Financial Data and Key Metrics Changes - Q1 2021 net sales were $69.8 million, a decrease from $74.7 million in the prior year period, primarily due to the impact of the second quarter 2020 curtailment of operations and lower shipments [10][11] - Adjusted EBITDA increased by 85% to $4.9 million, with an adjusted EBITDA margin improvement of 350 basis points to 7% compared to the prior year [11] - The company reported a net income of $1.1 million or $0.12 diluted earnings per share for Q1, a significant improvement from a net loss of $1.2 million or $0.13 diluted loss per share in Q1 2020 [11] Business Segment Data and Key Metrics Changes - The metal segment saw improvements in operational procedures and throughput, with a focus on enhancing efficiency [14][16] - The chemical segment did not meet internal margin targets, attributed primarily to a mix issue, and remains a smaller portion of total sales [16][26] Market Data and Key Metrics Changes - The operating environment for metals businesses is strong, benefiting from robust demand and improved pricing, allowing the company to pass through surcharges [16] - There are ongoing macroeconomic challenges affecting production and deliveries, impacting both metal and chemical segments [32] Company Strategy and Development Direction - The company is focused on fostering a culture of accountability and teamwork, with an emphasis on improving operational efficiencies and cost management [13][14] - There is a strategic roadmap aimed at making the chemical segment a meaningful value creator in the medium term [16] - The management team is committed to deepening customer and vendor relationships to enhance responsiveness and service [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to achieve long-term profitable growth, citing improvements in liquidity and operational positioning [9][12] - The company acknowledges the need for ongoing work to refine operations and productivity levels, particularly in the chemical segment [16][18] Other Important Information - The company secured a new revolving credit facility with up to $150 million of borrowing capacity, enhancing financial flexibility [12] - Capital expenditures for 2021 are projected to be about $4 million, with a focus on assessing every dollar spent [35] Q&A Session Summary Question: Inventory gains and accounting changes - Management acknowledged the relevance of inventory gains and stated that pricing adjustments will flow through in future quarters [20][23] Question: Margins in the metals segment - Management indicated that incremental improvements in margins can be expected in the June quarter due to favorable conditions [24][25] Question: Chemical segment margin targets - Management confirmed that the chemical segment missed internal margin targets primarily due to a mix issue [26][28] Question: Production delays and their impact - Management noted that production delays affected both segments and contributed to an increase in backlog, which is expected to flow through in upcoming quarters [32][33] Question: Capital expenditures and corporate expenses - Management stated that capital expenditures may come in slightly lower than projected and emphasized ongoing management of corporate expenses [35][37] Question: Operational improvements with new management - Management confirmed that operational improvements are a process and that new personnel are being brought in to enhance efficiency [41][42] Question: Potential benefits from the Safe Drinking Water Act - Management expressed optimism that the act could create opportunities for the company, particularly in the chemicals and pipe segments [44] Question: Strengthening the sales team in chemicals - Management is actively involved in a strategic plan to enhance the sales effort in the chemicals segment [50] Question: Future investor roadshow - Management confirmed plans for a potential investor roadshow in the second half of the year, contingent on operational improvements [51]

Financial Performance - Consolidated net sales for Q1 2021 were $69.8 million, a decrease of $4.9 million, or 6.6%, compared to Q1 2020[96] - Consolidated gross profit increased 22.2% to $8.7 million, representing 12.5% of sales in Q1 2021, up from 9.6% in Q1 2020[96] - Net income for Q1 2021 was $1.1 million, or $0.12 diluted earnings per share, compared to a net loss of $1.2 million, or $0.13 diluted loss per share in Q1 2020[98] - Metals Segment net sales totaled $55.2 million in Q1 2021, a decrease of $5.5 million, or 9.0%, from Q1 2020[99] - Specialty Chemicals Segment net sales increased by $0.5 million, or 3.8%, to $14.6 million in Q1 2021, driven by a 7.0% increase in pounds shipped[102] Operating Income and Expenses - Operating income for the Metals Segment increased 175.8% to $2.5 million in Q1 2021, influenced by higher surcharges for alloys[101] - Selling, general, and administrative expenses decreased to $6.9 million, or 9.8% of sales, in Q1 2021, down from $7.8 million, or 10.4% in Q1 2020[97] Tax