Ladies and gentlemen, thank you for standing by and welcome to the Synalloy's Third Quarter 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. I would now like to hand the conference over to Mr. Craig Bram, President and CEO. Thank you. Please go ahead, sir.

Good morning everyone. Welcome to Synalloy Corporation's third quarter 2020 conference call. Joining me today is our CFO, Sally Cunningham, also on the phone today is Chris Hutter. Chris will be assuming the role of Interim President and CEO upon my retirement from the company tomorrow. I will have Sally report on the Q3 financials and then I will provide some commentary on each of the business segments. Prior to the Q&A Chris will add some comments as well. Sally, I will now turn the call over to you.

Good morning. As is usual practice I will present the financial results using three different methods GAAP based EPS, adjusted net income and non-GAAP measures defined in the earnings release, and adjusted EBITDA, a non-GAAP measure also defined in earnings release. Starting with GAAP based EPS, for the third quarter the company reported a net loss of $10.5 million or $1.16 diluted loss per share as compared with the net loss of $1 million or $0.11 diluted loss per share for the third quarter of 2019. The primary factors contributing to the current quarter losses were a non-cash goodwill impairment in our metals segment of $10.7 million, operating losses at Palmer totaling $0.9 million, and inventory price change losses which on a pre-tax basis totaled $1.6 million. For the nine-months period, the company reported a net loss of $18.7 million, or $2.06 diluted loss per share, as compared with a net loss of $2.1 million or $0.24 diluted loss per share for the first nine months of 2019. The primary factors contributing to the current year-to-date losses were a non-cash goodwill impairment in our metal segments of $10.7 million, a non cash impairment charge at Palmer of $6.1 million, operating losses at Palmer totaling $3.6 million, proxy contest costs of $3.1 million, and inventory price change losses which on a pre-tax basis totaled $5.5 million. Third quarter non-GAAP adjusted net loss was $1 million or $0.11 dilutive loss per share compared with an adjusted net loss of $0.7 million or $0.08 dilutive loss per share for the third quarter of 2019. For the nine-month period, the adjusted net loss was $2.9 million or $0.31 dilutive loss per share compared with the adjusted net loss of $0.4 million or $0.04 dilutive loss per share for the first nine months of 2019. Third quarter non-GAAP adjusted EBITDA was $1.6 million, down from $2.8 million in the third quarter of 2019. For the first nine-months of 2020 adjusted EBITDA was $6.2 million, down from $10.9 million for the first nine-months to 2019. Both the adjusted net income and the adjusted EBITDA metrics for the first nine-months of 2020 include add backs of the non-cash goodwill impairment of $10.7 million in our metals segment, a $6.1 million in non-cash asset impairments to the Palmer operation and $3.1 million in cost associated with the company's proxy contest. As pointed out in the earnings release, operating losses at Palmer totaled $0.9 million and $3.6 million for the third quarter and first nine months of 2020 respectively. Additionally, results were negatively impacted by the inventory price change losses, which on a pre-tax basis totaled $1.6 million and $5.5 million for the third quarter and first nine months in 2020 respectively. Net debt at the end of the third quarter totaled approximately $71.3 million, down from $77 million at the end of the second quarter. I will now turn the call back over to Craig.

Thanks Sally. The company continued to make solid progress on multiple fronts in the third quarter. Looking at the balance sheet net debt was reduced by $6 million and we expect to bring that down by an additional $9 million by year end. We will file for federal tax refunds totaling $4.5 million with $1 million targeted through receipt possibly before year end and the balance targeted to be received prior to the end of the second quarter of 2021. The company continues to sell off assets related to businesses that we exited years ago or are in the process of exiting now like the Palmer operation. Expected proceeds from these sales in Q4 will total $500,000. Palmer sales proceeds in the first half of next year is expected to generate upwards of 2 million in additional cash. We recently received a favorable court ruling regarding a dispute over industrial gas pricing at our Munhall facility. As a result Bristol Metals hopes to recoup up to $200,000 in overcharges for 2020 and should realize comparable annual savings for a period of three years starting in 2021. As noted in the earnings release, Q3 adjusted pre-tax income showed substantial improvement over the same quarter last year, up $1.9 million. The performance of the -- is considering a decline in sales of roughly $9 million year-over-year speaks to the continuing efforts to bring down our cost structure. The chemical segment witnessed similar declines in volume in the quarter as its largest chemical customers experienced in their businesses. In spite of this, operating income for the segment was up 25% and 47% over the third quarter and nine month periods of last year respectively. The pipeline of new products remains favorable and will have a significantly positive impact on the Fountain Inn, South…

