UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, ~~2018~~2019



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

COMMISSION FILE NUMBER 0-19687

Synalloy Corporation

(Exact name of registrant as specified in its charter)



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

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

Securities registered pursuant to Section 12(b) of the Act:



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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated Filer ¨	Accelerated filer x	Non-accelerated filer ¨
Smaller reporting company ¨x	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ¨ No ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

The number of shares outstanding of the registrant's common stock as of ~~October 31, 2018~~November 08, 2019 was ~~8,870,988.~~9,033,854

Synalloy Corporation

~~Index~~Table of Contents




PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, ~~2018~~2019 (unaudited) and December 31, ~~2017~~2018	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2018~~2019 and ~~September 30, 2017~~2018 (unaudited)	4
	Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, ~~2018~~2019 and, ~~September 30, 2017~~2018 (unaudited)	5
	Condensed Consolidated Statements of Shareholders' Equity for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	68
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1620
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1925
Item 4.	Controls and Procedures	2025

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	2126
Item 1A.	Risk Factors	2126
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2126
Item 3.	Defaults Upon Senior Securities	2126
Item 4.	Mine Safety Disclosures	2126
Item 5.	Other Information	2126
Item 6.	Exhibits	2126

Signatures and Certifications		2227

~~Table of Contents~~

Part I - Financial Information

Item 1. Financial Statements

Synalloy Corporation

Condensed Consolidated Balance Sheets


	September 30, 2018 (unaudited)		December 31, 2017			September 30, 2019 Unaudited		December 31, 2018
Assets
Current assets
Cash and cash equivalents	$	1,872,360	$	14,706		$	253,596	$	2,220,272
Accounts receivable, less allowance for doubtful accounts
of $6,000 and $35,000, respectively	49,555,481		28,704,481
of $149,000 and $169,107, respectively						41,912,336		41,065,251
Inventories, net	116,029,651		72,125,181			106,204,183		114,201,386
Prepaid expenses and other current assets	12,692,661		6,802,072			12,400,987		9,983,416
Total current assets	180,150,153		107,646,440			160,771,102		167,470,325
Non-current assets
Property, plant and equipment, net of accumulated
depreciation of $54,988,727 and $50,451,436 respectively	39,880,040		35,080,009

Property, plant and equipment, net						40,729,347		40,924,455
Right-of-use assets, operating leases, net						36,102,240		—
Goodwill	9,548,992		6,003,525			17,557,620		9,799,992
Intangible assets, net of accumulated amortization
of $12,326,049 and $10,568,479 respectively	10,546,951		10,880,521
of $15,540,065 and $12,925,888, respectively						16,585,935		9,696,112
Deferred charges, net	237,001		263,655			388,075		507,962
Total assets	$	240,363,137	$	159,874,150		$	272,134,319	$	228,398,846

Liabilities and Shareholders' Equity
Current liabilities
Accounts payable	$	46,696,068	$	24,256,812		$	25,564,479	$	25,073,698
Accrued expenses and other current liabilities	15,184,210		8,993,454			12,696,490		12,163,686
Current portion of long-term debt						4,000,000		—
Current portion of operating lease liabilities						3,543,866		—
Current portion of finance lease liabilities						252,896		—
Total current liabilities	61,880,278		33,250,266			46,057,731		37,237,384

Long-term debt	62,782,563		25,913,557			79,108,499		76,405,458
Deferred income taxes	1,349,745		635,910			991,657		252,988
Long-term deferred gain, sale-leaseback	5,682,645		5,933,350			—		5,599,077
Long-term portion of earn-out liability	5,679,350		3,170,099			4,452,908		4,702,562
Long-term portion of operating lease liabilities						33,942,080		—
Long-term portion of finance lease liabilities						397,815		—
Other long-term liabilities	1,224,861		1,270,542			155,259		1,717,291
Total non-current liabilities	76,719,164		36,923,458			119,048,218		88,677,376
Commitments and contingencies – See Note 11

Shareholders' equity
Common stock, par value $1 per share; authorized 24,000,000 shares; issued 10,300,000 shares	10,300,000		10,300,000			10,300,000		10,300,000
Capital in excess of par value	36,413,908		35,193,152			37,472,995		36,520,840
Retained earnings	68,450,319		58,129,382			71,445,238		68,965,410
Accumulated other comprehensive loss	—		(10,864		)
	115,164,227		103,611,670			119,218,233		115,786,250
Less cost of common stock in treasury: 1,435,228 and 1,566,769 shares, respectively	13,400,532		13,911,244
Less cost of common stock in treasury: 1,305,149 and 1,424,279 shares, respectively						12,189,863		13,302,164
Total shareholders' equity	101,763,695		89,700,426			107,028,370		102,484,086
Total liabilities and shareholders' equity	$	240,363,137	$	159,874,150		$	272,134,319	$	228,398,846

Note: The condensed consolidated balance sheet at December 31, 2018 has been derived from the audited consolidated financial statements at that date. See accompanying notes to condensed consolidated financial statements.

