~~Synalloy Corporation~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(Unaudited)~~

Nine 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 —
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 ) —
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 ) —
Straight line lease cost on sale-leaseback 304,898
—
Change in cash value of life insurance —
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 —
(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 ) —
Proceeds from sale of available for sale securities 4,141,564
—
Acquisition of the stainless pipe and tube assets of Marcegaglia USA, Inc. (11,953,513 ) —
Proceeds from life insurance policies —
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 —
(26,068,228 )
Payments on capital lease obligation (91,565 ) (49,288 )
Settlement of CRI interest rate swap —
(290,427 )
Payments on earn-out liability to MUSA sellers (518,456 ) —
Purchase of common stock —
(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

Cash paid during the year for:
Interest $ 617,606
$ 711,916
Income taxes $ 2,557,121
$ 916,015

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~September 30, 2017~~

Unless indicated otherwise, the terms "Company," "we," "us," and "our" refer to Synalloy Corporation and its consolidated subsidiaries.

~~NOTE 1--BASIS OF PRESENTATION~~Note 1: Basis of Presentation

Basis of Financial Statement 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~~

These interim unaudited condensed consolidated financial statements should be read in conjunction with 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~~audited consolidated financial statements and notes thereto ~~included~~ in the ~~Company's annual report~~Synalloy Corporation (the Company) Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2019 (the Annual Report). The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year.

~~NOTE 2--RECENTLY ISSUED ACCOUNTING STANDARDS~~

~~In May 2014, the Financial~~Recently Issued Accounting Standards ~~Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09,~~ ~~"Revenue from Contracts~~- Adopted

On January 1, 2020, the Company adopted ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The updated guidance removes disclosure requirements pertaining to the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. In addition, the amendment clarifies that the measurement uncertainty disclosure is to communicate information about uncertainty in measurement as of the reporting date. The guidance also adds disclosure requirements for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The adoption of this standard by the Company did not have a material impact on the unaudited condensed consolidated financial statements or footnote disclosures. See Note 2 for further discussion on the Company's fair value measurements.

On January 1, 2020, the Company adopted ASU No. 2017-04 Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. The updated guidance eliminated step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with ~~Customers~~its carrying amount. Additionally, the amount of goodwill allocated to a reporting unit with a zero or negative carrying amount of net assets should be disclosed. The adoption of this standard by the Company did not have a material impact on the unaudited condensed consolidated financial statements.

On January 1, 2020, the Company adopted ASU No. 2016-13 Financial Instruments - Credit Losses (Topic ~~606)"~~,326): Measurement of Credit Losses on Financial Instruments. The updated guidance amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions, and reasonable and supportable forecasts rather than the incurred loss model which reflects losses that are probable. Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the ~~criteria for recognizing revenue. The standard requires an entity to recognize revenue to depict~~beginning of the ~~transfer of promised goods or services to customers~~first reporting period in ~~an amount that reflects the consideration to~~ which the ~~entity expects to be entitled in exchange for those goods or services.~~guidance is effective. 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 priceCompany evaluated its financial instruments and determined that its trade accounts receivable are subject to the ~~performance obligations in~~new current expected credit loss model. Based upon 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~~new current expected credit loss model, on January 1, 2020, we recorded a cumulative effect adjustment of $0.4 million to Retained Earnings. The adoption of this standard by the Company did not have a material impact on the unaudited condensed consolidated statement of operations or cash flows.

Recently Issued Accounting Standards - Not Yet Adopted

In December 2019, the FASB issued ASU No. 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This ASU removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation, and calculating income taxes in ~~the standard.~~interim periods. This ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group. The ~~new standard~~updated guidance is effective for ~~the Company for annual~~fiscal years, and interim periods inwithin those fiscal years, beginning after December 15, ~~2017.~~ ~~The company will adopt the new guidance in the first quarter of 2018.~~2020 with early adoption permitted. The Company is currently assessing the impact ~~the~~that adopting this new standard will have on ~~the~~its 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.footnote disclosures.

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~September 30, 2017~~

~~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 doesRecent accounting pronouncements pending adoption, other than those stated above, are not ~~believe its implementation will~~expected to have a material ~~effect~~impact on the Company.

Note 2: Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, we use a three-tier valuation hierarchy based upon observable and non-observable inputs:

Level 1 - Unadjusted quoted prices that are available in active markets for identical assets or liabilities at the measurement date.

Level 2 - Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in non-active markets;

Inputs other than quoted prices that are observable for the asset or liability; and

Inputs that are derived principally from or corroborated by other observable market data.

Level 3- Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using model-based techniques, including option pricing models, discounted cash flow models, probability weighted models, and Monte Carlo simulations..

The Company's ~~consolidated~~ financial ~~statements.~~instruments include cash and cash equivalents, accounts receivable, derivative instruments, accounts payable, earn-out liabilities, a revolving line of credit, a term loan, and equity investments.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value hierarchy requires the use of observable market data when available. In ~~January 2017,~~instances where 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~~inputs used to measure ~~goodwill impairment. Instead, impairment will be measured~~fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

Level 1: Equity securities

During the three and six months ended June 30, 2020, the Company sold 705,926 shares of its equity securities investments, resulting in a realized gain of $31,421.

For the three and six months ended June 30, 2020, the Company also recorded net unrealized gains of $1.1 million and $0.2 million, respectively, on the investments in equity securities held, which is included in "Other expense (income)" on the accompanying unaudited condensed consolidated statements of operations.

The fair value of equity securities held by the Company as of June 30, 2020 and December 31, 2019 was $1.8 million and $4.3 million, respectively, and is included in “Prepaid expenses and other current assets” on the accompanying condensed consolidated balance sheets.

Level 2: Derivative Instruments

The Company has 1 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 ~~difference between~~contract was a liability of $0.1 million at June 30, 2020 and an asset of $6,088 at December 31, 2019, respectively. The interest rate swap was priced using discounted cash flow techniques. Changes in its fair value were recorded to other expense (income) with corresponding offsetting entries to "Prepaid expenses and other current assets" or "Accrued Expenses", as appropriate. Significant inputs to the ~~carrying amount~~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.

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Level 3: Contingent consideration (earn-out) liabilities

The fair value of contingent consideration ("earn-out") liabilities resulting from the 2017 MUSA-Stainless acquisition, 2018 MUSA-Galvanized acquisition, and 2019 American Stainless acquisition are classified as Level 3. Each quarter-end, the Company re-evaluates its assumptions for all earn-out liabilities and adjusts to reflect the updated fair values. Changes in the estimated fair value of the earn-out liabilities are reflected in operating income in the periods in which they are identified. Changes in the fair value of the ~~reporting unit. ASU 2017-04 is effective~~earn-out liabilities may materially impact and cause volatility in the Company's operating results. The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration (earn-out) liabilities are the discount rate, timing of the estimated payouts, and future revenue projections. Significant increases (decreases) in any of those inputs would not have resulted in a material difference in the fair value measurement of the earn-out liabilities for ~~fiscal years beginning after December 15, 2019.~~ the three and six months ended June 30, 2020.

The following table presents a summary of changes in fair value of the Company's Level 3 earn-out liabilities measured on a recurring basis for the six months ended June 30, 2020:



(in thousands)	MUSA-Stainless			MUSA-Galvanized			American Stainless			Total
Balance at December 31, 2019	$	2,403		$	1,782		$	4,969		$	9,154
Earn-out payments during the period	(919		)	(352		)	(1,008		)	(2,279		)
Changes in fair value during the period	(271		)	74			(626		)	(823		)
Balance at June 30, 2020	$	1,213		$	1,504		$	3,335		$	6,052

For the three and six months ended June 30, 2020, the Company had no unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value instruments.

Quantitative Information about Significant Unobservable Inputs Used in Level 3 Fair Value Measurements

The following table summarizes the significant unobservable inputs in the fair value measurement of our contingent consideration (earn-out) liabilities as of June 30, 2020:



Instrument	Fair Value June 30, 2020	Principal Valuation Technique	Significant Unobservable Inputs	Range	Weighted Average
Contingent consideration (earn-out) liabilities	$6,052	Probability Weighted Expected Return	Discount rate	-	5%
			Timing of estimated payouts	2020 - 2022	-
			Future revenue projection	$5.8M - 14.3M	$10.7M

The weighted average discount rate was calculated by applying an equal weighting to each contingent consideration's (earn-out liabilities) discount rate. The weighted average future revenue projection was calculated by applying an equal weighting of probabilities to each forecasted scenario within the valuation models to determine the probability weighted sales applicable to the contingent consideration (earn-out liabilities).

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

During the three and six months ended June 30, 2020, the Company's only significant assets or liabilities measured at fair value on a non-recurring basis subsequent to their initial recognition were certain long-lived assets.

The Company ~~elected~~reviews the carrying amounts of long-lived assets whenever certain events or changes in circumstances indicate that the carrying amounts may not be recoverable. With input from executive management, the Company's accounting and finance personnel that organizationally report to ~~early adopt~~ the ~~provisions~~chief financial officer, assess performance quarterly against historical patterns, projections of ~~this ASU in~~future profitability, and whether it is more likely than not that the ~~quarterly period ending March 31, 2017.~~assets will be disposed of significantly prior to the end of their estimated useful life for evidence of possible impairment. An impairment loss is recognized when the carrying amount of the asset (disposal) group is not recoverable and exceeds fair value. The ~~implementation~~Company estimates the fair values of ~~this ASU did not have a material effect~~assets subject to long-lived asset impairment based on the Company's ~~consolidated financial statements.~~own judgments about the assumptions market participants would use in pricing the assets and observable market data, when available. The Company classifies these fair value measurements as Level 3.

~~In May 2017,~~

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

During 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~~quarter ended June 30, 2020, due to the ~~terms or conditions~~continued curtailment of ~~share-based payment awards~~operations related to ~~which an entity would be~~the COVID-19 pandemic, inventory of Palmer was written down to its net realizable value of $2.1 million and certain long-lived assets of Palmer, including tangible and intangible assets, were written down to their estimated fair value of $1.7 million, resulting in asset impairment charges of $6.1 million.

Fair Value of Financial Instruments

For short-term instruments, other than those required to ~~apply modification accounting under ASC 718. ASU 2017-09~~be reported at fair value on a recurring and non-recurring basis and for which additional disclosures are included above, management concluded the historical carrying value is ~~effective~~a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization. Therefore, as of June 30, 2020 and December 31, 2019, the carrying amounts for ~~fiscal years beginning after December 15, 2017. The Company does not believe its implementation will have a material effect on~~cash and cash equivalents, accounts receivable, accounts payable, the Company's ~~consolidated financial statements.~~revolving line of credit, which is based on a variable interest rate, and term loan approximate their fair value.

~~NOTE 3--INVENTORIES~~Note 3: 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:



(in thousands)	June 30, 2020		December 31, 2019
Raw materials	$	40,183	$	42,896
Work-in-process	23,481		17,616
Finished goods	32,945		38,422
	96,609		98,934
Less inventory reserves	1,278		748
Inventories, net	$	95,331	$	98,186

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

~~NOTE 4--INTANGIBLE ASSETS AND DEFERRED CHARGES~~Note 4: Property, Plant and Equipment

~~Deferred charges~~

Property, plant and equipment consist of the following:



(in thousands)	June 30, 2020		December 31, 2019
Land	$	63	$	63
Leasehold improvements	2,338		1,921
Buildings	84		214
Machinery, fixtures and equipment	99,220		100,300
Construction-in-progress	3,083		2,999
	104,788		105,497
Less accumulated depreciation and amortization	67,429		64,807
Property, plant and equipment, net	$	37,359	$	40,690

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 5: Goodwill and Intangible Assets

During the second quarter of 2020, the Company determined potential indicators of impairment within the Welded Pipe & Tube reporting unit included in the Metals Segment, with an associated goodwill balance of $16.2 million, existed. Continued deterioration in macroeconomic conditions, continued risks within the stainless steel industrial business, reporting unit operating losses and a decline in the reporting unit's net sales compared to forecast, collectively, indicated that the reporting unit had experienced a triggering event. As a result, the Company quantitatively evaluated the Welded Pipe & Tube reporting unit for impairment. Fair value of the reporting unit was determined using an income approach. Determining the fair value of the reporting unit and allocation of that fair value to individual assets and liabilities within the reporting unit to determine the implied fair value of the goodwill is judgmental in nature and requires the use of significant management estimates and assumptions. These estimates and assumptions include the discount rate, terminal growth rate, tax rate, projected capital expenditures, and overall operational forecasts, including sales growth, gross margins, and operating margins. Any changes in the judgments, estimates, or assumptions could produce significantly different results. As a result of the goodwill impairment evaluation, it was concluded that the estimated fair value of the Welded Pipe and Tube reporting unit was greater than its carrying value by 1.7% and, as such, 0 goodwill impairment was necessary in the quarter ended June 30, 2020.

During the second quarter of 2020, due to the continued curtailment of operations related to the COVID-19 pandemic and managements decision to pursue a sale and exit of the Palmer business, the intangible customer list related to Palmer was written down to its estimated fair market value of 0, resulting in an impairment charge of $1.3 million, which is included in "Asset impairments" on the accompanying unaudited condensed consolidated statements of operations.

