506,055 $ 60,799,509 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Schedule of segment information | The following table summarizes certain information regarding segments of the Company's operations: Three Months Ended Nine Months Ended Sep 30, 2017 Sep 30, 2016 Sep 30, 2017 Sep 30, 2016 Net sales Metals Segment $ 43,022,833 $ 22,290,752 $ 111,821,115 $ 68,331,389 Specialty Chemicals Segment 11,573,091 12,006,479 36,489,433 37,184,522 $ 54,595,924 $ 34,297,231 $ 148,310,548 $ 105,515,911 Operating (loss) income Metals Segment $ (1,323,801 ) $ (1,013,669 ) $ 2,479,963 $ (3,434,725 ) Gain (loss) on sale-leaseback 59,901 (2,226,037 ) 179,703 (2,226,037 ) Total Metals segment (1,263,900 ) (3,239,706 ) 2,659,666 (5,660,762 ) Specialty Chemicals Segment 1,126,994 1,417,116 3,725,030 3,949,453 Gain (loss) on sale-leaseback 23,667 (229,309 ) 71,002 (229,309 ) Total Specialty Chemicals segment 1,150,661 1,187,807 3,796,032 3,720,144 Unallocated straight line lease cost 101,633 — 304,898 — Unallocated corporate expenses 1,452,731 1,713,684 4,407,563 4,335,756 Acquisition related costs 37,402 1,034 782,397 76,091 Operating (loss) income (1,705,005 ) (3,766,617 ) 960,840 (6,352,465 ) Interest expense 279,598 272,987 715,131 822,426 Change in fair value of interest rate swaps (8,497 ) (115,328 ) (33,000 ) 276,512 Earn-out adjustment 62,804 — 145,200 — Other income, net (316,158 ) — (316,158 ) — (Loss) income from continuing operations before income taxes $ (1,722,752 ) $ (3,924,276 ) $ 449,667 $ (7,451,403 ) As of Sep 30, 2017 Dec 31, 2016 Identifiable assets Metals Segment $ 130,500,181 $ 109,689,477 Specialty Chemicals Segment 25,957,147 22,907,672 Corporate 5,976,337 6,040,914 $ 162,433,665 $ 138,638,063 Goodwill Metals Segment $ 4,648,795 $ — Specialty Chemicals Segment 1,354,730 1,354,730 $ 6,003,525 $ 1,354,730 |
FAIR VALUE OF FINANCIAL INSTR22
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Schedule of summary of changes in fair value of the Company's Level 3 liability | The following table presents a summary of changes in fair value of the Company's Level 3 liability during the period: Level 3 Inputs Balance at December 31, 2016 $ — Fair value of the earn-out liability from the MUSA acquisition 4,663,783 Earn-out payments to MUSA sellers (518,456 ) Change in fair value during the period 145,200 Balance at September 30, 2017 $ 4,290,527 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Business Acquisition [Line Items] | |
Schedule of preliminary allocation of the total consideration paid to the fair value of the assets acquired and liabilities assumed | The following table shows the initial estimate of value as reported at March 31, 2017 and revisions made during the second quarter of 2017: Initial Revised estimate Revisions estimate Inventories $ 5,434,000 $ — $ 5,434,000 Other current assets - production and maintenance supplies 1,548,701 — 1,548,701 Equipment 7,576,733 — 7,576,733 Customer list intangible 992,000 — 992,000 Goodwill 3,589,342 1,059,453 4,648,795 Contingent consideration (3,604,330 ) (1,059,453 ) (4,663,783 ) Other liabilities assumed (582,933 ) — (582,933 ) $ 14,953,513 $ — $ 14,953,513 |