~~Table of Contents~~

Synalloy Corporation

Condensed Consolidated Statements of Operations (Unaudited)


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended September 30,						Nine months ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net sales	$	77,792,878		$	54,595,924		$	208,167,243		$	148,310,548		$	73,639,911		$	77,792,878		$	237,221,719		$	208,167,243

Cost of sales	63,764,512			49,759,304			167,189,136			127,892,423			66,351,871			63,764,512			213,412,253			167,189,136

Gross profit	14,028,366			4,836,620			40,978,107			20,418,125			7,288,040			14,028,366			23,809,466			40,978,107

Selling, general and administrative expense	6,584,407			6,504,223			20,179,278			18,674,888			8,361,500			6,584,407			24,919,946			20,179,278
Acquisition related costs	180,671			37,402			870,888			782,397			89,590			180,671			437,610			870,888
Earn-out adjustments	(269,083		)	62,804			2,192,574			145,200			(1,241,697		)	(269,083		)	(1,642,982		)	2,192,574
Operating income	7,532,371			(1,767,809		)	17,735,367			815,640			78,647			7,532,371			94,892			17,735,367
Other expense (income)
Interest expense	585,888			279,598			1,303,724			715,131			943,886			585,888			2,977,624			1,303,724
Change in fair value of interest rate swaps	(7,490		)	(8,497		)	(99,948		)	(33,000		)	20,791			(7,490		)	144,885			(99,948		)
Other, net	493,413			(316,158		)	522,598			(316,158		)	179,980			493,413			(224,461		)	522,598

Income before income taxes	6,460,560			(1,722,752		)	16,008,993			449,667
Provision for income taxes	1,425,002			(516,000		)	3,461,000			125,000
(Loss) income before income taxes													(1,066,010		)	6,460,560			(2,803,156		)	16,008,993
Income tax (benefit) provision													(112,598		)	1,425,002			(660,484		)	3,461,000

Net income	$	5,035,558		$	(1,206,752	)	$	12,547,993		$	324,667
Net (loss) income													$	(953,412	)	$	5,035,558		$	(2,142,672	)	$	12,547,993

Net income per common share:
Net (loss) income per common share:
Basic	$	0.57		$	(0.14	)	$	1.43		$	0.04		$	(0.11	)	$	0.57		$	(0.24	)	$	1.43
Diluted	$	0.56		$	(0.14	)	$	1.42		$	0.04		$	(0.11	)	$	0.56		$	(0.24	)	$	1.42

Weighted average shares outstanding:
Basic	8,828,523			8,716,893			8,783,876			8,696,884			8,994,851			8,828,523			8,968,782			8,783,876
Dilutive effect from stock options and grants	105,131			—			73,928			17,030			—			105,131			—			73,928
Diluted	8,933,654			8,716,893			8,857,804			8,713,914			8,994,851			8,933,654			8,968,782			8,857,804

See accompanying notes to condensed consolidated financial statements

Synalloy Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended September 30						Nine months ended September 30,
	2018			2017			2019			2018
Operating activities
Net income	$	12,547,993		$	324,667
Adjustments to reconcile net income to net cash used in operating activities:
Net (loss) income							$	(2,142,672	)	$	12,547,993
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation expense	4,584,005			3,916,131			5,806,386			4,584,005
Amortization expense	1,763,438			1,827,171			2,614,177			1,763,438
Amortization of debt issuance costs	73,932			40,829			119,887			73,932
Deferred income taxes	713,835			(32,978		)	(560,920		)	713,835
Gain on sale of available-for-sale securities	—			(310,043		)
Earn-out adjustments	2,192,574			145,200			(1,642,982		)	2,192,574
Payments of MUSA-Stainless earn-out liability in excess of acquisition date fair value	(194,462		)	—
Provision for (reduction of) losses on accounts receivable	(29,000		)	192,892
Provision for (reduction of) losses on inventories	995,033			500,338
Loss (gain) on disposal of property, plant and equipment	(17,762		)	2,279
Payments of earn-out liability in excess of acquisition date fair value							(447,550		)	(194,462		)
Reduction of accounts receivable							(92,232		)	(29,000		)
Provision for losses on inventories							1,392,188			995,033
Gain on disposal of property, plant and equipment							(50,014		)	(17,762		)
Amortization of deferred gain on sale-leaseback	(250,705		)	(250,705		)	—			(250,705		)
Straight line lease cost	276,516			304,898			432,404			276,516
Change in fair value of interest rate swaps	(99,948		)	(33,000		)	144,885			(99,948		)
Change in fair value of equity securities	522,703			—
Unrealized loss on equity securities							281,125			522,703
Realized gain on sale of equity securities							(474,227		)	—
Issuance of treasury stock for director fees	276,000			287,475			304,000			276,000
Employee stock option and grant compensation	621,699			486,740
Employee stock compensation							1,760,456			621,699
Changes in operating assets and liabilities:
Accounts receivable	(18,655,048		)	(12,476,532		)	2,779,069			(18,655,048		)
Inventories	(42,153,503		)	(4,772,884		)	12,169,015			(42,153,503		)
Other assets and liabilities, net	(2,483,326		)	10,179,835
Accounts payable	21,388,017			8,084,756			(909,228		)	21,388,017
Accrued expenses	2,247,339			(8,046,199		)	(1,258,391		)	2,247,339
Accrued income taxes	1,396,820			(2,392,073		)	(1,262,504		)	1,396,820
Net cash used in operating activities	(14,283,850		)	(2,021,203		)
Other assets and liabilities, net							(1,035,414		)	(2,483,326		)
Net cash provided by (used in) operating activities							17,927,458			(14,283,850		)
Investing activities
Purchases of property, plant and equipment	(4,482,427		)	(3,692,571		)	(2,840,931		)	(4,482,427		)
Proceeds from sale of property, plant and equipment	—			1,048			189,057			—
Purchases of equity securities	(4,970,470		)	(3,831,521		)	(543,552		)	(4,970,470		)
Proceeds from sale of available-for-sale securities	—			4,141,564
Acquisition of the stainless pipe and tube assets of Marcegaglia USA, Inc. ("MUSA")	—			(11,953,513		)
Acquisition of the galvanized pipe and tube assets of MUSA	(10,378,281		)	—
Proceeds from sale of equity securities							1,091,644			—
Acquisition of the assets and operations of American Stainless Tubing, Inc. (see Note 9)							(21,895,409		)	—
Acquisition of the galvanized pipe and tube assets of MUSA (see Note 9)							—			(10,378,281		)
Net cash used in investing activities	(19,831,178		)	(15,334,993		)	(23,999,191		)	(19,831,178		)
Financing activities
Net borrowings from line of credit	36,869,006			17,918,754
Payments on capital lease obligation	(78,369		)	(91,565		)
Net (payments) borrowings (on) from line of credit							(10,630,292		)	36,869,006
Borrowing from term loan							20,000,000			—
Payments on term loan							(2,666,667		)	—
Principal payments on finance lease obligations							(101,413		)	(78,369		)
Payments of debt issuance costs	(53,146		)	—			—			(53,146		)
Payments on earn-out liabilities to MUSA	(1,618,767		)	(518,456		)
Payments on earn-out liabilities							(2,496,571		)	(1,618,767		)
Proceeds from exercised stock options	141,852			—			—			141,852
Net proceeds from at-the-market offering	1,002,712			—			—			1,002,712
Tax withholdings related to net share settlements of exercised stock options	(290,606		)	—			—			(290,606		)
Net cash provided by financing activities	35,972,682			17,308,733			4,105,057			35,972,682
Increase in cash and cash equivalents	1,857,654			(47,463		)
(Decrease) increase in cash and cash equivalents							(1,966,676		)	1,857,654
Cash and cash equivalents at beginning of period	14,706			62,873			2,220,272			14,706
Cash and cash equivalents at end of period	$	1,872,360		$	15,410		$	253,596		$	1,872,360

