UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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
ORFor the Quarterly Period Ended September 30, 2020
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____


COMMISSION FILE NUMBER 0-19687
synalloylogorgba04a08.jpgsynl-20200930_g1.jpg
Synalloy Corporation
(Exact name of registrant as specified in its charter)
Delaware57-0426694
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
4510 Cox Road,Suite 201, Richmond, Virginia23060
Richmond,Virginia23060
(Address of principal executive offices)(Zip Code)
(864) 585-3605(804)822-3260
(Registrant's telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common Stock, par value $1.00 per shareSYNLNASDAQ Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x☒  No ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated Filer ¨
filer
☐
Accelerated filerx
☒
Non-accelerated filer¨ (Do not check if smaller reporting company)☐
Smaller reporting company¨
☒
Emerging growth company¨☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ¨☐  No ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨☐    No x☒
The number of shares outstanding of the registrant's common stock as of November 3, 20176, 2020 was 8,728,498.9,108,691


1





Synalloy Corporation
Index
Table of Contents
PART II. FINANCIAL INFORMATION
Item 1.
Item 1.
Financial Statements
3
4
5
6
8
Item 2.
23
Item 3.
36
Item 4.
36
Part II
PART II. OTHER INFORMATION
Item 1.
37
Item 1A.Risk Factors
37
Item 2.
38
Item 3.
38
Item 4.
38
Item 5.
38
Item 6.
39
40



2

PART
Part I - Financial Information
Item 1. FINANCIAL STATEMENTSFinancial Statements

Synalloy CorporationSYNALLOY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)(in thousands, except par value and share data)
(Unaudited)
Sep 30, 2017 Dec 31, 2016 September 30, 2020December 31, 2019
Assets   Assets 
Current assets   Current assets 
Cash and cash equivalents$15,410
 $62,873
Cash and cash equivalents$163 $626 
Accounts receivable, less allowance for doubtful accounts   
of $236,000 and $82,000, respectively30,312,586
 18,028,946
Accounts receivable, net of allowance for credit losses of $237 and $70, respectivelyAccounts receivable, net of allowance for credit losses of $237 and $70, respectively33,132 35,074 
Inventories, net70,506,055
 60,799,509
Inventories, net89,007 98,186 
Prepaid expenses and other current assets9,048,905
 7,272,569
Prepaid expenses and other current assets13,453 13,229 
Indemnified contingencies - see Note 11—
 11,339,888
Total current assets109,882,956
 97,503,785
Total current assets135,755 147,115 
   
Property, plant and equipment, net of accumulated   
depreciation of $49,135,440 and $45,219,309 respectively34,967,728
 27,324,092
Property, plant and equipment, netProperty, plant and equipment, net36,331 40,690 
Right-of-use assets, operating leases, netRight-of-use assets, operating leases, net32,090 35,772 
Goodwill6,003,525
 1,354,730
Goodwill6,810 17,558 
Intangible assets, net of accumulated amortization   
of $9,885,902 and $8,148,162, respectively11,490,767
 12,308,838
Deferred charges, net and other non-current assets88,689
 146,618
Intangible assets, netIntangible assets, net12,131 15,714 
Deferred income taxesDeferred income taxes1,327 0 
Deferred charges, netDeferred charges, net271 348 
Total assets$162,433,665
 $138,638,063
Total assets$224,715 $257,197 
   
Liabilities and Shareholders' Equity   Liabilities and Shareholders' Equity 
Current liabilities   Current liabilities 
Accounts payable$24,769,264
 $16,684,508
Accounts payable$19,514 $21,150 
Accrued expenses9,779,911
 16,087,434
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities6,718 6,037 
Current portion of long-term debtCurrent portion of long-term debt4,000 4,000 
Current portion of earn-out liabilityCurrent portion of earn-out liability3,959 5,576 
Current portion of operating lease liabilitiesCurrent portion of operating lease liabilities835 3,562 
Current portion of finance lease liabilitiesCurrent portion of finance lease liabilities26 253 
Total current liabilities34,549,175
 32,771,942
Total current liabilities35,052 40,578 
   
Long-term debt26,722,960
 8,804,206
Long-term debt67,343 71,554 
Long-term portion of earn-out liabilityLong-term portion of earn-out liability994 3,578 
Deferred income taxes1,576,515
 1,609,492
Deferred income taxes0 790 
Long-term deferred gain, sale-leaseback6,016,918
 6,267,623
Long-term portion of earn-out liability3,119,856
 —
Long-term portion of operating lease liabilitiesLong-term portion of operating lease liabilities33,000 33,723 
Long-term portion of finance lease liabilitiesLong-term portion of finance lease liabilities41 336 
Other long-term liabilities756,806
 592,245
Other long-term liabilities92 127 
Total non-current liabilitiesTotal non-current liabilities101,470 110,108 
Commitments and contingencies – See Note 11Commitments and contingencies – See Note 11
   
Shareholders' equity   Shareholders' equity 
Common stock, par value $1 per share - authorized 24,000,000 shares; issued 10,300,000 shares10,300,000
 10,300,000
Common stock, par value $1 per share; authorized 24,000,000 shares; issued 10,300,000 sharesCommon stock, par value $1 per share; authorized 24,000,000 shares; issued 10,300,000 shares10,300 10,300 
Capital in excess of par value35,069,410
 34,714,206
Capital in excess of par value37,664 37,407 
Retained earnings58,261,200
 57,936,533
Retained earnings51,428 70,552 
103,630,610
 102,950,739
 99,392 118,259 
Less cost of common stock in treasury: 1,583,107 and 1,630,690 shares, respectively13,939,175
 14,358,184
Less cost of common stock in treasury - 1,191,309 and 1,257,784 shares, respectivelyLess cost of common stock in treasury - 1,191,309 and 1,257,784 shares, respectively11,199 11,748 
Total shareholders' equity89,691,435
 88,592,555
Total shareholders' equity88,193 106,511 
Commitments and contingencies – See Note 11
 
Total liabilities and shareholders' equity$162,433,665
 $138,638,063
Total liabilities and shareholders' equity$224,715 $257,197 


Note: The condensed consolidated balance sheet at December 31, 20162019 has been derived from the audited consolidated financial statements at that date. See accompanying notes to condensed consolidated financial statements.

3
SYNALLOY CORPORATION
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net sales$59,266 $73,640 $200,099 $237,222 
Cost of sales54,271 66,352 183,592 213,412 
Gross profit4,995 7,288 16,507 23,810 
Selling, general and administrative expense6,275 8,361 21,088 24,920 
Acquisition costs and other656 90 803 438 
Proxy contest costs207 0 3,105 0 
Earn-out adjustments(146)(1,242)(969)(1,643)
Asset impairments0 0 6,079 0 
Goodwill impairment10,748 0 10,748 0 
Gain on lease modification(171)0 (171)0 
Operating (loss) income(12,574)79 (24,176)95 
Other expense (income)
Interest expense452 944 1,703 2,977 
Change in fair value of interest rate swaps(16)21 65 145 
Other, net59 180 (1,244)(224)
Loss before income taxes(13,069)(1,066)(24,700)(2,803)
Income tax benefit(2,530)(112)(6,026)(660)
Net loss$(10,539)$(954)$(18,674)$(2,143)
Net loss per common share:
Basic$(1.16)$(0.11)$(2.06)$(0.24)
Diluted$(1.16)$(0.11)$(2.06)$(0.24)
Weighted average shares outstanding:
Basic9,105 8,995 9,079 8,969 
Dilutive effect from stock options and grants0 0 0 0 
Diluted9,105 8,995 9,079 8,969 
See accompanying notes to condensed consolidated financial statements
4
SYNALLOY CORPORATION
Condensed Consolidated Statement of Cash Flows (Unaudited)
(in thousands)
Nine Months Ended September 30,
 20202019
Operating activities  
Net loss$(18,674)$(2,143)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation expense5,752 5,806 
Amortization expense2,324 2,614 
Asset impairments6,079 0 
Goodwill impairment10,748 0 
Amortization of debt issuance costs129 120 
Unrealized (gain) loss on equity securities(208)282 
Deferred income taxes(2,116)(561)
Proceeds from business interruption insurance1,040 0 
Loss (gain) on sale of equity securities38 (474)
Earn-out adjustments(969)(1,643)
Payments on earn-out liabilities in excess of acquisition date fair value(292)(448)
Provision for losses on accounts receivable53 (92)
Provision for losses on inventories874 1,392 
Loss on sale of property, plant and equipment237 (50)
Non-cash lease expense385 432 
Non-cash lease termination loss24 0 
Gain on lease modification(171)0 
Change in fair value of interest rate swap65 145 
Issuance of treasury stock for director fees405 304 
Stock-based compensation expense1,036 1,760 
Changes in operating assets and liabilities:  
Accounts receivable1,438 2,779 
Inventories4,593 12,169 
Other assets and liabilities(1,902)(1,035)
Accounts payable(1,636)(909)
Accrued expenses681 (1,258)
Accrued income taxes(3,963)(1,263)
Net cash provided by operating activities5,970 17,927 
Investing activities  
Purchases of property, plant and equipment(2,824)(2,841)
Proceeds from sale of property, plant and equipment102 189 
Proceeds from sale of equity securities4,430 1,091 
Purchase of equity securities0 (543)
Acquisition of ASTI0 (21,895)
Net cash provided by (used in) investing activities1,708 (23,999)
Financing activities  
Borrowings (repayments) from line of credit(1,210)(10,630)
Borrowings from term loan0 20,000 
Payments on long-term debt(3,000)(2,667)
Principal payments on finance lease obligations(101)(101)
Payments for finance lease terminations(204)0 
Payments on earn-out liabilities(2,939)(2,497)
Repurchase of common stock(635)0 
Payments for deferred financing costs(52)0 
Net cash (used in) provided by financing activities(8,141)4,105 
Decrease in cash and cash equivalents(463)(1,967)
Cash and cash equivalents at beginning of period626 2,220 
Cash and cash equivalents at end of period$163 $253 
Supplemental disclosure
Cash paid for:
  Interest$1,573 $2,780 
  Income taxes$16 $1,174 
See accompanying notes to condensed consolidated financial statements
5
SYNALLOY CORPORATION
Condensed Consolidated Statement of Shareholders' Equity (Unaudited)
(in thousands)