The gross carrying amounts of goodwill are as follows:



(in thousands)	June 30, 2020		December 31, 2019
Metals Segment	$	16,203	$	16,203
Specialty Chemicals Segment	1,355		1,355
Goodwill	$	17,558	$	17,558

The balance of intangible assets ~~totaled $21,700,496 at September 30, 2017 and $20,708,496 at December 31, 2016. Accumulated~~subject to amortization ~~of deferred charges and intangible assets totaled $10,121,040 at September 30, 2017 and $8,253,040 at December 31, 2016.~~ are as follows:



(in thousands)	June 30, 2020			December 31, 2019
Intangible assets, gross	$	30,866		$	32,126
Accumulated amortization of intangible assets	(18,031		)	(16,412		)
Intangible assets, net	$	12,835		$	15,714

Estimated amortization expense related to intangible assets 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.~~are as follows (in thousands):



Remainder of 2020	$	1,409
2021	2,721
2022	2,501
2023	1,050
2024	952
2025	855
Thereafter	3,347

~~NOTE 5--STOCK OPTIONS AND RESTRICTED STOCK~~

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 6: Long-term Debt

Long-term debt consists of the following:



(in thousands)	June 30, 2020		December 31, 2019
$100 million Revolving line of credit, due December 20, 2021	$	64,302	$	59,221
$20 million Term loan, due January 1, 2024	14,333		16,333
	$	78,635	$	75,554

On December 20, 2018, the Company amended its Credit Agreement with its bank to refinance and increase its Line of Credit (the "Line") from $80,000,000 to $100,000,000 and to create a new 5-year term loan in the principal amount of $20,000,000 (the “Term Loan”). The Term Loan was used to finance the purchase of substantially all of the assets of American Stainless (see Note 13). The Term Loan’s maturity date is January 1, 2024 and shall be repaid in 60 consecutive monthly installments. Interest on the Term Loan is calculated using the One Month LIBOR Rate (as defined in the Credit Agreement), plus 1.90 percent. The Line will be used for working capital needs and as a source for funding future acquisitions. The maturity date of the Line has been extended to December 20, 2021. Interest on the Line remains unchanged and is calculated using the One Month LIBOR Rate, plus 1.65%. Borrowings under the Line are limited to an amount equal to a Borrowing Base calculation that includes eligible accounts receivable and inventory. As of June 30, 2020, the Company had $7.2 million of remaining available capacity under the Line.

Pursuant to the Credit Agreement, the Company is subject to certain covenants including maintaining a minimum fixed charge coverage ratio of not less than 1.25, maintaining a minimum tangible net worth of not less than $60.0 million, and a limitation on the Company’s maximum amount of capital expenditures per year, which is in line with currently projected needs.

The Company notified its bank of a technical default of the fixed charge coverage ratio in its Credit Agreement at the quarter ended June 30, 2020. To address the technical default, the Company entered into two amendments to its Credit Agreement with its bank subsequent to the end of the quarter. On July 31, 2020, the Company entered into the Third Amendment to the Third Amended and Restated Loan Agreement (the "Third Amendment") with its bank. The Third Amendment amended the definition of the fixed charge coverage ratio to include the proxy contest costs in the numerator of the ratio calculation. The amendment is effective for the quarter ended June 30, 2020 and the directly following three quarters after June 30, 2020. Additionally, on August 13, 2020, the Company entered into the Fourth Amendment to the Third Amended and Restated Loan Agreement (the "Fourth Amendment") with its bank. The Fourth Amendment amended the definition of the fixed charge coverage ratio to include the lesser of the actual non-cash asset impairment charge related to Palmer, or $6.0 million in the numerator of the ratio calculation. The amendment is effective for the quarter ended June 30, 2020 and the directly following three quarters after June 30, 2020.

At June 30, 2020, the Company had a minimum fixed charge coverage ratio of 1.39 and a minimum tangible net worth of $67.4 million.

Note 7: Stock-Based Compensation

Stock-based compensation expense for the three and six months ended June 30, 2020 was $0.4 million and $0.8 million, respectively. Stock-based compensation expense for the three and six months ended June 30, 2019 was $0.2 million and $0.9 million, respectively.

Stock Options

During the ~~first nine~~three and six months ~~of 2017, no~~ended June 30, 2020 and June 30, 2019, 0 stock options were exercised by officers ~~and~~or 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.

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~September 30, 2017~~

2011 Long-Term Incentive Stock Option Plan

On February ~~8, 2017,~~5, 2020 the Compensation & Long-Term Incentive Committee ~~(the "Committee")~~ of the Company's Board of Directors ("Compensation Committee") approved stock option grants under the ~~Company's 2015~~2011 Long-Term Incentive Stock ~~Awards~~Option Plan ("the 2011 Plan"). Options for a total of 123,500 shares, with an exercise price of $12.995 per share, were granted under the 2011 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~~Company. The stock ~~awards amendment detailed in the following paragraph, these stock awards~~options will vest in 33 percent increments annually on a cumulative basis, beginning one year after the date of grant. In order for the options to vest, the employee must be in the continuous employment of the Company since the date of the grant. Except for death, disability, or qualifying retirement, any portion of the grant ~~from shares~~that has not vested will be forfeited upon termination of employment. The Company may terminate any portion of the grant that has not vested upon an employee's failure to comply with all conditions of the award or the 2011 Plan. Shares representing grants that have not yet vested will be held in ~~treasury~~escrow by the Company. An employee will not be entitled to any voting rights with respect to any shares not yet vested, and the shares are not transferable. The per share weighted-average fair value of this stock option grant was $4.53. The Black-Scholes model for this grant was based on a risk-free interest rate of 1.66 percent, an expected life of ten years, an expected volatility of 35.1 percent and a dividend yield of 1.79 percent.

On June 30, 2020 the Compensation Committee approved stock option grants under the 2011 Plan. Options for a total of 20,000 shares, with an exercise price of $7.329 per share, were granted under the 2011 Plan to certain management employees of the Company. The stock options will vest in 33 percent increments annually on a cumulative basis, beginning one year after the date of grant. In order for the options to vest, the employee must be in the continuous employment of the Company since the date of the grant. Except for death, disability, or qualifying retirement, any portion of the grant that has not vested will be forfeited upon termination of employment. The Company may terminate any portion of the grant that has not vested upon an employee's failure to comply with all conditions of the award or the 2011 Plan. Shares representing grants that have not yet vested will be held in escrow by the Company. An employee will not be entitled to any voting rights with respect to any shares not yet vested, and the shares are not transferable. The per share weighted-average fair value of this stock option grant was $2.59. The Black-Scholes model for this grant was based on a risk-free interest rate of 0.64 percent, an expected life of ten years, an expected volatility of 38.7 percent and a dividend yield of 1.89 percent.

Restricted Stock Awards

2015 Stock Awards Plan

On February 5, 2020, the Compensation Committee approved stock grants under the Company's 2015 Stock Awards Plan (the "Plan") to certain management employees of the Company where 45,418 shares with a market price of $12.995 per share were granted under the Plan. The stock awards vest in either 20 percent or 33 percent increments annually on a cumulative basis, beginning one year after the date of grant. 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~~Except for death, disability, or qualifying retirement, 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.

Performance-Based Restricted Stock Awards

~~Effective May~~In 2017, the Compensation Committee granted performance restricted stock awards (“2017 Performance Based Incentive Award”) to officers and certain key management-level employees. The 2017 Performance Based Incentive Award vested three years from the grant date based on continuous service, with the number of shares earned (0 percent to 150 percent of the target award) depending on the extent to which the Company achieved certain financial performance targets measured over the period from January 1, 2017 to December 31, 2019. On February 5, 2020, 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, theCompensation Committee approved the ~~amendment~~vesting of the ~~vesting schedules~~2017 Performance Based Incentive Award for a total of 28,481 restricted shares at a grant date market price of $12.30.

On February 5, 2020, the ~~May 5, 2016~~Compensation Committee approved performance-based restricted stock awards to certain management employees of the Company where 36,647 shares with a market price of $12.995 per share were granted under the Plan. The Company's performance-based restricted stock awards are classified as equity and ~~February 8, 2017~~contain performance and service conditions that must be satisfied for an employee to earn the right to benefit from the award. The performance condition is based on the achievement of the Company's Adjusted EBITDA targets. The fair value of the performance-based restricted stock ~~grants reducing~~awards are determined based on the ~~vesting~~closing market price of our stock on the date of grant. In general, 0 percent to 150 percent of the Company's performance-based restricted stock awards vest at the end of a three year service period from ~~five years~~the date of grant based upon achievement of the performance condition specified. Except for death, disability, or qualifying retirement, 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 ~~three years.~~comply with all conditions of the award. An employee is not entitled to any voting rights with respect to any shares not yet vested, and the shares are not transferable.

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 8: Loss Per Share

The following table sets forth the computation of basic and diluted loss per share:



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	2020			2019			2020			2019
Numerator:
Net loss	$	(6,957	)	$	(262	)	$	(8,135	)	$	(1,189	)
Denominator:
Denominator for basic earnings per share - weighted average shares	9,058			8,974			9,066			8,951
Effect of dilutive securities:
Employee stock options and stock grants	0			0			0			0
Denominator for diluted earnings per share - weighted average shares	9,058			8,974			9,066			8,951

Net loss per share:
Basic	$	(0.77	)	$	(0.03	)	$	(0.90	)	$	(0.13	)
Diluted	$	(0.77	)	$	(0.03	)	$	(0.90	)	$	(0.13	)

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~~The Company had ~~weighted average~~0.3 million and 0.2 million shares of common stock inthat were anti-dilutive for the ~~form~~three and six months ended June 30, 2020, respectively. The Company had 0 shares of common stock ~~grants~~that were anti-dilutive for the three 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.~~six months ended June 30, 2019, respectively.

~~NOTE 6--INCOME TAXES~~Note 9: 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 or state examinations for years before ~~2014 or state~~2014. During the first six months of 2020 and 2019, the Company did not identify nor reserve for any unrecognized tax benefits.

Our income tax ~~examinations~~provision and overall effective tax rates for ~~years before 2012.~~the periods presented are as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2020			2019			2020			2019
Income tax benefit	$	(2,116	)	$	(142	)	$	(3,496	)	$	(548	)
Effective income tax rate	23.3		%	35.0		%	30.1		%	31.5		%

The three and six months ended June 30, 2020 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~~were higher than the statutory rate of ~~34 percent primarily~~21.0% due to discrete tax benefits over the costs associated with our public proxy contest, additional benefits on asset impairment of our Palmer business, and benefits from our stock compensation plan. Additionally, we recognized estimated tax benefits associated with the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) which was signed into law on March 27, 2020. The CARES Act includes various income and payroll tax provisions, notably enabling the Company to carry back net operating losses and recover taxes paid in prior years.

The three and six months ended June 30, 2019 effective tax rates were higher than the statutory tax rate of 21% due to state ~~tax expense~~taxes, net of federal benefit, 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 proceedsdiscrete benefits on ~~certain life insurance policies reducing the amount of tax benefit of the pre-tax loss for that period.~~our stock compensation plans.

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~September 30, 2017~~

~~NOTE 7--SEGMENT INFORMATION~~Note 10: Leases

Balance Sheet Presentation

Operating and finance lease amounts included in the unaudited condensed consolidated balance sheet are as follows (in thousands):



Classification	Financial Statement Line Item	June 30, 2020
Assets	Right-of-use assets, operating leases	$	35,717
Assets	Property, plant and equipment	74
Current liabilities	Current portion of lease liabilities, operating leases	991
Current liabilities	Current portion of lease liabilities, finance leases	31
Non-current liabilities	Non-current portion of lease liabilities, operating leases	36,510
Non-current liabilities	Non-current portion of lease liabilities, finance leases	44

Total Lease Cost

Individual components of the total lease cost incurred by the Company are as follows:



(in thousands)	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Operating lease cost	$	1,035	$	2,069
Finance lease cost:
Amortization of right-of-use assets	26		75
Interest on finance lease liabilities	7		24
Total lease cost	$	1,068	$	2,168

Reduction in carrying amounts of right-of-use assets held under finance leases is included in depreciation expense. Minimum rental payments under operating leases are recognized on a straight-line method over the term of the lease including any periods of free rent and are included in selling, general, and administrative expense on the unaudited condensed consolidated statement of operations.

Maturity of Leases

The amounts of undiscounted future minimum lease payments under leases as of June 30, 2020 are as follows:



(in thousands)	Operating		Finance
Remainder of 2020	$	1,829	$	17
2021	3,710		22
2022	3,767		15
2023	3,803		15
2024	3,656		8
Thereafter	48,577		0
Total undiscounted minimum future lease payments	65,342		77
Imputed Interest	27,841		2
Present value of lease liabilities	$	37,501	$	75

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Lease Term and Discount Rate



Weighted-average remaining lease term	June 30, 2020
Operating Leases	15.96 years
Finance Leases	2.97 years
Weighted-average discount rate
Operating Leases	7.31	%
Finance Leases	2.65	%

During the three and six months ended June 30, 2020, 0 right-of-use assets were recognized in exchange for new operating lease liabilities.

Note 11: Commitments and 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.

