Note: The condensed consolidated balance sheet at December 31, ~~2016~~2022 has been derived from the audited consolidated financial statements at that date. See accompanying notes to condensed consolidated financial statements.

Ascent Industries Co.

Condensed Consolidated Statements of Income (Unaudited)

(in thousands, except per share data)


	Three Months Ended March 31,
	2023		2022
Net sales	$	82,452	$	116,218
Cost of sales	78,160		93,722
Gross profit	4,292		22,496

Selling, general and administrative	9,553		8,646
Acquisition costs and other	333		531

Earn-out adjustments	—		102



Operating income (loss)	(5,594)		13,217
Other expense (income)
Interest expense	1,107		403


Other, net	(95)		(35)
Income (loss) before income taxes	(6,606)		12,849
Income tax provision (benefit)	(1,407)		2,589




Net income (loss)	$	(5,199)	$	10,260















Net income (loss) per common share:
Basic	$	(0.51)	$	1.00
Diluted	$	(0.51)	$	0.99

Weighted average shares outstanding:
Basic	10,148		10,209
Dilutive effect from stock options and grants	—		111
Diluted	10,148		10,320

See accompanying notes to condensed consolidated financial statements.

~~Synalloy Corporation~~

~~Condensed Consolidated Statements of Operations~~

~~(unaudited)~~

Three Months Ended Nine Months Ended
Sep 30, 2017 Sep 30, 2016 Sep 30, 2017 Sep 30, 2016
Net sales $ 54,595,924
$ 34,297,231
$ 148,310,548
$ 105,515,911

Cost of sales 49,759,304
29,792,812
127,892,423
92,295,722

Gross profit 4,836,620
4,504,419
20,418,125
13,220,189

Selling, general and administrative expense 6,587,791
5,814,655
18,925,593
17,041,216
Acquisition related costs 37,402
1,034
782,397
76,091
(Gain) loss on sale-leaseback (83,568 ) 2,455,347
(250,705 ) 2,455,347
Operating (loss) income (1,705,005 ) (3,766,617 ) 960,840
(6,352,465 )
Other expense (income)
Interest expense 279,598
272,987
715,131
822,426
Change in fair value of interest rate swaps (8,497 ) (115,328 ) (33,000 ) 276,512
Earn-out adjustment 62,804
—
145,200
—
Other, net (316,158 ) —
(316,158 ) —

(Loss) income from continuing operations before income taxes (1,722,752 ) (3,924,276 ) 449,667
(7,451,403 )
(Benefit from) provision for income taxes (516,000 ) (1,316,000 ) 125,000
(1,893,000 )

Net (loss) income from continuing operations (1,206,752 ) (2,608,276 ) 324,667
(5,558,403 )
Net loss from discontinued operations, net of tax —
—
—
(99,334 )
Net (loss) income $ (1,206,752 ) $ (2,608,276 ) $ 324,667
$ (5,657,737 )

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

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

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

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

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

~~Synalloy Corporation~~Ascent Industries Co.

Condensed Consolidated Statements of Cash Flows (Unaudited)

~~(Unaudited)~~

(in thousands)

Nine Months Ended
Sep 30, 2017 Sep 30, 2016
Operating activities
Net income (loss) $ 324,667
$ (5,657,737 )
Loss from discontinued operations, net of tax —
99,334
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation expense 3,916,131
3,322,115
Amortization expense 1,827,171
1,844,840
Amortization of debt issuance costs 40,829
58,681
Deferred income taxes (32,978 ) (1,124,386 )
Gain on sale of available for sale securities (310,043 ) —
Provision for (reduction) of losses on accounts receivable 192,892
(51,531 )
Provision for losses on inventories 500,338
460,726
Gain on sale of property, plant and equipment 2,279
2,294,917
Amortization of deferred gain on sale-leaseback (250,705 ) —
Straight line lease cost on sale-leaseback 304,898
—
Change in cash value of life insurance —
1,502
Change in fair value of interest rate swaps (33,000 ) 276,512
Issuance of treasury stock for director fees 287,475
330,000
Employee stock option and grant compensation 486,740
291,262
Changes in operating assets and liabilities:

Accounts receivable (12,476,532 ) (2,130,955 )
Inventories (4,772,884 ) 4,198,000
Other assets and liabilities, net 10,179,835
(932,324 )
Accounts payable 8,084,756
770,428
Accrued expenses (7,900,999 ) (142,533 )
Accrued income taxes (2,392,073 ) (1,605,714 )
Net cash (used in) provided by continuing operating activities (2,021,203 ) 2,303,137
Net cash used in discontinued operating activities —
(3,943,137 )
Net cash used in operating activities (2,021,203 ) (1,640,000 )
Investing activities

Purchases of property, plant and equipment (3,692,571 ) (2,115,577 )
Proceeds from sale of property, plant and equipment 1,048
22,215,362
Purchases of available for sale securities (3,831,521 ) —
Proceeds from sale of available for sale securities 4,141,564
—
Acquisition of the stainless pipe and tube assets of Marcegaglia USA, Inc. (11,953,513 ) —
Proceeds from life insurance policies —
1,502,283
Net cash (used in) provided by investing activities (15,334,993 ) 21,602,068
Financing activities

Net borrowings from line of credit 17,918,754
6,566,157
Payments on long-term debt —
(26,068,228 )
Payments on capital lease obligation (91,565 ) (49,288 )
Settlement of CRI interest rate swap —
(290,427 )
Payments on earn-out liability to MUSA sellers (518,456 ) —
Purchase of common stock —
(253,889 )
Net cash provided by (used in) financing activities 17,308,733
(20,095,675 )
Decrease in cash and cash equivalents (47,463 ) (133,607 )
Cash and cash equivalents at beginning of period 62,873
391,424
Cash and cash equivalents at end of period $ 15,410
$ 257,817

Supplemental disclosure

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


	Three Months Ended March 31,
	2023		2022
Operating activities
Net income (loss)	$	(5,199)	$	10,260
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation expense	1,991		2,116
Amortization expense	396		721
Amortization of debt issuance costs	25		25





Deferred income taxes	353		428


Earn-out adjustments	—		102
Payments on earn-out liabilities in excess of acquisition date fair value	—		(372)
(Reduction of) provision for losses on accounts receivable	(275)		240
Provision for losses on inventories	1,178		496
Loss (gain) on disposal of property, plant and equipment	182		(5)
Non-cash lease expense	91		107



Issuance of treasury stock for director fees	—		254
Stock-based compensation expense	311		132
Changes in operating assets and liabilities:
Accounts receivable	(1,384)		(17,933)
Inventories	13,680		(9,302)
Other assets and liabilities	352		(27)
Accounts payable	2,786		11,950

Accrued expenses	1,480		(959)
Accrued income taxes	(2,577)		2,161
Net cash provided by operating activities	13,390		394
Investing activities
Purchases of property, plant and equipment	(824)		(1,117)
Proceeds from disposal of property, plant and equipment	—		5



Net cash used in investing activities	(824)		(1,112)
Financing activities
Borrowings from long-term debt	67,488		122,068

Proceeds from exercise of stock options	—		118
Payments on long-term debt	(80,384)		(121,386)
Payments on note payable	(289)		—
Principal payments on finance lease obligations	(74)		(62)
Payments on earn-out liabilities	—		(800)

Repurchase of common stock	(327)		—

Net cash used in financing activities	(13,586)		(62)
Decrease in cash and cash equivalents	(1,020)		(780)
Cash and cash equivalents at beginning of period	1,441		2,021
Cash and cash equivalents at end of period	$	421	$	1,241

Supplemental Disclosure of Cash Flow Information
Cash paid for:
Interest	$	1,061	$	317
Income taxes	$	817	$	2

Noncash Investing Activities:
Capital expenditures, not yet paid	$	266	$	—

See accompanying notes to condensed consolidated financial statements.

~~Synalloy Corporation~~

Ascent Industries Co.

Condensed Consolidated Statements of Shareholders' Equity (Unaudited)

(in thousands)


	Three Months Ended March 31, 2023

	Common Stock			Capital in Excess of Par Value		Retained Earnings		Treasury Stock			Total
	Shares	Amount						Shares	Amount
Balance December 31, 2022	11,085	$	11,085	$	47,021	$	85,146	924	$	(8,993)	$	134,259
Net loss	—	—		—		(5,199)			—		(5,199)
Issuance of 43,479 shares of common stock from treasury	—	—		(429)		—		(43)	429		—

Stock-based compensation	—	—		311		—			—		311
Repurchase of 32,313 shares of common stock	—	—		—		—		32	(327)		(327)
Balance March 31, 2023	11,085	$	11,085	$	46,903	$	79,947	913	$	(8,891)	$	129,044

See accompanying notes to condensed consolidated financial statements.


	Three Months Ended March 31, 2022

	Common Stock			Capital in Excess of Par Value		Retained Earnings		Treasury Stock			Total
	Shares	Amount						Shares	Amount
Balance December 31, 2021	11,085	$	11,085	$	46,058	$	63,080	918	$	(8,633)	$	111,590
Net income	—	—		—		10,260			—		10,260
Issuance of 43,082 shares of common stock from treasury	—	—		(151)		—		(43)	405		254
Exercise of stock options for 13,784 shares, net	—	—		(11)		—		(14)	129		118
Stock-based compensation	—	—		132		—			—		132

Balance March 31, 2022	11,085	$	11,085	$	46,028	$	73,340	861	$	(8,099)	$	122,354

See accompanying notes to condensed consolidated financial statements.

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~September 30, 2017~~

Unless indicated otherwise, the terms "Company," "we," "us," and "our" refer to ~~Synalloy Corporation~~Ascent Industries Co. 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 and notes to the unaudited condensed consolidated financial statements are presented in accordance with the rules and regulations of the ~~Company have been~~Securities and Exchange Commission and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The unaudited condensed consolidated financial statements, in the opinion of management, contain all normal recurring adjustments necessary to present a fair statement of the condensed consolidated balance sheets as of March 31, 2023, the statements of income and shareholders’ equity for the three months ended March 31, 2023 and 2022, and the statements of cash flows for the three months ended March 31, 2023 and 2022. The December 31, 2022 condensed consolidated balance sheet was derived from the audited financial statements.

These interim unaudited condensed consolidated financial ~~information and~~statements should be read in conjunction with the ~~instructions to~~audited consolidated financial statements and notes thereto in the Company's Annual Report on Form ~~10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do~~10-K for the year ended December 31, 2022 (the "Annual Report"). The financial results for the interim periods may not ~~include all~~be indicative of the ~~information and notes required by~~financial results for the entire year as our future assessment of our current expectations could result in material impacts to our consolidated financial statements in future reporting periods.

Use of Estimates

The preparation of the Company's financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosures of contingent assets and liabilities. Significant items subject to such estimates and assumptions include the carrying value of property, plant and equipment; intangible assets; the fair value of assets or liabilities acquired in a business combination; valuation allowances for ~~complete financial statements. In~~receivables, inventories and deferred income tax assets and liabilities; environmental liabilities; liabilities for potential tax deficiencies; and, potential litigation claims and settlements. The Company bases these estimates on historical results and various other assumptions believed to be reasonable, all of which form the ~~opinion~~basis for making estimates concerning the carrying value of ~~management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation~~assets and liabilities that are readily available from other sources. Actual results may differ from these estimates.