Three Months Ended September 30, 2020
 Common StockCapital in Excess of
Par Value		Retained EarningsCost of Common Stock in TreasuryTotal
Balance at June 30, 2020$10,300 $37,465 $61,967 $(11,675)$98,057 
Net loss— — (10,539)— (10,539)
Issuance of 50,652 shares of common stock from treasury(71)476 405 
Stock-based compensation— 270 — — 270 
Balance at September 30, 2020$10,300 $37,664 $51,428 $(11,199)$88,193 
Nine Months Ended September 30, 2020
Common StockCapital in Excess of
Par Value		Retained EarningsCost of Common Stock in TreasuryTotal
Balance at December 31, 2019$10,300 $37,407 $70,552 $(11,748)$106,511 
Net loss— — (18,674)— (18,674)
Cumulative adjustment due to adoption of ASC 326— — (450)— (450)
Issuance of 126,092 shares of common stock from treasury— (779)— 1,184 405 
Stock-based compensation— 1,036 — — 1,036 
Purchase of common stock— — — (635)(635)
Balance at September 30, 2020$10,300 $37,664 $51,428 $(11,199)$88,193 
See accompanying notes to condensed consolidated financial statements.
3
6





Synalloy Corporation
Condensed Consolidated StatementsStatement of OperationsShareholders' Equity (Unaudited)
(unaudited)Continued

 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 sales49,759,304
 29,792,812
 127,892,423
 92,295,722
        
Gross profit4,836,620
 4,504,419
 20,418,125
 13,220,189
        
Selling, general and administrative expense6,587,791
 5,814,655
 18,925,593
 17,041,216
Acquisition related costs37,402
 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 expense279,598
 272,987
 715,131
 822,426
Change in fair value of interest rate swaps(8,497) (115,328) (33,000) 276,512
Earn-out adjustment62,804
 —
 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:       
Basic8,716,893
 8,658,361
 8,696,884
 8,644,437
Dilutive effect from stock options and grants—
 —
 17,030
 —
Diluted8,716,893
 8,658,361
 8,713,914
 8,644,437
Three Months Ended September 30, 2019
 Common StockCapital in Excess of
Par Value		Retained EarningsCost of Common Stock in TreasuryTotal
Balance at June 30, 2019$10,300 $36,565 $72,399 $(12,190)$107,074 
Net loss— — (954)— (954)
Stock-based compensation— 908 — — 908 
Balance at September 30, 2019$10,300 $37,473 $71,445 $(12,190)$107,028 
Nine Months Ended September 30, 2019
Common StockCapital in Excess of
Par Value		Retained EarningsCost of Common Stock in TreasuryTotal
Balance at December 31, 2018$10,300 $36,521 $68,965 $(13,302)$102,484 
Net loss— — (2,143)— (2,143)
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— 1,760 — — 1,760 
Balance at September 30, 2019$10,300 $37,473 $71,445 $(12,190)$107,028 
See accompanying notes to condensed consolidated financial statements.



7

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 expense3,916,131
 3,322,115
Amortization expense1,827,171
 1,844,840
Amortization of debt issuance costs40,829
 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 receivable192,892
 (51,531)
Provision for losses on inventories500,338
 460,726
Gain on sale of property, plant and equipment2,279
 2,294,917
Amortization of deferred gain on sale-leaseback(250,705) —
Straight line lease cost on sale-leaseback304,898
 —
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 fees287,475
 330,000
Employee stock option and grant compensation486,740
 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, net10,179,835
 (932,324)
Accounts payable8,084,756
 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 equipment1,048
 22,215,362
Purchases of available for sale securities(3,831,521) —
Proceeds from sale of available for sale securities4,141,564
 —
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 credit17,918,754
 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 activities17,308,733
 (20,095,675)
Decrease in cash and cash equivalents(47,463) (133,607)
Cash and cash equivalents at beginning of period62,873
 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 theaudited consolidated financial statements and notes thereto included in the Company's annual reportSynalloy 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.

Reclassifications
Certain prior period amounts have been reclassified to conform to current period presentation.
NOTE 2--RECENTLY ISSUED ACCOUNTING STANDARDS
In May 2014, the FinancialRecently Issued Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers- Adopted
On January 1, 2020, the Company adopted ASU No. 2018-13 Fair Value Measurement (Topic 606)", which changes the criteria for recognizing revenue. The standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires a five-step process for recognizing revenue including identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price820): Disclosure Framework - Changes to the performance obligationsDisclosure 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 contractreporting date. The guidance also adds disclosure requirements for changes in unrealized gains and recognizing revenue when (or as)losses for the entity satisfies a performance obligation. Two transition methods are availableperiod included in other comprehensive income for implementing the requirements of ASU 2014-09: retrospectively for each prior reporting period presented or retrospectively with the cumulative effect of initial application recognizedrecurring Level 3 measurements held at the date of initial application. The FASB has issued several amendments to the standard, which are intended to promote a more consistent applicationend of the principles outlined in the standard. The new standard is effective for the Company for annual periods in fiscal years beginning after December 15, 2017. The company will adopt the new guidance in the first quarter of 2018. The Company is currently assessing the impact the new standard will have on the consolidated financial statementsreporting period as well as its business processes, internal controls,the range and accounting policies. As partweighted average of its assessment,significant unobservable inputs used to develop Level 3 fair value measurements. The adoption of this standard by 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 doesdid not believe the standard will have a material impact on the unaudited condensed consolidated financial statements other thanor footnote disclosures. See Note 2 for further discussion on the disclosures requiredCompany'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 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 standard,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 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 a result of the Company being a manufacturer that records revenue at a single pointbeginning of the first reporting period in time when controlwhich the guidance is transferred.effective. 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 resultsevaluated its financial instruments and determined that its trade accounts receivable are subject to the new current expected credit loss model. Based upon the application 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")new current expected credit loss 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, 20172020, 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.
8
Synalloy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
On September 30, 2020, the Company early adopted ASU No. 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This ASU removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and itthe recognition of deferred tax liabilities for outside basis differences as well as adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group. The most significant impact to the Company is the removal of a limit on the tax benefit recognized on pre-tax losses in interim periods. The adoption of this standard by the Company did not have a material effect on the Company'sunaudited condensed consolidated financial statements.statements or footnote disclosures.
Recently Issued Accounting Standards - Not Yet Adopted
Recent accounting pronouncements pending adoption, other than those stated above, are not expected to have a material 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 financial 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 securities 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 instances where the inputs used to measure 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 nine months ended September 30, 2020, the Company sold 494,074 and 1.2 million shares, respectively, of its equity securities investments, resulting in a realized loss of $69,375 and $37,954, respectively.
For the three months ended September 30, 2020, the Company recorded 0 net unrealized gains or losses on investments in equity securities. For the nine months ended September 30, 2020, the Company recorded net unrealized gains of $0.2 million on the investments in equity securities held, which is included in "Other expense (income)" on the accompanying unaudited condensed consolidated statements of operations.
The Company held 0 equity securities as of September 30, 2020. The fair value of equity securities held by the Company as of December 31, 2019 was $4.3 million and is included in “Prepaid expenses and other current assets” on the accompanying condensed consolidated balance sheets.
9
Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)
(Unaudited)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 contract was a liability of $0.1 million at September 30, 2017
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 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.