Management is not currently aware of any asserted or unasserted matters which could have a material effect on the financial condition or results of operations of the Company.

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 12: Industry Segments

The following table summarizes certain information regarding segments of the Company's operations:



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2020			2019			2020			2019
Net sales
Metals Segment	$	52,018		$	64,503		$	112,681		$	135,607
Specialty Chemicals Segment	14,118			14,275			28,152			27,975
	$	66,136		$	78,778		$	140,833		$	163,582
Operating (loss) income
Metals Segment	$	(9,155	)	$	1,193		$	(8,221	)	$	2,675
Specialty Chemicals Segment	1,980			926			2,447			1,540

Unallocated corporate expenses	1,586			1,944			3,607			4,251
Acquisition related costs and other	6			20			135			348
Proxy contest costs	2,734			0			2,909			0
Earn-out adjustments	(827		)	(418		)	(823		)	(401		)
Operating (loss) income	(10,674		)	573			(11,602		)	17
Interest expense	532			1,010			1,251			2,034
Change in fair value of interest rate swap	(4		)	77			81			124
Other (income) expense, net	(2,129		)	(110		)	(1,303		)	(404		)
Loss before income taxes	$	(9,073	)	$	(404	)	$	(11,631	)	$	(1,737	)

	As of
(in thousands)	June 30, 2020			December 31, 2019
Identifiable assets
Metals Segment	$	177,442		$	186,758
Specialty Chemicals Segment	27,039			25,428
Corporate	46,943			45,011
	$	251,424		$	257,197

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

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~September 30, 2017~~

~~NOTE 8--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

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~September 30, 2017~~

~~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.

~~NOTE 9--ACQUISITIONS~~Note 13: Acquisitions

Acquisition of the Assets and Operations of American Stainless ~~Pipe and Tube Assets of Marcegaglia USA,~~Tubing, Inc.

On ~~December 9, 2016,~~January 1, 2019, the Company's wholly-owned subsidiary, ~~Bristol Metals,~~ASTI Acquisition, LLC (now American Stainless Tubing, LLC) ("~~BRISMET"~~ASTI"), ~~entered into a definitive agreement to acquire~~completed the ~~stainless steel pipe and tube~~acquisition of substantially all of the assets of ~~MUSA located in Munhall, PA (the "Bristol Metals-Munhall"~~American Stainless Tubing, Inc. ("American Stainless") 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~~all-cash acquisition was $21.9 million, subject to a post-closing working capital adjustment. The Company funded the acquisition with a new five-year $20 million term note 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 closea draw against its asset-based line of ~~the transaction and was reflected as a~~ credit ~~against the purchase price.~~(see Note 6).

The transaction ~~was~~is 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~~During the ~~acquisition closed on February 28, 2017, the allocation~~third quarter 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,2019, 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~~finalized 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.

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~September 30, 2017~~

~~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 onallocation for 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. American Stainless acquisition.

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~~American Stainless' production capabilities ~~acquired as part of Bristol Metals-Munhall~~

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

with ~~BRISMET's~~the Metals Segment 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.

American Stainless will receive quarterly earn-out payments for a period of three years following closing. Pursuant to the asset purchase agreement between ASTI and American Stainless, earn-out payments will equate to six and one-half percent (6.5 percent) of ASTI’s revenue over the three-year earn-out period. In determining the appropriate discount rate to apply to the contingent payments, the risk associated with the functional form of the earn-out, and the credit risk associated with the payment of the earn-out were all considered. The fair value of the contingent consideration was estimated by applying the probability weighted expected return method using management's estimates of pounds to be shipped and future price per unit.

During the second quarter of 2019, management identified circumstances that existed on the date of acquisition and as a result, revised the purchase price allocation of certain acquired assets and liabilities as allowable during the measurement period.

The following table shows the initial estimate of value ~~as reported at March 31, 2017~~ and revisions made during ~~the second quarter of 2017:~~2019:



(in thousands)	Initial estimate			Revisions			Final
Inventories	$	5,564		$	0		$	5,564
Accounts receivable	3,534			0			3,534
Other current assets - production and maintenance supplies	605			0			605
Property, plant and equipment	2,793			0			2,793
Customer list intangible	10,000			(496		)	9,504
Goodwill	7,044			714			7,758
Contingent consideration (earn-out liability)	(6,148		)	(218		)	(6,366		)
Accounts payable	(1,400		)	0			(1,400		)
Other liabilities	(97		)	0			(97		)
	$	21,895		$	0		$	21,895

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~~ASTI's results of operations ~~since acquisition~~ are reflected in the Company's ~~consolidated statements~~Condensed Consolidated Statements of ~~operations.~~Operations as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2020		2019		2020		2019
Net sales	$	7,255	$	8,557	$	14,900	$	18,070
Income before taxes	$	1,377	$	992	$	1,718	$	1,099

Note 14: Shareholders' Equity

Stock Repurchase Program

On February 21, 2019, the Board of Directors authorized a stock repurchase program for up to 850,000 shares of its outstanding common stock over 24 months. The ~~amount~~shares will be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. Under the program, the purchases will be funded from available working capital, and the repurchased shares will be returned to the status of ~~Bristol Metals-Munhall's revenues~~authorized, but unissued shares of common stock or held in treasury. There is no guarantee as to the exact number of shares that will be repurchased by the Company, and ~~pre-tax loss included in~~ the ~~consolidated statements of operations for~~Company may discontinue purchases at any time that management determines additional purchases are not warranted.

During the three months ended ~~September~~June 30, ~~2017 was $8,675,104 and $621,881, respectively. For~~2020, 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 ofCompany purchased 0 shares under the ~~combined results of~~stock repurchase program. During 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 threesix months ended ~~September~~June 30, ~~2017 are not presented as those results already include Bristol Metal-Munhall's results.~~2020, the Company purchased 59,617 shares under the stock repurchase program at an average price of approximately $10.65 per share for an aggregate amount of $0.6 million.

During the three and six months ended June 30, 2019, the Company purchased 0 shares under the stock repurchase program.

As of June 30, 2020, the Company has 790,383 shares of its share repurchase authorization remaining.

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~September 30, 2017~~

Shareholder Rights Plan

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 )
On March 31, 2020, the Board of Directors unanimously authorized the adoption of a limited duration shareholder rights plan expiring on March 31, 2021 and an ownership trigger threshold of 15%. In connection with the shareholder rights plan, the Board of Directors authorized and declared a dividend of 1 right (each, a "Right") for each outstanding share of the Company's common stock, par value $1.00 per share ("Common Stock") to stockholders of record at the close of business on April 10, 2020 (the "Record Date"). The complete terms of the Rights are set forth in a Rights Agreement dated March 31, 2020 (the "Rights Agreement"), by and between the Company and American Stock Transfer & Trust Company, LLC, as rights agent. The Rights will become exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company's outstanding Common Stock or announces a tender or exchange offer that would result in beneficial ownership of 15% or more of the Company's Common Stock. Each Right would entitle the holder to purchase from the Company one half of one share of Common Stock at a purchase price of $22.50 per right, subject to adjustments (equivalent to $45.00 for each whole share of Common Stock).

On June 27, 2020, the Company entered into Amendment 1 to the Rights Agreement (the "Amendment"). The Amendment terminated the Rights Agreement by accelerating the expiration of the Rights to June 28, 2020. At the time of the termination of the Rights Agreement, all of the Rights, which were distributed to holders of the Company's common stock, par value, $1.00, pursuant to the Rights Agreement, expired.

Note 15: Revenues

Revenues are recognized when control of the promised goods is transferred to our customers or when a service is rendered, in an amount that reflects the consideration we are to receive in exchange for those goods or services.

The ~~pro-forma calculation excludes non-recurring acquisition~~following table presents the Company's revenues, disaggregated by product group. Substantially all of the Company's revenues are derived from contracts with customers where performance obligations are satisfied at a point-in-time.



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2020		2019		2020		2019
Fiberglass and steel liquid storage tanks and separation equipment	$	1,038	$	10,247	$	4,456	$	20,076
Heavy wall seamless carbon steel pipe and tube	5,658		6,703		12,972		15,289
Stainless steel pipe and tube	39,306		41,310		83,034		87,305
Galvanized pipe and tube	6,016		6,243		12,219		12,936
Specialty chemicals	14,118		14,275		28,152		27,976
Net sales	$	66,136	$	78,778	$	140,833	$	163,582

Arrangements with Multiple Performance Obligations

Our contracts with customers may include multiple performance obligations. For such arrangements, revenue for each performance obligation is based on its stand-alone selling price and revenue is recognized as each performance obligation is satisfied. The Company generally determines stand-alone selling prices based on the prices charged to customers using the adjusted market assessment approach or expected cost plus margin.

Note 16: Proxy Contest and Related Costs

During the six months ended June 30, 2020, the Company engaged in a proxy contest with Privet Fund Management, LLC ("Privet") and UPG Enterprises, LLC ("UPG"), which parties acted as a group during the proxy contest. At the Company’s Annual Meeting of Shareholders held on June 30, 2020 (the “Annual Meeting”), the Company’s independent shareholders voted the Company’s proxy card, resulting in five (of eight) incumbent Board members being re-elected to the Board of Directors. Due to cumulative voting, a unique voting method permitted by the Company’s Certificate of Incorporation, Privet and UPG were able to cumulate their group-owned shares to elect three (of eight) new directors at the Annual Meeting.

During the three and six months ended June 30, 2020, total costs ~~of $698,587 which were~~ incurred by the Company ~~during 2017. The stainless steel operations of MUSA's historical financial results~~relating to the proxy contest 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~~$2.7 million and ~~an estimated amount of interest expense associated with the additional line of credit borrowings.~~$2.9 million, respectively.

~~NOTE 10--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.

~~NOTE 11--CONTINGENCIES~~

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

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~September 30, 2017~~

~~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~~Note 17: Subsequent Events

The Company notified its bank 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 favortechnical default of the ~~plaintiff by ruling that an enforceable contract existed between~~fixed charge coverage ratio in its Credit Agreement at the ~~parties and~~quarter ended June 30, 2020. To address the technical default, 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.

~~NOTE 12-- 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 equaltwo amendments 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.

~~NOTE 13--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 subsequent to ~~increase~~ the ~~limit~~end of the ~~asset-based revolving line~~quarter. On July 31, 2020, the Company entered into the Third Amendment to the Third Amended and Restated Loan Agreement (the "Third Amendment") with its bank. The Third Amendment amended the definition of ~~credit by $20,000,000~~the fixed charge coverage ratio to ~~a maximum~~include the proxy contest costs in the numerator of ~~$65,000,000~~the ratio calculation. The amendment is effective for the quarter ended June 30, 2020 and ~~extended~~ the ~~maturity date to October~~directly following three quarters after June 30, 2020. ~~None~~Additionally, on August 13, 2020, the Company entered into the Fourth Amendment to the Third Amended and Restated Loan Agreement (the "Fourth Amendment") with its bank. The Fourth Amendment amended the definition of the ~~other provisions~~fixed charge coverage ratio to include the lesser of the ~~Credit Agreement were changed as a result~~actual non-cash asset impairment charge related to Palmer, or $6.0 million in the numerator of ~~this amendment.~~the ratio calculation. The amendment is effective for the quarter ended June 30, 2020 and the directly following three quarters after June 30, 2020.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~The following is management's~~This discussion ~~of certain~~and analysis summarizes the significant factors ~~that affected the Company~~affecting our consolidated operating results, liquidity, and capital resources during the three months ended June 30, 2020, and ~~nine-month periods~~June 30, 2019. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that are included in our Annual Report on Form 10-K for the year ended ~~September~~December 31, 2019 (the Annual Report), as well as the condensed consolidated financial statements (unaudited) and notes to the condensed consolidated financial statements (unaudited) contained in this report. Unless otherwise specified, all comparisons made are to the corresponding period of 2019. This discussion and analysis is presented in five sections:

Business Overview

Results of Operations and Non-GAAP Financial Measures

Liquidity and Capital Resources

Off-Balance Sheet Arrangements and Contractual Obligations

Significant Accounting Policies and Estimates

Business Overview

Synalloy Corporation, a Delaware corporation, was incorporated in 1958 as the successor to a chemical manufacturing business founded in 1945. Its charter is perpetual. The name was changed on July 31, 1967 from Blackman Uhler Industries, Inc. The Company's executive office is located at 4510 Cox Road, Suite 201, Richmond, Virginia 23060. Unless indicated otherwise, the terms "Synalloy", "Company," "we" "us," and "our" refer to Synalloy Corporation and its consolidated subsidiaries.