Reclassifications

Certain prior period amounts have been ~~included as required by Regulation S-X, Rule 10-01. Operating results~~reclassified to conform to current period presentation, including the reclassification of immaterial revenue and expenses related to the Palmer business within the Company's reportable segments.

Accounting Pronouncements Recently Adopted

On March 31, 2023, the Company adopted ASU 2020-04 "Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting." The ASU, and subsequent clarifications, provide practical expedients for contract modification accounting related to the ~~three~~transition away from the London Interbank Offered Rate (LIBOR) and ~~nine-month periods ended September 30, 2017,~~other interbank offering rates to alternative reference rates. The expedients are ~~not necessarily indicative of the results that may be expected for the year ending~~applicable to contract modifications made and hedging relationships entered into on or before December 31, ~~2017. For further information, refer~~2024. The Company intends to use the expedients where needed for reference rate transition. The adoption of this standard by the Company did not have a material effect on the condensed consolidated financial statements or footnote disclosures.

Note 2: Revenue Recognition

Revenue is generated primarily from contracts to produce, ship and ~~notes thereto included in~~deliver steel and specialty chemical products. Revenues are recognized when control of the ~~Company's annual report on Form 10-K for the year ended December 31, 2016.~~

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

~~In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09,~~ ~~"Revenue from Contracts with Customers (Topic 606)", which changes the criteria for recognizing revenue. The standard requires an entity to recognize revenue to depict the transfer of~~ promised goods or services is transferred to our customers upon shipment, in an amount that reflects the consideration ~~to which the entity expects~~we expect to be entitled to in exchange for those goods or services. The ~~standard requires~~Company's revenues are derived from contracts with customers where performance obligations are satisfied at a ~~five-step process~~point-in-time or over-time. For certain contracts under which the Company produces product with no alternative use and for ~~recognizing revenue including identifying~~which the ~~contract with~~Company has an enforceable right to payment during the production cycle, product in which the material is customer owned or in which the customer ~~identifying~~simultaneously consumes the benefits throughout the production cycle, progress toward satisfying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies a performance obligation. Two transition methods are available for implementing the requirementsobligation is measured using an output method of ~~ASU 2014-09: retrospectively for each prior reporting period presented or retrospectively with the cumulative effect~~units produced. Certain customer arrangements consist of initial application recognized at the date of initial application. The FASB has issued several amendments to the standard, which are intended to promote a more consistent application of the principles outlined in the standard. The new standard is effective for the Company for annual periods in fiscal years beginning after December 15, 2017. The company will adopt the new guidance in the first quarter of 2018. The Company is currently assessing the impact the new standard will have on the consolidated financial statements as well as its business processes, internal controls, and accounting policies. As part of its assessment, the Company is reviewing its contract portfolio and identifying which attributes of its contracts are impacted by ASU 2014-09. Based on the preliminary assessment performed as of September 30, 2017, the company does not believe the standard will have a material impact on consolidated financial statements, other than for the disclosures required by the standard, as a result of the Company being a manufacturer that records revenue at a single point in time when control is transferred. The Company also has no significant long-term sales contracts, which would require revenue be recognized over a period of time in excess of one year. In addition, based on initial results of the preliminary assessment performed as of September 30, 2017, the company plans to apply the standard with the cumulative effect of initial application recognized at the date of initial application.

~~In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)~~,” to increase the transparency and comparability of lease recognition and disclosure. The update establishes a right of use ("ROU") model which requires lessees to recognize lease contracts with a term greater than one year on the balance sheet as ROU assets and lease liabilities. Leases will be classified as either financing or operating which will determine expense classification and recognition. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and must be applied using the modified retrospective approach. Early adoption is permitted. While the Company expects ASU 2016-02 to add material ROU assets and lease liabilities to the consolidated balance sheets related to its current land and building operating leases, it is evaluating other effects that the new standard will have on the consolidated financial statements.

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~"Improvements to Employee Share-Based Payment Accounting (Topic 718)."~~ The amendments in this updated guidance include changes to simplify the Codification for several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows and was effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. The Company implemented this standard on January 1, 2017 and it did not have a material effect on the Company's consolidated financial statements.bill-and-hold characteristics

~~Synalloy Corporation~~

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~September 30, 2017~~

under which transfer of control has been met (including the passing of title and significant risk and reward of ownership to the customers). Therefore, the customers can direct the use of the bill-and-hold inventory while we retain physical possession of the product until it is shipped to a customer at a point in time in the future.

~~In January 2017,~~Sales tax and other taxes we collect with revenue-producing activities are excluded from revenue. Shipping costs charged to customers are treated as fulfillment activities and are recorded in both revenue and cost of sales at the ~~FASB issued ASU No. 2017-01,~~ ~~"Business Combinations (Topic 805): Clarifying~~time control is transferred to the ~~Definition of~~customer. Costs related to obtaining sales contracts are incidental and are expensed when incurred. Because customers are invoiced at the time title transfers and the Company’s right to consideration is unconditional at that time, the Company does not maintain contract asset balances. Additionally, the Company does not maintain material contract liability balances, as performance obligations for substantially all contracts are satisfied prior to customer payment for product. The Company offers industry standard payment terms.

The following table presents the Company's revenues, disaggregated by product group:


	Three Months Ended March 31,
(in thousands)		2023		2022
Fiberglass and steel liquid storage tanks and separation equipment		$	50	$	114
Heavy wall seamless carbon steel pipe and tube		12,387		12,373
Stainless steel pipe and tube		44,460		62,239
Galvanized pipe and tube		1,806		13,771
Specialty Chemicals		23,749		27,721
Net sales		$	82,452	$	116,218

Performance obligations are supported by contracts with customers, providing a ~~Business"~~ ~~which provides a new~~ framework for ~~determining whether transactions should~~the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract. The following table represents the Company's revenue recognized at a point- in-time and over-time:


	Three Months Ended March 31,
(in thousands)	2023		2022
Point-in-time	$	77,029	$	109,003
Over-time	$	5,423	$	7,215

Note 3: Fair Value of Financial Instruments

Fair value is defined as the price that would be ~~accounted~~received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for ~~as acquisitions (or disposals)~~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.

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

During the three months ended March 31, 2023, the Company's only significant measurements of assets or ~~businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017.~~ liabilities at fair value on a non-recurring basis subsequent to their initial recognition were certain long-lived assets.

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Long-lived assets

The Company ~~does~~reviews the carrying amounts of long-lived assets whenever certain events or changes in circumstances indicate that the carrying amounts may not ~~believe its implementation~~be recoverable. The Company assesses performance quarterly against historical patterns, projections of future profitability, and whether it is more likely than not that the assets will ~~have a material effect~~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 Company estimates the fair values of assets subject to long-lived asset impairment based on the Company's 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.

During the fourth quarter of 2022, the Company began a strategic reassessment of certain operations to drive an increased focus on its core operations and to continue to improve overall performance and operating profitability. As a result of this reassessment, management and the Board of Directors decided to pursue an exit of the Company's galvanized pipe and tube operations at its Munhall facility. During the first quarter of 2023, it was determined that a continued change in the use of the assets of the Munhall facility had occurred before the end of their previous useful lives, and therefore, had experienced a triggering event and were evaluated for recoverability. Based on this evaluation of the Munhall assets, it was determined the assets were recoverable and no impairment was recorded.

Assets Held for Sale

On February 17, 2021, the Board of Directors authorized the permanent cessation of operations at Palmer of Texas Tanks, Inc. ("Palmer") and the subleasing of the Palmer facility. As of December 31, 2021, the Company permanently ceased operations at the Palmer facility and determined that the remaining asset group met the criteria to be classified as held for sale, and therefore classified the related assets as held for sale on the consolidated balance sheets. The Company determined that the exit from this business did not represent a strategic shift that had a major effect on its consolidated results of operations, and therefore this business was not classified as discontinued operations. As of March 31, 2023, the Company has disposed of all remaining assets classified as held for sale at the Palmer facility. The Palmer assets held for sale at December 31, 2022 were classified as Level 2 fair value measurements.

The assets classified as held for sale as are as follows:


(in thousands)	March 31, 2023		December 31, 2022
Inventory, net	$	—	$	198
Property, plant and equipment, net	—		182
Assets held for sale	$	—	$	380

The Company remains obligated under the terms of the leases for the rent and other costs that may be associated with the lease of the facility through 2036. During the fourth quarter of 2022, the Company entered into an amended sublease agreement with a third party to sublease the entirety of the Palmer facility. The sublease agreement amends the previous sublease agreement entered into in the fourth quarter of 2021 and continues through the remaining term of the Master Lease Agreement. The sublease will expire on September 30, 2036, unless terminated in accordance with the amended sublease agreement. The sublease provides for an annual base rent of approximately $0.4 million, which increases on an annual basis by 2.0%. The sublessee is responsible for its pro rata share of certain costs, taxes and operating expenses related to the subleased space. The sublease includes an initial security deposit of $0.1 million.

Fair Value of Financial Instruments

The fair values of cash and cash equivalents, accounts receivable, accounts payable and the Company's note payable approximated their carrying value because of the short-term nature of these instruments. The Company's revolving line of credit and long-term debt, which is based on a variable interest rate, are also reflected in the financial ~~statements.~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~"Intangibles - Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment,"~~statements at carrying value 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~~approximate fair values as of March 31, 2023. The carrying amount of cash and ~~the fair value~~cash equivalents are considered Level 1 measurements. The carrying amounts of ~~the reporting unit. ASU 2017-04 is effective~~accounts receivable, accounts payable, note payable, revolving line of credit and long-term debt are considered Level 2 measurements. See Note 7 for fiscal years beginning after December 15, 2019. The Company elected to early adopt the provisions of this ASU in the quarterly period ending March 31, 2017. The implementation of this ASU did not have a material effectfurther information on the Company's ~~consolidated financial statements.~~debt.

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~"Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting,"~~ ~~which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes~~

Ascent Industries Co.