Level 3: Contingent consideration (earn-out) liabilities
In JanuaryThe 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 FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): ClarifyingCompany re-evaluates its assumptions for all earn-out liabilities and adjusts to reflect the Definitionupdated fair values. Changes in the estimated fair value of a Business"the earn-out liabilities are reflected in operating income in the periods in which provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017. The Company does not believe its implementation will have a material effect on the Company's consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment," which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount andthey are identified. Changes in the fair value of the reporting unit. ASU 2017-04 is effectiveearn-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 nine months ended September 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 nine months ended September 30, 2020:
(in thousands)MUSA-StainlessMUSA-GalvanizedAmerican StainlessTotal
Balance at December 31, 2019$2,403 $1,782 $4,969 $9,154 
Earn-out payments during the period(1,263)(488)(1,480)(3,231)
Changes in fair value during the period(415)(38)(516)(969)
Balance at September 30, 2020$725 $1,256 $2,973 $4,954 
For the three and nine months ended September 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 September 30, 2020:
InstrumentFair Value
September 30, 2020		Principal Valuation TechniqueSignificant Unobservable InputsRangeWeighted
Average
Contingent consideration (earn-out) liabilities$4,954Probability Weighted Expected ReturnDiscount rate-5%
Timing of estimated payouts2020 - 2022-
Future revenue projections$5.5M - 12.3M$9.5M
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 nine months ended September 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 and goodwill.
10
Synalloy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
The Company electedreviews 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 provisionschief financial officer, assess performance quarterly against historical patterns, projections of this ASU infuture 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 implementationCompany estimates the fair values of this ASU did not have a material effectassets 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,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 changesquarter ended June 30, 2020, due to the termscontinued curtailment of operations related to 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.
The Company evaluates goodwill for impairment annually and earlier if an event or conditionsother circumstances indicates that we may not recover the carrying value of share-based payment awards to which an entity would bethe asset. During the third quarter of 2020, the Company determined potential indicators of impairment within the Welded Pipe & Tube reporting unit included in the Metals Segment existed. 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 below its carrying value by 9.7% resulting in a goodwill impairment charge of $10.7 million for the quarter ended September 30, 2020. See Note 5 - Goodwill and Intangible Assets for additional details. The Company classifies these fair value measurements as Level 3.
Fair Value of Financial Instruments
For short-term instruments, other than those required to apply modification accounting under ASC 718. ASU 2017-09be 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 effectivea 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 September 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 oncash 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--INVENTORIESNote 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)September 30, 2020December 31, 2019
Raw materials$39,843 $42,896 
Work-in-process20,780 17,616 
Finished goods29,964 38,422 
$90,587 $98,934 
Less inventory reserves$1,580 $748 
Inventories, net$89,007 $98,186 

11
 Sep 30, 2017 Dec 31, 2016
Raw materials$36,226,019
 $31,973,073
Work-in-process9,574,418
 9,897,857
Finished goods24,705,618
 18,928,579
 $70,506,055
 $60,799,509
Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 4: Property, Plant and Equipment
NOTE 4--INTANGIBLE ASSETS AND DEFERRED CHARGES
Deferred chargesProperty, plant and equipment consist of the following: 
(in thousands)September 30, 2020December 31, 2019
Land63 63 
Leasehold improvements2,866 1,921 
Buildings84 214 
Machinery, fixtures and equipment100,097 100,300 
Construction-in-progress2,456 2,999 
105,566 105,497 
Less accumulated depreciation and amortization69,235 64,807 
Property, plant and equipment, net36,331 40,690 

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 third 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 declines in the Company's stock price, reporting unit operating losses, and continued declines in the reporting unit's net sales compared to forecast, collectively, indicated that the reporting unit had experienced a triggering event and the need to perform another quantitative interim evaluation of goodwill. As a result, the Company quantitatively evaluated the Welded Pipe & Tube reporting unit for impairment. Fair value of the reporting unit was determined using a combination of an income approach and a market-based approach with equal weighting applied to each approach. The income approach utilized the estimated discounted cash flows expected to be generated by the reporting unit's assets while the market-based approach utilized comparable company information. 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 below its carrying value by 9.7% resulting in a goodwill impairment charge of $10.7 million for the quarter ended September 30, 2020.

The carrying amounts of goodwill are as follows:
(in thousands)Metals SegmentChemicals Segment
Balance at December 31, 2019$16,203 $1,355 
Impairment charges(10,748)0 
Balance at September 30, 2020$5,455 $1,355 
12
Synalloy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)

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 balance of intangible assets totaled $21,700,496 at September 30, 2017 and $20,708,496 at December 31, 2016. Accumulatedsubject 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)September 30, 2020December 31, 2019
Intangible assets, gross$30,866 $32,126 
Accumulated amortization of intangible assets(18,735)(16,412)
Intangible assets, net$12,131 $15,714 

Estimated amortization expense related to intangible assets for the next five years is: remainderare as follows (in thousands):
Remainder of 2020$705 
20212,721 
20222,501 
20231,050 
2024952 
2025855 
Thereafter3,347 

Note 6: Long-term Debt

Long-term debt consists of 2017 - $629,558;the following:
(in thousands)September 30, 2020December 31, 2019
$100 million Revolving line of credit, due December 20, 2021$58,010 $59,221 
$20 million Term loan, due February 1, 2024$13,333 $16,333 
$71,343 $75,554 
On December 20, 2018, - $2,344,404;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 February 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 September 30, 2020, the Company had $7.5 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 second 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. 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
13
Synalloy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 amendments are effective for the quarter ended June 30, 2020 and the directly following three quarters after June 30, 2020.
The Company notified its bank of a technical default of the fixed charge coverage ratio in its Credit Agreement at the quarter ended September 30, 2020. To address the technical default, the Company entered into an amendment to its Credit Agreement with its bank subsequent to the end of the third quarter. On October 23, 2020, the Company entered into the Fifth Amendment to the Third Amended and Restated Loan Agreement (the "Fifth Amendment") with its bank. The Fifth Amendment amended the definition of the fixed charge coverage ratio to include in the numerator (i) the calculation of losses from the suspended operations of Palmer in the amount of $1,560,000, which is effective for the quarter ended June 30, 2020 and for the directly following three quarters after June 30, 2020, (ii) the calculation of losses from the suspended operations of Palmer in the amount of $740,000, which is effective for the quarter ended September 30, 2020 and for the directly following three quarters after September 30, 2020, and (iii) the extraordinary expenses related to the investigation of a whistleblower complaint in the amount of $636,000, which is effective for the quarter ended September 30, 2020 and for the directly following three quarters after September 30, 2020.
At September 30, 2020, the Company had a minimum fixed charge coverage ratio of 1.47 and a minimum tangible net worth of $67.7 million.

Note 7: Stock-Based Compensation

Stock-based compensation expense for the three and nine months ended September 30, 2020 was $0.3 million and $1.0 million, respectively. Stock-based compensation expense for the three and nine months ended September 30, 2019 - $2,155,832; 2020 - $1,997,565; 2021 - $1,899,298;was $0.9 million and thereafter - $2,552,799.$1.8 million, respectively.

NOTE 5--STOCK OPTIONS AND RESTRICTED STOCK

Stock Options
During the firstthree and nine months of 2017, noended September 30, 2020 and September 30, 2019, 0 stock options were exercised by officers andor employees of the Company.
2011 Long-Term Incentive 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

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 20152011 Long-Term Incentive Stock AwardsOption 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 theCompany. The stock awards amendment detailed in the following paragraph, these stock awardsoptions 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 sharesthat 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 treasuryescrow 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.
14
Synalloy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
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. AnyExcept 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 MayIn 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 amendmentvesting of the vesting schedules2017 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, 2016Compensation 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, 2017contain 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 reducingawards are determined based on the vestingclosing 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 yearsthe 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.

Note 8: Loss Per Share

The following table sets forth the computation of basic and diluted loss per share:
Three Months Ended
September 30,		Nine Months Ended September 30,
(in thousands, except per share data)2020201920202019
Numerator:  
Net loss(10,539)(954)(18,674)(2,143)
Denominator:  
Denominator for basic earnings per share - weighted average shares9,105 8,995 9,079 8,969 
Effect of dilutive securities:  
Employee stock options and stock grants0 0 0 0 
Denominator for diluted earnings per share - weighted average shares9,105 8,995 9,079 8,969 
Net loss per share:
Basic$(1.16)$(0.11)$(2.06)$(0.24)
Diluted$(1.16)$(0.11)$(2.06)$(0.24)

15
Synalloy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
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. ForThe Company had 0.3 million and 0.2 million shares of common stock that were anti-dilutive for the three and nine months ended September 30, 2017 and September 30, 2016 the2020, respectively. The Company had weighted average0 shares of common stock inthat were anti-dilutive for the form of stock grantsthree 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.nine months ended September 30, 2019, respectively.


NOTE 6--INCOME TAXESNote 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 examinations for years before 20142015 or state income tax examinations for years before 2012.2014. During the first nine months of 2020 and 2019, the Company did not identify nor reserve for any unrecognized tax benefits.

Our income tax provision and overall effective tax rates for the periods presented are as follows:
Three Months Ended
September 30,		Nine Months Ended September 30,
(in thousands)2020201920202019
Income tax benefit$(2,530)$(112)$(6,026)$(660)
Effective income tax rate19.4 %10.6 %24.4 %23.6 %

The effective tax rate was 30 percent19.4% and 28 percent10.6% for the three and nine-month periodsmonths ended September 30, 2017,2020 and 2019, respectively. The 2017September 30, 2020 effective tax rate was approximately equal to the U.S. statutory rate of 21.0%. The September 30, 2019 effective tax rate was lower than the statutory rate of 34 percent primarily21.0% due to state taxes, net of the federal benefit, and discrete tax expense and other permanent differences, mainly the manufacturer's exemption. benefits on our stock compensation plan.

The effective tax rate was 34 percent24.4% and 25 percent23.6% for the three and nine- month periodsnine months ended September 30, 2016,2020 and 2019, respectively. The nine-monthSeptember 30, 2020 effective tax rate was lowerhigher than the 34 percent statutory rate primarilyof 21.0% due to statediscrete tax expensebenefits over the costs associated with our public proxy contest, asset impairments at our Palmer facility, goodwill impairment over our Metals Segment 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 September 30, 2019 effective tax rate was approximately equal to the U.S. statutory tax rate of 21%.

