Investor Presentation to Scott & Stringfellow a BB&T Corporation Affiliate

August 27, 2012

Forward-Looking Statements

We want to remind everyone that the information included in this presentation may contain statements relating to future results, which are forward-looking statements within the meaning of federal securities laws. We caution you that these forward-looking statements speak only as of the date hereof, and we have no obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments, or otherwise. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including the risks described in our Form 10-K and Form 10-Q and our other filings with the Securities and Exchange Commission.

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Strategic Goals (Presented in Dec 2011)

§  Foster a Performance Driven Culture

§  Be a Sales and Customer Driven Organization

§  Pursue Complementary and New Platform Acquisitions

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Topics

I.  Business Unit Review – Key Developments § Manufacturers Chemicals § Metals Group

II.  Palmer of Texas Acquisition

III.  Synalloy EPS Potential

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I-A. Business Unit Review:

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Ashland Defoamer Product Line

§  New line of defoamers: 50+ individual products for the water and paint industries

§  Annual revenue potential: $18MM to $20MM

§  30% annual increase in pounds thru Cleveland (TN) facility

§  Two-year agreement with continuous one-year renewals

§  Will reach full production in Sept 2012

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Fruit of the Loom Textile Products

§  Acquired rights from former MC customer

§  Reached full production in April 2012

§  Evaluating add-on lines for Walmart

§  Annual revenue potential: $3MM+

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Other Key Developments

§  Improving material margins via daily updates to cost inputs

§  Business development re: sulfation and reactor capacity

§  New bonus program based on pounds shipped – up to 5% of base salary for production and support staff

§  Projected total annual revenue: $65MM to $68MM

I-B. Business Unit Review:

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Nickel Price History

Spot  Prices  for  Nickel  on  the  LME   Per  Pound  

2008   $  9.55  

2009        6.67  

2010    10.00  

2011    10.37  

2012  (forecast  by  Pres9ge  Economics)        7.89  

2013  (forecast  by  Pres9ge  Economics)        7.94  

August  17,  2012        7.01  

Nickel Forecast (source: Prestige Economics)

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§  Prices have not yet bottomed

§  Price forecasts for 2012 and 2013 recently lowered

§  Still expect marginally higher prices in 2013 than in 2012

§  Price slide has been accompanied by increase in inventories amidst tepid global growth (LME inventories up 25% in 2012)

§  Pig nickel iron (a low grade stainless steel substitute) availability is a major bearish price factor

Raw Material Surcharges

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304L 316L

BRISMET  inventory  profits  totaled  $7.8  million  

2006  -­‐  2007   2008  -­‐  2009  

BRISMET  inventory  losses  totaled  ($5.4  million)  

2012 YTD Inventory Losses

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$2.21 million total

($0.23 per share)

through seven months

BRISMET: Key Developments

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§  17% sales growth in 1H 2012 – continued gains in special alloys and commodity pipe

§  Opening new Houston sales office with 3 account reps selling straight pipe, fabricated pipe, and FRP & steel tanks

§  DuPont project (Jan/Feb 2013 start): $1.5MM in pipe sales and $6.0MM in fabrication

BRISMET: Key Developments (cont…)

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§  Bechtel project for Wolf Creek nuclear facility (Dec 2012 start):

•  Order  for  six  miles  of  carbon  and  special  alloy  pipe  

•  First  work  for  Bechtel  in  5+  years  

§  Several large projects in Argentina and Australia AND a large domestic special alloy pipe project – totaling $5MM+

§  $798K annual savings via retrofit to produce 18” pipe on a continuous mill (to be operational in 6 to 8 months)

FAB: Key Developments

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§  Ram-Fab has returned to profitability – looking to add 2nd shift and expand capacity

§  Focused on making substantial labor efficiency improvement at BristolFab

§  Current total backlog: $22 million

II. Palmer of Texas Acquisition

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Palmer at a Glance

§  Founded in 1989 as fiberglass (FRP) tank manufacturer

§  Three equal owners: One active, one recently became inactive, one passive from the start

§  Began investing in steel tank capabilities in 2007; Now 50% of total revenue

§  130+ non-union employees

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Palmer at a Glance (cont…)

§  100K sq ft main facility in Andrews (TX); Second facility for oversized FRP tanks in Orange (TX)

§  ISO 9001 and ASME certifications

§  End markets include oil & gas and municipal water

§  Palmer typically ships tanks up to 300 miles

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Financial Performance

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Fiscal  Year    (ends  Sept  30)   Revenue   Adjusted  EBITDA                  