Notes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. ASU 2017-09 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.Condensed Consolidated Financial Statements (Unaudited)

~~NOTE 3--INVENTORIES~~Note 4: 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)	March 31, 2023		December 31, 2022
Raw materials	$	49,862	$	57,475
Work-in-process	22,786		23,136
Finished goods	32,030		37,549
	104,678		118,160
Less: inventory reserves	(4,886)		(3,708)
Inventories, net	$	99,792	$	114,452

Note 5: Property, Plant and Equipment

Sep 30, 2017 Dec 31, 2016
Raw materials $ 36,226,019
$ 31,973,073
Work-in-process 9,574,418
9,897,857
Finished goods 24,705,618
18,928,579
$ 70,506,055
$ 60,799,509
Property, plant and equipment consist of the following:


(in thousands)	March 31, 2023		December 31, 2022
Land	$	723	$	723
Leasehold improvements	4,203		4,114
Buildings	1,534		1,534
Machinery, fixtures and equipment	114,780		113,413
Construction-in-progress	2,866		3,270
	124,106		123,054
Less: accumulated depreciation and amortization	(82,661)		(80,708)
Property, plant and equipment, net	$	41,445	$	42,346

~~NOTE 4--INTANGIBLE ASSETS AND DEFERRED CHARGES~~The following table sets forth depreciation expense related to property, plant and equipment:


	Three Months Ended March 31,
(in thousands)	2023		2022
Cost of sales	$	1,917	$	2,054
Selling, general and administrative	74		62
Total depreciation	$	1,991	$	2,116

Note 6: Goodwill, Intangible Assets and Deferred ~~charges~~Charges

Goodwill

The Company's goodwill balance of $11.4 million as of March 31, 2023 and ~~intangible assets totaled $21,700,496 at September 30, 2017 and $20,708,496 at~~ December 31, ~~2016. Accumulated amortization~~2022, respectively, was attributable to the Specialty Chemicals segment.

Intangible Assets

Intangible assets represent the fair value of ~~deferred charges~~intellectual, non-physical assets resulting from business acquisitions and ~~intangible assets totaled $10,121,040 at September 30, 2017 and $8,253,040 at December 31, 2016. Estimated amortization expense for the next five years is: remainder~~are amortized over their estimated useful life using either an accelerated or straight-line method over a period of ~~2017 - $629,558; 2018 - $2,344,404; 2019 - $2,155,832; 2020 - $1,997,565; 2021 - $1,899,298; and thereafter - $2,552,799.~~

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

During the first nine months of 2017, no stock options were exercised by officers and employees of the Company. Stock compensation expense for the three and nine-month periods ended September 30, 2017 was $156,502 and $486,740, respectively, while stock compensation expense for the three and nine-month periods ended September 30, 2016 was $102,004 and $291,262, respectively.

eight to 15 years.

~~Synalloy Corporation~~

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~September 30, 2017~~

The balance of intangible assets subject to amortization are as follows:


	March 31, 2023				December 31, 2022
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Definite-lived intangible assets:
Customer related	$	28,226	$	(18,823)	$	28,226	$	(18,437)
Trademarks and trade names	150		(14)		150		(12)
Other	500		(48)		500		(40)
Total definite-lived intangible assets	$	28,876	$	(18,885)	$	28,876	$	(18,489)

Estimated amortization expense related to intangible assets for the next five years are as follows:


(in thousands)
Remainder of 2023	$	1,185
2024	1,555
2025	1,384
2026	1,153
2027	973
2028	820
Thereafter	2,921

Deferred Charges

Deferred charges represent debt issuance costs and are amortized over their estimated useful lives using the straight-line method over a period of four years.

The balance of deferred charges subject to amortization are as follows:


(in thousands)	March 31, 2023		December 31, 2022
Deferred charges, gross	$	398	$	398
Accumulated amortization of deferred charges	(220)		(195)
Deferred charges, net	$	178	$	203

Note 7: Debt

Short-term debt

On ~~February 8, 2017,~~June 6, 2022, the ~~Compensation & Long-Term Incentive Committee (the "Committee")~~Company entered into a note payable in the amount of $1.0 million with an interest rate of 2.77% maturing April 1, 2023. The agreement is associated with the financing of the Company's insurance premium in the current year. As of March 31, 2023, the outstanding balance was $0.1 million.

Credit Facilities


(in thousands)	March 31, 2023		December 31, 2022
Revolving line of credit, due January 15, 2025	$	54,724	$	67,442
Term loan, due January 15, 2025	3,929		4,107
Total long-term debt	58,653		71,549
Less: Current portion of long-term debt	(2,464)		(2,464)
Long-term debt, less current portion	$	56,189	$	69,085

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

During the first quarter of 2023, the Company entered into an Amended and Restated Credit Agreement ("Credit Agreement") with BMO Harris Bank, N.A. ("BMO") to replace LIBOR with the Secured Overnight Funding Rate ("SOFR"). The Credit Agreement provides the Company with a four-year revolving credit facility with up to $150.0 million of borrowing capacity (the "Facility").

The initial borrowing capacity under the Facility totals $110.0 million consisting of a $105.0 million revolving line of credit and a $5.0 million delayed draw term loan. The revolving line of credit includes a $17.5 million machinery and equipment sub-limit which requires quarterly payments of $0.4 million with a balloon payment due upon maturity of the Facility in January 2025. The term loan requires quarterly payments of $0.2 million with a balloon payment due upon maturity of the Facility in January 2025.

We have pledged all of our accounts receivable, inventory, and certain machinery and equipment as collateral for the Credit Agreement. Availability under the Credit Agreement is subject to the amount of eligible collateral as determined by the lenders' borrowing base calculations. Amounts outstanding under the revolving line of credit portion of the Facility currently bear interest, at the Company's option, at (a) the Base Rate (as defined in the Credit Agreement) plus 0.50%, or (b) SOFR plus 1.50%. Amounts outstanding under the delayed draw term loan portion of the Facility bear interest at SOFR plus 1.65%. The Facility also provides an unused commitment fee based on the daily used portion of the Facility.

The weighted average interest rate per annum was 6.62% as of March 31, 2023.

Pursuant to the Credit Agreement, the Company was required to pledge all of its tangible and intangible properties, including the stock and membership interests of its subsidiaries. The Facility contains covenants requiring the maintenance of a minimum consolidated fixed charge coverage ratio if excess availability falls below the greater of (i) $7.5 million and (ii) 10% of the revolving credit facility (currently $10.5 million). As of March 31, 2023, the Company was in compliance with all financial debt covenants.

As of March 31, 2023, the Company had $50.0 million of remaining available capacity under its credit facility.

Note 8: Leases

The Company's portfolio of leases contains both finance and operating leases that relate to real estate and manufacturing equipment. Substantially all of the value of the Company's lease portfolio relates to the Master Lease with Store Master Funding XII, LLC (“Store”), an affiliate of Store Capital Corporation ("Store Capital") that was entered into in 2016 and amended with the American Stainless acquisition in 2019 as well as the sale of land at the Munhall facility in 2020. As of March 31, 2023, operating lease liabilities related to the master lease agreement with Store Capital totaled $31.3 million, or 94% of the total lease liabilities on the consolidated balance sheet.

During the three months ended March 31, 2023, the Company entered into new finance lease agreements resulting in an additional $0.3 million of right-of-use assets and lease liabilities.

Balance Sheet Presentation

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


Classification	Financial Statement Line Item	March 31, 2023		December 31, 2022
Assets	Right-of-use assets, operating leases	$	28,871	$	29,224
Assets	Property, plant and equipment	1,617		1,494
Current liabilities	Current portion of lease liabilities, operating leases	1,077		1,056
Current liabilities	Current portion of lease liabilities, finance leases	273		280
Non-current liabilities	Non-current portion of lease liabilities, operating leases	30,628		30,911
Non-current liabilities	Non-current portion of lease liabilities, finance leases	1,378		1,242

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Total Lease Cost

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


	Three Months Ended March 31,
(in thousands)	2023		2022
Operating lease cost1	$	1,000	$	1,048
Finance lease cost:
Amortization of right-of-use assets	78		67
Interest on finance lease liabilities	13		9
Sublease income	(91)		(33)
Total lease cost	$	1,000	$	1,091

1Includes short term leases, which are immaterial

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 income.

Future expected cash receipts from the sublease as of March 31, 2023 are as follows:


(in thousands)	Sublease Receipts
Remainder of 2023	$	272
2024	370
2025	377
2026	385
2027	392
Thereafter	3,786
Total sublease receipts	$	5,582

Maturity of Leases

The amounts of undiscounted future minimum lease payments under leases as of March 31, 2023 are as follows:


(in thousands)	Operating		Finance
Remainder of 2023	$	2,736	$	300
2024	3,667		333
2025	3,687		326
2026	3,703		326
2027	3,765		326
Thereafter	36,152		354
Total undiscounted minimum future lease payments	53,710		1,965
Imputed interest	(22,005)		(314)
Present value of lease liabilities	$	31,705	$	1,651

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Lease Term and Discount Rate


Weighted-average remaining lease term	March 31, 2023		December 31, 2022
Operating leases	13.37 years		13.61 years
Finance leases	5.75 years		6.06 years
Weighted-average discount rate
Operating leases	8.32	%	8.31	%
Finance leases	5.85	%	2.32	%

Note 9: Shareholders' Equity

Share Repurchase Program

On December 20, 2022, the Board of Directors ~~approved stock grants under~~re-authorized the Company's ~~2015 Stock Awards Plan~~share repurchase program. The previous share repurchase program had a term of 24 months and was set to ~~certain management employees~~expire on February 17, 2023. The share repurchase program allows for repurchase of up to 790,383 shares of the ~~Company where 44,686~~Company's outstanding common stock and extends to February 17, 2025. The shares ~~with a~~will be purchased from time to time at prevailing market ~~price~~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 ~~$12.30 per share were granted under the Plan. In connection with the~~authorized, but unissued shares of common stock ~~awards amendment detailed in the following paragraph, these stock awards vest in 33 percent increments annually on a cumulative basis, beginning one year after the date of grant from shares~~or held in ~~treasury with~~treasury. There is no guarantee as to the ~~Company. In order~~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 March 31, 2023, the Company has 647,666 shares of its share repurchase authorization remaining.

Shares repurchased for the ~~awards~~three months ended March 31, 2023 and 2022 were as follows:


	Three Months Ended March 31,
	2023		2022
Number of shares repurchased	32,313		—
Average price per share	$	10.11	$	—
Total cost of shares repurchased	$	327,521	$	—

Note 10: Earnings (Loss) Per Share

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


	Three Months Ended March 31,
(in thousands, except per share data)	2023		2022
Numerator:
Net income (loss)	$	(5,199)	$	10,260
Denominator:
Denominator for basic earnings (loss) per share - weighted average shares	10,148		10,209
Effect of dilutive securities:
Employee stock options and stock grants	—		111
Denominator for diluted earnings (loss) per share - weighted average shares	10,148		10,320









Net income (loss) per share:
Basic	$	(0.51)	$	1.00
Diluted	$	(0.51)	$	0.99

Ascent Industries Co.

Notes to vest, the employee must be in the continuous employment of the Company since the date of the award. 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.Condensed Consolidated Financial Statements (Unaudited)

Effective May 1, 2017, 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, the Committee approved the amendment of the vesting schedules for the May 5, 2016 and February 8, 2017 stock grants reducing the vesting period from five years to three years.

The diluted earnings (loss) per share calculations exclude the effect of potentially dilutive shares when the inclusion of those shares in the calculation would have an anti-dilutive effect. ~~For~~The Company had 0.1 million shares that were anti-dilutive for the ~~nine~~three months ended ~~September 30, 2017 and September 30, 2016 the~~March 31, 2023. The Company had ~~weighted average~~an immaterial number of shares of common stock inthat were anti-dilutive for the ~~form of stock grants 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.~~three months ended March 31, 2022.