The Company's business is divided into two reportable operating segments, the Metals Segment and the Specialty Chemicals Segment. The Metals Segment operates as three reporting units, all International Organization for Standardization ("ISO") certified manufacturers, including Welded Pipe & Tube Operations, a unit that includes Bristol Metals, LLC ("BRISMET") and American Stainless Tubing, LLC ("ASTI"), which began operations effective January 1, 2019 pursuant to the American Stainless acquisition (see Note 13 to the Condensed Consolidated Financial Statements), Palmer of Texas Tanks, Inc. ("Palmer"), and Specialty Pipe & Tube, Inc. ("Specialty"). Welded Pipe & Tube Operations manufactures stainless steel, galvanized, ornamental stainless steel tubing, and other alloy pipe and tube. Palmer manufactures liquid storage solutions and separation equipment. Specialty is a master distributor of seamless carbon pipe and tube. The Metals Segment's markets include the oil and gas, chemical, petrochemical, pulp and paper, mining, power generation (including nuclear), water and waste water treatment, liquid natural gas ("LNG"), brewery, food processing, petroleum, pharmaceutical, automotive & commercial transportation, appliance, architectural, and other heavy industries. The Specialty Chemicals Segment operates as one reporting unit which includes Manufacturers Chemicals, LLC ("MC"), a wholly-owned subsidiary of Manufacturers Soap and Chemical Company ("MS&C"), and CRI Tolling, LLC ("CRI Tolling"). The Specialty Chemicals Segment produces specialty chemicals for the chemical, paper, metals, mining, agricultural, fiber, paint, textile, automotive, petroleum, cosmetics, mattress, furniture, janitorial and other industries. MC manufactures lubricants, surfactants, defoamers, reaction intermediaries and sulfated fats and oils. CRI Tolling provides chemical tolling manufacturing resources to global and regional chemical companies and contracts with other chemical companies to manufacture certain, pre-defined products.

COVID-19 Update

We are closely monitoring the impact of the outbreak of COVID-19 on all aspects of our business, including the impacts to our customers, employees and supply chain. Through the second quarter of 2020, COVID-19 did have an adverse effect on our reported results and operations, specifically with the continued curtailment of operations at our Palmer facility and $6.1 million of asset impairments related to that business. There remains significant uncertainty concerning the magnitude of the impact and the duration of the COVID-19 pandemic and as a result, we are unable to predict the ultimate impact it may have on our business, future operations, financial position or cash flows. The extent that our operations will continue to be impacted by the COVID-19 pandemic will depend on future developments, which are highly uncertain and cannot be accurately predicted, including the severity of the outbreak and continued actions by government authorities to contain and treat the outbreak. See Part II - Item 1A, "Risk Factors," included herein for updates to our risk factors regarding risks associated with the COVID-19 pandemic.

Synalloy Corporation

Condensed Consolidated Statement of Shareholders' Equity (Unaudited)

Goodwill Impairment Review

During the second quarter of 2020, as described in Note 5 - Goodwill and Intangible Assets, we tested our goodwill for impairment. The Company determined potential indicators of impairment within the Welded Pipe & Tube reporting unit included in the Metals Segment, with an associated goodwill balance of $16.2 million, existed. Continued deterioration in macroeconomic conditions, continued risks within the stainless steel industrial business, reporting unit operating losses and a decline in the reporting unit's net sales compared to forecast, collectively, indicated that the reporting unit had experienced a triggering event. As a result, the Company quantitatively evaluated the Welded Pipe & Tube reporting unit for impairment. Fair value of the reporting unit was determined using an income approach. Determining the fair value of the reporting unit and allocation of that fair value to individual assets and liabilities within the reporting unit to determine the implied fair value of the goodwill is judgmental in nature and requires the use of significant management estimates and assumptions. These estimates and assumptions include the discount rate, terminal growth rate, tax rate, projected capital expenditures, and overall operational forecasts, including sales growth, gross margins, and operating margins. Any changes in the judgments, estimates, or assumptions could produce significantly different results. We corroborated the reasonableness of the estimated reporting unit fair value by reconciling to our enterprise value and market capitalization.

As a result of the goodwill impairment evaluation, it was concluded that the estimated fair value of the Welded Pipe and Tube reporting unit was greater than its carrying value by 1.7% and, as such, no goodwill impairment was necessary in the quarter ended June 30, ~~2017.~~2020. We do consider our Welded Pipe & Tube reporting unit's goodwill to be at risk and changes in our future operating results, cash flows, share price, market capitalization, or discount rate used when conducting future goodwill impairment tests could affect the estimated fair values of our reporting unit and may result in a goodwill impairment charge in the future. For example, we estimate that a 39 basis point increase in the discount rate would result in a goodwill impairment charge of approximately $0.7 million.

Results of Operations

Consolidated Performance Summary

Consolidated net sales for the ~~third~~second quarter of ~~2017~~2020 were ~~$54,596,000, an increase~~$66.1 million representing a decrease of ~~$20,299,000~~$12.6 million or ~~59 percent~~16.0% when compared to net sales for the ~~third~~second quarter of ~~2016 of $34,297,000.~~2019. Net sales for the first ~~nine~~six months of ~~2017~~2020 were ~~$148,311,000, an increase~~$140.8 million representing a decrease of ~~$42,795,000~~$22.7 million or ~~41 percent~~13.9% when compared to the ~~same period~~first six months of 2019. The decrease in sales for the ~~prior year.~~ second quarter and first six months of 2020 was driven by our Metals Segment, which had a decrease of $12.5 million over the second quarter of 2019 and a decrease of $22.9 million over the first six months of 2019.

For the ~~third~~second quarter of ~~2017,~~2020, the Company recorded a net loss ~~from continuing operations~~ of ~~$1,207,000,~~$7.0 million, or ~~$0.14~~$0.77 diluted loss per share, compared to a net loss ~~from continuing operations~~ of ~~$2,608,000~~$0.3 million, or ~~$0.30~~$0.03 diluted loss per share for the ~~same~~second quarter ~~in the prior year.~~of 2019. For the first ~~nine~~six months of ~~2017,~~2020, the Company recorded a net ~~income from~~

~~continuing operations was $325,000,~~loss of $8.1 million, or ~~$0.04~~$0.90 diluted loss per ~~share. This compares~~share, compared to a net loss ~~from continuing operations~~ of ~~$5,658,000,~~$1.2 million, or ~~$0.64~~$0.13 diluted loss per share for the first ~~nine~~six months of ~~2016.~~2019.

The ~~third~~second quarter and first ~~nine-month periods~~six months of ~~2017 include financial results~~2020 were positively impacted by mark-to-market valuation gains on investments in equity securities totaling $1.1 million and $0.2 million, respectively, compared to gains on investments in equity securities of $0.1 million and $0.4 million for the second quarter and first six months of 2019, respectively. The second quarter and first six months of 2020 were also impacted by $6.1 million in non-cash asset impairment charges related to Palmer and inventory price change losses which, on a pre-tax basis, totaled $3.5 million and $3.9 million, respectively, compared to a $1.8 million loss in the second quarter of 2019 and a $5.2 million loss for the first six months of 2019. The second quarter and first six months of 2020 results were also negatively impacted by $2.7 million and $2.9 million, respectively, in costs associated with the Company's proxy contest and election of directors at the 2020 Annual Meeting of Shareholders. See Note 16, Proxy Contest and Related Costs, in the notes to the unaudited condensed consolidated financial statements for additional information.

The second quarter of 2020 consolidated gross profit decreased 44.4% to $4.4 million, or 6.6% of sales, compared to $7.8 million, or 10.0% of sales in the second quarter of 2019. For the first six months of 2020, consolidated gross profit decreased 30.3% to $11.5 million, or 8.2% of sales, from $16.5 million, or 10.1% of sales in the first six months of 2019. The decrease in dollars and percentage of sales were attributable to the Metals Segment ~~related~~as discussed below.

Consolidated selling, general, and administrative expense for the second quarter of 2020 decreased by $0.6 million to $7.0 million or 10.7% of sales compared to $7.7 million, or 9.7% of sales in the ~~acquisition~~second quarter of ~~Bristol Metals-Munhall, which closed on February 28, 2017, including net sales~~2019. For first six months of ~~$8,675,000~~2020, consolidated selling, general, and ~~$17,087,000, respectively, operating losses~~administrative expenses decreased $1.7 million, or 10.5%, to $14.8 million compared to $16.6 million in the first six months of ~~$622,000~~2019. The most significant decreases for the second quarter and ~~$260,000 , respectively,~~first six months of 2020 compared the same period in the prior year resulted from salaries and ~~pretax acquisition transaction related charges totaling $186,000~~benefits ($0.7 million lower in the second quarter and ~~$1,188,000 respectively.~~$1.0 million lower in the first six months); travel expenses ($0.3 million lower in the second quarter and $0.4 million lower in the first six months); and professional fees ($0.1 million lower in the second quarter and $0.2 million lower in the first six months).

Metals Segment

The Metals ~~Segment~~Segment's net sales for the ~~third~~second quarter of ~~2017~~2020 totaled ~~$43,023,000, an increase~~$52.0 million, a decrease of ~~$20,732,000~~$12.5 million or ~~93 percent~~19.4% from the ~~third~~second quarter of ~~2016. Excluding Bristol Metals-Munhall, third quarter net~~2019. Net sales ~~were up 54 percent over the same period last year. Sales~~ for the first ~~nine~~six months of ~~2017 were $111,821,000, an increase~~2020 totaled $112.7 million, a decrease of ~~$43,490,000~~$22.9 million or ~~64 percent~~16.9% from ~~2016. Excluding Bristol Metals-Munhall, year to date net sales were up 39 percent. Each product line in~~ the Metals Segment showed positive sales growth, including sequential quarterly gains, and gains against the prior year’s quarter and on a year to date basis. Sales of seamless carbon pipe were up 84 percent over last year’s third quarter and up 74 percent year to date. Sales were affected during the third quarter and first ~~nine~~six months of ~~2017 due~~2019.

Net sales decrease for the second quarter of 2020 compared to ~~third~~the second quarter ~~shipments and order activity across the businesses in the Metals Segment showing improvement over the first and second quarters and are~~of 2019 is summarized as follows:

Sales Increase (decrease) from prior year period
$ % Average selling price
Units
shipped
Third quarter
Storage tank and vessel $ 3,116,000
68.7% 31.0% 37.7%
Seamless carbon steel pipe and tube 3,049,000
84.2% 13.8% 70.4%
Stainless steel pipe⁽¹⁾
14,567,000
103.0% (27.4)% 130.4%
   Total third quarter change $ 20,732,000

        (1) Excluding Bristol Metals - Munhall 5,892,000
41.7% (4.4)% 46.1%

First nine months
Storage tank and vessel $ 5,770,000
40.6% 27.9% 12.7%
Seamless carbon steel pipe and tube 8,011,000
74.4% 4.5% 69.9%
Stainless steel pipe⁽²⁾
29,709,000
68.5% (6.2)% 74.7%
   Total first nine months change $ 43,490,000

        (2) Excluding Bristol Metals - Munhall 12,622,000
29.1% 5.6% 23.5%



($ in thousands)	$			%	Average selling price ⁽¹⁾	Units shipped

Fiberglass and steel liquid storage tanks and separation equipment	$	(9,209	)	(89.9)%	(27.9)%	(86.1)%
Heavy wall seamless carbon steel pipe and tube	(1,044		)	(15.6)%	(12.0)%	(4.0)%
Stainless steel pipe and tube	(2,004		)	(4.9)%	(4.1)%	(0.7)%
Galvanized pipe and tube	(228		)	(3.6)%	(3.2)%	(0.5)%
Total decrease	$	(12,485	)

¹⁾Average price decreases for the second quarter of 2020 as compared to the second quarter of 2019 primarily relate to the following:

Fiberglass and steel liquid storage tanks and separation equipment - decline due to curtailment of operations and effects of COVID-19 on oil and gas industry and Permian Basin;

Heavy wall seamless carbon steel pipe and tube - decline based on lower mix of energy based sales, lower mill pricing and lessening impact of 232 tariffs;

Stainless steel pipe and tube - pass through of input and cost changes related to:


a.	Alloy surcharges decrease of approximately 11%; offset by,


b.	Favorable product mix and other competitive pricing, increase of 7%; and,

Galvanized pipe and tube - primarily decline in indexed pricing

Net sales decrease for the first six months of 2020 compared to the first six months of 2019 is summarized as follows:



($ in thousands)	$			%	Average selling price ⁽¹⁾	Units shipped

Fiberglass and steel liquid storage tanks and separation equipment	$	(15,619	)	(77.8)%	(9.9)%	(75.5)%
Heavy wall seamless carbon steel pipe and tube	(2,317		)	(15.2)%	(10.0)%	(5.8)%
Stainless steel pipe and tube	(4,272		)	(4.9)%	(6.6)%	1.9%
Galvanized pipe and tube	(717		)	(5.5)%	(8.9)%	3.7%
Total decrease	$	(22,925	)

¹⁾Average price decreases for the first six months of 2020 as compared to the first six months of 2019 primarily relate to the following:

Fiberglass and steel liquid storage tanks and separation equipment - decline due to curtailment of operations and effects of COVID-19 on oil and gas industry and Permian Basin;

Heavy wall seamless carbon steel pipe and tube - decline based on lower mix of energy based sales, lower mill pricing and lessening impact of 232 tariffs;

Stainless steel pipe and tube - pass through of input and cost changes related to:


a.	Alloy surcharges decrease of approximately 2%; and,


b.	Base raw material input mill pricing, product mix and other competitive pricing, decrease of 5%; and,

Galvanized pipe and tube - primarily decline in indexed pricing

The Metals Segment's operating loss ~~from continuing operations improved $1,976,000~~increased $10.3 million, or 867.6%, to ~~a loss of $1,264,000~~$9.2 million for the ~~third~~second quarter of ~~2017~~2020 compared to ~~a loss~~income of ~~$3,240,000~~$1.2 million for the ~~third~~second quarter of ~~2016. For~~2019. Operating loss for the first ~~nine~~six months of ~~2017, operating~~2020 increased $10.9 million,

or 407.3%, to $8.2 million from income ~~from continuing operations for~~of $2.7 million in the ~~Metals Segment increased $8,321,000~~first six months of 2019. As mentioned above, the second quarter and first six months of 2020 were negatively impacted by $6.1 million in non-cash asset impairment charges related to ~~an operating profit of $2,660,000 compared to a loss of $5,661,000 for the same period of 2016.~~ Palmer.