and Cash Flow - The effective tax rate for Q1 2021 was 18.1%, significantly lower than 54.0% in Q1 2020, due to valuation allowances[105] - Cash balance increased by $0.2 million to $0.4 million as of March 31, 2021, compared to $0.2 million at December 31, 2020[105] - Total cash provided by financing activities for Q1 2021 was $1,157,000, an increase from $625,000 in Q1 2020, indicating improved financing operations[113] Inventory and Liquidity - Net inventories increased by $3.7 million at March 31, 2021, primarily due to purchases to support increased customer demand[105] - As of March 31, 2021, the company had $0.4 million in cash and cash equivalents and $41.2 million available on its revolving line of credit, indicating strong liquidity[112] - The current ratio decreased to 3.8 as of March 31, 2021, down from 4.1 at the end of 2020, suggesting a slight decline in short-term financial health[121] EBITDA Performance - Consolidated EBITDA for Q1 2021 was $4,217,000, a significant increase from $1,014,000 in Q1 2020, representing a growth of 316%[108] - Adjusted EBITDA for Q1 2021 reached $4,875,000, up from $2,638,000 in Q1 2020, reflecting an increase of 85%[108] - Metals Segment Adjusted EBITDA was $4,874,000 for Q1 2021, compared to $3,300,000 in Q1 2020, marking a 48% increase[109] - Specialty Chemicals Segment Adjusted EBITDA increased to $1,472,000 in Q1 2021 from $929,000 in Q1 2020, a rise of 58%[110] Debt and Share Repurchase - Long-term debt as of March 31, 2021, was $63.8 million, reflecting an increase of $2.4 million from December 31, 2020[117] - The company repurchased 59,617 shares at an average price of $10.65 during Q1 2020, totaling $636,940[119]

Financial Data and Key Metrics Changes - Net sales for Q4 2020 were $55.9 million, a decline attributed to the curtailment of Palmer operations and lower pipe and tube shipments [9] - Gross margin increased by 80 basis points to 11% due to operational efficiencies and successful passthrough of raw material price increases [10] - Adjusted EBITDA for Q4 increased by 19% to $3 million, with an adjusted EBITDA margin improvement of 170 basis points to 5.4% compared to the prior year [11] - The company reported a net loss of $8.6 million or $0.94 per share for Q4 2020, compared to a net loss of $9 million or $0.10 per share for Q4 2019 [10] Business Line Data and Key Metrics Changes - The Palmer Texas business was curtailed in April 2020 as it no longer met internal return thresholds, impacting overall sales [9] - The metal segment includes three businesses: welded pipe and tube, specialty pipe and tube, and American stainless tubing, which are expected to rebound as industries recover from the pandemic [17] - The chemical segment, while a minor portion of revenue, has a better margin profile and is expected to leverage its capabilities for additional products and services [18] Market Data and Key Metrics Changes - The company noted that the pandemic has created uncertainty affecting customer demand, but operational improvements have been made to enhance efficiency [6] - There is a significant improvement in backlog from Q3 to Q4 2020, indicating a positive trend in demand [45] Company Strategy and Development Direction - The management team is focused on improving operational efficiency and effectiveness, with plans to invest in employees and foster a culture of accountability [14] - The company aims to maximize shareholder value through strategic planning, operational improvements, and potential acquisitions [20] - There is a commitment to growth without solely relying on cost-cutting measures, emphasizing the importance of setting up for profitable growth [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for improved performance in 2021 due to favorable economic conditions and commodity pricing [28] - The company is focused on leveraging its diverse experiences and relationships to better service customers and improve overall efficiency [15] - Management acknowledged challenges in attracting and retaining talent but does not foresee significant wage inflation impacting operations [51] Other Important Information - Total debt as of December 31, 2020, was $61.4 million, representing a nearly 20% reduction compared to the previous year [12] - The company entered into a new revolving credit facility with BMO Harris Bank, providing up to $150 million in borrowing capacity [12] Q&A Session Summary Question: Interest savings from the new credit facility - Management indicated that the new interest rate is lower, resulting in significant savings, approximately $100,000 per month [22][42] Question: Plans for acquisitions - Management confirmed that the new credit facility allows for acquisitions up to $25 million, not exceeding $100 million over four years, indicating a strategy for potential inorganic growth [24] Question: Consolidation of corporate infrastructure - Management acknowledged the efficiency of the current corporate structure in Richmond and indicated no immediate