Business acquisition, pro forma information | The unaudited pro-forma financial information is for information purposes only and is not necessarily indicative of what the results would have been had the acquisition been completed on the date indicated above. The three months ended September 30, 2017 are not presented as those results already include Bristol Metal-Munhall's results. Pro-Forma (Unaudited) Three Months Ended Sep 30, 2016 Pro-forma revenues $ 40,172,000 Pro-forma net loss (3,573,000 ) Loss per share: Basic $ (0.41 ) Diluted $ (0.41 ) Nine Months Ended Sep 30, 2017 Sep 30, 2016 Pro-forma revenues $ 153,235,000 $ 122,117,000 Pro-forma net income (loss) 368,000 (7,347,000 ) Earnings (loss) per share: Basic $ 0.04 $ (0.85 ) Diluted $ 0.04 $ (0.85 ) |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 36,226,019 | $ 31,973,073 |
Work-in-process | 9,574,418 | 9,897,857 |
Finished goods | 24,705,618 | 18,928,579 |
Inventories | $ 70,506,055 | $ 60,799,509 |
INTANGIBLE ASSETS AND DEFERRE25
INTANGIBLE ASSETS AND DEFERRED CHARGES (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Intangible assets, (excluding goodwill), including deferred charges | $ 21,700,496 | $ 20,708,496 |
Finite-lived intangible assets, including deferred charges accumulated amortization | 10,121,040 | $ 8,253,040 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
Remainder of 2017 | 629,558 | |
2,018 | 2,344,404 | |
2,019 | 2,155,832 | |
2,020 | 1,997,565 | |
2,021 | 1,899,298 | |
Thereafter | $ 2,552,799 |
STOCK OPTIONS AND RESTRICTED 26
STOCK OPTIONS AND RESTRICTED STOCK (Details) - USD ($) | May 09, 2017 | May 08, 2017 | Feb. 08, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Allocated share-based compensation expense | $ 156,502 | $ 102,004 | $ 486,740 | $ 291,262 | |||
Antidilutive securities excluded from computation of earnings per share, amount (in shares) | 144,064 | 311,537 | |||||
Stock Options | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options exercised (in shares) | 0 | ||||||
2015 Stock Awards Plan | Stock Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Equity instruments other options, grants in period (in shares) | 44,686 | ||||||
Equity instruments other than options, grants in period, weighted average grant date fair value (in dollars per share) | $ 12.30 | ||||||
Annual vesting rate (percent) | 33.00% | ||||||
Period after option grant before options can be exercised (in years) | 1 year | ||||||
Stock awards vesting period | 3 years | 5 years |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | ||||
Effective tax rate, percent | 30.00% | 34.00% | 28.00% | 25.00% |
Effective statutory tax rate, percent | 34.00% | 34.00% |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Segment Reporting Information [Line Items] | |||||
Net sales | $ 54,595,924 | $ 34,297,231 | $ 148,310,548 | $ 105,515,911 | |
Unallocated straight line lease cost | 304,898 | 0 | |||
Acquisition related costs | 37,402 | 1,034 | 782,397 | 76,091 | |
Operating (loss) income | (1,705,005) | (3,766,617) | 960,840 | (6,352,465) | |
Gain (loss) on sale-leaseback | (2,279) | (2,294,917) | |||
Interest expense | 279,598 | 272,987 | 715,131 | 822,426 | |
Change in fair value of interest rate swaps | (8,497) | (115,328) | (33,000) | 276,512 | |
Earn-out adjustment | 62,804 | 0 | 145,200 | 0 | |
Other income, net | (316,158) | 0 | (316,158) | 0 | |
(Loss) income from continuing operations before income taxes | (1,722,752) | (3,924,276) | 449,667 | (7,451,403) | |
Assets | 162,433,665 | 162,433,665 | $ 138,638,063 | ||
Goodwill | 6,003,525 | 6,003,525 | 1,354,730 | ||