Current ~~year~~quarter operating results were affected by nickel prices and resulting surcharges for 304 and 316 alloys. The second quarter of 2020 proved to be a much more unfavorable environment than the ~~following factors:~~


a)	~~The addition of Bristol Metals-Munhall operations as noted above.~~

Nickel prices and resulting surcharges for 304 and 316 alloys experienced a sharp decline in the third quarter when compared to the first half of 2017. Surcharges for both alloys declined by $.13 per pound in the third quarter, generating Metals Segment inventory price changes losses of $1,978,000, up from the prior year’s inventory price changes losses of $1,255,000. The current quarter’s inventory price changes losses more than offset the first six months’ inventory price changes gains of $719,000, resulting in a year to date inventory price changes loss totaling $1,259,000.

Margins in the stainless steel business continued to be negatively impacted during 2017. Special alloy sales were at historically low levels due to a lower incidence of project work in the downstream energy markets. While special alloy shipments as a percentage of total sales at the Bristol facility improved marginally, the decline in shipments of larger diameter pipe (14 inches and up) offset any improvement in alloy mix.

second quarter of 2019, with net metal pricing losses of $3.5 million, compared to last year's $1.8 million in metal pricing losses. Second quarter 2020 surcharges on 304 alloy were approximately 11% lower than second quarter 2019 levels and 2020 surcharges on 316 alloy were 17% lower than the second quarter of 2019. More importantly, second quarter 2020 surcharges on 304 and 316 alloys were lower by 19% and 21%, respectively, when compared with the surcharges in place just five months earlier.


d)	~~Operating income from both seamless carbon pipe and tube and storage tanks and vessels continued to show solid improvement over the prior year.~~


e)	A $2,229,000 charge in the third quarter 2016 associated with the book loss on three Metal Segment properties sold as part of the sale-leaseback transaction closed in 2016 with no comparable loss recognized in 2017.

Selling, general, and administrative expense decreased 0.3% to $4.8 million for the second quarter of 2020 compared to $4.9 million in the second quarter of 2019. For the first six months of 2020, selling, general, and administrative expenses decreased $0.7 million, or 7.0%, to $9.7 million from $10.4 million for the first six months of 2019. The most significant decreases for the second quarter and first six months of 2020 compared the same periods in the prior year resulted from salaries and benefits ($0.6 million lower in the second quarter and $0.9 million lower in the first six months) and travel expenses ($0.2 million lower in the second quarter and $0.3 million lower in the first six months).

Specialty Chemicals Segment

Net sales for the Specialty Chemicals Segment in the ~~third~~second quarter of ~~2017 were $11,573,000,~~2020 totaled $14.1 million, representing a ~~$433,000~~$0.2 million, or ~~four percent~~1.1%, decrease from the ~~same~~second quarter of ~~2016.~~2019. Net sales for the first ~~nine~~six months of ~~2017 were $36,489,000, down $696,000~~2020 totaled $28.2 million, representing a $0.2 million, or ~~two percent~~0.6%, increase from 2016 results. The third quarter sales decrease was comprised of a two percent decrease in pounds sold and a two percent decrease in average selling price when compared to the same period of the prior year. For the first ~~nine months, pounds sold decreased four percent and average selling price increased two percent. Net sales were negatively impacted during the third quarter and first nine~~six months of ~~2017 by:~~

~~a) The loss of a single customer~~2019. Pounds shipped in the second ~~half~~quarter of ~~2016 that reduced~~2020 were up 1.4% over the second quarter of 2019, with average selling prices declining 2.6%. Pounds for the first six months of 2020 were down 2.8%, with average selling prices increasing 3.5%.

The relative strength of sales during the second quarter, in the ~~first half of 2017 by $2,100,000. There was no impact from this customer loss in the third quarter of this year.~~

~~b) The ramp up of our new fire retardant customer at CRI Tolling has not gone as quickly as we had earlier projected. Shipments did commence in the second half~~face of the ~~third quarter~~COVID-19 pandemic's impact on the Household, Industrial & Institutional and will continue to build into the fourth quarter of this year and the first quarter of 2018. Our agreement calls for an annual volume of 3 million pounds, the run rate, which we now expect to achieve in the first quarter of next year.

~~c) We experienced some delays in receipt of raw materials coming out~~Sanitation supply chain, is a result of the ~~Houston area following Hurricane Harvey.~~Segment's increased production of hand sanitizer and cleaning aids to help supply critical sanitation products.

Operating income for the Specialty Chemicals Segment for the ~~third~~second quarter of ~~2017 decreased $37,000~~2020 was $2.0 million, an increase of $1.1 million, or 113.9%, from the ~~third~~second quarter of ~~2016 to $1,151,000.~~2019. Operating income for the ~~Specialty Chemicals Segment for~~first six months of 2020 was $2.4 million, an increase of $0.9 million, or 58.8%, from the first ~~nine~~six months of ~~2017 amounted to $3,796,000, a $76,000 or two percent~~2019. The increase from the same period for 2016. Operating income in the third quarter and year to date was negatively impacted by an increase to the allowance for doubtful accounts of $227,000 for one customer that became financially unstable during the quarter combined with higher legal fees of $81,000. The decrease in operating income ~~was partially offset by a $229,000 charge in the third quarter 2016 associated with the book loss on two Specialty Chemicals Segment properties sold as part~~is directly related to cost cutting and other initiatives that yielded margin improvements of ~~the sale-leaseback transaction closed in 2016 with no comparable loss recognized in 2017.~~

~~Other Items~~

~~Consolidated~~$0.2 million, lower manufacturing costs of $0.6 million and lower selling, general, and administrative expenses ~~increased 13 percent~~of $0.3 million.

Selling, general, and administrative expense decreased $0.3 million, or 27.0%, to ~~$6,588,000, or 12.1 percent of sales, from $5,815,000, 17.0 percent of sales,~~$0.7 million for the ~~third~~second quarter of ~~2017~~2020 compared to the ~~third~~second quarter of ~~2016.~~2019. For the first ~~nine~~six months of ~~2017, consolidated~~2020, selling, general, and administrative expenses ~~were $18,926,000,~~decreased $0.4 million, or ~~12.8 percent of sales, an increase of eleven percent~~18.5%, to $1.8 million from ~~$17,041,000, or 16.2 percent of sales,~~$2.2 million for the first ~~nine~~six months of ~~2016. Approximately $411,000~~2019. The most significant decreases for the second quarter and ~~$783,000~~first six months of 2020 compared to the ~~increases arose~~same periods in the prior year resulted from ~~including Bristol Metals-Munhall's selling, general~~salaries and ~~administrative~~benefits ($0.2 million lower for the second quarter and $0.3 million lower in the first six months).

Other Items

Unallocated corporate expenses for the second quarter of 2020 decreased $0.4 million, or 18.4%, to $1.6 million (2.4 percent of sales) compared to $1.9 million (2.5 percent of sales) for the same period in the prior year comparative period. For first six months of 2020, unallocated corporate expenses decreased $0.6 million, or 15.0%, to $3.6 million from $4.2 million for the first six months of 2019. The second quarter and first six months decreases resulted primarily from lower professional fees, incentive bonuses, and travel expenses in the third quarter and first nine months of 2017, respectively, with no comparable costs for 2016. The remainder of the change for both periods resulted from higher incentive based bonuses (up $233,000 for the quarter and $1,008,000 for the first nine months), increased sales commissions and wages (up $193,000 for the quarter and $337,000 for the first nine months) and an increase to the allowance for doubtful accounts (up $256,000 for the quarter and $224,000 for the first nine months) partially offset by lower professional fees (down $101,000 for the quarter and $220,000 for the first nine months), shelf registration costs (down $5,000 for the quarter and $145,000 for the first nine months) and lower travel expenses (down $30,000 for the quarter and $125,000 for the first nine months).

Acquisition costs for the third quarter of 2017 of $186,000 (mainly in the Metals Segment cost of sales) and $1,188,000 for the first nine months of 2017 ($782,000 in unallocated SG&A and $406,000 in Metals Segment cost of sales), resulted from costs associated with the Bristol Metals-Munhall acquisition.period.

Interest expense was ~~$279,000~~$0.5 million and ~~$273,000~~$1.0 million for ~~the third quarter of 2017 and 2016, respectively. For the first nine months, interest expense decreased to $715,000 for 2017 from $822,000 for 2016.~~

Due to a higher projected sales of small diameter stainless-steel pipe and tube (outside diameter of ten inches or less) for the remainder of the measurement period, the earn-out liability resulting from the acquisition of Bristol Metals-Munhall was increased by $63,000 and $145,000 for the third quarter and first nine months of 2017.

~~The Company purchased 225,000 shares of a potential acquisition target for $3,832,000 during~~ the second quarter of ~~2017. During~~2020 and 2019, respectively. The decrease was related to lower average debt outstanding in the ~~third~~second quarter of ~~2017, acquisition discussions were stopped and~~2020 compared to the ~~Company sold all~~second quarter of their holdings, realizing a $310,000 gain on the investment. As a result of the sale, unrealized gains, net of tax, of $366,000 were reclassified out of accumulated other comprehensive income ("AOCI") with the realized gain on sale included in other income 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.2019.

The effective tax rate was ~~30 percent~~23.3% and ~~28 percent~~30.1% for the ~~three-month~~three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017,~~2020, respectively, and 35.0% and 31.5% for the three and six months ended June 30, 2019, respectively. The ~~2017~~June 30, 2020 effective tax rate was ~~lower~~higher than the statutory rate of ~~34 percent primarily~~21.0% due to ~~state~~discrete tax ~~expense~~benefits on our stock compensation plan and ~~other permanent differences, mainly~~estimated tax benefits associated with the ~~manufacturer's exemption.~~Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) which was signed into law on March 27, 2020. The ~~effective~~CARES Act includes various income and payroll tax ~~rate was 34 percent~~provisions, notably enabling the Company to carry back net operating losses and 25 percent for the three-month and nine-month periods ended September 30, 2016, respectively. The nine-month 2016 effective tax rate was lower than the 34 percent statutory rate primarily due to state tax expense andrecover taxes paid in prior years. Additionally, we recognized a ~~one-time permanent difference reducing the amount of~~discrete tax benefit ofrelated to the ~~pre-tax loss for that period.~~costs associated with our public proxy contest.

The Company's cash balance ~~decreased $48,000~~increased $0.8 million to ~~$15,000~~$1.4 million as of ~~September~~June 30, ~~2017~~2020 compared to ~~$63,000~~$0.6 million at December 31, ~~2016.~~2019. Fluctuations affecting cash flows during the ~~period~~six months ended June 30, 2020 were comprised of the following:

~~On February 28, 2017,~~Net inventories decreased $2.9 million at June 30, 2020 when compared to December 31, 2019, mainly due to the ~~Company completed~~write-down of inventory related to the ~~acquisition of Bristol Metals-Munhall for $11,954,000. This excludes a $3,000,000 deposit made~~Palmer business in the ~~prior year;~~second quarter. Inventory turns increased from 1.62 turns at December 31, 2019, calculated on a three-month average basis, to 1.75 turns at June 30, 2020;

~~Net accounts receivable~~Accounts payable increased ~~$12,284,000 at September~~$3.7 million as of June 30, ~~2017 when~~2020 as compared to December 31, 2019, primarily due to higher metal purchases in the second quarter compared to the ~~prior year end, which resulted from a 59 percent increase in sales for the last two months of the third quarter 2017~~fourth quarter. Accounts payable days outstanding were approximately 32 days at June 30, 2020 compared to ~~the last two months of the fourth quarter 2016. Also,~~36 days ~~sales outstanding, calculated using a three-month average basis, decreased by 2 days to 49 days outstanding~~ at ~~the end of the third quarter 2017 from 51 days outstanding at the end of 2016;~~December 31, 2019;

Net ~~inventories, excluding the $5,434,000 of inventory obtained in the Bristol Metals-Munhall acquisition,~~accounts receivable increased ~~$4,272,000~~$1.2 million at ~~September~~June 30, ~~2017~~2020 as compared to ~~year-end 2016. The increase resulted from building Bristol Metals-Munhall inventory from acquisition levels (up $8,110,000), increased inventory for storage tanks~~December 31, 2019, due primarily to ~~support higher sales~~improved business activity ~~(up $2,899,000) along with higher~~within the Specialty Chemicals ~~inventory (up $2,714,000) due~~Segment in the second quarter compared to raw material inventory required for the fire retardant product line along with raw material price increases. These increases were partially offset by lower heavy wall pipe and tube inventory (down $4,643,000) resulting from higher sales levels and lower stainless steel pipe inventory (down $4,808,000) resulting from purchases for a large sales order being made during the fourth quarter of ~~2016 that~~2019. Days sales outstanding, calculated using a six-month average basis, was ~~shipped early 2017 combined with lower nickel surcharges in 2017. Inventory turns increased from 1.90 turns~~46 days outstanding at June 30, 2020 and 50 days at December 31, ~~2016, calculated on a three-month average basis, to 2.79 turns at September 30, 2017;~~2019, respectively;

~~Accounts payable increased $8,084,000 as~~Capital expenditures for the first six months of September 30, 2017 from the prior year-end. The significant portion of the increase was for Bristol Metals-Munhall (up $6,716,000) as inventory is being purchased to support sales projections. Payable days outstanding remained at approximately 60 days at the end of the third quarter of 2017 and at December 31, 2016;2020 were $2.0 million; and


e)	~~Capital expenditures for~~The Company paid $2.3 million during the first ~~nine~~six months of 2020 related to the earn-out liabilities from the 2019 American Stainless, 2018 MUSA-Galvanized and 2017 ~~were $3,693,000.~~MUSA-Stainless acquisitions.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), we use the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, Adjusted Net (Loss) Income, and Adjusted Diluted (Loss) Earnings Per Share. Management believes that these non-GAAP measures provide additional useful information to allow readers to compare the financial results between periods. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under GAAP.