plans for consolidation [26] Question: Future EBITDA expectations - Management expressed confidence in significantly improving EBITDA through operational efficiencies but did not provide specific numbers [43] Question: Capacity utilization at CRI Tolling - Management noted opportunities to optimize asset efficiency and throughput at CRI, indicating a focus on increasing capacity utilization [30] Question: Impact of nickel price fluctuations - Management explained that while nickel is a component in stainless products, it is not a significant driver of inventory profits, and they have strategies to manage inventory effectively [40] Question: Demand outlook for the chemical segment - Management reported robust demand in the chemical segment, with opportunities arising from increased customer capacity needs [59]

Financial Performance - Consolidated net sales for Q3 2020 were $59.3 million, a decrease of $14.4 million or 19.5% compared to Q3 2019[93] - The Metals Segment's net sales for Q3 2020 totaled $47.1 million, a decrease of $13.0 million or 21.7% from Q3 2019[96] - The Company recorded a net loss of $10.5 million for Q3 2020, compared to a net loss of $1.0 million for Q3 2019[94] - For the first nine months of 2020, consolidated net sales were $200.1 million, a decrease of $37.1 million or 15.6% compared to the same period in 2019[93] - The Metals Segment's net sales for the first nine months of 2020 totaled $159.8 million, a decrease of $36.0 million or 18.4% from the same period in 2019[96] - The company reported a net loss of $18.7 million for the first nine months of 2020, compared to a net loss of $2.1 million for the same period in 2019[121] Segment Performance - Specialty Chemicals Segment net sales for Q3 2020 totaled $12.2 million, a decrease of $1.3 million, or 9.9%, from Q3 2019[101] - Operating income for the Specialty Chemicals Segment increased by $0.2 million, or 25.4%, to $1.1 million in Q3 2020 compared to Q3 2019[103] - Metals Segment reported a net loss of $11,417 thousand for the three months ended September 30, 2020, compared to a net income of $1,671 thousand in the same period of 2019[113] - Adjusted EBITDA for the Metals Segment was $1,355 thousand, representing 2.9% of segment sales, down from $3,004 thousand and 5.0% in the prior year[113] - Specialty Chemicals Segment net income increased to $1,061 thousand for the three months ended September 30, 2020, compared to $846 thousand in the same period of 2019[114] - Adjusted EBITDA for the Specialty Chemicals Segment was $1,498 thousand, which is 12.3% of segment sales, up from $1,309 thousand and 9.7% in the prior year[114] Expenses and Profitability - Consolidated gross profit for Q3 2020 decreased 31.5% to $5.0 million, or 8.4% of sales, compared to $7.3 million, or 9.9% of sales in Q3 2019[94] - Consolidated selling, general, and administrative expenses decreased by $2.1 million to $6.3 million, or 10.6% of sales in Q3 2020[95] - Selling, general, and administrative expenses decreased by 20.6% to $4.0 million for Q3 2020 compared to $5.0 million in Q3 2019[100] - Unallocated corporate expenses decreased by $0.9 million, or 35.6%, to $1.5 million in Q3 2020 compared to $2.4 million in Q3 2019[105] Cash Flow and Liquidity - Cash balance decreased by $0.4 million to $0.2 million as of September 30, 2020, compared to $0.6 million at December 31, 2019[108] - Cash flows from operating activities decreased to $5,970 thousand for the nine months ended September 30, 2020, down from $17,927 thousand in the prior year[120] - Total cash used in financing activities was $(8,141) thousand for the nine months ended September 30, 2020, compared to cash provided of $4,105 thousand in the same period of 2019[120] - The company had $71.3 million of total borrowings outstanding as of September 30, 2020, down $4.2 million from the balance at December 31, 2019[125] - The current ratio was 3.9 at September 30, 2020, compared to 3.6 at December 31, 2019[131] Impairments and Adjustments - Non-cash goodwill impairment in the Metals Segment amounted to $10.7 million for Q3 2020[94] - Adjusted EBITDA for Q3 2020 was $1.64 million, representing 2.8% of sales[112] - Adjusted net loss for the three months ended September 30, 2020, was $(1,032) thousand, compared to $(739) thousand in the same period of 2019[117] Debt and Credit Facilities - The Company has a $100 million asset-backed revolving line of credit with a maturity date of December 21, 2021[125] - The long-term debt to capital ratio increased to 45% at September 30, 2020, from 41% at December 31, 2019[131] - The Company entered into multiple amendments to its Credit Agreement to address technical defaults related to the fixed charge coverage ratio[126] Shareholder Actions - The Company repurchased 59,617 shares at an average price of $10.65, totaling $636,940 in the nine months ended September 30, 2020[129] - As of September 30, 2020, the Company had 790,383 shares remaining under its stock repurchase authorization[127] Tax