Summary of Significant Accounting Policies (Policies) |
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Dec. 31, 2017 | |||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||
| Principles of Consolidation |
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. The Metals Segment is comprised of three subsidiaries: Synalloy Metals, Inc. which owns 100 percent of BRISMET, located in Bristol, Tennessee and Munhall, Pennsylvania; Palmer, located in Andrews, Texas and Specialty, located in Mineral Ridge, Ohio and Houston, Texas. The Specialty Chemicals Segment consists of two subsidiaries: Manufacturers Soap and Chemical Company ("MS&C") which owns 100 percent of MC, located in Cleveland, Tennessee and CRI Tolling, located in Fountain Inn, South Carolina. All significant intercompany transactions have been eliminated.
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| Cash and Cash Equivalents |
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains cash balances at financial institutions with strong credit ratings.
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| Accounts Receivable |
Accounts Receivable
Accounts receivable from the sale of products are recorded at net realizable value and the Company generally grants credit to customers on an unsecured basis. Substantially all of the Company's accounts receivable are due from companies located throughout the United States. The Company provides an allowance for doubtful accounts for projected uncollectable amounts. The allowance is based upon a review of outstanding receivables, historical collection information and existing economic conditions. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Receivables are generally due within 30 to 60 days. Delinquent receivables are written off based on individual credit evaluations and specific circumstances of the customer.
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| 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.
Inventory cost is adjusted when its net realizable value is estimated to be below estimated selling price. At the end of each quarter, all facilities review recent sales reports to identify sales price trends that would indicate products or product lines that are being sold below cost. This would indicate that an adjustment would be required.
In addition, the Company establishes inventory reserves for:
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| Property, Plant and Equipment |
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided on the straight-line method over the estimated useful life of the assets. Leasehold improvements are depreciated over the shorter of their useful lives or the remaining non-cancellable lease term, buildings are depreciated over a range of ten years to 40 years, and machinery, fixtures and equipment are depreciated over a range of three to 20 years. The costs of software licenses are amortized over five years using the straight-line method. The Company continually reviews the recoverability of the carrying value of long-lived assets. The Company also reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. When the future undiscounted cash flows of the operation to which the assets relate do not exceed the carrying value of the asset, the assets are written down to fair value.
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| Business Combinations |
Business Combinations
Acquisitions are accounted for using the acquisition method of accounting for business combinations. Under this method, the total consideration transferred to consummate the acquisition is allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the closing date of the acquisition. The acquisition method of accounting requires extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets acquired, if any, and liabilities assumed.
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| Goodwill, Intangible Assets and Deferred Charges |
Goodwill, Intangible Assets and Deferred Charges
Goodwill, arising from the excess of purchase price over fair value of net assets of businesses acquired, is not amortized but is reviewed annually, at the reporting unit level, in the fourth quarter for impairment and whenever events or circumstances indicate that the carrying value may not be recoverable. In 2017, the evaluation involved comparing the estimated fair value, based on a discounted cash flow model, of the associated reporting unit to its carrying value, including goodwill. No goodwill impairment was identified as a result of the testing procedures performed for the years ended December 31, 2017 and December 31, 2016.
Intangible assets represent the fair value of intellectual, non-physical assets resulting from business acquisitions. Deferred charges represent other intangible assets and debt issuance costs. Intangible assets are amortized over their estimated useful lives using either an accelerated or straight-line method. Deferred charges are amortized over their estimated useful lives using the straight-line method. Deferred charges are amortized over a period ranging from three to ten years and intangible assets are amortized over a period ranging from eight to 15 years. The weighted average amortization period for the customer relationships is approximately eleven years. Deferred charges and intangible assets totaled $21,837,351 and $20,708,496 at December 31, 2017 and December 31, 2016, respectively. Accumulated amortization of deferred charges and intangible assets as of December 31, 2017 and December 31, 2016 totaled $10,693,175 and $8,253,040, respectively. Estimated amortization expense for the next five fiscal years based on existing deferred charges and intangible assets is: 2018 - $2,380,950, 2019 - $2,246,816, 2020 - $2,073,384; 2021 - $1,899,298; 2022 - $1,677,948; and thereafter - $865,780.