~~NOTE 6--INCOME TAXES~~Note 11: 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 ~~2014~~2019 or state ~~income tax~~ examinations for years before ~~2012.~~2018. During the three months ended March 31, 2023 and 2022, the Company did not identify nor reserve for any unrecognized tax benefits.

Our income tax provision (benefit) and overall effective tax rates for the periods presented are as follows:


	Three Months Ended March 31,
(in thousands)	2023			2022
Income tax provision (benefit)	$	(1,407)		$	2,589
Effective income tax rate	21.3		%	20.2		%

The effective tax rate was ~~30 percent~~21.3% and ~~28 percent~~20.2% for the three months ended March 31, 2023 and ~~nine-month periods ended September 30, 2017,~~2022, respectively. The ~~2017~~March 31, 2023, effective tax rate was higher than the U.S. statutory rate of 21.0% primarily due to the effects of discrete tax charges related to stock based compensation and an increase in pre-tax book losses.

The March 31, 2022, effective tax rate was lower than the U.S. statutory tax rate of ~~34 percent~~21.0% primarily due to ~~state tax expense~~a forecasted reduction in the valuation allowance for the period.

Note 12: Commitments and Contingencies

In October 2021, the Company acquired DanChem Technologies, Inc. ("DanChem"), a specialty chemical manufacturer based in Virginia. In June of 2020, DanChem received a demand letter from Henkel US Operations Corporation (“Henkel”), a former customer, asserting various claims for breach of contract alleging that product supplied by DanChem under four (4) purchase orders in 2018 and 2019 were defective and/or non-conforming and seeking approximately $315,000 in damages. DanChem responded in August 2020 disputing the claims and denying wrongdoing. Henkel was silent almost two years and then, in August 2022, sent another demand letter to DanChem asserting similar, if not identical claims, but now seeking alleged damages of approximately $3 million (with the main difference between the two demands being Henkel’s new claims for lost profits and other ~~permanent differences, mainly~~consequential damages). Henkel filed a lawsuit against DanChem in Connecticut state court in October 2022 seeking its newly alleged damages of approximately $3 million. Given the ~~manufacturer's exemption. The effective tax rate was 34 percent~~various amounts alleged by Henkel, the early stages of the proceedings, and ~~25 percent~~the fact that DanChem denies liability under the purported legal theory for the ~~three~~claims, we are unable to estimate the reasonably possible loss or range of loss, if any, arising from this matter.

In addition, from time to time, we are involved in various other legal proceedings arising from the normal course of business activities. We are not presently a party to any other such litigation the outcome of which, we believe, if determined adversely to us, would individually, or taken together, have a material adverse effect on our business, operating results, cash flows, or financial condition. Defending such proceedings is costly and ~~nine- month periods ended September 30, 2016, respectively. The nine-month effective tax rate was lower than~~can impose a significant burden on management and employees. We may receive unfavorable preliminary or interim rulings in the ~~34 percent statutory rate primarily due to state tax expense~~course of litigation, and ~~a one-time permanent difference relating to cash surrender proceeds on certain life insurance policies reducing the amount of tax benefit of the pre-tax loss for~~there can be no assurances that ~~period.~~favorable final outcomes will be obtained.

~~Synalloy Corporation~~ Ascent Logo.jpg

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~September 30, 2017~~

Note 13: Industry Segments

~~NOTE 7--SEGMENT INFORMATION~~Ascent Industries Co. has two reportable segments: Tubular Products and Specialty Chemicals. The Tubular Products segment includes the operating results of the Company’s plants involved in the production and distribution of stainless steel, galvanized steel and seamless carbon pipe and tube. The Tubular Products segment serves markets through pipe and tube and customers in the appliance, architectural, automotive and commercial transportation, brewery, chemical, petrochemical, pulp and paper, mining, power generation (including nuclear), water and waste-water treatment, liquid natural gas ("LNG"), food processing, pharmaceutical, oil and gas and other industries.

On January 1, 2023, the Company changed the grouping of certain immaterial revenue and expenses associated with the ceased Palmer operations. As a result, certain prior period Tubular Products segment results have been reclassified to All Other to be comparable to the current period's presentation.

The Specialty Chemicals segment includes the operating results of the Company’s plants involved in the production of specialty chemicals. The Specialty Chemicals segment produces products for the pulp and paper, coatings, adhesives, sealants and elastomers (CASE), textile, automotive, household, industrial and institutional ("HII"), agricultural, water and waste-water treatment, construction, oil and gas and other industries.

The chief operating decision maker evaluates performance and determines resource allocations based on a number of factors, the primary measures being operating income and Adjusted earnings (loss) before interest, income taxes, depreciation and amortization. Adjusted earnings (loss) before interest, income taxes, depreciation and amortization excludes certain items that management believes are not indicative of future results.

The accounting principles applied at the operating segment level are the same as those applied at the consolidated financial statement level. Intersegment sales and transfers are eliminated at the corporate consolidation level.

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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


	Three Months Ended March 31,
(in thousands)	2023		2022
Net sales
Tubular Products	$	58,653	$	88,383
Specialty Chemicals	23,749		27,721
All Other	50		114
	$	82,452	$	116,218
Operating income (loss)
Tubular Products	$	(2,504)	$	14,574
Specialty Chemicals	1,352		2,387
All Other	(479)		(82)

Corporate
Unallocated corporate expenses	(3,704)		(3,029)
Acquisition costs and other	(259)		(531)

Earn-out adjustments	—		(102)
Total Corporate	(3,963)		(3,662)
Operating income (loss)	(5,594)		13,217
Interest expense	1,107		403



Other, net	(95)		(35)

Income (loss) before income taxes	$	(6,606)	$	12,849

	As of
(in thousands)	March 31, 2023		December 31, 2022
Identifiable assets
Tubular Products	$	145,416	$	158,664
Specialty Chemicals	70,406		72,990
Corporate	39,210		37,389

	$	255,032	$	269,043

Three Months Ended Nine Months Ended
Sep 30, 2017 Sep 30, 2016 Sep 30, 2017 Sep 30, 2016
Net sales
Metals Segment $ 43,022,833
$ 22,290,752
$ 111,821,115
$ 68,331,389
Specialty Chemicals Segment 11,573,091
12,006,479
36,489,433
37,184,522
$ 54,595,924
$ 34,297,231
$ 148,310,548
$ 105,515,911
Operating (loss) income
Metals Segment $ (1,323,801 ) $ (1,013,669 ) $ 2,479,963
$ (3,434,725 )
Gain (loss) on sale-leaseback 59,901
(2,226,037 ) 179,703
(2,226,037 )
Total Metals segment (1,263,900 ) (3,239,706 ) 2,659,666
(5,660,762 )

Specialty Chemicals Segment 1,126,994
1,417,116
3,725,030
3,949,453
Gain (loss) on sale-leaseback 23,667
(229,309 ) 71,002
(229,309 )
Total Specialty Chemicals segment 1,150,661
1,187,807
3,796,032
3,720,144

Unallocated straight line lease cost 101,633
—
304,898
—
Unallocated corporate expenses 1,452,731
1,713,684
4,407,563
4,335,756
Acquisition related costs 37,402
1,034
782,397
76,091
Operating (loss) income (1,705,005 ) (3,766,617 ) 960,840
(6,352,465 )
Interest expense 279,598
272,987
715,131
822,426
Change in fair value of interest rate swaps (8,497 ) (115,328 ) (33,000 ) 276,512
Earn-out adjustment 62,804
—
145,200
—
Other income, net (316,158 ) —
(316,158 ) —
(Loss) income from continuing operations
before income taxes $ (1,722,752 ) $ (3,924,276 ) $ 449,667
$ (7,451,403 )

As of
Sep 30, 2017 Dec 31, 2016
Identifiable assets
Metals Segment $ 130,500,181
$ 109,689,477

Specialty Chemicals Segment 25,957,147
22,907,672

Corporate 5,976,337
6,040,914

$ 162,433,665
$ 138,638,063

Goodwill
Metals Segment $ 4,648,795
$ —

Specialty Chemicals Segment 1,354,730
1,354,730

$ 6,003,525
$ 1,354,730

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~September 30, 2017~~

~~NOTE 8--FAIR VALUE OF FINANCIAL INSTRUMENTS~~

The Company makes estimates of fair value in accounting for certain transactions, in testing and measuring impairment and in providing disclosures of fair value in its condensed consolidated financial instruments. The Company determines the fair values of its financial instruments for disclosure purposes by maximizing the use of observable inputs and minimizing the use of unobservable inputs when measuring fair value. Fair value disclosures for assets and liabilities are grouped into three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are:

~~Level 1~~ ~~- Quoted prices (unadjusted) in active markets for identical assets or liabilities.~~

~~Level 2~~ - Inputs other than quoted prices that are observable for assets and liabilities, either directly or indirectly. These inputs include quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are less active.

~~Level 3~~ ~~- Unobservable inputs that are supported by little or no market activity for assets or liabilities and includes certain pricing models, discounted cash flow methodologies and similar techniques.~~

As of September 30, 2017 and December 31, 2016, the carrying amounts for cash and cash equivalents, accounts receivable, accounts payable and borrowings under the Company's bank debt, which are based on variable interest rates, approximate their fair value.

During the third quarter of 2017, the Company sold all of its shares of Level 1 available for sales securities. Proceeds from the sale totaled $4,141,564 which resulted in a realized gain of $310,043 which is included in other income on the accompanying condensed consolidated statements of operations. As a result of the sale, unrealized gains, net of tax, of $366,346 were reclassified out of accumulated other comprehensive income ("AOCI") with the realized gain on sale included in earnings which reduced the balance of AOCI to zero at September 30, 2017. The Company used the average cost method to determine the realized gain or loss for each transaction.

Estimates of fair value using levels 2 and 3 may require judgments as to the timing and amount of cash flows, discount rates, and other factors requiring significant judgment, and the outcomes may vary widely depending on the selection of these assumptions. The Company's most significant fair value estimates as of September 30, 2017 and December 31, 2016 relate to the purchase price allocation relating to the acquisition of the stainless steel operations of Marcegaglia USA, Inc. ("MUSA"), contingent consideration liability, testing goodwill for impairment, the interest rate swap, the nickel forward option contracts and disclosures of the fair values of financial instruments.

The Company has one interest rate swap contract, which is classified as a Level 2 financial instrument as it is not actively traded and is valued using pricing models that use observable market inputs. The fair value of the contract was an asset of $64,285 and $31,285 at September 30, 2017 and December 31, 2016, respectively. The interest rate swap was priced using discounted cash flow techniques which are corroborated by using non-binding market prices. Changes in its fair value were recorded to other income (expense) with corresponding offsetting entries to long-term assets or liabilities, as appropriate. Significant inputs to the discounted cash flow model include projected future cash flows based on projected one-month LIBOR and the average margin for companies with similar credit ratings and similar maturities. The fair value of this interest rate swap contract approximates its carrying value.