and Allowances - The effective tax rate for Q3 2020 was 19.4%, compared to 10.6% for Q3 2019[106] - The Company maintains an allowance for credit losses on accounts receivable, adjusting it based on current expected credit losses[135] Other Information - The Company anticipates continued lower customer demand in Q4 2020 compared to Q4 2019 due to the ongoing impacts of COVID-19[87] - The Company has no off-balance sheet arrangements that could materially affect its financial position[132] - No dividends were declared or paid by the Company in 2019[130] - The Company had a minimum fixed charge coverage ratio of 1.47 and a minimum tangible net worth of $67.7 million as of September 30, 2020[126] - The return on average equity was (10.8)% at September 30, 2020, compared to (2.9)% at December 31, 2019[131]

Financial Data and Key Metrics Changes - For Q3 2020, the company reported a net loss of $10.5 million or $1.16 diluted loss per share, compared to a net loss of $1 million or $0.11 diluted loss per share in Q3 2019 [5] - For the nine-month period, the net loss was $18.7 million or $2.06 diluted loss per share, compared to a net loss of $2.1 million or $0.24 diluted loss per share for the same period in 2019 [6] - Q3 non-GAAP adjusted EBITDA was $1.6 million, down from $2.8 million in Q3 2019, while for the first nine months of 2020, adjusted EBITDA was $6.2 million, down from $10.9 million in the same period of 2019 [7] Business Line Data and Key Metrics Changes - The chemical segment saw operating income increase by 25% and 47% over Q3 and nine-month periods of the previous year, despite a decline in volume [9] - The polished ornamental tubing business remained strong, particularly in consumer-oriented markets like marine and transportation [10] - The welded pipe and tube businesses faced challenging market conditions, with North American consumption of welded stainless steel pipe down approximately 5% from 2019 [11] Market Data and Key Metrics Changes - The company expects to see a recovery in demand for welded stainless steel pipe in North America in the second half of next year, driven by anticipated infrastructure spending [11] - Inventory price change losses totaled $5.5 million in the first nine months of 2020, but nickel surcharges turned positive in late summer, leading to expectations of inventory price change gains in 2021 [11] Company Strategy and Development Direction - The company is focused on reducing net debt, which decreased by $6 million in Q3, with expectations to reduce it by an additional $9 million by year-end [8] - The company is selling off assets related to exited businesses, with expected proceeds of $500,000 in Q4 and upwards of $2 million in the first half of next year from Palmer sales [8] - Management has suspended all fiscal 2020 guidance due to COVID-19 uncertainty and is not providing guidance for 2021 at this time [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning for the next phase of the manufacturing economy, highlighting the resilience of employees during challenging times [12] - There is uncertainty regarding the impact of the new administration on infrastructure spending, but management expects some improvement in demand in the second half of next year [25] Other Important Information - The company plans to file for federal tax refunds totaling $4.5 million, with $1 million expected before year-end [8] - A favorable court ruling regarding industrial gas pricing at the Munhall facility may allow the company to recoup up to $200,000 in overcharges for 2020 [9] Q&A Session Summary Question: Will the company's debt affect the ability to refinance the line of credit expiring in December 2021? - Management indicated preliminary conversations with Truist have been positive, and they expect to renew the line of credit before year-end [19] Question: Was the inventory evaluation able to happen in October? - The inventory revaluation did not occur in October due to COVID-related reasons, but a new valuation is in process with expectations of higher inventory prices [21] Question: How much of the company's revenue is connected to oil and gas? - Management estimated that about 80% of company revenue comes from end markets connected with oil and gas, with varying exposure across different business segments [22] Question: Is there a potential boost for companies supporting manufacturing infrastructure with the new administration? - Management noted that while there are initiatives in the Senate, the outcome is uncertain, but they expect infrastructure spending to improve demand in the second half of next year [25] Question: How is the BioLube ECO-7 product being accepted in the marketplace? - Management stated that the chemical business has historically catered to specific customers, and they would look into the product line's acceptance further [27] Question: Will the Board of Directors be expanded back to eight members? - Management indicated that the Board has not contemplated this at the moment [29]