Supplemental disclosure
Cash paid for:
Interest	$	1,189,018		$	617,606		$	2,779,756		$	1,189,018
Income taxes	$	1,292,000		$	2,557,121		$	1,174,201		$	1,292,000

See accompanying notes to condensed consolidated financial statements

~~Table~~Synalloy Corporation

Condensed Consolidated Statements of ~~Contents~~Cash Flows (Unaudited)



	Common Stock		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income (Loss)		Cost of Common Stock in Treasury			Total
For the Three Months Ended September 30, 2019
Balance at June 30, 2019	$	10,300,000	$	36,565,297		$	72,398,650		$	—	$	(12,189,863	)	$	107,074,084
Net loss	—		—			(953,412		)	—		—			(953,412		)
Employee stock compensation	—		907,698			—			—		—			907,698
Balance at September 30, 2019	$	10,300,000	$	37,472,995		$	71,445,238		$	—	$	(12,189,863	)	$	107,028,370

For the Nine Months Ended September 30, 2019
Balance at December 31, 2018	$	10,300,000	$	36,520,840		$	68,965,410		$	—	$	(13,302,164	)	$	102,484,086
Net loss	—		—			(2,142,672		)	—		—			(2,142,672		)
Cumulative adjustment due to adoption of ASC 842 (see Note 12)	—		—			4,622,500			—		—			4,622,500
Issuance of 119,130 shares of common stock from treasury	—		(808,301		)	—			—		1,112,301			304,000
Employee stock compensation	—		1,760,456			—			—		—			1,760,456
Balance at September 30, 2019	$	10,300,000	$	37,472,995		$	71,445,238		$	—	$	(12,189,863	)	$	107,028,370

See accompanying notes to condensed consolidated financial statements.

Synalloy Corporation

Condensed Consolidated Statement of Shareholders' Equity (Unaudited)

Continued



	Common Stock		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Cost of Common Stock in Treasury			Total
For the Three Months Ended September 30, 2018
Balance at June 30, 2018	$	10,300,000	$	35,496,901		$	65,630,954		$	—		$	(13,604,090	)	$	97,823,765
Net income	—		—			5,035,558			—			—			5,035,558
Dividends declared, $0.25 per share						(2,216,193		)							(2,216,193		)
Stock options exercised for 18,187 shares, net	—		140,849			—			—			(208,325		)	(67,476		)
Issuance of 44,378 shares in connection with at-the-market-offering			570,638									411,883			982,521
Employee stock compensation	—		205,520			—			—			—			205,520
Balance at September 30, 2018	$	10,300,000	$	36,413,908		$	68,450,319		$	—		$	(13,400,532	)	$	101,763,695