To manage the impact on earnings of fluctuating nickel prices, the Company enters into six-month forward option contracts, which are classified as Level 2. At September 30, 2017, the Company had contracts in place with notional quantities totaling approximately 2,100,000 pounds with strike prices ranging from $3.49 to $4.57 per pound. At December 31, 2016, the Company had contracts in place with notional quantities totaling approximately 340,000 pounds with strike prices ranging from $3.92 to $5.30 per pound. The fair value of the option contracts were an asset of $172,030 and $87,283 at September 30, 2017 and December 31, 2016, respectively. The fair value of the contracts was priced using discounted cash flows techniques based on forward curves and volatility levels by asset class determined on the basis of observable market inputs, when available. Changes in their fair value were recorded to cost of goods sold with corresponding offsetting entries to other current assets. The fair value of the forward option contracts approximates their carrying value.

The fair value of contingent consideration liabilities ("earn-out") resulting from the MUSA acquisition discussed in Note 9 is classified as Level 3. The fair value was estimated by applying the Monte Carlo Simulation approach using management's projection

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~September 30, 2017~~

~~of pounds shipped and price per unit. Each quarter-end the Company re-evaluates its assumptions and adjusts to the estimated present value of the expected payments to be made.~~

~~The following table presents a summary of changes in fair value of the Company's Level 3 liability during the period:~~

Level 3 Inputs
Balance at December 31, 2016 $ —
Fair value of the earn-out liability from the MUSA acquisition 4,663,783
Earn-out payments to MUSA sellers (518,456 )
Change in fair value during the period 145,200
Balance at September 30, 2017 $ 4,290,527

There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 in the nine-month period ended September 30, 2017 or year ended December 31, 2016. During the first nine months of 2017, there have been no changes in the fair value methodologies used by the Company.

~~NOTE 9--ACQUISITIONS~~

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

On December 9, 2016, the Company's subsidiary Bristol Metals, LLC ("BRISMET"), entered into a definitive agreement to acquire the stainless steel pipe and tube assets of MUSA located in Munhall, PA (the "Bristol Metals-Munhall") to enhance its on-going business with additional capacity and technological advantages. The transaction closed on February 28, 2017 and was funded through an increase to the Company's current credit facility (See Note 10). The purchase price for the transaction, which excludes real estate 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 close of the transaction and was reflected as a credit against the purchase price.

The transaction was accounted for using the acquisition method of accounting for business combinations. Under this method, the total consideration transferred to consummate the acquisition is allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the closing date of the acquisition. The acquisition method of accounting requires extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets, if any, acquired and liabilities assumed. Since the acquisition closed on February 28, 2017, the allocation 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, the Company forecasted earn out payments to be $4,063,204, which was discounted to a present value of $3,604,330 using a discount rate applicable to future revenue of five percent. In determining the appropriate discount rate to apply to the contingent payments, the risk associated with the functional form of the earn-out, the credit risk associated with the payment of the earn-out and the methodology to quantify the earn-out were all considered. The fair value of the contingent consideration was estimated by applying the Monte Carlo Simulation approach using management's estimates of pounds shipped.

In the second quarter of 2017, Management adjusted the selling price used in the earn-out calculation associated with the MUSA Stainless Acquisition. Since this adjustment was determined within the measurement period, the beginning earn-out liability and goodwill were increased by $1,059,453. Goodwill related to Bristol Metals-Munhall increased from $3,589,342 to $4,648,795 and the fair value on contingent consideration was increased from $3,604,330 to $4,663,783.

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~September 30, 2017~~

The total purchase price was allocated to BRISMET's Munhall facility's net tangible and identifiable intangible assets based on their estimated fair values as of February 28, 2017. The finalization of these allocations is subject to change based 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 mill capabilities acquired as part of Bristol Metals-Munhall with BRISMET's 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.

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

Initial Revised
estimate Revisions estimate
Inventories $ 5,434,000
$ —
$ 5,434,000
Other current assets - production and maintenance supplies 1,548,701
—
1,548,701
Equipment 7,576,733
—
7,576,733
Customer list intangible 992,000
—
992,000
Goodwill 3,589,342
1,059,453
4,648,795
Contingent consideration (3,604,330 ) (1,059,453 ) (4,663,783 )
Other liabilities assumed (582,933 ) —
(582,933 )
$ 14,953,513
$ —
$ 14,953,513

Bristol Metals-Munhall's results of operations since acquisition are reflected in the Company's consolidated statements of operations. The amount of Bristol Metals-Munhall's revenues and pre-tax loss included in the consolidated statements of operations for the three months ended September 30, 2017 was $8,675,104 and $621,881, respectively. For 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 of the combined results of 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 three months ended September 30, 2017 are not presented as those results already include Bristol Metal-Munhall's results.

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~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 acquisition 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~~

Pursuant to the Credit Agreement in place with the Company's bank, the Company is subject to certain covenants including maintaining a minimum fixed charge coverage ratio and a limitation on the Company’s maximum amount of capital expenditures per year, which is in line with currently projected needs. At September 30, 2017, the Company was in compliance with all debt covenants.

~~NOTE 11--CONTINGENCIES~~

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~~

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 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 favor of the plaintiff by ruling that an enforceable contract existed between 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 periods ended September 30, 2017, respectively. Rent expense began in October 2016 and therefore no rent expense was recognized for the three and nine-month periods ended September 30, 2016. The amount of future minimum lease payments under the sale-leaseback transaction are as follows: remainder of 2017 - $482,460; 2018 - $1,939,489; 2019 - $1,978,279; 2020 -$2,017,845; 2021 -$2,058,201; and thereafter - $35,602,349. In accordance with the agreement, the amount of future lease payments as of September 30, 2017 includes a rent escalator 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, the Company declared a $0.13 cash dividend. The dividend totaling approximately $1,100,000 was paid on November 6, 2017.~~

On October 30, 2017, the Company amended its Credit Agreement with its bank to increase the limit of the asset-based revolving line of credit by $20,000,000 to a maximum of $65,000,000 and extended the maturity date to October 30, 2020. None of the other provisions of the Credit Agreement were changed as a result of this amendment.

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

~~The following is management's~~This discussion ~~of certain~~and analysis summarizes the significant factors ~~that affected the Company~~affecting our consolidated operating results, liquidity, and capital resources during the three months ended March 31, 2023 and ~~nine-month periods~~2022, respectively. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that are included in our Annual Report on Form 10-K for the year ended ~~September 30, 2017.~~December 31, 2022 (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 2022. This discussion and analysis is presented in five sections:

•Executive Overview

•Results of Operations and Non-GAAP Financial Measures

•Liquidity and Capital Resources

•Material Cash Requirements from Contractual and Other Obligations

•Critical Accounting Policies and Estimates

Executive Overview

First Quarter 2023 Highlights

Consolidated net sales for the ~~third~~first quarter of ~~2017~~2023 were ~~$54,596,000,~~$82.5 million decreasing 29.1%, or $33.8 million, compared to the first quarter of 2022. The decrease was primarily driven by a decrease in pounds shipped partially offset by increases in average selling prices. The decrease in pounds shipped is significantly driven by the Company's decision to exit the galvanized pipe and tube operations at its Munhall facility in the fourth quarter of 2022.

Consolidated net loss increased to $5.2 million, or $0.51 loss per share, in the first quarter of 2023, compared to net income of $10.3 million, or $0.99 diluted earnings per share, in the first quarter of 2022.

During the quarter, the Company used $0.8 million for capital expenditures focusing on growth and maintenance projects to continue to improve operational efficiencies.

In the first quarter of 2023, we continued to experience inflationary pressures including continued increased raw material costs in both segments of our business, as well as reduced demand resulting from inventory management measures being pursued by our customers. The Company's decision to exit the galvanized pipe and tube operations at its Munhall facility in the fourth quarter of 2022 also had an ~~increase~~impact on the first quarter of ~~$20,299,000~~2023 with a 63.0% decrease in pounds shipped and a 53.1% decrease in net sales from that facility compared to the prior year. We continue to pass through rising input and other raw material costs as appropriate and continue efforts to maximize our working capital use and debt reduction. During the quarter, we also repurchased 32,313 shares for $0.3 million through our share repurchase program as part of our continued efforts to create sustainable value for our shareholders.

Macroeconomic Events

In February 2022, the United States announced targeted economic sanctions on Russia in response to the military conflict in Ukraine. As our operations are located in North America, we have no direct exposure to Russia and Ukraine. However, we are actively monitoring the broader economic impact of the crisis, especially the potential impact on commodity and fuel prices, and the potential decreased demand for our products.

There are additional macroeconomic uncertainties, including continued global supply chain constraints, labor shortages and the continuing impact of inflation, which continues to impact the Company's raw material costs. The Company continues efforts to implement price increases to offset these inflationary pressures and continues to take action to improve working capital and evaluate other opportunities to maintain and improve financial performance in the short and long term.

Results of Operations

Consolidated Performance Summary

Consolidated net sales for the first quarter of 2023 were $82.5 million, a decrease of $33.8 million, or ~~59 percent when~~29.1%, compared to net sales for the ~~third~~first quarter of ~~2016~~2022. The decrease in net sales was primarily driven by a 32.4% decrease in pounds shipped partially offset by a 5.8% increase in average selling prices. The decrease in pounds is significantly driven by the Company's decision to exit the galvanized pipe and tube operations at its Munhall facility in the fourth quarter of ~~$34,297,000.~~ 2022.

For the first quarter of 2023, consolidated gross profit decreased 80.9% to $4.3 million, or 5.2% of sales, compared to $22.5 million, or 19.4% of sales in the first quarter of 2022. The decrease for the first quarter of 2023 was attributable to continued increasing raw material and other manufacturing costs partially offset by increased selling prices.

Consolidated selling, general, and administrative expense (SG&A) for the first quarter of 2023 increased $1.0 million to $9.6 million, or 11.6% of sales, compared to $8.6 million, or 7.4% of sales in the first quarter of 2022. The increase in SG&A expense for the first quarter of 2023 was primarily driven by increases in professional fees, salaries, wages and benefits, and higher realized losses on the disposal of assets compared to the prior year partially offset by lower bad debt expense, amortization expense and repairs and maintenance expense.

Consolidated operating loss in the first quarter of 2023 totaled $5.6 million compared to operating income of $13.2 million in the first quarter of 2022. The operating decrease in the first quarter of 2023 was primarily driven by the aforementioned decrease in gross profit and increases in SG&A costs partially offset by increases in average selling prices.

Tubular Products

On January 1, 2023, the Company changed the grouping of certain immaterial revenue and expenses associated with the ceased Palmer operations. As a result, certain prior period Tubular Products segment results have been reclassified to be comparable to the current period's presentation.