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the period ended June 30, 2020, reflect a decline in total assets and shareholders' equity, a significant net loss, and negative operating cash flow [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2020, total assets decreased to **$251.4 million** from **$257.2 million**, while shareholders' equity declined to **$98.1 million** due to net losses Condensed Consolidated Balance Sheets Summary (in thousands) | Balance Sheet Items (in thousands) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $147,687 | $147,115 | | **Total Assets** | $251,424 | $257,197 | | **Total Current Liabilities** | $40,109 | $40,578 | | **Total Liabilities** | $153,367 | $150,686 | | **Total Shareholders' Equity** | $98,057 | $106,511 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2020, net sales fell to **$66.1 million**, resulting in a **$7.0 million** net loss, exacerbated by **$6.1 million** in asset impairments and **$2.7 million** in proxy contest costs Condensed Consolidated Statements of Operations Summary (in thousands) | Statement of Operations (in thousands) | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $66,136 | $78,778 | $140,833 | $163,582 | | **Gross Profit** | $4,361 | $7,838 | $11,512 | $16,522 | | **Operating (Loss) Income** | $(10,674) | $573 | $(11,602) | $17 | | **Net Loss** | $(6,957) | $(262) | $(8,135) | $(1,189) | | **Diluted Loss Per Share** | $(0.77) | $(0.03) | $(0.90) | $(0.13) | - Significant expenses in Q2 2020 included **$2.7 million** in proxy contest costs and **$6.1 million** in asset impairments, which were not present in 2019[9](index=9&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For H1 2020, net cash used in operating activities was **$0.2 million**, a significant downturn from the **$13.2 million** provided in the prior year, while investing activities provided **$0.8 million** Condensed Consolidated Statement of Cash Flows Summary (in thousands) | Cash Flow Activities (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(173) | $13,225 | | Net cash provided by (used in) investing activities | $798 | $(23,232) | | Net cash provided by financing activities | $161 | $7,810 | | **Increase (Decrease) in cash** | **$786** | **$(2,197)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the adoption of new accounting standards, a **$6.1 million** asset impairment, a goodwill impairment risk, a technical debt covenant default, and **$2.9 million** in proxy contest costs - The company adopted ASU 2016-13 (Credit Losses), recording a cumulative effect adjustment of **$0.4 million** to Retained Earnings on January 1, 2020[20](index=20&type=chunk) - Due to the COVID-19 pandemic's impact, the company recorded asset impairment charges of **$6.1 million** related to its Palmer business, writing down inventory and long-lived assets[37](index=37&type=chunk) - A goodwill impairment test for the Welded Pipe & Tube reporting unit concluded no impairment was necessary, but the estimated fair value exceeded its carrying value by only **1.7%**, indicating it is at risk[42](index=42&type=chunk) - The company experienced a technical default on its fixed charge coverage ratio covenant as of June 30, 2020, which was addressed through two amendments to its Credit Agreement in July and August 2020[49](index=49&type=chunk)[84](index=84&type=chunk) - Total costs incurred relating to a proxy contest with Privet Fund Management and UPG Enterprises were **$2.9 million** for the six months ended June 30, 2020[82](index=82&type=chunk)[83](index=83&type=chunk) [Management's Discussion and Analysis (MD&A)](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **16.0%** decline in Q2 2020 consolidated net sales primarily to the Metals Segment, while the Specialty Chemicals Segment showed resilience, despite a technical debt covenant default and identified material weakness in internal controls [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Consolidated net sales for Q2 2020 fell **16.0%** to **$66.1 million**, leading to a **$7.0 million** net loss, primarily due to asset impairments, proxy contest costs, and metal pricing losses, though Specialty Chemicals operating income more than doubled Segment Performance Summary (in millions) | Performance Summary | Q2 2020 | Q2 2019 | | :--- | :--- | :--- | | **Consolidated Net Sales** | $66.1M | $78.8M | | **Consolidated Net Loss** | $(7.0)M | $(0.3)M | | **Metals Segment Sales** | $52.0M | $64.5M | | **Metals Segment Operating (Loss)/Income** | $(9.2)M | $1.2M | | **Specialty Chemicals Segment Sales** | $14.1M | $14.3M | | **Specialty Chemicals Segment Operating Income** | $2.0M | $0.9M | - The decline in the Metals Segment was most severe in fiberglass and steel liquid storage tanks, with sales dropping **89.9%** in Q2 2020 vs Q2 2019 due to the curtailment of operations and the downturn in the oil and gas industry[96](index=96&type=chunk) - The Specialty Chemicals Segment's strong performance was driven by increased production