Under  Synalloy  Ownership  

2010   $16.9  million  

2011   $25.7  million   $3.8  million  

12  Months  Ended  Mar  2012   $31.8  million   $5.4  million  

Methodology 1.  Dixon Hughes Goodman (DHG) led examination of all aspects of Palmer’s financials 2.  Synalloy adjusted DHG results to reflect Synalloy ownership (i.e. increased expense) 3.  Analysis assumes no synergies

Fiscal 2012 YTD Revenue (Nine Months) Annualized = $34.0 million

Drivers of Recent Growth

1.  Palmer’s Steel Production Capacity Ramping Up: Each oil well requires one fiberglass tank and two steel tanks

2.  Oil & Gas Demand in Palmer’s Immediate Area: Horizontal drilling technology and higher oil prices are driving a shale oil drilling boom in the Permian Basin and Eagle Ford Shale

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Customers

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Primary Operation in Andrews

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Primary Operation in Andrews (cont…)

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Primary Operation in Andrews (cont…)

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Primary Operation in Andrews (cont…)

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Oil Market Overview

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§  US Oil Production: 4.95MM barrels per day in 2008; 5.7MM bpd currently; US DoE projects 7MM bpd by 2020 [source: New York Times]

§  Due to horizontal drilling, US crude oil production is projected to increase by 1.5 million bpd by 2015 [source: EOG Resources]

§  In 2011, Texas oil production exceeded 1MM bpd for the first time since 2001; Some industry executives project 2MM bpd is possible within the Permian Basin alone [source: Associated Press]

§  475 rigs (25% of US total) are operating in the Permian Basin [source: New York Times]

Proximity to Key Basins and Shale Plays

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Palmer  –  Andrews  0  mi  to  Permian  320  mi  to  BarneV  320  mi  to  Eagle  Ford  

Palmer  -­‐  Orange  

RAM-­‐FAB  100  mi  to  Smackover  150  mi  to  Bossier  200  mi  to  Tuscaloosa  

Brismet  300  mi  to  U9ca  

Relevant Activity by Oil Industry Leaders

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EOG  Resources  

§ Eagle  Ford:  647K  acres  secured;  375  wells  already;                                Drilling  280  in  2012;  3,200  total  yet  to  be  drilled  

§ BarneV:  200K  acres  § Permian:  240K  acres;  Drilling  112  wells  in  2012  

Anadarko  Petroleum  

§ Eagle  Ford:  4,000+  iden9fiable  drill  sites  (40+%  oil);                                          Plan  to  drill  250  wells  in  2012  

§ Permian:  130  wells  planned  for  2012  § East  Texas:  70+  wells  planned  for  2012  

Apache  § Permian:  7,000+  drill  sites  iden9fied;  Drilling  600  wells  in  2012  § Mid-­‐Con9nent:  2  million  acres  (50  to  90%  liquid)  

Devon  § Permian:  3,500  drill  sites  iden9fied;  Drilling  300  wells  in  2012  § BarneV:  625K  acres;  2,500  drill  sites  iden9fied;                                            Drilling  300  wells  in  2012  

Relevant Activity by Oil Industry Leaders

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Chesapeake  Energy  

§ Aggressively  shi`ing  to  liquid-­‐rich  plays  § #1  liquids  producer  in  Mid-­‐Con9nent;  #2  in  Eagle  Ford;                              #3  in  Permian  

Exxon-­‐Mobil  § 800K  total  acres  in  Permian,  Eagle  Ford  and  Woodford;        Projec9ng  steady  produc9on  growth  from  these  sites  thru  2022  

§ 215K  acres  in  Smackover  and  75K  acres  in  U9ca  

Chevron  

§ 1  million  total  acres  in  Permian  and  Midland  basins  § 150K  acres  in  Bossier  § Projec9ng  3.5x  increase  in  “unconven9onal”  oil  and  gas  produc9on  between  2012  to  2017  

Cabot   § 61K  acres  in  Eagle  Ford;  Projected  to  drill  700  wells  

Opportunities Outside the Oil Industry

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FRP Tank Market §  5.9% CAGR to $712 million by 2015

§  +/- 250 manufacturers in North America, most privately held

§  End Users: chemicals, oil & gas, water/wastewater, pulp & paper, septic, etc.