Note 10: Leases

On September 10, 2020, Store Master Funding XII, LLC, a one-time permanent difference relatingDelaware limited liability company (“Store”) and the Company's sale-leaseback partner, closed on a transaction pursuant to cash surrender proceeds on certain life insurance policies reducingwhich Store sold to a third party approximately 12.5 acres of unimproved land and immaterial improvements located at Synalloy’s facility in Munhall, Pennsylvania. Synalloy subleases the amount of tax benefitMunhall facility to Bristol Metals, LLC.
As a result of the pre-tax losssale, on September 10, 2020, Synalloy and Store entered into a Third Amended and Restated Master Lease Agreement (the “Master Lease”) to reduce Synalloy’s rent at the Munhall facility pursuant to the terms and conditions of the Second Amended and Restated Master Lease Agreement between the parties dated January 2, 2019. The Master Lease amendment was determined to be a lease modification that qualified for that period.a change of accounting on the existing lease and not a separate contract. Upon modification of the Master Lease Agreement, the right-of-use asset and operating lease liability were remeasured using an incremental borrowing rate determined on the date of modification. As such, the Company recognized a reduction in the right-of-use asset and operating lease liability related to the Master Lease of $3.2 million and $3.4 million, respectively, and recognized a gain on the modification of $0.2 million, which is reported within operating expenses on the unaudited condensed consolidated statement of operations.

16
Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)
(Unaudited)Balance Sheet Presentation

Operating and finance lease amounts included in the unaudited condensed consolidated balance sheet are as follows (in thousands):
ClassificationFinancial Statement Line ItemSeptember 30, 2020
AssetsRight-of-use assets, operating leases$32,090 
AssetsProperty, plant and equipment65 
Current liabilitiesCurrent portion of lease liabilities, operating leases835 
Current liabilitiesCurrent portion of lease liabilities, finance leases26 
Non-current liabilitiesNon-current portion of lease liabilities, operating leases33,000 
Non-current liabilitiesNon-current portion of lease liabilities, finance leases41 
Total Lease Cost
Individual components of the total lease cost incurred by the Company are as follows:
(in thousands)Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
Operating lease cost$1,032 $3,101 
Finance lease cost:
Amortization of right-of-use assets9 84 
Interest on finance lease liabilities0 24 
Total lease cost$1,041 $3,209 
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 September 30, 20172020 are as follows:
(in thousands)OperatingFinance
Remainder of 2020$899 $9 
20213,610 22 
20223,665 15 
20233,699 15 
20243,549 8 
Thereafter47,159 0 
Total undiscounted minimum future lease payments62,581 69 
Imputed Interest28,746 2 
Present value of lease liabilities$33,835 $67 
17
Synalloy Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)

Lease Term and Discount Rate
NOTE 7--SEGMENT INFORMATION
Weighted-average remaining lease termSeptember 30, 2020
Operating Leases15.70 years
Finance Leases2.91 years
Weighted-average discount rate
Operating Leases8.33 %
Finance Leases2.56 %

During the three and nine months ended September 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.

18
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 September 30,Nine Months Ended September 30,
(in thousands)2020201920202019
Net sales
Metals Segment$47,079 $60,121 $159,761 $195,728 
Specialty Chemicals Segment12,187 13,519 40,338 41,494 
$59,266 $73,640 $200,099 $237,222 
Operating (loss) income
Metals Segment$(11,563)$450 $(19,784)$3,125 
Specialty Chemicals Segment1,061 846 3,508 2,387 
Unallocated corporate expenses1,526 2,369 5,132 6,622 
Acquisition related costs and other656 90 803 438 
Proxy contest costs207 0 3,105 0 
Earn-out adjustments(146)(1,242)(969)(1,643)
Gain on lease modification(171)0 (171)0 
Operating (loss) income(12,574)79 (24,176)95 
Interest expense452 944 1,703 2,977 
Change in fair value of interest rate swap(16)21 65 145 
Other (income) expense, net59 180 (1,244)(224)
Loss before income taxes$(13,069)$(1,066)$(24,700)$(2,803)
As of
(in thousands)September 30, 2020December 31, 2019
Identifiable assets
Metals Segment$157,974 $186,758 
Specialty Chemicals Segment25,004 25,428 
Corporate41,737 45,011 
$224,715 $257,197 

Note 13: Acquisitions
 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 Segment11,573,091
 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-leaseback59,901
 (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 Segment1,126,994
 1,417,116
 3,725,030
 3,949,453
Gain (loss) on sale-leaseback23,667
 (229,309) 71,002
 (229,309)
Total Specialty Chemicals segment1,150,661
 1,187,807
 3,796,032
 3,720,144
        
Unallocated straight line lease cost101,633
 —
 304,898
 —
Unallocated corporate expenses1,452,731
 1,713,684
 4,407,563
 4,335,756
Acquisition related costs37,402
 1,034
 782,397
 76,091
Operating (loss) income(1,705,005) (3,766,617) 960,840
 (6,352,465)
Interest expense279,598
 272,987
 715,131
 822,426
Change in fair value of interest rate swaps(8,497) (115,328) (33,000) 276,512
Earn-out adjustment62,804
 —
 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 Segment25,957,147
 22,907,672
    
Corporate5,976,337
 6,040,914
    
 $162,433,665
 $138,638,063
    
Goodwill       
Metals Segment$4,648,795
 $—
    
Specialty Chemicals Segment1,354,730
 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
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 acquirecompleted the stainless steel pipe and tubeacquisition 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 estateall-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 wasis 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. SinceDuring the acquisition closed on February 28, 2017, the allocationthird 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 determiningfinalized the appropriate discount rate to apply topurchase price allocation for 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.American Stainless acquisition.
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.
19
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 on the results of the final review and acceptance of the independent appraiser’s valuation report, which is expected to be completed within the measurement period. The fair value assigned to the customer list intangible will be amortized on an accelerated basis over 15 years. The excess of the consideration transferred over the fair value of the net tangible and identifiable intangible assets and liabilities is reflected as goodwill. Goodwill consists of manufacturing cost synergies expected from combining MUSA's laser millAmerican Stainless' production capabilities acquired as part of Bristol Metals-Munhall with BRISMET'sthe 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 estimateRevisionsFinal
Inventories$5,564 $0 $5,564 
Accounts receivable3,534 0 3,534 
Other current assets - production and maintenance supplies605 0 605 
Property, plant and equipment2,793 0 2,793 
Customer list intangible10,000 (496)9,504 
Goodwill7,044 714 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
 estimateRevisionsestimate
Inventories$5,434,000
$—
$5,434,000
Other current assets - production and maintenance supplies1,548,701
—
1,548,701
Equipment7,576,733
—
7,576,733
Customer list intangible992,000
—
992,000
Goodwill3,589,342
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'sASTI's results of operations since acquisition are reflected in the Company's consolidated statementsCondensed Consolidated Statements of operations.Operations as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2020201920202019
Net sales$8,020 $8,469 $22,920 $26,539 
Income before taxes$(4,233)$902 $(2,515)$2,001 

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 amountshares 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 revenuesauthorized, 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 forCompany may discontinue purchases at any time that management determines additional purchases are not warranted.
During the three months ended September 30, 2017 was $8,675,104 and $621,881, respectively. For2020, 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 ofstock 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 threenine months ended September 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 nine months ended September 30, 2019, the Company purchased 0 shares under the stock repurchase program.
As of September 30, 2020, the Company has 790,383 shares of its share repurchase authorization remaining.
20
Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)
(Unaudited)Shareholder Rights Plan

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 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
September 30,		Nine Months Ended
September 30,
(in thousands)2020201920202019
Fiberglass and steel liquid storage tanks and separation equipment538 5,552 4,994 25,628 
Heavy wall seamless carbon steel pipe and tube5,436 7,963 18,408 23,252 
Stainless steel pipe and tube37,231 40,993 120,265 128,299 
Galvanized pipe and tube3,875 5,613 16,094 18,549 
Specialty chemicals12,186 13,519 40,338 41,494 
Net sales$59,266 $73,640 $200,099 $237,222 

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 5 (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 3 (of eight) new directors at the Annual Meeting.
During the three and nine months ended September 30, 2017

Pro-Forma (Unaudited)
   Three Months Ended
   Sep 30, 2016
Pro-forma revenues

 $40,172,000
Pro-forma net loss

 (3,573,000)
Loss per share:   
   Basic

 $(0.41)
   Diluted

 $(0.41)
    
 Nine Months Ended
 Sep 30, 2017 Sep 30, 2016
Pro-forma revenues$153,235,000
 $122,117,000
Pro-forma net income (loss)368,000
 (7,347,000)
Earnings (loss) per share:   
   Basic$0.04
 $(0.85)
   Diluted$0.04
 $(0.85)
The pro-forma calculation excludes non-recurring acquisition2020, total costs of $698,587 which were incurred by the Company during 2017. The stainless steel operations of MUSA's historical financial results were adjusted for both years to eliminate interest expense charged by the prior owner. Pro-forma net income was reduced for both years for the amount of amortization on MUSA's customer list intangible and an estimated amount of interest expense associated with the additional line of credit borrowings.

NOTE 10--LONG-TERM DEBT
Pursuantrelating 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 ratioproxy contest were $0.2 million 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.$3.1 million, respectively.