of hand sanitizer and cleaning aids, along with cost-cutting initiatives that improved margins and lowered manufacturing costs[102](index=102&type=chunk)[103](index=103&type=chunk) [Non-GAAP Financial Measures](index=27&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like EBITDA and Adjusted EBITDA, with consolidated Adjusted EBITDA for Q2 2020 at **$1.9 million**, down from **$3.4 million** in Q2 2019, primarily due to the Metals Segment decline Adjusted EBITDA Summary (in thousands) | Adjusted EBITDA (in thousands) | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | **Consolidated Adjusted EBITDA** | $1,947 | $3,408 | $4,587 | $8,175 | | **Metals Segment Adjusted EBITDA** | $450 | $3,645 | $3,749 | $9,046 | | **Specialty Chemicals Segment Adjusted EBITDA** | $2,450 | $1,322 | $3,379 | $2,375 | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity was impacted by a **$13.4 million** decrease in cash from operations in H1 2020, a technical debt covenant default that was subsequently cured, and **$0.6 million** in stock repurchases - Cash from operating activities decreased by **$13.4 million** in H1 2020 compared to H1 2019, primarily due to changes in working capital[119](index=119&type=chunk)[120](index=120&type=chunk) - The company notified its bank of a technical default on its fixed charge coverage ratio, which was addressed by amending the credit agreement to adjust the ratio's calculation to include proxy contest costs and the Palmer asset impairment charge[124](index=124&type=chunk)[126](index=126&type=chunk) - During H1 2020, the company purchased **59,617** shares under its stock repurchase program for an aggregate amount of **$0.6 million**[77](index=77&type=chunk)[128](index=128&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reported no material quantitative or qualitative changes in its market risk exposure since the filing of its Annual Report on Form 10-K for the year ended December 31, 2019 - There have been no material changes in market risk exposure since the end of fiscal 2019[136](index=136&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of June 30, 2020, due to a material weakness in the control environment, for which a remediation plan is being developed - The CEO and CFO concluded that disclosure controls and procedures were not effective as of the end of the quarter[137](index=137&type=chunk) - A material weakness was identified in the company's control environment, stemming from aggregated control deficiencies including improper management tone and delays in reporting a whistleblower complaint to the Audit Committee[140](index=140&type=chunk) - A remediation plan is in development, which includes leadership training, aligning job descriptions, improving the ethics hotline process, and enhancing transition processes for new executives and audit committee members[141](index=141&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions in the ordinary course of business, with no material changes since the 2019 year-end report, and believes outcomes will not have a material adverse effect - There were no material changes in legal proceedings from those disclosed in the Annual Report on Form 10-K for the period ending December 31, 2019[145](index=145&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) The company added several new risk factors, highlighting potential adverse impacts from recent leadership transitions, asset impairment risks, ongoing COVID-19 effects, and potential disruption from activist shareholders - New risk factors were added concerning the management of leadership transitions, including a new CFO and three new Board members[146](index=146&type=chunk) - The company identified a risk of impairment to the carrying value of fixed assets, intangible assets, or goodwill, which could adversely affect financial results[147](index=147&type=chunk) - A significant new risk factor relates to the adverse effects of global pandemics, specifically COVID-19, on business, financial condition, and cash flows[148](index=148&type=chunk) - The potential for negative impacts from the actions of activist shareholders was added as a risk factor[152](index=152&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including amendments to the Rights Agreement and Loan Agreement, CEO/CFO certifications, and XBRL data files - Key exhibits filed include the Third and Fourth Amendments to the company's Loan Agreement with Truist Bank, which addressed the technical debt covenant default[155](index=155&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to SEC rules were filed as exhibits[155](index=155&type=chunk)

Synalloy Corporation (SYNL) Q2 2020 Results Conference Call September 3, 2020 9:00 AM ET Company Participants Craig Bram - President and CEO Sally Cunningham - CFO Conference Call Participants Charles Gold - Truist Financial Operator Ladies and gentlemen, thank you for standing by, and welcome to the Synalloy's Second Quarter 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator I ...