For the Nine Months Ended September 30, 2018
Balance at December 31, 2017	$	10,300,000	$	35,193,152		$	58,129,383		$	(10,864	)	$	(13,911,245	)	$	89,700,426
Net income	—		—			12,547,993			$	—		—			12,547,993
Cumulative adjustment due to adoption of ASU 2016-01	—		—			(10,864		)	10,864			—			—
Dividends declared, $0.25 per share						(2,216,193		)							(2,216,193		)
Stock options exercised for 31,488 shares, net	—		246,757			—			—			(395,508		)	(148,751		)
Issuance of 55,675 shares of common stock from treasury	—		(218,338		)	—			—			494,338			276,000
Issuance of 44,378 shares in connection with at-the-market-offering			570,638									411,883			982,521
Employee stock compensation	—		621,699			—			—						621,699
Balance at September 30, 2018	$	10,300,000	$	36,413,908		$	68,450,319		$	—		$	(13,400,532	)	$	101,763,695

See accompanying notes to condensed consolidated financial statements.

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements ~~(unaudited)~~(Unaudited)

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

1. Basis of Financial Statement Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included as required by Regulation S-X, Rule 10-01. Operating results for the nine-month period ended September 30, ~~2018~~2019 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2018.~~2019. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Certain prior period amounts have been reclassified to conform to the current period presentation, including changes in the fair value of the Company's earn-out liabilities ~~(see "Note 8 - Fair Value Information")~~ from "Other Expense (Income)" to "Operating Income (Loss)" on the accompanying Condensed Consolidated Statements of Operations.

2. Recently Issued Accounting Standards

Recently Issued Accounting Standards - Adopted

~~In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09,~~ ~~"Revenue from Contracts with Customers (Topic 606)~~". Topic 606 supersedes the revenue recognition requirements in Topic 605 “Revenue Recognition” (Topic 605), and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted Topic 606 as of January 1, 2018 using the modified retrospective transition method. The adoption of this Topic did not have an effect on the Company's consolidated financial statements. See Note 3 for further details.

~~In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments (Topic 825)",~~ to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The standard is effective for all public companies for annual and interim reporting periods beginning after December 15, 2017. The standard requires equity investments (except for those under the equity method of accounting) to be measured at fair value, with changes in fair value recognized in net income. The amendments in the update supersede the guidance to classify equity securities with readily determinable fair values into different categories, and require equity securities to be measured at fair value with changes recognized in net income as opposed to other comprehensive income. The Company adopted ASU 2016-01 effective January 1, 2018 and the effects of this standard are included in the accompanying condensed consolidated financial statements for the three-month and nine-month periods ended September 30, 2018. The Company applied the amendments by means of a cumulative effective adjustment to the balance sheet as of January 1, 2018, which resulted in a reclassification of $10,864 from Accumulated Other Comprehensive Loss to Retained Earnings.

~~In January 2017, the FASB issued ASU No. 2017-01 “Business Combinations (Topic 805): Clarifying the Definition of a Business.~~” ASU 2017-01 provides guidance to evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. If substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single asset or a group of similar assets, the assets acquired (or disposed of) are not considered a business. The Company adopted ASU 2017-01 as of January 1, 2018 on a prospective basis. The adoption of this Topic did not have an effect on the Company's consolidated financial statements as of September 30, 2018.

~~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 to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. The Company adopted ASU 2017-09 as of January 1, 2018 on a prospective basis. The adoption of this Topic did not have an impact on the Company's consolidated financial statements as of September 30, 2018.

~~Table of Contents~~

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

~~Recently Issued Accounting Standards - Not Yet Adopted~~

In February 2016, the FASB issued ASU No. 2016-02 “~~Leases~~"Leases (Topic 842)”", ~~to increase the transparency and comparability of lease recognition and disclosure. The update establishes a right of use ("ROU") model~~as amended, which generally requires lessees to recognize operating and financing lease ~~contracts with a term greater than one year~~liabilities and corresponding right-of-use assets on the balance sheet ~~as ROU assets~~ and ~~lease liabilities. Leases will be classified as either financing or operating which will determine expense classification~~to provide enhanced disclosures surrounding the amount, timing and recognition. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. While the FASB had previously indicated that the modified retrospective approach must be applied to adoptuncertainty of cash flows arising from leasing arrangements. The Company adopted the new standard as of January 1, 2019 on a modified retrospective basis, which does not require comparative periods to be restated. On adoption, we recognized additional operating lease liabilities of $33,115,763 based on the ~~FASB issued ASU No. 2018-11 in July, 2018, which provides entities with an additional (and optional) transition method to adopt~~present value of the ~~new~~remaining minimum rental payments as of January 1, 2019. We additionally recognized corresponding right-of-use assets for operating leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Whiletotaling $32,171,829. On January 1, 2019, the Company ~~expects ASU 2016-02~~also recorded cumulative-effect increases to ~~add material ROU~~equity and deferred tax assets totaling $4,622,500 and ~~lease liabilities to the consolidated balance sheets~~$1,310,850, respectively, related to ~~its current land~~a deferred gain for a sale leaseback transaction that occurred in 2016 and ~~building operating leases, it is evaluating other effects that~~was being amortized into earnings under the ~~new~~prior accounting. The adoption of this standard ~~will~~did not have a material impact on the consolidated ~~financial statements as well as its business processes, internal controls, and accounting policies. As part~~statement of ~~its assessment,~~operations or cash flows for the Company is reviewing its lease portfolio and identifying which attributes of its leases will be impacted by ASU 2016-08. Information about our undiscounted future lease payments and the timing of those payments is innine months ended September 30, 2019. See Note ~~12, "Leases" in our 2017 Form 10-K.~~12.