21
NOTE 11--CONTINGENCIES
The Company is from time-to-time subject to various claims, possible legal actions for product liability and other damages, and other matters arising out of the normal conduct of the Company's business.  
In January 2014, a Metals Segment customer filed suit against Palmer and Synalloy and another unrelated defendant in Texas state court alleging breach of warranty, among other claims. The plaintiff’s claim for damages did not state a dollar amount. This matter arose out of products manufactured and sold by Palmer prior to Synalloy’s acquisition of all of Palmer's outstanding stock in August 2012. In August and September 2016, the parties to the lawsuit tried the matter in a bench trial in the District Court of Harris County, Texas, 333rd Judicial District (the “Court”). On December 31, 2016 (but made available to the parties to the lawsuit on January 3, 2017), the Court entered final judgment in favor of the Plaintiff and Synalloy and against Palmer. The Court ordered Palmer to pay the plaintiff approximately $8,600,000 in damages, plus pre- and post-judgment interest, and approximately $1,040,000 in attorneys’ fees. The Court ruled Synalloy had no liability to the plaintiff. At December 31, 2016, the Company recorded $11,000,000 in accrued expenses and current assets to reflect the legal liability and corresponding indemnified receivable due from the former shareholders of Palmer. Palmer filed a motion for a new trial with the Court at the end of January 2017, which the court denied. On June 30, 2017, the plaintiff entered into settlement agreements with Palmer/Synalloy and the former shareholders of Palmer, respectively, pursuant to which, the parties agreed to settle and release the judgment in full. On August 31, 2017, the former shareholders of Palmer satisfied the financial conditions specified in their settlement agreement with the plaintiff, and the plaintiff filed a Release of Final Judgment with the Court. Because the former shareholders of Palmer were contractually bound, pursuant to the Stock Purchase Agreement by and among Synalloy and the former shareholders dated August
Synalloy Corporation

Notes to Condensed Consolidated Financial Statements
(Unaudited)

September 30, 2017

Note 17: Subsequent Events
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
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 betweenfixed charge coverage ratio in its Credit Agreement at the parties and the Company breached the agreement. As a result of this ruling, the remaining issue in the case was the amount of the plaintiff's damages. Consequently, the Company increased the facility closing liability to a level of $3,000,000 for the estimated costs associated with this claim for the year ended December 31, 2015. In June 2016, the matter was settled for damages totaling $3,100,000. As a result, the Company increased the facility closing liability and made a payment of $2,500,000 in June 2016. The remaining balance of $600,000 was paid in September 2016. The amount required to adjust the facility closing reserve as a result of the settlement is included in discontinued operations on the accompanying consolidated statements of operations.
Other than the matters discussed in this note, management is not currently aware of any other asserted or unasserted matters which could have a material effect on the financial condition or results of operations of the Company.

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 periodsquarter ended September 30, 2017, respectively. Rent expense began in October 2016 and therefore no rent expense was recognized for2020. To address the three and nine-month periods ended September 30, 2016. The amount of future minimum lease payments under the sale-leaseback transaction are as follows: remainder of 2017 - $482,460; 2018 - $1,939,489; 2019 - $1,978,279; 2020 -$2,017,845; 2021 -$2,058,201; and thereafter - $35,602,349. In accordance with the agreement, the amount of future lease payments as of September 30, 2017 includes a rent escalator equal to two percent.
Losses on the sale-leaseback transaction of $2,455,347 were recognized and reflected in the accompanying condensed statement of operations for the three and nine-month periods ended September 30, 2016. In addition, transaction closing costs of $102,000 were included in "Selling, general, and administrative expense" on the condensed statement of operations for the third quarter and nine months ended September 30, 2016. The deferred gain recognized on the sale-leaseback transaction is amortized on the straight-line method over the life of the lease of 20 years. Deferred gain amortization began in October 2016 and totaled $83,568 and $250,705 for the three and nine-month periods ended September 30, 2017. The current portion of the deferred gain of $334,273 is included in "Accrued expenses" and the long-term portion of the deferred gain of $6,016,918 is included in "Long-term portion of deferred gain on sale-leaseback" in the accompanying condensed consolidated balance sheets.

NOTE 13--SUBSEQUENT EVENTS
On October 4, 2017,technical default, 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 amendedentered into an amendment to its Credit Agreement with its bank subsequent to increase the limitend of the asset-based revolving line of credit by $20,000,000third quarter. On October 23, 2020, the Company entered into the Fifth Amendment to a maximum of $65,000,000the Third Amended and extendedRestated Loan Agreement (the "Fifth Amendment") with its bank. The Fifth Amendment amended the maturity date to October 30, 2020. Nonedefinition of the other provisionsfixed charge coverage ratio to include in the numerator (i) the calculation of losses from the suspended operations of Palmer in the amount of $1,560,000, which is effective for the quarter ended June 30, 2020 and for the directly following three quarters after June 30, 2020, (ii) the calculation of losses from the suspended operations of Palmer in the amount of $740,000, which is effective for the quarter ended September 30, 2020 and for the directly following three quarters after September 30, 2020, and (iii) the extraordinary expenses related to the investigation of a whistleblower complaint in the amount of $636,000, which is effective for the quarter ended September 30, 2020 and for the directly following three quarters after September 30, 2020.

On October 27, 2020, the Company announced the retirement of Craig C. Bram, the Company's President and Chief Executive Officer and member of the Credit Agreement were changedCompany's Board of Directors, effective November 9, 2020. On October 27, 2020, the Company announced the appointment of Christopher G. Hutter, a member of the Company's Board of Directors, as a result of this amendment.interim President and Chief Executive Officer, effective November 9, 2020.



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

The following is management'sThis discussion of certainand analysis summarizes the significant factors that affected the Companyaffecting our consolidated operating results, liquidity, and capital resources during the three and nine-month periodsnine months ended September 30, 2017.2020, and September 30, 2019, respectively. 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 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

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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. We are an essential business and remain open in all locations, adhering to the health guidelines to operate safely provided by our government officials and the U.S. Centers for Disease Control and Prevention. Throughout the COVID-19 pandemic, our first priority has been to safeguard the health of our employees. This includes restricting outside personnel and visitors as well as requiring a face covering when a visitor is on-site, creating space between work areas for employees, providing ample PPE and cleaning supplies in our offices and manufacturing plants, restricting travel, and having formal policies for mitigation in the event of cases of illness.

Through the third quarter of 2020, COVID-19 has had an adverse effect on our reported results and operations. The Company has seen wide ranging impacts partially attributable to COVID-19 that have included:

•A $10.7 million non-cash goodwill impairment charge related to our Metals Segment;
•Continued curtailment of operations at our Palmer facility that has resulted in $3.6 million of operating losses through the third quarter of 2020 and $6.1 million of asset impairments related to that business; and,
•Technical defaults of our debt covenants in the second and third quarter of 2020 and the need to obtain waivers for compliance.

There remains significant uncertainty concerning the magnitude of the impact and the duration of the COVID-19 pandemic. We believe that, at a minimum, customer demand in the COVID-19 environment will continue to be lower in the fourth quarter of 2020 in comparison to the prior year fourth quarter and the manufacturing sector will continue to face challenges over the next several quarters. Given that, 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.

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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, 2020.

During the third 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 declines in the Company's stock price, reporting unit operating losses, and continued declines in the reporting unit's net sales compared to forecast, collectively, indicated that the reporting unit had experienced a triggering event and the need to perform another quantitative interim evaluation of goodwill. As a result, the Company quantitatively evaluated the Welded Pipe & Tube reporting unit for impairment. Fair value of the reporting unit was determined using a combination of an income approach and a market-based approach with equal weighting applied to each approach. The income approach utilized the estimated discounted cash flows expected to be generated by the reporting units assets while the market-based approach utilized comparable company information. 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 below its carrying value by 9.7% resulting in a goodwill impairment charge of $10.7 million for the quarter ended September 30, 2020.

We do consider the remainder of 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 95 basis point increase in the discount rate would result in an additional goodwill impairment charge of approximately $5.5 million and the remaining goodwill attributable to the Metals Segment to be impaired.

25

Results of Operations
Consolidated Performance Summary
Consolidated net sales for the third quarter of 20172020 were $54,596,000, an increase$59.3 million representing a decrease of $20,299,000$14.4 million or 59 percent19.5% when compared to net sales for the third quarter of 2016 of $34,297,000.2019. Net sales for the first nine months of 20172020 were $148,311,000, an increase$200.1 million representing a decrease of $42,795,000$37.1 million or 41 percent15.6% when compared to the same periodfirst nine months of 2019. The decrease in sales for the prior year. third quarter and first nine months of 2020 was driven by our Metals Segment, which had a decrease of $13.0 million over the third quarter of 2019 and a decrease of $36.0 million over the first nine months of 2019.

For the third quarter of 2017,2020, the Company recorded a net loss from continuing operations of $1,207,000,$10.5 million, or $0.14$1.16 diluted loss per share, compared to a net loss from continuing operations of $2,608,000$1.0 million, or $0.30$0.11 diluted loss per share for the samethird quarter of 2019. The third quarter of 2020 was negatively impacted by:
•Non-cash goodwill impairment in our Metals Segment of $10.7 million;
•Operating losses at Palmer totaling $0.9 million;
•Inventory price change losses which, on a pre-tax basis, totaled $1.6 million;
•Proxy contest costs of $0.2 million related to the prior year. Company's proxy contest and election of directors at the 2020 Annual Meeting of Shareholders; and
•Costs related to the hotline investigation regarding the accounting for Palmer and other matters $0.7 million, found within acquisition costs and other.
For the first nine months of 2017,2020, the Company recorded a net income from


continuing operations was $325,000,loss of $18.7 million, or $0.04$2.06 diluted loss per share. This comparesshare, compared to a net loss from continuing operations of $5,658,000,$2.1 million, or $0.64$0.24 diluted loss per share for the first nine months of 2016.2019. The first nine months of 2020 were negatively impacted by:
The third quarter and first nine-month periods of 2017 include financial results•Non-cash goodwill impairment in the Company'sour Metals Segment relatedof $10.7 million;
•Operating losses at Palmer totaling $3.6 million and $6.1 million in non-cash, pre-tax asset impairment charges;
•Inventory price change losses, which on a pre-tax basis totaled $5.5 million, compared to the acquisition of Bristol Metals-Munhall, which closed on February 28, 2017, including net sales of $8,675,000 and $17,087,000, respectively, operating losses of $622,000 and $260,000 , respectively, and pretax acquisition transaction related charges totaling $186,000 and $1,188,000 respectively.