Operating segment | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 54,595,924 | 34,297,231 | 148,310,548 | 105,515,911 | |
Operating segment | Metals Segment | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 43,022,833 | 22,290,752 | 111,821,115 | 68,331,389 | |
Operating (loss) income | (1,323,801) | (1,013,669) | 2,479,963 | (3,434,725) | |
Gain (loss) on sale-leaseback | 59,901 | (2,226,037) | 179,703 | (2,226,037) | |
Operating income (loss) plus gain (loss) sale-leaseback | (1,263,900) | (3,239,706) | 2,659,666 | (5,660,762) | |
Assets | 130,500,181 | 130,500,181 | 109,689,477 | ||
Goodwill | 4,648,795 | 4,648,795 | 0 | ||
Operating segment | Specialty Chemicals Segment | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 11,573,091 | 12,006,479 | 36,489,433 | 37,184,522 | |
Operating (loss) income | 1,126,994 | 1,417,116 | 3,725,030 | 3,949,453 | |
Gain (loss) on sale-leaseback | 23,667 | (229,309) | 71,002 | (229,309) | |
Operating income (loss) plus gain (loss) sale-leaseback | 1,150,661 | 1,187,807 | 3,796,032 | 3,720,144 | |
Assets | 25,957,147 | 25,957,147 | 22,907,672 | ||
Goodwill | 1,354,730 | 1,354,730 | 1,354,730 | ||
Segment reconciling items | |||||
Segment Reporting Information [Line Items] | |||||
Unallocated straight line lease cost | 101,633 | 0 | 304,898 | 0 | |
Acquisition related costs | 37,402 | 1,034 | 782,397 | 76,091 | |
Interest expense | 279,598 | 272,987 | 715,131 | 822,426 | |
Change in fair value of interest rate swaps | (8,497) | (115,328) | (33,000) | 276,512 | |
Earn-out adjustment | 62,804 | 0 | 145,200 | 0 | |
Other income, net | (316,158) | 0 | (316,158) | 0 | |
Corporate | |||||
Segment Reporting Information [Line Items] | |||||
Unallocated corporate expenses | 1,452,731 | $ 1,713,684 | 4,407,563 | $ 4,335,756 | |
Assets | $ 5,976,337 | $ 5,976,337 | $ 6,040,914 |
FAIR VALUE OF FINANCIAL INSTR29
FAIR VALUE OF FINANCIAL INSTRUMENTS (Narrative) (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017USD ($)financial_instrument$ / lbshares | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)financial_instrumentlb$ / lbshares | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($)lb$ / lb | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Proceeds from sale of available for sale securities | $ 4,141,564 | $ 0 | |||
Available-for-sale Securities, Gross Realized Gain (Loss), Excluding Other than Temporary Impairments | 310,043 | 0 | |||
Unrealized gains on available for sale securities, before tax | 555,979 | ||||
Unrealized gains on available for sale securities, tax | 189,632 | ||||
Unrealized gains on available for sale securities, net of tax | $ 0 | $ 0 | 366,346 | $ 0 | |
Accumulated other comprehensive income | $ 0 | $ 0 | |||
Derivative asset, number of instruments held | financial_instrument | 1 | 1 | |||
Commodity Option [Member] | Level 2 Inputs | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative asset, fair value, gross asset | $ 172,030 | $ 172,030 | $ 87,283 | ||
Derivative, Nonmonetary Notional Amount, Mass | lb | 2,100,000 | 340,000 | |||
Term Loan | Interest Rate Swap | Level 2 Inputs | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Variable rate basis on interest rate swap | LIBOR | ||||
Term Loan | Palmer of Texas | Interest Rate Swap | Level 2 Inputs | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative asset, fair value, gross asset | $ 64,285 | $ 64,285 | $ 31,285 | ||