Thank you, Sally. Thank you, Craig. Appreciate it. I want to start by commending all of my new colleagues at Synalloy for their tremendous efforts throughout this recent pandemic and over the past several years. Our more than 500 hardworking employees are producing high quality products and providing exceptional service to customers on a daily basis. Even during these trying times they are helping us to fuel American industry and drive results for all of our stakeholders. I'm looking forward to rolling up my sleeves and working side by side with everyone at the company to build on this foundation and ultimately position us as a perennial industry leader. I also want to take this opportunity to thank the Board for placing its confidence in me as Interim CEO. I've only been working with my fellow Directors for a few months but in that short time we've established a truly collaborative partnership. I believe this will be a tremendous asset for the company and myself as I take on this new role. As I continue learning more about the company each day, it only reinforces my belief in the long-term growth potential across all of our businesses. I saw this potential as an investor and I am excited to help realize it as Interim CEO. I believe we have the ability to become truly remarkable in the chemicals and metal segments. Our shareholders, employees, and stakeholders have my commitment that I will work tirelessly to leverage my experience, market knowledge, and relationships to further strengthen and grow our presence in these high potential areas. I'm also committed to ensuring that our culture from top to bottom fosters accountability, respect, transparency, and teamwork. We will always show respect for our stakeholders and the communities and environments that Synalloy operates in. Over the course of the next few months, I look forward to keeping our workforce safe and sharing our plans for the future and demonstrated progress in greater detail. Thank you.

Thanks, Chris. I will now open the call to questions.

[Operator Instructions]. Your first question is from David Sigfrid [ph], he's a private investor.

Hey, good morning. Just a quick question. Good morning. So nice progress on debt reduction. Thank you for giving us some clarity on the progress that you expect to see over the next couple of quarters with that. That's good. Just a question on debt. So right now market cap is about 50 million debt over 70 million, will then affect the ability to refinance line of credit that expires in December 2021?

I'm happy to take that and Sally you can you can add some comments as well. David, we've had preliminary conversations with Truist and they remain very excited about the renewal. And we expect to have the ADL and the term debt renewed prior to the end of the year.

Okay. Very good. Thank you. Another question, it was mentioned I think last call that you would be performing inventory evaluation in October, and that with higher nickel prices you might be able to increase your capacity on line of credit, is that anything that was able to happen?

The inventory revaluation was not able to happen in October just due to COVID related reasons. But we are in the process of getting a new valuation and we do expect to have a higher inventory prices with the increasing nickel prices.

Okay. And then now we're at ex-Palmer we're less connected to the price of oil. I think, Craig, if I got this right is that about 80% of company revenue comes from end markets snap connected with oil and gas, does that sound about right?

Yeah, David, I think that's in the ballpark. When you look at the remaining businesses, the non-Palmer businesses, the specialty pipe and tube operation down in Houston has the exposure to both the midstream energy business and also offshore. To the offshore at this point is very, very slow. And then when you look at Bristol Metals there is the downstream energy market but what we're talking about there is exposure to infrastructure spending on LNG, petrochemical, and chemical operations. So it's in that downstream energy market, but obviously not nearly as volatile as the upstream energy markets that Palmer and specialty have some exposure to.

Okay. And then do you see with the new administration, politically do you see a catalyst or a boost for companies that support manufacturing instruction [ph] potentially?

You know, there is a water and wastewater initiative in the Senate. It's been in there since the summertime, but obviously hasn't gone anywhere. Stimulus spending we would expect if that were to occur, that would include some spending on infrastructure. But that's probably anybody's guess right now as to how that plays out. I don't know that any of us have a sense of where the Senate's going in terms of control and how that might impact some of the initiatives. But when you look at infrastructure spending as I mentioned in the earnings release, there are -- it's typically two and a half years of strong demand followed by two and half years of weak demand and we certainly in 2019 and 2020, infrastructure spending has been very, very low. So, if it sticks to that kind of schedule then certainly stimulus would help turn that around. We would expect to see some improvement in the second half of next year and that's what our customers are telling us right now.

Makes sense. Now I noticed tangible net worth 67.7 million, we think that's about 744 share, that's about consistent with June 30. I noticed in the chemical, it was nice to see a little operating income increase from third quarter last year, so that was good. But I noticed there was an article in Textile World on October 8th, material science group at Synallow introduces BioLube ECO-7, I think designed for fiber extrusion. How is that being accepted in the marketplace?

Yeah, the chemical business has always been and products that have catered to the lubricants which go into the textile industry. And we've had over the years multiple products that kind of fit that description. I've not heard anything specifically from our guys that, that is a product line that goes beyond a particular customer. Typically, we told those products for a pretty specific customer, but that's something we could look into David. If you want to follow up we can get a little more detail on that product line for you.

Okay, thank you. Wish you the best Craig in future endeavors. We'll be out golfing here soon I would assume.

Thank you David, I appreciate it.

Hey, just one other question. So right now we have eight Board Members with you on the Board, but effective I think tomorrow we'll be down to seven Board Members. Is that -- is there an expectation that with a new CEO eventually that will be back up to eight or is that anything that you could talk about?

I don't know that the Board has even contemplated that at this point, how they're going to deal with it.

Right, okay. Very good. Well, that's all I have at this time. Thank you.

Thanks, David.

[Operator Instructions]. At this time we have no other questions in queue. Do you all have any closing remarks.

Thank you as always for your time. We appreciate it.

ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.