EBITDA and Adjusted EBITDA

We define "EBITDA" as earnings before discontinued operations, interest (including change in fair value of interest rate swap), income taxes, depreciation and amortization. We define "Adjusted EBITDA" as EBITDA further adjusted for the impact of non-cash and other items we do not consider in our evaluation of ongoing performance. These items include: discontinued operations, goodwill impairment, asset impairment, interest (including change in fair value of interest rate swap), income taxes, depreciation, amortization, stock option / grant costs, non-cash lease cost, acquisition costs, proxy contest costs, shelf registration costs, earn-out adjustments, gain on excess death benefit, realized and unrealized (gains) and losses on investments in equity securities, casualty insurance gain, all (gains) losses associated with a Sale-Leaseback, retention costs and other adjustments from net income. We caution investors amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by other companies because not all companies calculate EBITDA and Adjusted EBITDA in the same manner. We present EBITDA and Adjusted EBITDA because we consider them to be important supplemental measures of our performance and investors' understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.

Consolidated EBITDA and Adjusted EBITDA are as follows:



		Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)		2020			2019			2020			2019
Consolidated
Net loss		$	(6,957	)	$	(262	)	$	(8,135	)	$	(1,189	)
Adjustments:
	Interest expense	532			1,010			1,251			2,034
	Change in fair value of interest rate swap	(4		)	77			81			124
	Income taxes	(2,116		)	(142		)	(3,496		)	(548		)
	Depreciation	1,989			1,943			3,947			3,832
	Amortization	810			819			1,619			1,743
EBITDA		(5,746		)	3,445			(4,733		)	5,996
	Acquisition costs and other	6			32			138			1,672
	Proxy contest costs	2,734			—			2,909			—
	Shelf registration costs	—			10			—			10
	Earn-out adjustments	(827		)	(418		)	(823		)	(401		)
	Gain on investments in equity securities	(1,092		)	(100		)	(240		)	(373		)
	Asset impairments	6,079			—			6,079			—
	Stock-based compensation	430			237			766			853
	Non-cash lease expense	128			151			256			288
	Retention expense	235			51			235			130
Adjusted EBITDA		$	1,947		$	3,408		$	4,587		$	8,175
	% sales	2.9		%	4.3		%	3.3		%	5.0		%

Metals Segment EBITDA and Adjusted EBITDA are as follows:



		Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)		2020			2019			2020			2019
Metals Segment
Net (loss) income		$	(7,308	)	$	1,587		$	(6,381	)	$	2,986
Adjustments:
	Interest expense	7			23			11			44
	Depreciation	1,559			1,533			3,070			3,014
	Amortization	810			819			1,619			1,743
EBITDA		(4,932		)	3,962			(1,681		)	7,787
	Acquisition costs and other	—			12			3			1,370
	Earn-out adjustments	(827		)	(418		)	(823		)	(401		)
	Asset impairments	6,079			—			6,079			—
	Stock-based compensation	130			63			171			210
	Retention expense	—			26			—			80
Metals Segment Adjusted EBITDA		$	450		$	3,645		$	3,749		$	9,046
	% of segment sales	0.9		%	5.7		%	3.3		%	6.7		%

Specialty Chemicals Segment EBITDA and Adjusted EBITDA are as follows:



		Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)		2020			2019			2020			2019
Chemicals Segment
Net income		$	1,980		$	926		$	2,460		$	1,539
Adjustments:
	Interest expense	1			—			9			1
	Depreciation	389			370			792			739
EBITDA		2,370			1,296			3,261			2,279
	Stock-based compensation	80			26			118			96
Specialty Chemicals Segment Adjusted EBITDA		$	2,450		$	1,322		$	3,379		$	2,375
	% of segment sales	17.4		%	9.3		%	12.0		%	8.5		%

Adjusted Net (Loss) Income and Adjusted Diluted (Loss) Earnings per Share

Adjusted Net (Loss) Income and Adjusted Diluted (Loss) Earnings per Share are non-GAAP measures and exclude discontinued operations, goodwill impairment, asset impairment, stock option / grant costs, non-cash lease costs, acquisition costs, proxy contest costs, shelf registration costs, earn-out adjustments, gain on excess death benefit, realized and unrealized (gains) and losses on investments in equity securities, casualty insurance gain, all (gains) losses associated with a Sale-Leaseback, and retention costs from net income. They also utilize a constant effective tax rate to reflect tax neutral results. Adjusted net (loss) income and adjusted diluted (loss) earnings per share should not be considered an alternative to, or a more meaningful indicator of, the Company's net (loss) income or diluted (loss) earnings per share as prepared in accordance with GAAP. The Company's methods of determining this non-GAAP financial measure may differ from the method used by other companies for this or similar non-GAAP financial measures. Accordingly, these non-GAAP measures may not be comparable to the measures used by other companies.

The reconciliation of net (loss) income and (loss) earnings per share to adjusted net (loss) income and adjusted (loss) earnings per share is as follows:



		Three Months Ended June 30,						Six Months Ended June 30,
(Amounts in thousands, except per share data)		2020			2019			2020			2019
Loss before taxes		$	(9,073	)	$	(404	)	$	(11,631	)	$	(1,737	)

Adjustments:
	Acquisition costs and other	6			32			138			1,672
	Proxy contest costs	2,734			—			2,909			—
	Shelf registration costs	—			10			—			10
	Earn-out adjustments	(827		)	(418		)	(823		)	(401		)
	Gain on investments in equity securities	(1,092		)	(100		)	(240		)	(373		)
	Asset impairments	6,079			—			6,079			—
	Stock-based compensation	430			237			766			853
	Non-cash lease expense	128			151			256			288
	Retention expense	235			51			235			130
Adjusted (loss) income before income taxes		(1,380		)	(441		)	(2,311		)	442
	(Benefit) provision for income taxes at 21%	(290		)	(93		)	(485		)	93

Adjusted net (loss) income		$	(1,090	)	$	(348	)	$	(1,826	)	$	349

Average shares outstanding, as reported
	Basic	9,058			8,974			9,066			8,951
	Diluted	9,058			8,974			9,066			8,951

Adjusted net (loss) income per common share
	Basic	$	(0.12	)	$	(0.04	)	$	(0.20	)	$	0.04
	Diluted	$	(0.12	)	$	(0.04	)	$	(0.20	)	$	0.04

Liquidity and Capital Resources

Summary

We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including level of investment required to support our business strategies, the performance of our business, capital expenditures, credit facilities and working capital management. Capital expenditures and share repurchases are a component of our cash flow and capital management strategy which we can adjust in response to economic and other changes in our business environment. We have a disciplined approach to capital allocation focusing on priorities that support our business and growth.

Cash Flows

Cash flows from total operations were as follows ($ in thousands):



	Six Months Ended June 30,
	2020			2019
Total cash (used in) provided by:
Operating activities	$	(173	)	$	13,225
Investing activities	798			(23,232		)
Financing activities	161			7,810
Net increase (decrease) in cash and cash equivalents	$	786		$	(2,197	)

Operating Activities

The decrease in cash provided by operating activities for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily driven by changes in working capital, driven by increases in accounts receivable, which decreased operating cash flows for the first six months of 2020 by $1.9 million, compared to an increase of $0.9 million in the first six months of 2019, increases in inventory which decreased operating cash flows $1.4 million in the first six months of 2020, compared to an increase of $8.6 million in the first six months of 2019 and accrued income taxes, which decreased operating cash flow $3.1 million for the first six months of 2020, compared to a decrease of $1.5 million in the first six months of 2020. These were partially offset by increases in accounts payable, which increased operating cash flows $3.7 million in the first six months of 2020 compared to an increase of $2.5 million in the first six months of 2019 and $1.0 million in proceeds received from the Company's business interruption insurance related to the heavy wall press outage in 2019.

Investing Activities

Net cash used in investing activities primarily consists of transactions related to capital expenditures and acquisitions. The increase in cash provided by investing activities for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to a decrease in cash outflows related to the American Stainless acquisition in the prior year and increase in proceeds from the sale of equity securities in the current year over the prior year.

Financing Activities

Net cash provided by financing activities primarily consists of transactions related to our long-term debt. The decrease in cash provided by financing activities for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to borrowings from the Term Loan related to the American Stainless acquisition in the prior year not in the current year.

Sources of Liquidity

Funds generated by operating activities, available cash and cash equivalents and our credit facilities are our most significant sources of liquidity. We believe our sources of liquidity will be sufficient to fund operations, debt obligations, and anticipated capital expenditures over the next 12 months.

We have a $100 million asset-backed revolving Line with a maturity date of December 21, 2021 and a $20 million Term Loan with a maturity date of January 1, 2024. As of June 30, 2020, the Company had $78.6 million of total borrowings outstanding with its lender. That total is up $3.0 million from the balance at December 31, 2019. As of June 30, 2020, the Company had $7.2 million of remaining available capacity under its Line. See Note 6, Long-term Debt, in the notes to the unaudited condensed consolidated financial statements for additional information.

The Company ~~drew $17,919,000 against its line of credit during the first nine months of 2017 and had $26,723,000 of borrowings outstanding as of September 30, 2017. Covenants under the Credit Agreement include~~is subject to certain covenants including maintaining a minimum fixed charge coverage ratio of not less than 1.25, maintaining a minimum tangible net worth of not less than $60.0 million, and a limitation on the Company’s maximum amount of capital expenditures per year, which is in line with currently projected needs.

The Company ~~was~~notified its bank of a technical default of the fixed charge coverage ratio in ~~compliance~~its Credit Agreement at the quarter ended June 30, 2020. To address the technical default, the Company entered into two amendments to its Credit Agreement with ~~all covenants as~~its bank subsequent to the end of ~~September~~the quarter. On July 31, 2020, the Company entered into the Third Amendment to the Third Amended and Restated Loan Agreement (the "Third Amendment") with its bank. The Third Amendment amended the definition

of the fixed charge coverage ratio to include the proxy contest costs in the numerator of the ratio calculation. The amendment is effective for the quarter ended June 30, ~~2017.~~2020 and the directly following three quarters after June 30, 2020. Additionally, on August 13, 2020, the Company entered into the Fourth Amendment to the Third Amended and Restated Loan Agreement (the "Fourth Amendment") with its bank. The Fourth Amendment amended the definition of the fixed charge coverage ratio to include the lesser of the actual non-cash asset impairment charge related to Palmer, or $6.0 million in the numerator of the ratio calculation. The amendment is effective for the quarter ended June 30, 2020 and the directly following three quarters after June 30, 2020.

At ~~December 31, 2016,~~June 30, 2020, the Company ~~recorded $11,000,000~~had a minimum fixed charge coverage ratio of 1.39 and a minimum tangible net worth of $67.4 million.

Stock Repurchases and Dividends

We repurchase common stock and pay dividends pursuant to programs approved by our Board of Directors. The payment of cash dividends is also subject to customary legal and contractual restrictions. Our capital allocation strategy is to first fund operations and investments in ~~accrued expenses~~growth and ~~current assets~~then return excess cash over time to ~~reflect the legal liability~~shareholders through share repurchases and ~~corresponding indemnified receivable due from the former shareholders of Palmer.~~ dividends.

On June 30, 2017, the plaintiff entered into settlement agreements with Palmer/Synalloy and the former shareholders of Palmer, respectively. 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 of indemnification terms included in the Stock Purchase Agreement between Synalloy and the former owners of Palmer, neither Synalloy or Palmer contributed to the payments required by the settlement agreements. As a result of the filed Release of Final Judgment the legal liability and corresponding indemnified receivable due from the former shareholders of Palmer were reduced to zero at August 31, 2017.