Available-for-sale securities | Level 1 Inputs | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Investment owned, balance (in shares) | shares | 225,000 | 225,000 | |||
Minimum [Member] | Commodity Option [Member] | Level 2 Inputs | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative, Price Risk Option Strike Price | $ / lb | 3.49 | 3.49 | 3.92 | ||
Maximum | Commodity Option [Member] | Level 2 Inputs | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative, Price Risk Option Strike Price | $ / lb | 4.57 | 4.57 | 5.30 |
FAIR VALUE OF FINANCIAL INSTR30
FAIR VALUE OF FINANCIAL INSTRUMENTS (Level 3 Liabilities Rollforward) (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Earn-out payments to MUSA sellers | $ (518,456) | $ 0 |
Level 3 Inputs | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance at December 31, 2016 | 0 | |
Fair value of the earn-out liability from the MUSA acquisition | 4,663,783 | |
Earn-out payments to MUSA sellers | (518,456) | |
Change in fair value during the period | 145,200 | |
Balance at September 30, 2017 | $ 4,290,527 |
ACQUISITIONS (Narrative) (Detai
ACQUISITIONS (Narrative) (Details) - USD ($) | Feb. 28, 2017 | Jun. 30, 2017 | Sep. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Dec. 09, 2016 |
Business Acquisition [Line Items] | ||||||
Goodwill | $ 6,003,525 | $ 1,354,730 | ||||
MUSA | ||||||
Business Acquisition [Line Items] | ||||||
Consideration transferred | $ 14,953,513 | |||||
Escrow deposit | $ 3,000,000 | |||||
Measurement period adjustment, contingent consideration liability | $ 1,059,453 | |||||
Measurement period adjustment, goodwill | 1,059,453 | |||||
Goodwill | 4,648,795 | $ 3,589,342 | ||||
Contingent consideration liability | $ 4,663,783 | $ 3,604,330 | ||||
Finite-lived intangible asset, useful life | 15 years | |||||
Earn-out payment | MUSA | ||||||
Business Acquisition [Line Items] | ||||||
Contingent consideration, earn out period | 4 years | |||||
Contingent consideration, earn-out payment, range of outcomes, minimum | $ 3,000,000 | |||||
Contingent consideration, earn-out payment forecasted | 4,063,204 | |||||
Contingent consideration, estimated ear-out payments, discounted | $ 3,604,330 | |||||
Discount rate | 5.00% | |||||
Earn-out payment | Maximum | MUSA | ||||||
Business Acquisition [Line Items] | ||||||
Contingent consideration, target | 3.00% |
ACQUISITIONS (Preliminary Alloc
ACQUISITIONS (Preliminary Allocation of Total Consideration) (Details) - USD ($) | 3 Months Ended | |||
Jun. 30, 2017 | Sep. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | |
Initial / Revised estimates | ||||
Goodwill | $ 6,003,525 | $ 1,354,730 | ||
MUSA | ||||
Initial / Revised estimates | ||||
Inventories | $ 5,434,000 | $ 5,434,000 | ||
Other current assets - production and maintenance supplies | 1,548,701 | 1,548,701 | ||
Equipment | 7,576,733 | 7,576,733 | ||
Customer list intangible | 992,000 | 992,000 | ||
Goodwill | 4,648,795 | 3,589,342 | ||
Contingent consideration | (4,663,783) | (3,604,330) | ||
Other liabilities assumed | (582,933) | (582,933) | ||
Total net assets acquired | 14,953,513 | $ 14,953,513 | ||
Revisions | ||||
Goodwill | 1,059,453 | |||
Contingent consideration | (1,059,453) | |||
Revisions | $ 0 |
ACQUISITIONS (Pro Forma Informa
ACQUISITIONS (Pro Forma Information) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items] | ||||
Pro-forma revenues | $ 40,172,000 | $ 153,235,000 | $ 122,117,000 | |