Metals Segment
Metals Segment net sales for the third quarter of 2017 totaled $43,023,000, an increase of $20,732,000 or 93 percent from the third quarter of 2016. Excluding Bristol Metals-Munhall, third quarter net sales were up 54 percent over the same period last year. Salesa $5.7 million loss for the first nine months of 2017 were $111,821,000, an increase2019;
•Proxy contest costs of $43,490,000$3.1 million related to the Company's proxy contest and election of directors at the 2020 Annual Meeting of Shareholders; and
•Costs related to the hotline investigation regarding the accounting for Palmer and other matters of $0.7 million, found within acquisition costs and other.
The third quarter of 2020 consolidated gross profit decreased 31.5% to $5.0 million, or 64 percent8.4% of sales, compared to $7.3 million, or 9.9% of sales in the third quarter of 2019. For the first nine months of 2020, consolidated gross profit decreased 30.7% to $16.5 million, or 8.2% of sales, from 2016. Excluding Bristol Metals-Munhall, year to date net$23.8 million, or 10.0% of sales in the first nine months of 2019. The decrease in dollars and percentage of sales were up 39 percent. Each product line inattributable to the Metals Segment showed positive sales growth, including sequential quarterly gains,as discussed below.
Consolidated selling, general, and gains againstadministrative expense for 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 of 2020 decreased by $2.1 million to $6.3 million or 10.6% of sales compared to $8.4 million, or 11.4% of sales in the second quarter of 2019. For first nine months of 2020, consolidated selling, general, and up 74 percent yearadministrative expenses decreased $3.8 million, or 15.4%, to date. Sales were affected during$21.1 million compared to $24.9 million in the first nine months of 2019. The most significant decreases for the third quarter and first nine months of 2017 due to2020 compared the same period in the prior year resulted from salaries and benefits ($0.8 million lower in the third quarter shipments and order activity across the businesses$1.8 million lower in the Metals Segment showing improvement overfirst nine months); travel expenses ($0.3 million lower in the third quarter and $0.7 million lower in the first nine months); stock compensation expense ($0.6 million lower in the third quarter and second quarters$0.7 million lower in the first nine months); and areamortization expense ($0.2 million lower in the third quarter and $0.3 million lower in the first nine months).
Metals Segment
The Metals Segment's net sales for the third quarter of 2020 totaled $47.1 million, a decrease of $13.0 million or 21.7% from the third quarter of 2019. Net sales for the first nine months of 2020 totaled $159.8 million, a decrease of $36.0 million or 18.4% from the first nine months of 2019.
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Net sales decrease for the third quarter of 2020 compared to the third quarter of 2019 is summarized as follows:
($ in thousands)$%
Average selling price (1)
Units
shipped
Fiberglass and steel liquid storage tanks and separation equipment$(5,014)(90.3)%(76.7)%(61.8)%
Heavy wall seamless carbon steel pipe and tube(2,527)(31.7)%(7.8)%(26.1)%
Stainless steel pipe and tube(3,762)(9.2)%6.3%(13.9)%
Galvanized pipe and tube(1,738)(31.0)%(6.9)%(24.1)%
   Total decrease$(13,041)
 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 tube3,049,000
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 - Munhall5,892,000
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 tube8,011,000
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 - Munhall12,622,000
29.1%5.6%23.5%
1) Average price decreases for the third quarter of 2020 as compared to the third 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 and lower mill pricing;
•Stainless steel pipe and tube - pass through of input and cost changes related to - 304 Alloy surcharges increase of approximately 3% and a more favorable product mix; and,
•Galvanized pipe and tube - primarily decline in indexed pricing

Net sales decrease for the first nine months of 2020 compared to the first nine months of 2019 is summarized as follows:
($ in thousands)$%
Average selling price (1)
Units
shipped
Fiberglass and steel liquid storage tanks and separation equipment$(20,634)(80.5)%(30.5)%(72.4)%
Heavy wall seamless carbon steel pipe and tube(4,844)(20.8)%(9.1)%(12.8)%
Stainless steel pipe and tube(8,034)(6.3)%(2.0)%(4.1)%
Galvanized pipe and tube(2,455)(13.2)%(7.8)%(5.1)%
   Total decrease$(35,967)
1) Average price decreases for the first nine months of 2020 as compared to the first nine 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 and lower mill pricing;
•Stainless steel pipe and tube - pass through of input and cost changes related to - 304 Alloy surcharges decrease of approximately 1% and a slightly less favorable product mix; and,
•Galvanized pipe and tube - primarily decline in indexed pricing

The Metals Segment's operating loss from continuing operations improved $1,976,000increased $12.0 million, or 2,672.1%, to a loss of $1,264,000$11.6 million for the third quarter of 20172020 compared to a lossincome of $3,240,000$0.4 million for the third quarter of 2016.2019. Operating loss for the first nine months of 2020 increased $22.9 million, or 733.1%, to $19.8 million from income of $3.1 million in the first nine months of 2019. As mentioned above, the first nine months of 2020 were negatively impacted by a non-cash goodwill impairment charge of $10.7 million as well as $6.1 million in non-cash asset impairment charges related to Palmer.
Current quarter operating results were also affected by nickel prices and resulting surcharges for 304 and 316 alloys. The third quarter of 2020 proved to be a much more unfavorable environment than the third quarter of 2019, with net metal pricing losses of $1.6 million, compared to last year's $0.6 million in metal pricing losses. Third quarter 2020 surcharges on 304 alloy were approximately 2.7% higher than third quarter 2019 levels and 2020 surcharges on 316 alloy were 10.3% lower than the third quarter of 2019.
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Selling, general, and administrative expense decreased 20.6% to $4.0 million for the third quarter of 2020 compared to $5.0 million in the third quarter of 2019. For the first nine months of 2017, operating income2020, selling, general, and administrative expenses decreased $1.8 million, or 11.4%, to $13.7 million from continuing operations$15.4 million for the Metals Segment increased $8,321,000 to an operating profitfirst nine months of $2,660,000 compared to a loss of $5,661,0002019. The most significant decreases for the third quarter and first nine months of 2020 compared the same period of 2016. Currentperiods in the prior year operating results were affected byresulted from salaries and benefits ($0.5 million lower in the following factors:
a)The addition of Bristol Metals-Munhall operations as noted above.
b)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.
c)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.


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.

third quarter and $1.5 million lower in the first nine months); travel expenses ($0.2 million lower in the third quarter and $0.4 million lower in the first nine months); and amortization expense ($0.2 million lower in the third quarter and $0.3 million lower in the first nine months).
Specialty Chemicals Segment
Net sales for the Specialty Chemicals Segment in the third quarter of 2017 were $11,573,000,2020 totaled $12.2 million, representing a $433,000$1.3 million, or four percent9.9%, decrease from the samethird quarter of 2016.2019. Net sales for the first nine months of 2017 were $36,489,000, down $696,0002020 totaled $40.3 million, representing a $1.2 million, or two percent2.8%, decrease 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 andof 2019. Pounds shipped in the third quarter of 2020 were down 2.0% over the third quarter of 2019, with average selling price increased two percent. Netprices declining 8.5%. Pounds for the first nine months of 2020 were down 2.4%, with average selling prices decreasing 0.6%.
The U.S. specialty chemical industry continues to face significant downturns in demand due to weak industrial and manufacturing activities related to the COVID-19 pandemic. However, during the first nine months of 2020, the Specialty Chemicals Segment was able to demonstrate relative strength in sales were negatively impacted duringby increasing production of hand sanitizer and cleaning aids to offset reduced production into the oil and gas industry. Additionally, the Specialty Chemicals Segment’s cost cutting efforts have generated a decrease in selling, general and administrative costs of $0.2 million and $0.6 million for the third quarter and first nine months of 2017 by:
a) The loss of a single customer in2020, respectively. These cost cutting measures have allowed the second half of 2016 that reducedSpecialty Chemicals Segment to generate increased profits on lower sales 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 of the third quarter 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 of the Houston area following Hurricane Harvey.volume.
Operating income for the Specialty Chemicals Segment for the third quarter of 2017 decreased $37,0002020 was $1.1 million, an increase of $0.2 million, or 25.4%, from the third quarter of 2016 to $1,151,000.2019. Operating income for the Specialty Chemicals Segment for the first nine months of 2017 amounted to $3,796,000, a $76,0002020 was $3.5 million, an increase of $1.1 million, or two percent increase47.0%, 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 accountsfirst nine months 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 of the sale-leaseback transaction closed in 2016 with no comparable loss recognized in 2017.2019.