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| Earn-Out Liability |
Earn-Out Liability
In connection with the acquisition of Bristol Metals-Munhall on February 28, 2017, the Company is required to make contingent earn-out payments to the prior owners based upon actual sales levels of stainless steel pipe and tube (outside diameter of ten inches or less). The Company determined the fair value of the earn-out liability on the acquisition date using a Monte Carlo simulation model. Future changes to the fair value of the earn-out liability will be determined each quarter-end and charged to income or expense in the “Earn-Out Adjustment” line item in the Consolidated Statements of Operations and Other Comprehensive Income.
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| Revenue Recognition |
Revenue Recognition
Revenue from product sales is recognized at the time ownership of goods transfers to the customer and the earnings process is complete.
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| Shipping Costs |
Shipping Costs
Shipping costs of approximately $7,502,945, $4,488,041 and $5,155,011 in 2017, 2016 and 2015, respectively, are recorded in cost of goods sold.
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| Research and Development Expenses |
Research and Development Expenses
The Company incurred research and development expense of approximately $556,181, $603,067 and $548,257 in 2017, 2016 and 2015, respectively.
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| Income Tax, Policy |
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing accounts and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in fiscal years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities were remeasured at December 22, 2017 as a result of the Tax Act signed into law on December 22,2017. See Note 10 for further explanation. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized.
Additionally, the Company maintains the required reserves for any and all uncertain tax provisions.
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| Earnings Per Share of Common Stock |
Earnings Per Share of Common Stock
Earnings per share of common stock are computed based on the weighted average number of basic and diluted shares outstanding during each period.
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| Fair Value of Financial Instruments and Fair Value Disclosures |
Fair Market Value
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 consolidated financial statements. 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 in 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.
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| Use of Estimates |
Use of Estimates
The preparation of the consolidated financial statements requires management to make estimates and assumptions, primarily for testing goodwill for impairment, determining balances for the earn-out liability and certain employee benefit accruals, estimating fair value of identifiable assets acquired and liabilities assumed as a result of business acquisitions and for establishing reserves on accounts receivable, inventories and environmental issues, that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
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| Concentrations of Credit Risk |
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash deposits and trade accounts receivable.
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| Recent Accounting Pronouncements |
Recent accounting pronouncements
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 Topic 606: 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 on January 1, 2018, using the modified retrospective transition method..
The Company assessed 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 reviewed its contract portfolio and determined how its contracts should be accounted for under Topic 606. Based on the assessment performed, the company determined that the primary form of contracts with customers impacting revenue recognition are individual sales orders. The Company’s sales orders consist of distinct goods with stand-alone selling prices and are typically completed within 12 months from inception. No significant long-term sales contracts requiring revenue to be recognized over a period of time in excess of one year have been identified.
The main performance obligation included in sales orders is the manufacture and distribution of goods as prescribed by our customers. This performance obligation is satisfied upon the transfer of title of each distinct item, which occurs at a point-in-time. Consistent with manufacturing and distribution industry norms, the Company’s transfer of title of goods is determined by FOB shipping terms. Recognizing revenue in accordance with shipping terms is consistent with the Company’s current revenue recognition policy under ASC Topic 605, therefore we do not expect any significant change in the timing under which we recognize revenue.
Shipping and handling of goods is considered a part of the fulfillment of our performance obligation regardless of whether shipping terms are shipping point or destination. This position is supported by the practical expedient provided under Topic 606 which allows a company to account for shipping and handling as activities to fulfill the promise to transfer the good if that methodology is consistently applied. For revenues recognized on orders prior to completion of shipping activities offsetting shipping costs are accrued. This practice is consistent with the Company’s current accounting policy and will not result in any financial statement impact.
Based on the assessment performed, the Company does not believe the standard will have a material impact on its consolidated financial statements or internal controls over financial reporting, other than for the disclosures required by the standard.
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. Topic 842 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 Topic 842 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. Topic 805 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. Topic 350 is effective for fiscal years beginning after December 15, 2019. The Company elected to early adopt the provisions of this ASU in 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 Topic 718. Topic 718 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.
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