~~Outlook~~

The Metals Segment should benefit from higher nickel and WTI prices, improving order activity, and solid backlog. The fire retardant business along with several smaller product additions should provide incremental gains for the Specialty Chemicals Segment over the next several quarters. As previously reported,February 21, 2019, the Board of Directors ~~has declared~~authorized a ~~$.13 per share dividend,~~

~~which~~stock repurchase program for up to 850,000 shares of its outstanding common stock over 24 months. The shares will be ~~paid~~purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on ~~November 6, 2017. We have started our planning activities for 2018~~market conditions. Under the program, the purchases will be funded from available working capital, and the repurchased shares will ~~provide some guidance later this year. We remain optimistic~~be returned to the status of authorized, but unissued shares of common stock or held in treasury. There is no guarantee as to the exact number of shares that ~~our end markets continue to improve and that~~will be repurchased by the Company, and the Company may discontinue purchases at any time that management determines additional purchases are not warranted. As of June 30, 2020, the Company has 790,383 shares of its share repurchase authorization remaining.

Stock repurchase activity was as follows:



	Six Months Ended June 30,
	2020		2019
Number of shares repurchased	59,617		—
Average price per share	$	10.65	$	—
Total cost of shares repurchased	$	636,940	$	—

At the end of each fiscal year the Board of Directors reviews the financial performance and capital needed to support future growth to determine the amount of cash dividend, if any, which is ~~well positioned~~appropriate. In 2019, no dividends were declared or paid by the Company.

Other Financial Measures

Our current ratio, calculated as current assets divided by current liabilities, was 3.7 at June 30, 2020 and 3.6 at December 31, 2019.

Our long-term debt to capital, calculated as long-term debt divided by total capital, was 45% at June 30, 2020 and 41% at December 31, 2019.

Our return on average equity, calculated as net income divided by the trailing 12-month average of equity, was (7.9)% at June 30, 2020 and (2.9)% at December 31, 2019, respectively.

Off-Balance Sheet Arrangements and Contractual Obligations

The Company has no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on the Company's financial position, revenues, results of operations, liquidity, or capital expenditures.

There has been no material change in our contractual obligations other than in the ordinary course of business since the end of fiscal 2019. See our Annual Report on Form 10-K for ~~growth~~the year ended December 31, 2019, for additional information regarding our contractual obligations.

Significant Accounting Policies and Estimates

We describe our significant accounting policies in ~~2018.~~Note 1, Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements presented in the Annual Report on Form 10-K for the year ended December 31, 2019. We discuss our critical accounting estimates in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in the Annual Report on Form 10-K for the year ended December 31, 2019. There have been no significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal 2019, except as discussed below.

Credit Losses on Accounts Receivable

The Company maintains an allowance for credit losses on its accounts receivable balances, which represents its best estimate of current expected credit losses over the contractual life of the accounts receivable. Beginning January 1, 2020, when evaluating the adequacy of its allowance for credit losses each reporting period, the Company analyzes accounts receivable balances with similar risk characteristics on a collective basis, considering factors such as the aging of receivables balances, historical loss experience, current information, and future expectations. Each reporting period, the Company reassesses whether any accounts receivable no longer share similar risk characteristics and should instead be evaluated as part of another pool or on an individual basis. Changes to the allowance for credit losses are adjusted through bad debt expense, which is presented within "Selling, general and administrative" operating expenses on the unaudited condensed consolidated statement of operations.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This quarterly report includes and incorporates by reference "forward-looking statements" within the meaning of the federal securities laws. All statements that are not historical facts are "forward-looking statements." The words "estimate," "project," "intend," "expect," "believe," "should," "anticipate," "hope," "optimistic," "plan," "outlook," "should," "could," "may" and similar expressions identify forward-looking statements. The forward-looking statements are subject to certain risks and uncertainties, including without limitation those identified below, which could cause actual results to differ materially from historical results or those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements. The following factors could cause actual results to differ materially from historical results or those anticipated: adverse economic conditions; the impact of competitive products and pricing; product demand and acceptance risks; raw material and other increased costs; raw materials availability; employee relations; ability to maintain workforce by hiring trained employees; labor efficiencies; customer delays or difficulties in the production of products; new fracking regulations; a prolonged decrease in ~~oil~~nickel and ~~nickel~~oil prices; unforeseen delays in completing the integrations of acquisitions; risks associated with mergers, acquisitions, dispositions and other expansion activities; financial stability of our customers; environmental issues; negative or unexpected results from tax law changes; unavailability of debt financing on acceptable terms and exposure to increased market interest rate risk; inability to comply with covenants and ratios required by our debt financing arrangements; ability to weather an economic downturn; loss of consumer or investor confidence, risks relating to the impact and spread of COVID-19 and other risks detailed from time-to-time in the Company's ~~Securities and Exchange Commission~~SEC filings. The Company assumes no obligation to update the information included in this report.

Item 3. Quantitative and Qualitative Disclosures about Market Risks

Information about the Company's exposure to market risk was disclosed in its Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, which was filed with the ~~Securities and Exchange Commission~~SEC on March ~~14, 2017.~~6, 2020. There have been no material quantitative or qualitative changes in market risk exposure since the date of that filing.

Item 4. Controls and Procedures

Based on the evaluation required by 17 C.F.R. Section 240.13a-15(b) or 240.15d-15(b) of the Company's disclosure controls and procedures (as defined in 17 C.F.R. Sections 240.13a-15(e) and 240.15d-15(e)), the Company's Chief Executive Officer and Chief Financial Officer ~~and Chief Accounting Officer~~ concluded ~~that~~ that such controls and procedures, as of the end of the period covered by this quarterly report, were ~~effective.~~not effective due to the presence of a material weakness in internal control over financial reporting described below. Notwithstanding the material weakness, management believes, based on its procedures in preparing this report, that the consolidated financial statements included in this report fairly present, in all material respects, the Company’s financial position, results of operations and cash flows as of and for the periods presented in conformity with accounting principles generally accepted in the United States of America.

As previously disclosed, during the same period, the Company received a hotline complaint principally regarding the accounting treatment of Palmer and other matters. In response to this complaint, the Board of Directors engaged an independent law firm to investigate the matters. The independent law firm’s investigation concluded that there was no evidence of intentional misconduct, bad faith or criminal acts.

Material Weakness in Internal Control Over Financial Reporting

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

The Company’s Chief Executive Officer and Chief Financial Officer concluded that several control deficiencies existed related to the Company’s control environment. These control deficiencies included improper tone related to the treatment of and communication with lower-level employees by management, and certain personnel performing job responsibilities outside their job descriptions. Additionally, there was a delay in reporting a whistleblower matter to the Audit Committee, and a certain matter not being transitioned to the new Audit Committee. These control deficiencies, when aggregated, resulted in a material weakness in the Company’s control environment as of June 30, 2020.

Remediation Plan

The Company is committed to remediating the control deficiencies that constituted the above material weakness by implementing changes to the Company's internal control over financial reporting. Management is responsible for implementing changes and improvements in the internal control over financial reporting and for remediating the control deficiencies that gave rise to the material weakness. In response to the identified deficiencies that aggregated to a material weakness, management, with oversight from the Company's Audit Committee, is in the process of developing a detailed plan for remediation of the material weakness, including:

Providing leadership training and mentorship to key executives;

Alignment of job descriptions with actual job responsibilities;

Improving the Ethics and Compliance Hotline process, including the consideration of a third-party hotline service with automated reporting to the Audit Committee; and

Enhancing the transition process for new finance executives and audit committee members.

As the Company continues to evaluate and work to remediate the control deficiencies that gave rise to the material weakness, the Company may determine to take additional measures to address the control deficiencies.

Changes in Internal Control over Financial Reporting

~~The~~Other than the material weakness discussed above, the Company's management, including the Chief Executive Officer ~~Chief Financial Officer~~ and Chief ~~Accounting~~Financial Officer, identified no change in the Company's internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's control over financial reporting. Management has excluded the Munhall facility's operations (acquired in the MUSA Stainless acquisition) from its assessment of internal control over financial reporting as of September 30, 2017 because this material acquisition closed in the first quarter of 2017. Total assets and total revenue associated with the Munhall facility represent approximately 21 percent, or $33.5 million and twelve percent, or $17.1 million, respectively, of the related consolidated financial statement amounts of the Metals Segment as of, and for the quarter ended, September 30, 2017.

PART II

Item 1. Legal Proceedings

It is not unusual for us and our subsidiaries to be involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of business involving, among other things, product liability, commercial, employment, workers' compensation, and environmental matters. We establish reserves in a manner that is consistent with accounting principles generally accepted in the ~~United States~~U.S. for costs associated with such matters when a liability is probable and those costs are capable of being reasonably estimated. We cannot predict with any certainty the outcome of these unresolved legal actions or the range of possible loss or recovery. Based on current information, however, we believe that the eventual outcome of these unresolved legal actions, either individually or in the aggregate, will not have a material adverse effect on our financial position, results of operations or cash flows. There were no material changes in our Legal Proceedings, as discussed in Part I, Item 3 in the Company's Annual Report on Form 10-K for the period ending December 31, ~~2016, other than those discussed in Note 11 in Part I, Item 1 of this quarterly report.~~2019.

Item 1A. Risk Factors

There were no material changes in our assessment of risk factors as discussed in Part I, Item 1A in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2019, except for the addition of the following risk factors:

If we do not successfully manage the transitions associated with the election of three new members of our Board of Directors, the appointment of a new Chairman of the Board and a new Chief Financial Officer, it could have an adverse impact on our business operations, including our internal controls over financial reporting, as well as be viewed negatively by our customers and shareholders.

On June 30, 2020, the Company appointed Sally M. Cunningham Senior Vice President and Chief Financial Officer effective June 30, 2020 after the resignation of Dennis M. Loughran. In addition, on July 7, 2020, the Company announced the election of three new members of the Board of Directors at the 2020 Annual Meeting of Shareholders. On July 9, 2020, the Company's Board of Directors elected Henry L. Guy as Chairman of the Board of Directors. Such leadership transitions can be inherently difficult to manage, and an inadequate transition may cause disruption to our business, including our relationships with customers, suppliers, vendors, and employees. It may also make it more difficult to hire and retain key employees.

An impairment in the carrying value of our fixed assets, intangible assets, or goodwill could adversely affect our financial condition and Consolidated Results of Operations.

Goodwill represents the excess of cost over the fair value of identified net assets of businesses acquired. We review goodwill for impairment annually, or whenever circumstances change in a way which could indicate that impairment may have occurred. Goodwill is tested at the reporting unit level. We identify potential goodwill impairments by comparing the fair value of the reporting unit to its carrying amount, which includes goodwill and other intangible assets. If the carrying amount of the reporting unit exceeds the fair value, an impairment exists. The amount of the impairment is the amount by which the carrying amount exceeds the fair value. A significant amount of judgment is involved in determining if an indication of impairment exists. Factors may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; and slower growth rates. Any adverse change in these factors would have a significant impact on the recoverability of these assets and negatively affect our financial condition and consolidated results of operations. We are required to record a non-cash impairment charge if the testing performed indicates that goodwill has been impaired.

We evaluate the useful lives of our fixed assets and intangible assets to determine if they are definite or indefinite-lived. Reaching a determination on useful life requires significant judgments and assumptions regarding the lease term, future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the level of required maintenance expenditures and the expected lives of other related groups of assets. We cannot accurately predict the amount and timing of any impairment of assets. Should the value of goodwill, fixed assets or intangible assets become impaired, there could be an adverse effect on our financial condition and consolidated results of operations.

Our business, financial condition, results of operations and cash flows may be adversely affected by global public health epidemics and pandemics, including the recent COVID-19 outbreak.

Our business and operations expose us to risks associated with global health epidemics or pandemics, such as the recent outbreak of the coronavirus (COVID-19) which has spread from China to many other countries including the United States. The outbreak has resulted in governments around the world implementing increasingly stringent measures to help the control of the spread of

the virus, including quarantines, "shelter in place" and "stay at home" orders, travel restrictions, business curtailments, and school closures among others. The President of the United States has declared the COVID-19 outbreak a national emergency and the Federal Reserve has enacted fiscal and monetary stimulus measures to counteract the impacts of COVID-19.

We are a company operating in a critical infrastructure industry, as defined by the U.S. Department of Homeland Security. Consistent with federal guidelines and with state and local orders to date, we currently continue to operate across our business footprint. Notwithstanding our continued operations, COVID-19 has begun to have and may have additional negative impacts on our operations and customers, which may compress our margins, including as a result of preventative and precautionary measures that we, other businesses, and governments are taking. Any resulting economic downturn could adversely affect the demand for our products and contribute to volatile supply and demand conditions affecting prices and volumes in the markets for our products and raw materials. The continued progression of the outbreak could also negatively impact our business or results of operations through the temporary closure or suspension of manufacturing operations at our operating locations or those of our customers or suppliers.

In addition, the ability of our employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19, and as a result, may impact our production throughout our supply chain and constrict sales channels. Our customers may be directly impacted by business curtailments or weak market conditions and may not be able to fulfill their contractual obligations. Our bank credit agreement requires that we maintain certain financial and other covenants. Events resulting from the effects of the COVID-19 outbreak may negatively affect our ability to comply with these covenants, which could lead us to seek amendment or waivers from our lenders, limit access to or require accelerated repayment of our existing credit facilities, or require us to pursue alternative financing arrangements. We have no assurance that any alternative financing arrangements, if required, could be obtained at acceptable terms to us, or at all, given effects of the financial markets at such time.