Other Items
Consolidated selling,Selling, general, and administrative expenses increased 13 percentexpense decreased $0.2 million, or 20.3%, to $6,588,000, or 12.1 percent of sales, from $5,815,000, 17.0 percent of sales,$0.9 million for the third quarter of 20172020 compared to the third quarter of 2016.2019. For the first nine months of 2017, consolidated2020, selling, general, and administrative expenses were $18,926,000,decreased $0.6 million, or 12.8 percent of sales, an increase of eleven percent19.1%, to $2.7 million from $17,041,000, or 16.2 percent of sales,$3.3 million for the first nine months of 2016. Approximately $411,000 and $783,000 of the increases arose from including Bristol Metals-Munhall's selling, general and administrative expenses in the third quarter and first nine months of 2017, respectively, with no comparable costs for 2016.2019. 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.
Interest expense was $279,000 and $273,000 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 $145,000most significant decreases for the third quarter and first nine months of 2017.2020 compared to the same periods in the prior year resulted from salaries and benefits ($0.2 million lower for the third quarter and $0.5 million lower in the first nine months).

Other Items

The Company purchased 225,000 shares of a potential acquisition targetUnallocated corporate expenses for $3,832,000 during the second quarter of 2017. During the third quarter of 2017, acquisition discussions were stopped2020 decreased $0.9 million, or 35.6%, to $1.5 million (2.6 percent of sales) compared to $2.4 million (3.2 percent of sales) for the same period in the prior year comparative period. For first nine months of 2020, unallocated corporate expenses decreased $1.5 million, or 22.5%, to $5.1 million from $6.6 million for the first nine months of 2019. The third quarter and first nine months decreases resulted primarily from lower professional fees, stock compensation expense and travel expenses in the Company sold allperiod.
Interest expense was $0.5 million and $0.9 million for the third quarter of their holdings, realizing a $310,000 gain on2020 and 2019, respectively. The decrease was related to lower average debt outstanding in the investment. As a resultthird quarter of 2020 compared to the sale, unrealized gains, netthird quarter 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 percent19.4% and 28 percent10.6% for the three-month and nine-month periodsthree months ended September 30, 2017,2020 and 2019, respectively. The 2017September 30, 2020 effective tax rate was lowerapproximately equal to the U.S. statutory rate of 21.0%.

The effective tax rate was 24.4% and 23.6% for the nine months ended September 30, 2020 and 2019, respectively. The September 30, 2020 effective tax rate was higher than the statutory rate of 34 percent primarily21.0% due to statediscrete tax expensebenefits over the costs associated with our public proxy contest, asset impairments at our Palmer facility, goodwill impairment over our Metals Segment and other permanent differences, mainlybenefits from our stock compensation plan. Additionally, we recognized 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 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 September 30, 2019 effective tax rate was 34 percent and 25 percent forapproximately equal to the three-month and nine-month periods ended September 30, 2016, respectively. The nine-month 2016 effectiveU.S. statutory tax rate was lower than the 34 percent statutory rate primarily due to state tax expense and a one-time permanent difference reducing the amount of tax benefit of the pre-tax loss for that period.21%.

The Company's cash balance decreased $48,000$0.4 million to $15,000$0.2 million as of September 30, 20172020 compared to $63,000$0.6 million at December 31, 2016.2019. Fluctuations affecting cash flows during the periodnine months ended September 30, 2020 were comprised of the following:
a)On February 28, 2017, the Company completed the acquisition of Bristol Metals-Munhall for $11,954,000. This excludes a $3,000,000 deposit made in the prior year;
b)Net accounts receivable increased $12,284,000 at September 30, 2017 when 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 compared to the last two months of the fourth quarter 2016. Also, 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;
c)Net inventories, excluding the $5,434,000 of inventory obtained in the Bristol Metals-Munhall acquisition, increased $4,272,000 at September 30, 2017 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 to support higher sales activity (up $2,899,000) along with higher Specialty Chemicals inventory (up $2,714,000) due 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 was shipped early 2017 combined with lower nickel surcharges in 2017. Inventory turns increased from 1.90 turns at December 31, 2016, calculated on a three-month average basis, to 2.79 turns at September 30, 2017;
d)Accounts payable increased $8,084,000 as 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; and
e)Capital expenditures for the first nine months of 2017 were $3,693,000.
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a)Net inventories decreased $9.2 million at September 30, 2020 when compared to December 31, 2019, mainly due to efforts to balance inventory with projected business levels and the write-down of inventory related to the Palmer business in the 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 September 30, 2020;
b)Accounts payable decreased $1.6 million as of September 30, 2020 as compared to December 31, 2019, primarily due to the reduction of payables at the curtailed Palmer operations. Accounts payable days outstanding were approximately 32 days at September 30, 2020 compared to 36 days at December 31, 2019. Accounts payable days outstanding using a three-month average basis was approximately 38 days at September 30, 2020;
c)Net accounts receivable decreased $1.9 million at September 30, 2020 as compared to December 31, 2019, due primarily to the reduction of receivables at the curtailed Palmer operations. Days sales outstanding, calculated using a nine-month average basis, was 47 days outstanding at September 30, 2020 and 51 days at December 31, 2019, respectively. Days sales outstanding using a three-month average basis was approximately 54 days at September 30, 2020;
d)Capital expenditures for the first nine months of 2020 were $2.8 million; and
e)The Company drew $17,919,000 against its line of creditpaid $3.2 million during the first nine months of 2020 related to the earn-out liabilities from the 2019 American Stainless, 2018 MUSA-Galvanized and 2017 MUSA-Stainless acquisitions.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and had $26,723,000presented 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, gain on lease modification, 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.








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Consolidated EBITDA and Adjusted EBITDA are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2020201920202019
Consolidated
Net loss$(10,539)$(954)$(18,674)$(2,143)
Adjustments:
Interest expense452 944 1,703 2,977 
Change in fair value of interest rate swap(16)21 65 145 
Income taxes(2,530)(112)(6,026)(660)
Depreciation1,805 1,858 5,752 5,690 
Amortization705 871 2,324 2,614 
EBITDA(10,123)2,628 (14,856)8,623 
Acquisition costs and other656 90 807 1,763 
Proxy contest costs207 — 3,105 — 
Shelf registration costs— — — 10 
Earn-out adjustments(146)(1,242)(969)(1,643)
Loss/(gain) on investments in equity securities69 180 (170)(193)
Asset impairments— — 6,079 — 
Goodwill impairment10,748 — 10,748 — 
Gain on lease modification(171)— (171)— 
Stock-based compensation270 908 1,036 1,760 
Non-cash lease expense130 144 386 432 
Retention expense— 51 235 181 
Adjusted EBITDA$1,640 $2,759 $6,230 $10,933 
% sales2.8 %3.7 %3.1 %4.6 %



















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Metals Segment EBITDA and Adjusted EBITDA are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2020201920202019
Metals Segment
Net (loss) income$(11,417)$1,671 $(17,798)$4,658 
Adjustments:
Interest expense— 20 11 64 
Depreciation1,387 1,461 4,457 4,476 
Amortization705 872 2,324 2,614 
EBITDA(9,325)4,024 (11,006)11,812 
Acquisition costs and other— 1 3 1,371 
Earn-out adjustments(146)(1,242)(969)(1,643)
Asset impairments— — 6,079 — 
Goodwill impairment10,748 — 10,748 — 
Stock-based compensation78 195 249 405 
Retention expense— 26 — 106 
Metals Segment Adjusted EBITDA$1,355 $3,004 $5,104 $12,051 
% of segment sales2.9 %5.0 %3.2 %6.2 %
Specialty Chemicals Segment EBITDA and Adjusted EBITDA are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2020201920202019
Chemicals Segment
Net income$1,061 $846 $3,521 $2,386 
Adjustments:
Interest expense— — 9 1 
Depreciation378 355 1,170 1,094 
EBITDA1,439 1,201 4,700 3,481 
Stock-based compensation59 108 178 204 
Specialty Chemicals Segment Adjusted EBITDA$1,498 $1,309 $4,878 $3,685 
% of segment sales12.3 %9.7 %12.1 %8.9 %
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Adjusted Net (Loss) Income and Adjusted Diluted (Loss) Earnings per Share
Adjusted Net (Loss) Income and Adjusted Diluted (Loss) Earnings per Share are non-GAAP measures and exclude discontinued operations, goodwill impairment, asset impairment, gain on lease modification, stock option / grant costs, non-cash lease costs, acquisition costs, proxy contest costs, shelf registration costs, earn-out adjustments, gain on excess death benefit, realized and unrealized (gains) and losses on investments in equity securities, casualty insurance gain, all (gains) losses associated with a Sale-Leaseback, and retention costs from net income. They also utilize a constant effective tax rate to reflect tax neutral results. Adjusted net (loss) income and adjusted diluted (loss) earnings per share should not be considered an alternative to, or a more meaningful indicator of, the Company's net (loss) income or diluted (loss) earnings per share as prepared in accordance with GAAP. The Company's methods of determining this non-GAAP financial measure may differ from the method used by other companies for this or similar non-GAAP financial measures. Accordingly, these non-GAAP measures may not be comparable to the measures used by other companies.
The reconciliation of net (loss) income and (loss) earnings per share to adjusted net (loss) income and adjusted (loss) earnings per share is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(Amounts in thousands, except per share data)2020201920202019
Loss before taxes$(13,069)$(1,066)$(24,700)$(2,803)
Adjustments:
Acquisition costs and other656 90 807 1,763 
Proxy contest costs207 — 3,105 — 
Shelf registration costs— — — 10 
Earn-out adjustments(146)(1,242)(969)(1,643)
Loss/(gain) on investments in equity securities69 180 (170)(193)
Asset impairments— — 6,079 — 
Goodwill impairment10,748 — 10,748 — 
Gain on lease modification(171)— (171)— 
Stock-based compensation270 908 1,036 1,760 
Non-cash lease expense130 144 386 432 
Retention expense— 51 235 181 
Adjusted loss before income taxes(1,306)(935)(3,614)(493)
(Benefit) for income taxes at 21%(274)(196)(759)(104)
Adjusted net loss$(1,032)$(739)$(2,855)$(389)
Average shares outstanding, as reported
Basic9,105 8,995 9,079 8,969 
Diluted9,105 8,995 9,079 8,969 
Adjusted net loss per common share
Basic$(0.11)$(0.08)$(0.31)$(0.04)
Diluted$(0.11)$(0.08)$(0.31)$(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
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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):
Nine Months Ended September 30,
20202019
Total cash (used in) provided by:
Operating activities$5,970 $17,927 
Investing activities1,708 (23,999)
Financing activities(8,141)4,105 
Net increase (decrease) in cash and cash equivalents$(463)$(1,967)