Recently Issued Accounting Standards - Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-13 "Fair Value Measurement (Topic 820)". The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the ~~timing~~impact that adopting this new standard will have on its condensed consolidated financial statements and ~~impact of adopting the updated provisions.~~footnote disclosures.

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

3. Revenues

~~Adoption of ASC Topic 606, "Revenue from Contracts with Customers"~~

On January 1, 2018, the Company adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605. The Company operates as a manufacturer of various products, and revenue is comprised of short-term contracts with point-in-time performance obligations. As a result, the Company did not identify any differences in its recognition of revenue between Topic 606 and Topic 605. Accordingly, there was no adjustment required to opening retained earnings for the cumulative impact of adopting Topic 606 and no impact to revenues for the three-month or nine-month periods ended September 30, 2018 as a result of applying Topic 606.

~~Revenue Recognition~~

Revenues are recognized when control of the promised goods or services is transferred to our customers upon shipment, in an amount that reflects the consideration we ~~expect~~are to ~~be entitled to~~receive in exchange for those goods or services.

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


	Three Months Ended				Nine Months Ended				Three Months Ended September 30,				Nine months ended September 30,
	Sep 30, 2018		Sep 30, 2017		Sep 30, 2018		Sep 30, 2017		2019		2018		2019		2018
Storage tank and vessel	$	9,016,796	$	7,650,080	$	23,864,217	$	19,981,786	$	5,552,192	$	9,016,796	$	25,628,225	$	23,864,217
Seamless carbon steel pipe and tube	7,887,027		6,669,977		24,722,928		18,782,664		7,962,459		7,887,027		23,251,744		24,722,928
Stainless steel pipe	$	37,656,273	28,702,776		107,839,677		73,056,665		40,980,757		37,656,273		128,286,087		107,839,677
Galvanized pipe	6,464,277		—		6,464,277		—		5,625,737		6,464,277		18,561,542		6,464,277
Specialty chemicals	16,768,505		11,573,091		45,276,144		36,489,433		13,518,766		16,768,505		41,494,121		45,276,144
Total revenues	$	77,792,878	$	54,595,924	$	208,167,243	$	148,310,548	$	73,639,911	$	77,792,878	$	237,221,719	$	208,167,243

Arrangements with Multiple Performance Obligations

Our contracts with customers may include multiple performance obligations. For such arrangements, revenue for each performance obligation is based on its ~~standalone~~stand-alone selling price and revenue is recognized as each performance obligation is satisfied. The

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~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

Company generally determines ~~standalone~~stand-alone selling prices based on the prices charged to customers using the adjusted market assessment approach or expected cost plus margin.

Deferred Revenues

Deferred revenues are recorded when cash payments are received in advance of satisfying the performance obligation, including amounts which are refundable. The deferred revenue balance decreased ~~$43,054~~$23,725 during the first nine months of ~~2018~~2019 to ~~$141,820~~$153,793 as of September 30, ~~2018~~2019 due to receiving ~~$1,917,775~~$1,861,612 in advance of satisfying our performance obligations during the period, offset by ~~$1,960,829~~$1,885,337 of revenue that was recognized during the period after satisfying the performance obligations that were included in the beginning deferred revenue balance or ~~received~~entered into during the current period. Deferred revenues are included in "Accrued expenses and other current liabilities" on the accompanying Condensed Consolidated Balance Sheets.

Our payment terms vary by the financial strength or location of our customer and the products offered. The length of time between invoicing and when payment is due is not significant. For certain customers, payment is required before the products or services are delivered to the customer.

~~Practical Expedients and Elections~~

When shipping and handling activities are performed after a customer obtains control of goods, the Company reflects shipping and handling activities as part of satisfying the obligation of providing goods to the customer.

In some instances, the Company withholds various states' sales taxes upon shipments into those states. Accordingly, management makes an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are imposed on and concurrent with a specific revenue-producing transaction and collected from a customer.

~~The Company expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general, and administrative expenses.~~

~~The Company does not disclose the value of unsatisfied performance obligations since contracts are expected to be completed within one year.~~

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:


	Sep 30, 2018		Dec 31, 2017		September 30, 2019		December 31, 2018
Raw materials	$	65,458,268	$	37,748,316	$	52,468,342	$	59,778,767
Work-in-process	18,262,774		9,491,408		16,535,978		21,033,532
Finished goods	32,308,609		24,885,457		37,199,863		33,389,087
	$	116,029,651	$	72,125,181	$	106,204,183	$	114,201,386

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

5. Property Plant and Equipment

Property, plant and equipment consist of the following:



	September 30, 2019	December 31, 2018

Land	62,916	62,916
Leasehold improvements	1,432,641	1,162,942
Buildings	213,667	412,301
Machinery, fixtures and equipment	97,563,905	92,930,734
Right of use assets finance lease	1,208,038	—
Construction in progress	3,166,992	3,643,795
	103,648,159	98,212,688
Less accumulated deprecation	62,918,812	57,288,233
Property plant and equipment, net	40,729,347	40,924,455