The extent to which the COVID-19 outbreak may adversely affect our business depends on future developments, which are highly uncertain and unpredictable, including new information about the severity of the outbreak and the effectiveness of actions to contain or mitigate its effects. As such, the related financial impacts cannot be reasonably estimated at this time.

Our business could be negatively affected as a result of actions of activist shareholders.

From time to time, we may be subject to proposals by shareholders urging us to take certain corporate actions. If activist shareholder activities ensue, our business could be adversely impacted because (i) responding to actions by activist shareholders can be costly and time-consuming, and divert the attention of our management and employees; (ii) perceived uncertainties as to our future direction may result in the loss of potential business opportunities, and may make it more difficult to attract and retain qualified personnel and business partners; and (iii) pursuit of an activist shareholder's agenda may adversely affect our ability to effectively implement our business strategy and create additional value for our shareholders.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Purchases of Equity Securities by the Issuer and Affiliated Purchasers~~None.

~~Period~~

~~(a)~~

~~Total number of shares (or units) purchased~~

~~(b)~~

~~Average price paid per share (or unit)~~

~~(c)~~

~~Total number of shares (or units) purchased as part of publicly announced plans or programs~~

~~(d)~~

~~Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs~~

~~Jan 1, 2017 - Mar 31, 2017~~

—

~~870,100~~

~~Apr 1, 2017 - June 30, 2017~~

—

~~870,100~~

~~Jul 1, 2017 - Aug 31, 2017~~

—

~~870,100~~

~~Total~~

—

The Stock Repurchase Plan was approved by the Company's Board of Directors on August 31, 2015 authorizing the Company's Chief Executive Officer or the Chief Financial Officer to repurchase shares of the Company's stock on the open market, provided however, that the number of shares of common stock repurchased pursuant to the resolutions adopted by the Board do not exceed 1,000,000 shares and no shares shall be repurchased at a price in excess of $10.99 per share or during an insider trading "closed window" period. There is no guarantee on the exact number of shares that will be purchased by the Company and the Company may discontinue purchases at any time that management determines additional purchases are not warranted. The Stock Repurchase Plan will expire on August 31, 2017.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit No.		Description
~~10.1~~4.1		Amendment No. 1 to the Rights Agreement, dated as of June 27, 2020, by and between Synalloy Corporation and American Stock Transfer & Trust Company, LLC, as rights agent, incorporated by reference to Registrants Form 8-K filed on June 29, 2020.
10.1		Third Amendment to the Third Amended and Restated Loan ~~agreement,~~Agreement, dated as of ~~October 30, 2017,~~July 31, 2020, between Registrant and Truist Bank, formerly Branch Banking ~~and Trust ("BB&T")~~& Trust.
~~31.1~~10.2		Fourth Amendment to the Third Amended and Restated Loan Agreement, dated as of August 13, 2020, between Registrant and Truist Bank, formerly Branch Banking & Trust.
31.1		Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
~~31.3~~32		~~Rule 13a-14(a)/15d-14(a) Certification of the Chief Accounting Officer~~
32	Certifications Pursuant to 18 U.S.C. Section 1350
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase
101.LAB*		XBRL Taxonomy Extension Label Linkbase
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
104		Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101*)
*		In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed "furnished" and not "filed."

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




	SYNALLOY CORPORATION
	(Registrant)


Date: ~~November 7, 2017~~	September 3, 2020	By:	/s/ Craig C. Bram
			Craig C. Bram
			President and Chief Executive Officer
			(principal executive officer)

Date: ~~November 7, 2017~~	September 3, 2020	By:	/s/ ~~Dennis~~Sally M. ~~Loughran~~Cunningham
		~~Dennis~~	Sally M. ~~Loughran~~Cunningham
			Senior Vice President and Chief Financial Officer
		~~(principal financial officer)~~

~~Date: November 7, 2017~~	~~By:~~	~~/s/ Richard D. Sieradzki~~
		~~Richard D. Sieradzki~~
		~~Chief Accounting Officer~~
		(principal accounting officer)

2137



Delaware				57-0426694
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

4510 Cox Road,	Suite 201,
Richmond,	Virginia			23060
(Address of principal executive offices)				(Zip Code)
	~~(864) 585-3605~~	(804)	822-3260
		(Registrant's telephone number, including area code)



Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, par value $1.00 per share	SYNL	NASDAQ Global Market



Large accelerated ~~Filer~~ ¨ filer	☐	Accelerated filerx	☒	Non-accelerated filer¨ ~~(Do not check if smaller reporting company)~~	☐
Smaller reporting company¨	☒	Emerging growth company¨	☐


					(Unaudited)
	Sep 30, 2017		Dec 31, 2016		June 30, 2020		December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	15,410	$	62,873	$	1,412	$	626
Accounts receivable, less allowance for doubtful accounts
of $236,000 and $82,000, respectively	30,312,586		18,028,946
Accounts receivable, net of allowance for credit losses of $939 and $70, respectively					36,226		35,074
Inventories, net	70,506,055		60,799,509		95,331		98,186
Prepaid expenses and other current assets	9,048,905		7,272,569		14,718		13,229
Indemnified contingencies - see Note 11	—		11,339,888
Total current assets	109,882,956		97,503,785		147,687		147,115

Property, plant and equipment, net of accumulated
depreciation of $49,135,440 and $45,219,309 respectively	34,967,728		27,324,092
Property, plant and equipment, net					37,359		40,690
Right-of-use assets, operating leases, net					35,717		35,772
Goodwill	6,003,525		1,354,730		17,558		17,558
Intangible assets, net of accumulated amortization
of $9,885,902 and $8,148,162, respectively	11,490,767		12,308,838
Deferred charges, net and other non-current assets	88,689		146,618
Intangible assets, net					12,835		15,714
Deferred charges, net					268		348
Total assets	$	162,433,665	$	138,638,063	$	251,424	$	257,197

Liabilities and Shareholders' Equity
Current liabilities
Accounts payable	$	24,769,264	$	16,684,508	$	24,844	$	21,150
Accrued expenses	9,779,911		16,087,434
Accrued expenses and other current liabilities					10,243		11,613
Current portion of long-term debt					4,000		4,000
Current portion of operating lease liabilities					991		3,562
Current portion of finance lease liabilities					31		253
Total current liabilities	34,549,175		32,771,942		40,109		40,578

Long-term debt	26,722,960		8,804,206		74,635		71,554
Long-term portion of earn-out liability					1,642		3,578
Deferred income taxes	1,576,515		1,609,492		333		790
Long-term deferred gain, sale-leaseback	6,016,918		6,267,623
Long-term portion of earn-out liability	3,119,856		—
Long-term portion of operating lease liabilities					36,510		33,723
Long-term portion of finance lease liabilities					44		336
Other long-term liabilities	756,806		592,245		94		127
Total non-current liabilities					113,258		110,108
Commitments and contingencies – See Note 11

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
Common stock, par value $1 per share; authorized 24,000,000 shares; issued 10,300,000 shares					10,300		10,300
Capital in excess of par value	35,069,410		34,714,206		37,465		37,407
Retained earnings	58,261,200		57,936,533		61,967		70,552
	103,630,610		102,950,739		109,732		118,259
Less cost of common stock in treasury: 1,583,107 and 1,630,690 shares, respectively	13,939,175		14,358,184
Less cost of common stock in treasury - 1,241,961 and 1,257,784 shares, respectively					11,675		11,748
Total shareholders' equity	89,691,435		88,592,555		98,057		106,511
Commitments and contingencies – See Note 11
Total liabilities and shareholders' equity	$	162,433,665	$	138,638,063	$	251,424	$	257,197



	Three Months Ended June 30, 2019

	Common Stock		Capital in Excess of Par Value			Retained Earnings			Cost of Common Stock in Treasury			Total
Balance at March 31, 2019	$	10,300	$	36,304		$	72,661		$	(12,470	)	$	106,795
Net loss	—		—			(262		)	—			(262		)
Issuance of 29,276 shares of common stock from treasury	—		24			—			280			304
Stock-based compensation	—		237			—			—			237
Balance at June 30, 2019	$	10,300	$	36,565		$	72,399		$	(12,190	)	$	107,074

	Six Months Ended June 30, 2019

	Common Stock		Capital in Excess of Par Value			Retained Earnings			Cost of Common Stock in Treasury			Total
Balance at December 31, 2018	$	10,300	$	36,521		$	68,965		$	(13,302	)	$	102,484
Net loss	—		—			(1,189		)	—			(1,189		)
Cumulative adjustment due to adoption of ASC 842	—		—			4,623			—			4,623
Issuance of 118,430 shares of common stock from treasury	—		(808		)	—			1,112			304
Stock-based compensation	—		852			—			—			852
Balance at June 30, 2019	$	10,300	$	36,565		$	72,399		$	(12,190	)	$	107,074



x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~For the Quarterly Period Ended September 30, 2017~~



¨☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Transition Period from _____ to _____




PART I				I. FINANCIAL INFORMATION
	Item 1.		Financial Statements
		Condensed ~~consolidated balance sheets - September~~Consolidated Balance Sheets as of June 30, ~~2017~~2020 (unaudited) and December 31, ~~2016~~2019	3
		Condensed ~~consolidated statements~~Consolidated Statements of ~~operations - Three-month~~Operations for the Three and ~~nine-month periods ended September~~Six Months Ended June 30, ~~2017~~2020 and ~~September 30, 2016~~2019 (unaudited)	4
		Condensed ~~consolidated statements~~Consolidated Statement of ~~cash flows - Nine-month periods ended September~~Cash Flows for the Six Months Ended June 30, ~~2017~~2020 and ~~September 30, 2016~~2019 (unaudited)	5
		~~Notes to condensed consolidated financial statements~~ Condensed Consolidated Statements of Shareholders' Equity for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)	6
		Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3.		Quantitative and Qualitative Disclosures About Market Risk	32
	Item 4.		Controls and Procedures	32

~~Part II~~				PART II. OTHER INFORMATION
	Item 1.	~~Legal Proceedings~~
	~~Item~~ Legal Proceedings~~1A.~~	~~Risk Factors~~ 34
Item 1A.		Risk Factors	34
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.		Defaults Upon Senior Securities	35
Item 4.		Mine Safety Disclosures	35
Item 5.		Other Information	35
Item 6.		Exhibits	36
	~~Item 3.~~	~~Defaults Upon Senior Securities~~
	~~Item 4.~~	~~Mine Safety Disclosures~~
Signatures	~~Item 5.~~	~~Other Information~~
	~~Item 6.~~	~~Exhibits~~
	~~Signatures and Certifications~~ 37



	Three Months Ended						Nine 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	(83,568		)	2,455,347			(250,705		)	2,455,347
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			—			145,200			—
Other, net	(316,158		)	—			(316,158		)	—

(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	—			—			—			(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	—			—			366,346			—
Reclassification adjustment for gains included in
net income, net of tax	(366,346		)	—			(366,346		)	—
Other comprehensive loss	(366,346		)	—			—			—
Comprehensive (loss) income	$	(1,573,098	)	$	(2,608,276	)	$	324,667		$	(5,657,737	)

Net (loss) income per common share from continuing operations:
Basic	$	(0.14	)	$	(0.30	)	$	0.04		$	(0.64	)
Diluted	$	(0.14	)	$	(0.30	)	$	0.04		$	(0.64	)

Net loss per common share from discontinued operations:
Basic	$	—		$	—		$	—		$	(0.01	)
Diluted	$	—		$	—		$	—		$	(0.01	)

Net (loss) income per common share:
Basic	$	(0.14	)	$	(0.30	)	$	0.04		$	(0.65	)
Diluted	$	(0.14	)	$	(0.30	)	$	0.04		$	(0.65	)

Weighted average shares outstanding:
Basic	8,716,893			8,658,361			8,696,884			8,644,437
Dilutive effect from stock options and grants	—			—			17,030			—
Diluted	8,716,893			8,658,361			8,713,914			8,644,437



	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



	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



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	)



	Sales Increase (decrease) from prior year period
	$		%	Average selling price	Units shipped
Third quarter
Storage tank and vessel	$	3,116,000	68.7%	31.0%	37.7%
Seamless carbon steel pipe and tube	3,049,000		84.2%	13.8%	70.4%
Stainless steel pipe⁽¹⁾	14,567,000		103.0%	(27.4)%	130.4%
Total third quarter change	$	20,732,000
(1) Excluding Bristol Metals - Munhall	5,892,000		41.7%	(4.4)%	46.1%

First nine months
Storage tank and vessel	$	5,770,000	40.6%	27.9%	12.7%
Seamless carbon steel pipe and tube	8,011,000		74.4%	4.5%	69.9%
Stainless steel pipe⁽²⁾	29,709,000		68.5%	(6.2)%	74.7%
Total first nine months change	$	43,490,000
(2) Excluding Bristol Metals - Munhall	12,622,000		29.1%	5.6%	23.5%