§  FRP Advantages: corrosion resistance, high strength-to-weight ratio, low maintenance, longer lifecycle

Steel Tank Market §  Mature $7 billion industry

§  +/- 650 manufacturers in North America, most privately held

§  End Users: energy, water/wastewater, steel, pharma, micro-electronics, pulp & paper, mining, automotive, chemical, oil & gas, petrochemical, food & beverage, agri-business and pollution control

Palmer: Fit with Synalloy’s Acquisition Criteria

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Complementary Business (+)

§  SYNL management understands the business

§  Potential synergies: •  Purchasing power – steel and resin

•  Overlap in target markets – oil & gas, water & wastewater

•  Potential to expand tank capabilities into other SYNL facilities

§  Transaction will be easily understood by SYNL shareholders and by its bank

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Strong Management Staying (+)

§  Jim Lee: 20+ years running the business day-to-day; Will remain with SYNL for a minimum of 3 years

§  An experienced group of managers report to Jim Lee

§  Palmer management has continued to invest in the business even with a potential sale pending: •  New steel tank production line in Andrews

•  Orange facility to pursue international sales

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Other Positive Factors (+)

§  Andrews (TX) location relative to existing and emerging shale oil plays

§  PP&E is fairly new and in good shape; Facility is “customer tour ready”

§  Palmer owns and operates specialty delivery trucks

§  Recent pressure vessel certifications present a new revenue source

§  International sales potential via Orange (TX) facility

§  Non-union workforce with relatively low turnover; Less demanding welding skills (relative to SYNL FAB); Community college alliance

§  Can consolidate results within SYNL’s existing Metals unit

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Palmer: Key Deal Terms

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Transaction Structure

§  Stock purchase of all shares in Lee-Var, Inc. dba Palmer of Texas

§  $27.5MM net upfront cost to SYNL, incl. transaction expenses

§  Includes $15MM of net tangible assets

§  Excludes Palmer’s existing debt, which Sellers retired at closing

§  Net working capital and PP&E adjusted 60 days post-closing

§  Sellers have customary non-competes and other restrictions

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Escrow

$3.65 Million for Unknown Liabilities

§  Up to $900K released at 12 months dependent on sales tax claims

§  Up to another $1.75MM released at 18 months

§  Balance released at 24 months

$375K for Orange CapEx

§  Used at Synalloy’s discretion for concrete pads and retaining walls

§  Balance released at year-end 2012

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Earn Out and Claw Back

§  Sellers eligible for three-year earn out based on actual EBITDA

§  SYNL reimbursed by Sellers for the amount by which EBITDA is less than $3.5 million in either of the first two years post-closing

 

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EBITDA  for  the  Year*   Earn  Out  Payment   Three-­‐Year  Total  

<  $5.825  million   $0   $0  ≥  $5.825  million   $2.5  million   $7.5  million  ≥  $6.825  million   $3.5  million   $10.5  million  

*  Before  Palmer  management  bonuses  

Other Terms

§  SYNL reimbursed for uncollected AR at 120 days post-closing

§  Sellers pay for actual maintenance capex (if any) in excess of $500K annually during the first 18 months post-closing

§  Sellers pay for actual cost of new tank line project (if any) in excess of the $1.63 million total budget

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BB&T Lending Commitment 1.  Line of Credit

§  Increased from $20MM to $25MM (as of 6/29: into it by $8.9MM)

§  LIBOR plus 1.75% (currently 2.00% total)

§  Approximately 36-month maturity

§  Note: BB&T will also provide a temporary increase to fund material purchases for Brismet Bechtel project

2.  Term Note

§ $22.5MM, 10-year term, principal paid down by $2.25MM each year

§ Fixed rate at approximately 3.85% via interest rate swaps  

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BB&T Lending Commitment

3.  Synalloy pledged all tangible and intangible assets as security

4.  Covenants provide ample flexibility under worse case scenarios

§ Funded debt to EBITDA: 3.5x

§ Minimum tangible net worth: $38 million

§ Total liabilities to tangible net worth ≤ 2.75x

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Accretion and Capital Structure

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Post-­‐Transac5on  Consolidated  EBITDA  and  Capital  Structure  

Total  Synalloy  Funded  Debt   $36.9  million  

Total  Synalloy  Annual  EBITDA  incl.  Palmer  and  Ashland   $17.9  million  

Total  Synalloy  Funded  Debt-­‐to-­‐EBITDA   2.06x  

Total  Synalloy  EBITDA-­‐to-­‐Debt  Service                                                  (term  loan  only  in  year  1)   5.83x  

Estimated Synalloy EPS Increase from Palmer at Current Run Rate: $0.30 per share

III. Synalloy EPS Potential

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Impact of Recent Developments

Ashland Defoamers

Fruit of the Loom Products

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DuPont Project

Bechtel - Wolf Creek Project International Projects Special Alloy Project

Acquired

$80 to $85 million in total incremental revenue

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EPS Assumptions

§  Neutral nickel prices – no inventory profits/losses

§  Full year contribution from Ashland defoamers

§  Full year contribution from Palmer of Texas

§  Annual savings from 18” pipe production on continuous mill

§  Synalloy Fabrication at break-even

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Projected Annual EPS

$1.80 with stated assumptions

OR

$1.95 with Synalloy Fabrication at a 5% after-tax margin

NOTE: Synalloy’s previous best year since 2000 was $1.13 per share on a nickel-neutral basis

Questions?

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