Financial Data and Key Metrics Changes - First quarter GAAP-based income was a net loss of $1.2 million or $0.13 diluted loss per share, compared to a net loss of $0.9 million or $0.10 diluted loss per share in Q1 2019 [6] - First quarter non-GAAP adjusted net loss was $0.7 million or $0.08 adjusted diluted loss per share, compared to adjusted net income of $0.6 million or $0.07 adjusted diluted earnings per share in Q1 2019 [6] - First quarter non-GAAP adjusted EBITDA totaled $2.6 million or 3.5% of sales, down from $4.8 million or 5.6% of sales in the prior year's first quarter [6][8] Business Line Data and Key Metrics Changes - In the welded pipe and tube business, pounds shipped were up almost 6% year-over-year, but pricing was down 10% [11] - Material margin for the welded pipe and tube segment fell by $0.14 per pound and was down $2.9 million in absolute dollar terms [11] - The Chemicals segment saw pounds shipped decline by 7% year-over-year, while prices increased by 10.2% [15] Market Data and Key Metrics Changes - The company gained 3.4 points of North American market share in the welded stainless steel pipe category [11] - Order activity softened in April, indicating a potential decline in demand moving forward [13] Company Strategy and Development Direction - The company is focused on improving liquidity and reducing debt, with plans for inventory reductions of approximately $7 million and responsible constraints on capital spending [9] - Cost-cutting initiatives have resulted in a reduction of costs by $1.54 million year-over-year, with expectations for further savings in the coming quarters [10] Management Comments on Operating Environment and Future Outlook - Management noted weaker year-over-year demand, particularly in the metals segment, and pricing pressure negatively impacted material margins [10] - The company expects to extract several million dollars of capital from the Palmer facility as accounts receivables are collected and remaining inventory is sold [14] - The CARES Act is expected to generate an estimated $2 million in tax refunds over the next two quarters [16] Other Important Information - The company is pursuing a cash settlement in excess of $1 million related to a property and business interruption claim [16] - A lawsuit has been filed against a supplier for overcharging approximately $1 million over the last three years [17] Q&A Session Summary Question: Inquiry about Bristol Metals segment profit for Q1 and Q2 - Management did not disclose specific profit numbers for competitive reasons [18] Question: Follow-up on the previous inquiry - The analyst acknowledged the response and thanked management [19]

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the company's unaudited condensed consolidated financial statements and related management discussion and analysis for the period [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2020, including balance sheets, statements of operations, cash flows, and equity, with explanatory notes Condensed Consolidated Statements of Operations (Q1 2020 vs Q1 2019) | Metric | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | **Net sales** | $74,697 thousand | $84,804 thousand | | **Gross profit** | $7,151 thousand | $8,684 thousand | | **Operating loss** | $(927) thousand | $(556) thousand | | **Net loss** | $(1,178) thousand | $(927) thousand | | **Diluted loss per share** | $(0.13) | $(0.10) | Condensed Consolidated Balance Sheet Highlights (As of March 31, 2020) | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total current assets** | $154,275 thousand | $147,115 thousand | | **Total assets** | $262,504 thousand | $257,197 thousand | | **Total current liabilities** | $42,424 thousand | $40,578 thousand | | **Total liabilities** | $157,920 thousand | $150,686 thousand | | **Total shareholders' equity** | $104,584 thousand | $106,511 thousand | Condensed Consolidated Statement of Cash Flows (Q1 2020 vs Q1 2019) | Cash Flow Activity | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | **Net cash (used in) provided by operating activities** | $(642) thousand | $6,099 thousand | | **Net cash used in investing activities** | $(587) thousand | $(22,553) thousand | | **Net cash provided by financing activities** | $625 thousand | $14,839 thousand | | **Decrease in cash and cash equivalents** | $(604) thousand | $(1,615) thousand | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This subsection details accounting policies, fair value measurements, segment performance, debt, leases, acquisitions, shareholder equity, revenue disaggregation, and subsequent events including COVID-19 impact - On January 1, 2020, the Company adopted new accounting standards for Fair Value Measurement (Topic 820), Goodwill Impairment (Topic 350), and Financial Instruments - Credit Losses (Topic 326), resulting in a **$0.4 million cumulative effect adjustment to Retained Earnings** from the credit loss standard adoption[16](index=16&type=chunk) Segment Net Sales (Q1 2020 vs Q1 2019) | Segment | Q1 2020 Net Sales | Q1 2019 Net Sales | | :--- | :--- | :--- | | **Metals Segment** | $60,664 thousand | $71,103 thousand | | **Specialty Chemicals Segment** | $14,033 thousand | $13,701 thousand | | **Total** | **$74,697 thousand** | **$84,804 thousand** | - On March 31, 2020, the Board of Directors adopted a **limited duration shareholder