Net sales for the Tubular Products segment in the first ~~nine months~~quarter of ~~2017 were $148,311,000, an~~2023 totaled $58.7 million, a decrease of $29.7 million, or 33.6%, from the first quarter of 2022. The decrease was primarily driven by a 42.1% decrease in pounds shipped partially offset by 15.6% increase in average selling prices. The decrease in pounds shipped is significantly driven by the Company's decision to exit the galvanized pipe and tube operations at its Munhall facility in the fourth quarter of ~~$42,795,000 or 41 percent when~~2022.

The net sales decrease for the first quarter of 2023 compared to the ~~same period of the prior year. For the third~~first quarter of 2017, the Company recorded net loss from continuing operations of $1,207,000, or $0.14 per share, compared to a net loss from continuing operations of $2,608,000 or $0.30 loss per share for the same quarter in the prior year. For the first nine months of 2017, net income from2022 is summarized as follows:


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

Heavy wall seamless carbon steel pipe and tube	14		0.1%	15.9%	(13.6)%
Stainless steel pipe and tube	(17,779)		(28.6)%	(1.8)%	(27.2)%
Galvanized pipe and tube	(11,965)		(86.9)%	(30.2)%	(81.2)%
Total decrease	$	(29,730)

~~continuing operations was $325,000, or $0.04 per share. This compares to a net loss from continuing operations of $5,658,000, or $0.64 loss per share~~SG&A expense for the first ~~nine months~~quarter of ~~2016.~~

~~The third quarter and first nine-month periods of 2017 include financial results~~2023 decreased to $3.9 million compared to $4.1 million in the ~~Company's Metals Segment related~~first quarter of 2022. As a percentage of sales, SG&A expense increased to 6.7% of sales in the first quarter of 2023 compared to 4.7% of sales in the first quarter of 2022. The changes in SG&A were primarily driven by by lower bad debt expense and amortization expense partially offset by higher salaries, wages and benefits and incentive bonus expense in the current year 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.prior year partially.

~~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. SalesOperating loss increased to $2.5 million for the first ~~nine months~~quarter of ~~2017 were $111,821,000, an~~2023 compared to operating income of $14.6 million for the first quarter of 2022. The current quarter increase ~~of $43,490,000 or 64 percent from 2016. Excluding Bristol Metals-Munhall, year to date net sales were up 39 percent. Each product line~~ in ~~the Metals Segment showed positive sales growth, including sequential quarterly gains,~~operating loss was primarily driven by increasing raw material costs and gains against the prior year’s quarter and on a year to date basis. Sales of seamless carbon pipe were up 84 percent over last year’s third quarter and up 74 percent year to date. Sales were affected during the third quarter and first nine months of 2017other manufacturing costs partially offset by average selling price increases due to ~~third quarter shipments and order activity across~~ the ~~businesses in the Metals Segment showing improvement over the first and second quarters and are summarized as follows:~~

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

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

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

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

~~The Metals Segment's operating loss from continuing operations improved $1,976,000 to a loss~~continued pass through of $1,264,000 for the third quarter of 2017 compared to a loss of $3,240,000 for the third quarter of 2016. For the first nine months of 2017, operating income from continuing operations for the Metals Segment increased $8,321,000 to an operating profit of $2,660,000 compared to a loss of $5,661,000 for the same period of 2016. Current year operating results were affected by the following factors:


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

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

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


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.

raw material cost fluctuations.

Specialty Chemicals ~~Segment~~

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

~~a) The loss of a single customer in the second half of 2016 that reduced 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 achievesegment in the first quarter of ~~next year.~~2023 totaled $23.7 million, representing a $4.0 million, or 14.3%, decrease from the first quarter of 2022. The decrease was driven by a 18.5% decrease in pounds shipped partially offset by a 7.1% increase in average selling prices.

~~c) We experienced some delays~~SG&A expense for the first quarter of 2023 in ~~receipt~~creased to $1.8 million, or 7.4% of ~~raw materials coming out~~sales, compared to $1.6 million, or 5.7% of sales in the ~~Houston area following Hurricane Harvey.~~first quarter of 2022. The increase in SG&A expense was primarily driven by increased incentive bonus expense, amortization expense and bad debt expense in the current year compared to the prior year partially offset by lower salaries, wages and benefits and professional fees.

Operating income ~~for the Specialty Chemicals Segment for the third quarter of 2017~~ decreased ~~$37,000 from the third quarter of 2016~~ to ~~$1,151,000. Operating income for the Specialty Chemicals Segment~~$1.4 million for the first ~~nine months~~quarter of ~~2017 amounted~~2023 compared to ~~$3,796,000, a $76,000 or two percent increase from~~operating income of $2.4 million for the ~~same period for 2016. Operating income in the third~~first quarter ~~and year to date was negatively impacted by an increase to the allowance for doubtful accounts~~ of ~~$227,000 for one customer that became financially unstable during the quarter combined with higher legal fees of $81,000.~~2022. The decrease in operating income ~~was~~is primarily driven by the aforementioned decreases in net sales and increases in SG&A expense in the period.

Corporate & Other Items

Unallocated corporate and other expenses for the first quarter of 2023 increased $1.2 million, or 39.8%, to $4.2 million, or 5.1% of sales, compared to $3.0 million, or 2.6% of sales, in the prior year. The first quarter of 2023 increases were primarily driven by increases in professional fees, stock based compensation, taxes and licenses and insurance expense partially offset by ~~a $229,000 charge~~decreases in salaries, wages and benefits, utilities, travel expense and repairs and maintenance expense.

Interest expense for the first quarter of 2023 increased to $1.1 million, from $0.4 million for the first quarter of 2022. The increase is primarily driven by higher interest rates 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.~~

~~Other Items~~

~~Consolidated selling, general and administrative expenses increased 13 percent to $6,588,000, or 12.1 percent of sales, from $5,815,000, 17.0 percent of sales, for the third quarter of 2017~~current year compared to the third quarter of 2016. For the first nine months of 2017, consolidated selling, general and administrative expenses were $18,926,000, or 12.8 percent of sales, an increase of eleven percent from $17,041,000, or 16.2 percent of sales, 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. 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 $145,000 for the third quarter and first nine months of 2017.

The Company purchased 225,000 shares of a potential acquisition target for $3,832,000 during the second quarter of 2017. During the third quarter of 2017, acquisition discussions were stopped and the Company sold all of their holdings, realizing a $310,000 gain on the investment. As a result of the sale, unrealized gains, net of tax, of $366,000 were reclassified out of accumulated other comprehensive income ("AOCI") with the realized gain on sale included in other income which reduced the balance of AOCI to zero at September 30, 2017. The Company used the average cost method to determine the realized gain or loss for each transaction.prior year.

The effective tax rate was ~~30 percent and 28 percent~~21.3% for the ~~three-month and nine-month periods~~three months ended ~~September 30, 2017, respectively.~~March 31, 2023. The ~~2017~~three months ended March 31, 2023, effective tax rate was ~~lower~~higher than the U.S. statutory rate ~~of 34 percent~~21.0% primarily due to ~~state~~the effects of discrete tax ~~expense~~charges related to stock based compensation and an increase in pre-tax book losses.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), we use the following non-GAAP financial measures: EBITDA and Adjusted EBITDA. Management believes that these non-GAAP measures are useful because they are key measures used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions as well as 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 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 ~~permanent differences, mainly~~items we do not consider in our evaluation of ongoing performance. These items include: goodwill impairment, asset impairment, gain on lease modification, stock-based compensation, non-cash lease cost, acquisition costs and other fees, proxy contest costs and recoveries, shelf registration costs, loss on extinguishment of debt, earn-out adjustments, realized and unrealized (gains) and losses on investments in equity securities and other investments, retention costs and restructuring and severance costs from net income. We caution investors that 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 ~~manufacturer's exemption.~~ same manner. We present EBITDA and Adjusted EBITDA because we consider them to be important supplemental measures of our performance and investors' understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.

Consolidated EBITDA and Adjusted EBITDA are as follows:


		Three Months Ended March 31,
($ in thousands)		2023			2022
Consolidated
Net income (loss)		$	(5,199)		$	10,260
Adjustments:
	Interest expense	1,107			403

	Income taxes	(1,407)			2,589
	Depreciation	1,991			2,116
	Amortization	396			721
EBITDA		(3,112)			16,089
	Acquisition costs and other	333			531



	Earn-out adjustments	—			102




	Stock-based compensation	211			132
	Non-cash lease expense	91			107

	Restructuring and severance cost	900			—
Adjusted EBITDA		$	(1,577)		$	16,961
	% of sales	(1.9)		%	14.6		%

Tubular Products EBITDA and Adjusted EBITDA are as follows:


		Three Months Ended March 31,
($ in thousands)		2023			2022
Tubular Products
Net income (loss)		$	(2,504)		$	14,424
Adjustments:

	Depreciation	1,017			1,213
	Amortization	238			625
EBITDA		(1,249)			16,262
	Acquisition costs and other	72			—
	Earn-out adjustments	—			102


	Stock-based compensation	(29)			35
	Non-cash lease expense	58			—

	Restructuring and severance costs	900			—
Tubular Products Adjusted EBITDA		$	(248)		$	16,399
	% of segment sales	(0.4)		%	18.5		%

Specialty Chemicals EBITDA and Adjusted EBITDA are as follows:


		Three Months Ended March 31,
($ in thousands)		2023			2022
Specialty Chemicals
Net income		$	1,342		$	2,378
Adjustments:
	Interest expense	12			9
	Depreciation	952			886
	Amortization	158			96
EBITDA		2,464			3,369
	Acquisition costs and other	2			—
	Stock-based compensation	8			6
	Non-cash lease expense	24			—

Specialty Chemicals Adjusted EBITDA		$	2,498		$	3,375
	% of segment sales	10.5		%	12.2		%

Liquidity and Capital Resources

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

Sources of Liquidity

Funds generated by operating activities supplemented by our available cash and cash equivalents and our credit facilities are our most significant sources of liquidity. As of March 31, 2023, we held $0.4 million of cash and cash equivalents, as well as $50.0 million of remaining available capacity on our revolving line of credit. We believe our sources of liquidity will be sufficient to fund operations and anticipated capital expenditures as well as repay our debt obligations as they become due over the next 12 months and beyond.

Cash Flows

Cash flows from total operations were as follows:


	Three Months Ended March 31,
(in thousands)	2023		2022
Total cash provided by (used in):
Operating activities	$	13,390	$	394
Investing activities	(824)		(1,112)
Financing activities	(13,586)		(62)
Net decrease in cash and cash equivalents	$	(1,020)	$	(780)

Operating Activities

The ~~effective tax rate was 34 percent and 25 percent~~increase in cash provided by operating activities for the ~~three-month~~three months ended March 31, 2023, compared to cash provided by operating activities in the three months ended March 31, 2022, was primarily driven by changes in working capital. Changes in working capital can vary significantly depending on factors such as the timing of inventory production and ~~nine-month periods~~purchases, customer payments of accounts receivable and payments to vendors in the regular course of business. Inventory increased operating cash flows for the first three months of 2023 by $13.7 million compared to a decrease of $9.3 million for the first three months of 2022, while accounts payable increased operating cash flows by $2.8 million for the first three months of 2023, compared to $12.0 million in the first three months of 2022. The decrease in inventory and accounts payable is primarily driven by lower inventory purchases to match inventory levels with sales partially offset by slightly lower inventory turns year-over-year and a decrease in days payables outstanding. Accounts receivable decreased operating cash flows by $1.4 million in the first three months of 2023 compared to $17.9 million in the first three months of 2022. The decrease in accounts receivable is primarily driven by a reduction in sales in the first quarter of 2023 partially offset by an increase in days sales outstanding compared to the first three months of 2022.