5.6. Stock options and restricted stock

During the first nine months of 2019, no stock options were exercised by officers or employees of the Company. During the first nine months of 2018, stock options for 85,440 shares of common stock were exercised by officers or employees for an aggregate exercise price of $1,033,108, including $891,255 relating to cashless exercises during the period. ~~No options were exercised by employees or directors during~~

Stock compensation expense for the ~~first nine months of 2017.~~three and nine-month periods ended September 30, 2019 was $907,698 and $1,760,456, respectively. Stock compensation expense for the three and nine-month periods ended September 30, 2018 was $205,520 and $621,699, respectively. ~~Stock compensation expense for the three and nine-month periods ended September 30, 2017 was $156,502 and $486,740, respectively.~~

~~On February 7, 2018,~~In 2016, the Compensation & Long-Term Incentive Committee (the "Committee") of the Company's Board of Directors granted performance restricted stock awards (“2016 Performance Stock Award”) to officers and certain key management-level employees. The 2016 Performance Stock Award vested three years from the grant date based on continuous service, with the number of shares earned (0 percent to 150 percent of the target award) depending on the extent to which the Company achieves certain financial performance targets measured over the period from January 1, 2016 to December 31, 2018. On February 8, 2019, the Committee approved ~~stock~~the vesting of the 2016 Performance Stock Award for a total of 46,477 restricted shares at a grant date market price of $8.05.

On February 8, 2019, the Committee approved grants under the Company's 2015 Stock Awards Plan to certain management employees of the Company where ~~65,527~~44,949 shares with a market price of ~~$12.47~~$15.72 per share were granted under the Plan. These stock awards vest in either 20 percent or 33 percent increments annually, ~~on a cumulative basis,~~ beginning one year after the date of grant. In order for the awards to vest, the employee must be in the continuous employment of the Company since the date of the award. Any 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.

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~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

On May 17, 2018, a majority of the shareholders of the Company, upon the recommendation of the Company's Board of Directors, voted to amend and restate the 2015 Stock Awards Plan to increase the authorization of issuances from 250,000 shares to 500,000 shares.

The diluted earnings per share calculations exclude the effect of potentially dilutive shares when the inclusion of those shares in the calculation would have an anti-dilutive effect. For the nine-month ~~periods~~period ended September 30, ~~2018~~2019 there is no difference in the number of shares used to calculate basic and diluted shares outstanding because their effect would have been anti-dilutive due to the Company reporting a net loss. For the nine-month period ended September 30, ~~2017~~2018, the Company had weighted average shares of common stock, in the form of stock grants and options of which 600 ~~and 144,064, respectively, which~~ were not included in the diluted earnings per share calculation as their effect was anti-dilutive.

6.7. 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 or state income tax examinations for years before 2013. During the first nine months of ~~2018,~~2019, the Company did not identify nor reserve for any unrecognized tax benefits.

The effective tax rate was 22 percent for the three and nine-month periods ended September 30, 2018, respectively. The effective tax rate was 30 percent and 28 percent for the three and nine-month periods ended September 30, 2017. The prior year effective tax rate was different than the 34 percent statutory rate primarily due to state tax expense, net of federal benefit and other permanent differences, including the manufacturer's exemption.

On December 22, 2017, the Tax Cuts and Jobs Act (“the Act”) was signed into law by the President of the United States, enacting significant changes to the Internal Revenue Code effective January 1, 2018. The Act included a number of provisions including, but not limited to, a permanent reduction of the U.S. corporate tax rate from a blended 35 percent to 21 percent, eliminating the deduction for domestic production activities, limiting the tax deductibility of interest expense, accelerating the expensing of certain business assets and reducing the amount of executive pay that could qualify as a tax deduction. Many effects of the Act are international in nature, such as the one-time transition tax, base erosion anti-abuse tax and the global intangible low-taxed income tax, and thus would not pertain to the Company as it has no international operations.

In December 2017, the Company recorded $381,000 of income tax benefit related to adopting various provisions of the Act. Under Staff Accounting Bulletin No. 118 (“SAB 118”) our income tax benefit is provisional in nature and is subject to further clarification of the new law, including but not limited to U.S. state conformity that cannot be estimated at this time and measurement of underlying tax basis in certain business assets. The ultimate impact may differ from provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, and additional regulatory guidance that may be issued. Further guidance may be forthcoming from federal and state agencies, which could result in additional adjustments. The accounting is expected to be completed no later than the filing of the 2017 U.S. corporate income tax return in 2018.

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Synalloy Corporation

Notes to Condensed Consolidated Financial Statements ~~(unaudited)~~(Unaudited)

7.The effective tax rate was 10.56 percent and 22.00 percent for the three months ended September 30, 2019 and 2018, respectively. The September 30, 2019 effective tax rate was lower than the statutory rate of 21.00 percent due to state taxes, net of the federal benefit, and discrete tax benefits on our stock compensation plan. The September 30, 2018 effective tax rate was approximately equal to the U.S. statutory rate of 21.00 percent.