Operating Activities
The decrease in cash provided by operating activities for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily driven by a net loss of $18.7 million for the first nine months of 2020 compared to a net loss of $2.1 million for the first nine months of 2019, changes in working capital, driven by decreases in accounts receivable, which increased operating cash flows for the first nine months of 2020 by $1.4 million, compared to an increase of $2.8 million in the first nine months of 2019, decreases in inventory which increased operating cash flows $4.6 million in the first nine months of 2020, compared to an increase of $12.2 million in the first nine months of 2019 and accrued income taxes, which decreased operating cash flow $4.0 million for the first nine months of 2020, compared to a decrease of $1.3 million in the first nine months of 2020. These were partially offset by changes in accounts payable, which decreased operating cash flows $1.6 million in the first nine months of 2020 compared to an decrease of $0.9 million in the first nine 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 provided by investing activities primarily consists of transactions related to capital expenditures, equity transactions, and acquisitions. The increase in cash provided by investing activities for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily due to a decrease in cash outflows related to the American Stainless acquisition in the prior year and an increase in proceeds from the sale of equity securities in the current year over the prior year.

Financing Activities
Net cash used in financing activities primarily consists of transactions related to our long-term debt. The increase in cash used in financing activities for the nine months ended September 30, 2020 compared to cash provided by financing activities for the nine months ended September 30, 2019 was primarily due to borrowings outstanding asfrom 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 February 1, 2024. As of September 30, 2017. Covenants2020, the Company had $71.3 million of total borrowings outstanding with its lender. That total is down $4.2 million from the balance at December 31, 2019. As of September 30, 2020, the Company had $7.5 million of remaining available capacity under its Line. See Note 6, Long-term Debt, in the Credit Agreement includenotes to the unaudited condensed consolidated financial statements for additional information.
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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 wasnotified its bank of a technical default of the fixed charge coverage ratio in complianceits 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 asits bank subsequent to the end of the second 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.
The Company notified its bank of a technical default of the fixed charge coverage ratio in its Credit Agreement at the quarter ended September 30, 2017.2020. To address the technical default, the Company entered into an amendment to its Credit Agreement with its bank subsequent to the end of the third quarter. On October 23, 2020, the Company entered into the Fifth Amendment to the Third Amended and Restated Loan Agreement (the "Fifth Amendment") with its bank. The Fifth Amendment amended the definition of the fixed charge coverage ratio to include in the numerator (i) the calculation of losses from the suspended operations of Palmer in the amount of $1,560,000, which is effective for the quarter ended June 30, 2020 and for the directly following three quarters after June 30, 2020, (ii) the calculation of losses from the suspended operations of Palmer in the amount of $740,000, which is effective for the quarter ended September 30, 2020 and for the directly following three quarters after September 30, 2020, and (iii) the extraordinary expenses related to the investigation of a whistleblower complaint in the amount of $636,000, which is effective for the quarter ended September 30, 2020 and for the directly following three quarters after September 30, 2020.
At December 31, 2016,September 30, 2020, the Company recorded $11,000,000had a minimum fixed charge coverage ratio of 1.47 and a minimum tangible net worth of $67.7 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 expensesgrowth and current assetsthen return excess cash over time to reflect the legal liabilityshareholders 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 declaredauthorized a $.13 per share dividend,


whichstock repurchase program for up to 850,000 shares of its outstanding common stock over 24 months. The 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 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 the Company may discontinue purchases at any time that management determines additional purchases are not warranted. As of September 30, 2020, the Company has 790,383 shares of its share repurchase authorization remaining.

Stock repurchase activity was as follows:
Nine Months Ended September 30,
20202019
Number of shares repurchased59,617 — 
Average price per share$10.65 $— 
Total cost of shares repurchased$636,940 $— 

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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 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 3.9 at September 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 September 30, 2020 and 41% at December 31, 2019.

Our return on November 6, 2017. average equity, calculated as net income divided by the trailing 12-month average of equity, was (10.8)% at September 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 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 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 startedbeen no significant changes in our planning activitiessignificant 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 2018credit 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 will provide some guidance later this year. We remain optimistic that our end markets continuefuture 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 improvethe allowance for credit losses are adjusted through bad debt expense, which is presented within "Selling, general and thatadministrative" operating expenses on the unaudited condensed consolidated statement of operations.

Leases
The Company determines whether an arrangement is a lease at contract inception. For leases in which the Company is well positionedthe lessee, the Company recognizes a right-of-use asset and corresponding lease liability on the accompanying unaudited condensed consolidated balance sheets equal to the present value of the fixed lease payments over the lease term. Lease with an initial term of 12 months or less are not recorded on the unaudited condensed consolidated balance sheets. Lease liabilities represent an obligation to make lease payments arising from a lease while right-of-use assets represent a right to use an underlying asset during the lease term. As the Company's leases generally do not have an implicit rate, the Company uses its incremental borrowing rate to determine the present value of fixed lease payments based on information available at the lease commencement date. Lease cost is recognized on a straight-line basis over the lease term.
Right-of-use assets and operating lease liabilities are remeasured upon certain modifications to leases using the present value of the remaining lease payments and estimated incremental borrowing rate upon lease modification. The difference between the remeasured right-of-use asset and the operating lease liabilities are recognized as a gain or loss within operating expenses.
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The Company reviews any changes to its lease agreements for growth in 2018.potential modifications and/or indicators of impairment of the respective right-of-use asset.


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 oilnickel and nickeloil 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 CommissionSEC 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 CommissionSEC 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, 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.

Changes in Internal Control over Financial Reporting
The Company's management, including
Other than the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, identifiedactions taken as described below under “Remediation Efforts to Address Material Weakness”, there were no changechanges in the Company's internal control over financial reporting that occurred during the most recent fiscalthird quarter of 2020, which were identified in connection with management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that hashave materially affected, or is reasonablyare reasonable likely to materially affect, the Company'sour internal control over financial reporting. Management has excluded

Remediation Efforts to Address Material Weakness

In response to the Munhall facility's operations (acquiredmaterial weakness identified in Management’s Report on Internal Control Over Financial Reporting as set forth in item 4 “Controls and Procedures” in the MUSA Stainless acquisition)Q2 2020 Form 10-Q, the Company, with oversight from its assessmentthe Audit Committee of the Board of Directors, developed a plan to remediate the material weakness at Synalloy. The remediation actions included the following:
•Holding executive coaching and mentoring sessions with select executives to reinforce their responsibility in maintaining effective internal control over financial reporting;
•Initiating activities to identify, evaluate, and align job descriptions with actual job responsibilities;
•Reaffirming communication protocols and refreshing policies related to the transition process for new finance executives and audit committee members;
•Initiating implementation of an independent third-party Ethics and Compliance Hotline service for the receipt and reporting as of September 30, 2017 because thisto the Audit Committee.

The Company believes the foregoing efforts will effectively remediate the material acquisition closedweakness described in “Management’s Report on Internal Control Over Financial Reporting” in the first quarter of 2017. Total assets and total revenue associated withQ2 2020 Form 10-Q. Because the Munhall facility represent approximately 21 percent, or $33.5 million and twelve percent, or $17.1 million, respectively,reliability of the related consolidated financial statement amountsinternal control process requires repeatable execution, the successful on-going remediation of the Metals Segment asmaterial weakness will require on-going review and evidence of and foreffectiveness prior to concluding that the quarter ended, September 30, 2017.material weakness is remediated.

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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 StatesU.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, the retirement of our Chief Executive Officer and appointment of a new Chief Executive Officer 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. On October 27, 2020, the Company announced the retirement of Craig C. Bram, the Company's President and Chief Executive Officer and member of the Company's Board of Directors, effective November 9, 2020. On October 27, 2020, the Company announced the appointment of Christopher G. Hutter, a member of the Company's Board of Directors, as interim President and Chief Executive Officer, effective November 9, 2020. 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.
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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 PurchasersNone.

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.



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Item 6. Exhibits
Exhibit No.  
 
 
 
Description
10.1
31.1
31.2
31.332
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."


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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 9, 2020By:/s/ Craig C. Bram               
Craig C. Bram
President and Chief Executive Officer
SYNALLOY CORPORATION
(Registrant)
Date: November 7, 2017By:/s/ Craig C. Bram               
Craig C. Bram
President and Chief Executive Officer
(principal executive officer)
Date:November 7, 20179, 2020By:/s/ DennisSally M. Loughran      Cunningham  
DennisSally M. LoughranCunningham
Senior Vice President and Chief Financial Officer
(principal financial officer)
Date: November 7, 2017By:/s/ Richard D. Sieradzki                   
Richard D. Sieradzki
Chief Accounting Officer
(principal accounting officer)









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