Investing Activities

Net cash used in investing activities primarily consists of transactions related to capital expenditures. The decrease in cash used in investing activities for the three months ended ~~September 30, 2016, respectively. The nine-month 2016 effective tax rate~~March 31, 2023, compared to the cash used in investing activities for the three months ended March 31, 2022, was ~~lower than the 34 percent statutory rate~~ primarily due to ~~state tax expense~~decreases in capital expenditures in the current year compared to 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 three months ended March 31, 2023, compared to cash used in financing activities for the three months ended March 31, 2022, was primarily due to decreased borrowings and increased repayments under the Company's credit facility compared to the prior year.

Short-term Debt

The Company has a ~~one-time permanent difference reducing~~note payable in the amount of ~~tax benefit~~$1.0 million with an annual interest rate of 2.77% maturing April 1, 2023, associated with the financing of the ~~pre-tax loss for that period.~~Company's insurance premium in the current year. As of March 31, 2023, the outstanding balance was $0.1 million.

Long-term Debt

The ~~Company's cash~~Company and its subsidiaries have a Credit Agreement with BMO providing the Company with a four-year revolving credit facility, maturing on January 15, 2025, and providing the Company with up to $150.0 million of borrowing capacity. As of March 31, 2023, the Company had $58.7 million of total borrowings outstanding with its lender, a decrease of $12.9 million from the balance ~~decreased $48,000 to $15,000 as of September 30, 2017 compared to $63,000~~ at December 31, ~~2016. Fluctuations during~~2022. The Facility contains covenants requiring the ~~period were comprised~~maintenance 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;~~

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;

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.~~

The Company drew $17,919,000 against its line of credit during the first nine months of 2017 and had $26,723,000 of borrowings outstanding as of September 30, 2017. Covenants under the Credit Agreement include maintaining a minimum consolidated fixed charge coverage ratio if excess availability falls below the greater of (i) $7.5 million and ~~a limitation on~~(ii) 10% of the ~~Company’s maximum amount~~revolving credit facility (currently $10.5 million). As of ~~capital expenditures per year, which is in line with currently projected needs. The~~March 31, 2023, the Company was in compliance with all ~~covenants as~~financial debt covenants. See Note 7 in the notes to the unaudited condensed consolidated financial statements for additional information on the Company's line of ~~September 30, 2017.~~credit.

Share Repurchases and Dividends

We have a share repurchase program, authorized by the Company's Board of Directors, that is executed through purchases made from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. Shares repurchased are returned to status of authorized, but unissued shares of common stock or held in treasury. During the three months ended March 31, 2023, the Company purchased 32,313 shares under the stock repurchase program at an average price of approximately $10.11 per share for an aggregate amount of $0.3 million. During the three months ended March 31, 2022, the Company purchased no shares under the stock repurchase program.

As of March 31, 2023, the Company has 647,666 shares of its share repurchase authorization remaining.

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~~end of Palmer. 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,each fiscal year the Board of Directors ~~has~~reviews the financial performance and capital needed to support future growth to determine the amount of cash dividend, if any, which is appropriate. In 2022, no dividends were declared ~~a $.13 per share dividend,~~or paid by the Company.

Other Financial Measures

Below are additional financial measures that we believe are important in understanding the Company's liquidity position from year to year. The metrics are defined as:

~~which~~

Liquidity Measure:

•Current ratio = current assets divided by current liabilities. The current ratio will be ~~paid on November 6, 2017. We have started our planning activities for 2018 and will provide some guidance later this year. We remain optimistic that our end markets continue to improve and that~~determined by the Company ~~is well positioned~~using generally accepted accounting principles, consistently applied.

Leverage Measure:

•Debt to capital = total debt divided by total capital. The debt to capital ratio will be determined by the Company using generally accepted accounting principles, consistently applied.

Profitability Ratio:

•Return on average equity ("ROAE") = net income divided by the trailing 12-month average of equity. The ROAE will be determined by the Company using generally accepted accounting principles, consistently applied.

Results of these additional measures are as follows:


	March 31, 2023	December 31, 2022
Current ratio	4.2	5.1
Debt to capital	30%	34%
Return on average equity	(4.1)%	18.0%

Material Cash Requirements from Contractual and Other Obligations

As of March 31, 2023, our material cash requirements for ~~growth~~our known contractual and other obligations were as follows:

•Debt Obligations and Interest Payments - Outstanding obligations on our revolving credit facility and term loan were $54.7 million and $3.9 million, respectively, with $2.5 million payable within 12 months. The interest payments on our remaining borrowings will be determined based upon the average outstanding balance of our borrowings and the prevailing interest rate during that time. Outstanding obligations on our note payable were $0.1 million, which matures within 12 months. Interest payments on the remaining note payable borrowings will be based on an interest rate of 2.77%. See Note 7 for further detail of our debt and the timing of expected future payments.

•Operating and Finance Leases - The Company enters into various lease agreements for the real estate and manufacturing equipment used in ~~2018.~~the normal course of business. Operating and finance lease obligations were $33.4 million, with $1.4 million payable within 12 months. See Note 8 for further detail of our lease obligations and the timing of expected future payments.

~~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~~The Company has no off-balance sheet arrangements 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"reasonably likely to have a material current or future effect on the Company's financial position, revenues, results of operations, liquidity, or capital expenditures. We expect capital spending to be as much as $4.9 million for the remainder of fiscal 2023.

Critical Accounting Policies 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 impactEstimates

We describe our significant accounting policies in Note 1, Summary 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 difficultiesSignificant Accounting Policies, in the ~~production of products; new fracking regulations; a prolonged decrease in oil and nickel prices; unforeseen delays in completing~~notes to the ~~integrations of acquisitions; risks associated with mergers, acquisitions, dispositions and other expansion activities;~~consolidated financial stability of our customers; environmental issues; 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 and other risks detailed from time-to-timestatements presented in the ~~Company's Securities~~Annual Report on Form 10-K for the year ended December 31, 2022. We discuss our critical accounting estimates in Item 7, Management's Discussion and ~~Exchange Commission filings. The Company assumes~~Analysis of Financial Condition and Results of Operations, in the Annual Report on Form 10-K for the year ended December 31, 2022. There have been no ~~obligation to update~~significant changes in our significant accounting policies or critical accounting estimates since the ~~information included in this report.~~end of 2022.

Item 3. Quantitative and Qualitative Disclosures about Market Risks

~~Information about~~We are a smaller reporting company as defined in Rule 12b-2 of the ~~Company's exposure~~Exchange Act; therefore, we are not required to ~~market risk was disclosed in its Annual Report on Form 10-K for~~provide the year ended December 31, 2016, which was filed with the Securities and Exchange Commission on March 14, 2017. There have been no material quantitative or qualitative changes in market risk exposure since the date of that filing.information required by this Item.

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)~~Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Rule 13a-15(e) of the ~~Company's~~Exchange Act as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms.” The Company’s disclosure controls and procedures ~~(as defined in 17 C.F.R. Sections 240.13a-15(e)~~are designed to ensure that material information relating to the Company and ~~240.15d-15(e)), the Company's~~its consolidated subsidiaries is accumulated and communicated to its management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. The Company’s management, with the participation of its Chief Executive Officer and Chief ~~Accounting~~Financial Officer, ~~concluded that that such~~conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2023. Based upon that evaluation, the ~~end~~Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2023, because of the previously reported material weaknesses in internal control over financial reporting, as described below.

Previously Reported Material Weaknesses in Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15f-15(f). As reported in our 2022 Form 10-K, we did not maintain effective internal control over financial reporting as of December 31, 2022 as a result of material weaknesses in the control environment and control activities areas. A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Refer to our 2022 Form 10-K for a description of our material weaknesses.

Ongoing Remediation Efforts to Address Material Weaknesses

Our material weaknesses were not remediated at March 31, 2023. Our Board of Directors and management are committed to the continued implementation of remediation efforts to address the material weaknesses. The Company is developing a remediation plan to include designing and implementing review and approval controls over the data utilized in various accounting processes, controls that will address the accuracy, timely recording and completeness of data used in the determination of significant accounting estimates, reserves and valuations in accordance with U.S. GAAP, controls that will address the sufficient review of complex accounting areas and controls that will address the monitoring of general information technology areas including user access, cyber security and segregation of duties.

The following steps are among the measures to be taken by the Company with a number of these initiatives directly related to strengthening our controls and addressing specific control deficiencies which contributed to the material weaknesses. The steps to remediate the deficiencies underlying the material weaknesses include:

•Hiring adequate accounting, finance and information technology resources to enhance the capabilities of these functions across the organization.

•Providing and expanding relevant training on internal controls over financial reporting to control owners and control preparers across the organization to reinforce the importance of a strong control environment

•Evaluating and realigning roles and responsibilities of management

•Evaluating and realigning roles and responsibilities of control owners and control preparers to maintain segregation of duties

•Developing enhanced policies and procedures relating to documentation of control activities performed including those that reflect the control attributes performed and the demonstration of completeness and accuracy of the data used in the control.

•Enhancing/designing/implementing controls over the inventory, revenue recognition and accounts receivable, period-end financial reporting, account analyses, and journal entry processes

•Enhancing/designing/implementing controls over accounting for complex areas

•Enhancing/designing/implementing controls over general information technology controls, including user access provisioning and cyber-security

The Audit Committee of the Board of Directors is monitoring management's ongoing remediation efforts. With the Audit Committee's oversight, management has dedicated significant resources and efforts to improve our internal control environment to remedy the identified material weaknesses. As we continue to evaluate and implement improvements to our internal control over financial reporting, our management may decide to take additional measures to address our control deficiencies or to modify the remediation efforts undertaken. Because the reliability of the internal control process requires repeatable execution, our material weaknesses cannot be considered fully remediated until all remedial processes and procedures (including additional remediation efforts identified by our senior management as necessary) have been implemented, each applicable control has operated for a sufficient period ~~covered by this quarterly report, were~~of time and management has concluded, through testing, that the controls are operating effectively. Until all identified material weaknesses are remediated, we will not be able to assert that our internal controls are 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, identified~~ongoing remediation efforts described above, there have been no ~~change~~changes in the ~~Company's~~Company’s internal control over financial reporting ~~that occurred~~ during the ~~most recent fiscal quarter~~three months ended March 31, 2023 that ~~has~~have materially affected, or isare reasonably likely to materially affect, ~~the Company's~~its internal control over financial reporting. Management has excluded the Munhall facility's operations (acquired in the MUSA Stainless acquisition) from its assessment of internal control over financial reporting as of September 30, 2017 because this material acquisition closed in the first quarter of 2017. Total assets and total revenue associated with the Munhall facility represent approximately 21 percent, or $33.5 million and twelve percent, or $17.1 million, respectively, of the related consolidated financial statement amounts of the Metals Segment as of, and for the quarter ended, September 30, 2017.