rights plan (a "poison pill") with a 15% ownership trigger**, expiring on March 31, 2021[61](index=61&type=chunk) - Subsequent to the quarter's end, on April 1, 2020, the company suspended manufacturing operations at its Palmer of Texas Tanks business due to the impact of the COVID-19 pandemic on the oil and gas industry, and the Board also committed to a **comprehensive review of strategic alternatives**[67](index=67&type=chunk)[68](index=68&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2020 financial performance, highlighting an 11.9% consolidated net sales decrease, segment performance, COVID-19 impact, liquidity, capital resources, and Adjusted EBITDA reconciliation - Consolidated net sales for Q1 2020 decreased by **11.9% to $74.7 million** compared to Q1 2019, driven by a **$10.4 million decline in the Metals Segment**[75](index=75&type=chunk)[76](index=76&type=chunk) - The Metals Segment's sales decline was significantly impacted by a **$6.4 million drop in sales for Palmer**, leading to the **indefinite curtailment of its production** due to the COVID-19 pandemic's effect on the oil and gas industry[81](index=81&type=chunk) Consolidated Adjusted EBITDA Reconciliation (Q1 2020 vs Q1 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | **Net loss** | $(1,178) | $(927) | | **EBITDA** | $1,014 | $2,553 | | **Adjusted EBITDA** | $2,638 | $4,769 | | **Adjusted EBITDA % of sales** | 3.5% | 5.6% | - As of March 31, 2020, the company had **$18.8 million of available capacity** under its line of credit and was in **compliance with all debt covenants**[98](index=98&type=chunk)[115](index=115&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section reports no material changes in the company's market risk exposure since the 2019 Annual Report on Form 10-K - There have been **no material changes in market risk exposure** since the company's 2019 Annual Report on Form 10-K[127](index=127&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of the end of the reporting period[128](index=128&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's control over financial reporting[129](index=129&type=chunk) [PART II. OTHER INFORMATION](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, and other required disclosures [Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) The company reports involvement in ordinary course legal actions, with no expected material adverse effects or changes since the 2019 Annual Report - The company is involved in various legal actions in the ordinary course of business but does not expect the outcomes to have a **material adverse effect on its financial condition or results of operations**[131](index=131&type=chunk) [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section introduces new risk factors, including the adverse effects of COVID-19, risks from the shareholder rights plan, and potential negative impacts of activist shareholder actions - A new risk factor was added concerning the **adverse effects of global public health pandemics**, specifically the COVID-19 outbreak, on the company's business, financial condition, and operations[132](index=132&type=chunk) - The adoption of a limited duration shareholder rights plan on March 31, 2020, is identified as a new risk factor that could **delay or discourage a merger, tender offer, or assumption of control** not approved by the Board of Directors[136](index=136&type=chunk) - A new risk factor was added regarding the potential for the business to be **negatively affected by the actions of activist shareholders**, which can be costly and divert management's attention[140](index=140&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's Q1 2020 stock repurchase activity, including the number of shares bought back and average price Issuer Purchases of Equity Securities (Q1 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 - Jan 31, 2020 | — | — | | Feb 1 - Feb 29, 2020 | — | — | | Mar 1 - Mar 31, 2020 | 59,617 | $10.65 | | **Total Q1 2020** | **59,617** | **$10.65** | - As of March 31, 2020, **790,383 shares remained available for purchase** under the company's stock repurchase program[141](index=141&type=chunk) [Defaults Upon Senior Securities](index=30&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities during the period - **None reported**[141](index=141&type=chunk) [Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports no mine safety disclosures - **None**[142](index=142&type=chunk) [Other Information](index=31&type=section&id=Item%205.%20Other%20Information) The company reports no other information for the period - **None**[142](index=142&type=chunk) [Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including the Shareholder Rights Agreement, CEO/CFO certifications, and XBRL data - Exhibits filed include the **Rights Agreement dated March 31, 2020**, CEO and CFO certifications pursuant to Rule 13a-14(a)/15d-14(a), and XBRL instance documents[143](index=143&type=chunk) [Signatures](index=33&type=section&id=Signatures) This section contains the authorized signatures for the Form 10-Q filing [Signatures](index=33&type=section&id=Signatures) The Form 10-Q was signed on May 5, 2020, by the President and CEO, and the Senior Vice President and CFO of Synalloy Corporation - The Form 10-Q was **signed and authorized by the company's CEO and CFO on May 5, 2020**[146](index=146&type=chunk)