The effective tax rate was 23.56 percent and 22.00 percent for the nine months ended September 30, 2019 and 2018, respectively. The September 30, 2019 and 2018 effective tax rate was approximately equal to the U.S statutory tax rate of 21.00 percent.

8. Segment Information

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


	Three Months Ended						Nine Months Ended						Three Months Ended September 30,						Nine months ended September 30,
	Sep 30, 2018			Sep 30, 2017			Sep 30, 2018			Sep 30, 2017			2019			2018			2019			2018
Net sales
Metals Segment	$	61,024,373		$	43,022,833		$	162,891,099		$	111,821,115		$	60,121,145		$	61,024,373		$	195,727,598		$	162,891,099
Specialty Chemicals Segment	16,768,505			11,573,091			45,276,144			36,489,433			13,518,766			16,768,505			41,494,121			45,276,144
	$	77,792,878		$	54,595,924		$	208,167,243		$	148,310,548		$	73,639,911		$	77,792,878		$	237,221,719		$	208,167,243
Operating income (loss)
Metals Segment	$	7,984,117		$	(1,263,900	)	$	23,091,164		$	2,659,666		$	449,553		$	7,984,117		$	3,078,839		$	23,091,164
Specialty Chemicals Segment	1,354,617			1,150,661			3,324,778			3,796,032			846,328			1,354,617			2,386,574			3,324,778

Unallocated corporate expenses	1,894,775			1,554,364			5,617,113			4,712,461			2,369,341			1,894,775			6,621,985			5,617,113
Acquisition related costs	180,671			37,402			870,888			782,397			89,590			180,671			391,518			870,888
Earn-out adjustments	(269,083		)	62,804			2,192,574			145,200			(1,241,697		)	(269,083		)	(1,642,982		)	2,192,574
Operating income (loss)	7,532,371			(1,767,809		)	17,735,367			815,640
Operating income													78,647			7,532,371			94,892			17,735,367
Interest expense	585,888			279,598			1,303,724			715,131			943,886			585,888			2,977,624			1,303,724
Change in fair value of interest rate swaps	(7,490		)	(8,497		)	(99,948		)	(33,000		)	20,791			(7,490		)	144,885			(99,948		)
Other loss (income), net	493,413			(316,158		)	522,598			(316,158		)
Income before income taxes	$	6,460,560		$	(1,722,752	)	$	16,008,993		$	449,667
Other expense (income), net													179,980			493,413			(224,461		)	522,598
(Loss) income before income taxes													$	(1,066,010	)	$	6,460,560		$	(2,803,156	)	$	16,008,993

	As of												As of
	Sep 30, 2018			Dec 31, 2017									September 30, 2019			December 31, 2018
Identifiable assets
Metals Segment	$	199,390,326		$	130,456,857								$	200,824,657		$	192,195,733
Specialty Chemicals Segment	31,109,653			25,394,078									27,283,356			28,174,675
Corporate(1)	9,863,158			4,023,215									44,026,306			8,028,438
	$	240,363,137		$	159,874,150								$	272,134,319		$	228,398,846
Goodwill
Metals Segment	$	8,194,262		$	4,648,795								$	16,202,890		$	8,445,262
Specialty Chemicals Segment	1,354,730			1,354,730									1,354,730			1,354,730
	$	9,548,992		$	6,003,525								$	17,557,620		$	9,799,992

^{(1) As of September 30, 2019, this amount included}^$36,102,240^{in right-of-use assets that were recorded with the adoption of ASC 842 ("Leases"). Refer to Note 12 for additional information.}

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

8.9. 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 statements. 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. 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.

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~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

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.

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

Level 1 Financial Instruments

For short-term instruments, other than those required to be reported at fair value on a recurring basis and for which additional disclosures are included below, management concluded the historical carrying value is a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization. Therefore, as of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, ~~and~~ the Company's revolving line of credit, which is based on a variable interest rate, and term loan approximate their fair value.

During the ~~third quarter~~first nine months of ~~2018,~~2019, the Company sold shares of its equity securities investments. Proceeds from the sale totaled $1,091,644 which resulted in a realized gain for the nine months of September 30, 2019 of $474,227, that is included in "Other expense (income)" on the accompanying Condensed Consolidated Statements of Operations.

For the three and nine months ended September 30, 2019, the Company also recorded a net unrealized loss of $180,000 and $281,125, respectively, on the ~~investment~~investments in equity securities ~~of $493,518~~held, which is included in "Other expense (income)" on the accompanying Condensed Consolidated Statements of Operations.

The fair value of equity securities held by the Company as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018 was ~~$4,985,000~~$2,580,000 and ~~$537,233,~~$2,935,000, respectively, and is included in “Prepaid expenses and other current assets” on the accompanying Consolidated Balance Sheets. ~~The equity securities are classified as a~~

Level ~~1 financial instrument.~~2 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 ~~$227,929~~$2,580 and ~~$127,981~~$147,465 at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The interest rate swap was priced using discounted cash flow techniques. Changes in its fair value were recorded to other income (expense) with corresponding offsetting entries to current 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. ~~It is classified as Level 2 as it is not actively traded and is valued using pricing models that use observable market inputs.~~

To manage the impact on earnings of fluctuating nickel prices, the Company occasionally enters into six-month forward option contracts, which are classified as Level 2. At September 30, 2019 and December 31, 2018, the Company did not have any such contracts in place. At December 31, 2017, the Company had contracts in place with notional quantities totaling approximately 1,351,494 pounds with strike prices ranging from $3.75 to $4.64 per pound. The fair value of the option contract in place at December 31, 2017 was an asset of $9,027. 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 "Other expense (income)" with corresponding offsetting entries to other current assets. The fair value of the forward option contracts approximates their carrying value.