PART II

Item 1. Legal Proceedings

It is not unusual for us and our subsidiaries to be involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of business involving, among other things, product liability, commercial, employment, workers' compensation, and environmental ~~matters. We establish~~matters.. With respect to such lawsuits, claims and proceedings, the Company records reserves ~~in a manner that~~when it is ~~consistent with accounting principles generally accepted in the United States for costs associated with such matters when~~probable a liability ~~is probable~~has been incurred and ~~those costs are capable~~the amount of ~~being~~loss can be 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~~Information pertaining to legal ~~actions, either individually or~~proceedings can be found in Note 1 2 - Commitments and Contingencies in the ~~aggregate, will not have a material adverse effect on our~~notes to the unaudited condensed consolidated 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 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.statements, and is incorporated by reference herein.

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.~~2022.

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

Issuer Purchases of Equity Securities

The following table sets forth information with respect to purchases of the Company’s common stock on a trade date basis made during the three months ended March 31, 2023:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs1	Number of Shares that May Yet Be Purchased under the Program
January 1, 2023 - January 31, 2023	23,865	$	10.07	23,865	656,114
February 1, 2023 - February 28, 2023	3,810	10.68		3,810	652,304
March 1, 2023 - March 31, 2023	4,638	9.82		4,638	647,666
As of March 31, 2023	32,313	$	10.11	32,313	647,666

1Pursuant to the 790,383 share stock repurchase program authorized by the ~~Issuer and Affiliated Purchasers~~

~~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~~in February 2021. The stock 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 sharesprogram expires in twenty-four months from authorization 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~~there is no guarantee onto the exact number of shares that will be ~~purchased~~repurchased by the Company ~~and the Company may discontinue purchases at any time~~over that ~~management determines~~period. See Note 9 for additional ~~purchases are not warranted. The Stock Repurchase Plan will expire on August 31, 2017.~~information.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit No.		Description
~~10.1~~31.1		~~Third Amended and Restated Loan agreement, dated as of October 30, 2017, between Registrant and Branch Banking and Trust ("BB&T")~~
~~31.1~~	Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
~~31.3~~32.1		~~Rule 13a-14(a)/15d-14(a) Certification of the Chief Accounting Officer~~
32	Certifications Pursuant to 18 U.S.C. Section 1350
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase
101.LAB*		XBRL Taxonomy Extension Label Linkbase
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
*104		Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101*)
*		In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed "furnished" and not "filed."


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


						(Unaudited)
	Sep 30, 2017		Dec 31, 2016			March 31, 2023		December 31, 2022
Assets					Assets
Current assets
Current assets:					Current assets:
Cash and cash equivalents	$	15,410	$	62,873	Cash and cash equivalents	$	421	$	1,441
Accounts receivable, less allowance for doubtful accounts
of $236,000 and $82,000, respectively	30,312,586		18,028,946
Accounts receivable, net of allowance for credit losses of $975 and $1,250, respectively					Accounts receivable, net of allowance for credit losses of $975 and $1,250, respectively	46,779		45,120
Inventories, net	70,506,055		60,799,509		Inventories, net	99,792		114,452
Prepaid expenses and other current assets	9,048,905		7,272,569		Prepaid expenses and other current assets	11,400		8,982
Indemnified contingencies - see Note 11	—		11,339,888
Assets held for sale					Assets held for sale	—		380
Total current assets	109,882,956		97,503,785		Total current assets	158,392		170,375

Property, plant and equipment, net of accumulated
depreciation of $49,135,440 and $45,219,309 respectively	34,967,728		27,324,092
Property, plant and equipment, net					Property, plant and equipment, net	41,445		42,346
Right-of-use assets, operating leases, net					Right-of-use assets, operating leases, net	28,871		29,224
Goodwill	6,003,525		1,354,730		Goodwill	11,389		11,389
Intangible assets, net of accumulated amortization
of $9,885,902 and $8,148,162, respectively	11,490,767		12,308,838
Deferred charges, net and other non-current assets	88,689		146,618
Intangible assets, net					Intangible assets, net	9,991		10,387
Deferred income taxes					Deferred income taxes	1,000		1,353
Deferred charges, net					Deferred charges, net	178		203
Other non-current assets, net					Other non-current assets, net	3,766		3,766
Total assets	$	162,433,665	$	138,638,063	Total assets	$	255,032	$	269,043

Liabilities and Shareholders' Equity					Liabilities and Shareholders' Equity
Current liabilities
Current liabilities:					Current liabilities:
Accounts payable	$	24,769,264	$	16,684,508	Accounts payable	$	25,783	$	22,731
Accrued expenses	9,779,911		16,087,434

Accrued expenses and other current liabilities					Accrued expenses and other current liabilities	8,040		6,560
Current portion of note payable					Current portion of note payable	98		387
Current portion of long-term debt					Current portion of long-term debt	2,464		2,464

Current portion of operating lease liabilities					Current portion of operating lease liabilities	1,077		1,056
Current portion of finance lease liabilities					Current portion of finance lease liabilities	273		280

Total current liabilities	34,549,175		32,771,942		Total current liabilities	37,735		33,478
Long-term debt					Long-term debt	56,189		69,085

Long-term debt	26,722,960		8,804,206
Deferred income taxes	1,576,515		1,609,492
Long-term deferred gain, sale-leaseback	6,016,918		6,267,623
Long-term portion of earn-out liability	3,119,856		—
Long-term portion of operating lease liabilities					Long-term portion of operating lease liabilities	30,628		30,911
Long-term portion of finance lease liabilities					Long-term portion of finance lease liabilities	1,378		1,242

Other long-term liabilities	756,806		592,245		Other long-term liabilities	58		68
Total non-current liabilities					Total non-current liabilities	88,253		101,306

Shareholders' equity
Common stock, par value $1 per share - authorized 24,000,000 shares; issued 10,300,000 shares	10,300,000		10,300,000
Commitments and contingencies – See Note 12					Commitments and contingencies – See Note 12

Shareholders' equity:					Shareholders' equity:
Common stock, par value $1 per share; 24,000,000 shares authorized; 11,085,103 and 10,172,265 shares issued and outstanding, respectively					Common stock, par value $1 per share; 24,000,000 shares authorized; 11,085,103 and 10,172,265 shares issued and outstanding, respectively	11,085		11,085
Capital in excess of par value	35,069,410		34,714,206		Capital in excess of par value	46,903		47,021
Retained earnings	58,261,200		57,936,533		Retained earnings	79,947		85,146
	103,630,610		102,950,739			137,935		143,252
Less cost of common stock in treasury: 1,583,107 and 1,630,690 shares, respectively	13,939,175		14,358,184
Less: cost of common stock in treasury - 912,838 and 924,504 shares, respectively					Less: cost of common stock in treasury - 912,838 and 924,504 shares, respectively	(8,891)		(8,993)
Total shareholders' equity	89,691,435		88,592,555		Total shareholders' equity	129,044		134,259
Commitments and contingencies – See Note 11
Total liabilities and shareholders' equity	$	162,433,665	$	138,638,063	Total liabilities and shareholders' equity	$	255,032	$	269,043



			ASCENT INDUSTRIES CO.
			(Registrant)


Date:			May 9, 2023	By:	/s/ Christopher G. Hutter
					Christopher G. Hutter
					President and Chief Executive Officer


~~SYNALLOY CORPORATION~~
~~(Registrant)~~


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

Date: ~~November 7, 2017~~			~~By:~~May 9, 2023	By:	/s/ ~~Dennis M. Loughran~~ William S. Steckel
				~~Dennis M. Loughran~~	William S. Steckel
				~~Senior Vice President and~~	Chief Financial Officer
				~~(principal financial officer)~~

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



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



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



	Three Months Ended						Nine Months Ended
	Sep 30, 2017			Sep 30, 2016			Sep 30, 2017			Sep 30, 2016
Net sales	$	54,595,924		$	34,297,231		$	148,310,548		$	105,515,911

Cost of sales	49,759,304			29,792,812			127,892,423			92,295,722

Gross profit	4,836,620			4,504,419			20,418,125			13,220,189

Selling, general and administrative expense	6,587,791			5,814,655			18,925,593			17,041,216
Acquisition related costs	37,402			1,034			782,397			76,091
(Gain) loss on sale-leaseback	(83,568		)	2,455,347			(250,705		)	2,455,347
Operating (loss) income	(1,705,005		)	(3,766,617		)	960,840			(6,352,465		)
Other expense (income)
Interest expense	279,598			272,987			715,131			822,426
Change in fair value of interest rate swaps	(8,497		)	(115,328		)	(33,000		)	276,512
Earn-out adjustment	62,804			—			145,200			—
Other, net	(316,158		)	—			(316,158		)	—

(Loss) income from continuing operations before income taxes	(1,722,752		)	(3,924,276		)	449,667			(7,451,403		)
(Benefit from) provision for income taxes	(516,000		)	(1,316,000		)	125,000			(1,893,000		)

Net (loss) income from continuing operations	(1,206,752		)	(2,608,276		)	324,667			(5,558,403		)
Net loss from discontinued operations, net of tax	—			—			—			(99,334		)
Net (loss) income	$	(1,206,752	)	$	(2,608,276	)	$	324,667		$	(5,657,737	)

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

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

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

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

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



	Level 3 Inputs
Balance at December 31, 2016	$	—
Fair value of the earn-out liability from the MUSA acquisition	4,663,783
Earn-out payments to MUSA sellers	(518,456		)
Change in fair value during the period	145,200
Balance at September 30, 2017	$	4,290,527



	Initial						Revised
	estimate			Revisions			estimate
Inventories	$	5,434,000		$	—		$	5,434,000
Other current assets - production and maintenance supplies	1,548,701			—			1,548,701
Equipment	7,576,733			—			7,576,733
Customer list intangible	992,000			—			992,000
Goodwill	3,589,342			1,059,453			4,648,795
Contingent consideration	(3,604,330		)	(1,059,453		)	(4,663,783		)
Other liabilities assumed	(582,933		)	—			(582,933		)
	$	14,953,513		$	—		$	14,953,513



Pro-Forma (Unaudited)
			Three Months Ended
			Sep 30, 2016
Pro-forma revenues			$	40,172,000
Pro-forma net loss			(3,573,000		)
Loss per share:
Basic			$	(0.41	)
Diluted			$	(0.41	)

	Nine Months Ended
	Sep 30, 2017		Sep 30, 2016
Pro-forma revenues	$	153,235,000	$	122,117,000
Pro-forma net income (loss)	368,000		(7,347,000		)
Earnings (loss) per share:
Basic	$	0.04	$	(0.85	)
Diluted	$	0.04	$	(0.85	)