Pro-forma net income (loss) | $ (3,573,000) | $ 368,000 | $ (7,347,000) | |
Loss per share: | ||||
Basic (in dollars per share) | $ (0.41) | $ 0.04 | $ (0.85) | |
Diluted (in dollars per share) | $ (0.41) | $ 0.04 | $ (0.85) | |
Acquisition related costs | $ 37,402 | $ 1,034 | $ 782,397 | $ 76,091 |
MUSA | ||||
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items] | ||||
Revenues | 8,675,104 | 17,087,030 | ||
Pre-tax loss | $ 621,881 | 259,801 | ||
Acquisition-related costs | MUSA | ||||
Loss per share: | ||||
Acquisition related costs | $ 698,587 |
CONTINGENCIES (Details)
CONTINGENCIES (Details) - USD ($) | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Dec. 31, 2015 |
Palmer of Texas Customer Breach of Contract Case | Settled Litigation | ||||
Product Liability Contingency [Line Items] | ||||
Loss contingency, damages awarded, value | $ 0 | |||
Loss contingency accrual | 11,000,000 | |||
Metals Segment Customer Breach of Contract Case | Settled Litigation | ||||
Product Liability Contingency [Line Items] | ||||
Loss contingency accrual | $ 600,000 | |||
Loss contingency, damages sought | 3,100,000 | |||
Loss contingency accrual, payments | $ 600,000 | $ 2,500,000 | ||
Metals Segment Customer Breach of Contract Case | Pending Litigation | ||||
Product Liability Contingency [Line Items] | ||||
Loss contingency, damages sought | $ 3,000,000 | |||
Palmer of Texas | Palmer of Texas Customer Breach of Contract Case | Settled Litigation | ||||
Product Liability Contingency [Line Items] | ||||
Loss contingency, damages awarded, value | 8,600,000 | |||
Litigation settlement, expense | $ 1,040,000 |
SALE LEASEBACK TRANSACTION (Det
SALE LEASEBACK TRANSACTION (Details) - USD ($) | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 |
Sale Leaseback Transaction [Line Items] | ||||||
Sale Leaseback Transaction, Rent Expense | $ 574,633 | $ 1,723,898 | ||||
Minimum Lease Payments, Sale Leaseback Transactions, Remainder of Fiscal Year | 482,460 | 482,460 | ||||
Minimum Lease Payments, Sale Leaseback Transactions, Next Twelve Months | 1,939,489 | 1,939,489 | ||||
Minimum Lease Payments, Sale Leaseback Transactions, within Two Years | 1,978,279 | 1,978,279 | ||||
Minimum Lease Payments, Sale Leaseback Transactions, within Three Years | 2,017,845 | 2,017,845 | ||||
Minimum Lease Payments, Sale Leaseback Transactions, within Four Years | 2,058,201 | 2,058,201 | ||||
Minimum Lease Payments, Sale Leaseback Transactions, Thereafter | 35,602,349 | 35,602,349 | ||||
Sale Leaseback Transaction, Transaction Costs, Investing Activities | $ 102,000 | |||||
(Gain) loss on sale-leaseback | 2,279 | $ 2,294,917 | ||||
Sale Leaseback Transaction, Lease Terms | P20Y | |||||
Sale Leaseback Transaction, Deferred Gain, Net, Current | 334,273 | 334,273 | ||||
Long-term deferred gain, sale-leaseback | 6,016,918 | 6,016,918 | $ 6,267,623 | |||
Sale-leaseback Transaction [Member] | ||||||
Sale Leaseback Transaction [Line Items] | ||||||
(Gain) loss on sale-leaseback | $ (83,568) | $ 2,455,347 | $ (250,705) | $ 2,455,347 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent Event [Member] - USD ($) | Nov. 06, 2017 | Oct. 04, 2017 | Oct. 30, 2017 |
Subsequent Event [Line Items] | |||
Line of Credit Facility, Maximum Borrowing Capacity | $ 65,000,000 | ||
Line Of Credit Facility, Increase In Maximum Borrowing Capacity | $ 20,000,000 | ||
Common Stock, Dividends, Per Share, Declared | $ 0.13 | ||
Dividends | $ 1,100,000 |