Level 3 Financial Instruments

The fair value of contingent consideration ~~liabilities~~ ("earn-out") liabilities resulting from the 2017 MUSA-Stainless acquisition, ~~and~~ 2018 MUSA-Galvanized acquisition, and 2019 American Stainless acquisition (see Note 9) are classified as Level 3. The fair value of the MUSA-Stainless earn-out was estimated by applying the Monte Carlo Simulation approach using management's projection of pounds to be shipped and future price per unit. The fair value of the MUSA-Galvanized earn-out ~~was~~and American Stainless earn-out

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

were estimated by applying the probability-weighted expected return method, using management's projection of pounds to be shipped and future price per unit. Each quarter-end, the Company re-evaluates its assumptions for ~~both~~all earn-out liabilities and adjusts to reflect the updated fair values. Changes in the estimated fair value of the earn-out liabilities are reflected in the results of operations in the periods in which they are identified. Changes in the fair value of the earn-out liabilities may materially impact and cause volatility in the Company's operating results.

The following table presents a summary of changes in fair value of the Company's earn-out liabilities during the period:

2017 MUSA-Stainless Earn-Out
Balance at December 31, 2017 $ 4,833,850
Earn-out payments to MUSA (1,685,519 )
Change in fair value during the period 2,412,122
Balance at September 30, 2018 $ 5,560,453



	MUSA-Stainless			MUSA-Galvanized			American Stainless			Total
Balance at December 31, 2018	$	4,251,584		$	3,357,800		$	—		$	7,609,384
Fair value of the earn-out liability associated with the American Stainless acquisition	—			—			6,366,324			6,366,324
Earn-out payments during the period	(1,186,666		)	(582,889		)	(1,174,566		)	(2,944,121		)
Changes in fair value during the period	(1,035,212		)	(894,288		)	286,518			(1,642,982		)
Balance at September 30, 2019	$	2,029,706		$	1,880,623		$	5,478,276		$	9,388,605

~~Table~~For the nine month period ended September 30, 2018 the Company recorded a $219,548 charge related to changes in the fair value of ~~Contents~~

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

2018 MUSA-Galvanized Earn-Out
Balance at December 31, 2017 $ —
Fair value of the earn-out liability associated with the MUSA-Galvanized acquisition 3,800,298
Earn-out payments to MUSA (127,710 )
Change in fair value during the period (219,548 )
Balance at September 30, 2018 $ 3,453,040
the MUSA-Stainless earn-out liability.

There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 in the ~~three-month or~~three and nine-month periods ended September 30, ~~2018~~2019 or year ended December 31, ~~2017.~~2018. During the first nine months of ~~2018,~~2019, there have been no changes in the fair value methodologies used by the Company.

9.10. Acquisitions

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

On ~~July~~January 1, ~~2018, Bristol Metals,~~2019, the Company's wholly-owned subsidiary, ASTI Acquisition, LLC ~~("BRISMET")~~(now American Stainless Tubing, LLC), a ~~subsidiary~~North Carolina limited liability company (“ASTI”), completed the purchase of substantially all of the ~~Company's Metals Segment, acquired Marcegaglia USA, Inc.'s ("MUSA") galvanized tube~~ assets and operations of American Stainless Tubing, Inc., a North Carolina corporation ("~~MUSA-Galvanized"~~American Stainless") ~~located~~, in ~~Munhall, PA. The purpose of the transaction was to enhance the Company's on-going business with additional capacity~~Statesville and ~~technological advantages. The transaction was funded through an increase to the Company's current credit facility (refer to Note 10).~~Troutman, North Carolina. The purchase price for the ~~transaction totaled $10,378,281.~~all-cash acquisition was $21,895,409, subject to a post-closing working capital adjustment. The ~~assets purchased~~Company funded the acquisition with a new five-year $20,000,000 term note and ~~liabilities assumed from MUSA include accounts receivable, inventory, equipment, and accounts payable.~~a draw against asset-based line of credit (see Note 10).

The transaction is ~~being~~ 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 acquired and liabilities assumed. ~~Because the acquisition closed on July 1, 2018,~~Accordingly, the allocation of the consideration transferred in the unaudited condensed 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.~~ During the third quarter of 2019, the Company finalized the purchase price allocation for the American Stainless acquisition.

The ~~final valuation~~excess of the consideration transferred over the fair value of the net tangible and identifiable intangible assets is reflected as goodwill. Goodwill consists of manufacturing cost synergies expected from combining American Stainless' production capabilities with the Metals Segment current operations. All of the goodwill recognized was assigned to the Company's Metals Segment and is expected to be ~~completed as soon as practicable but no later than twelve months after the closing date of the acquisition.~~deductible for income tax purposes.

~~MUSA~~American Stainless will receive quarterly earn-out payments for a period of ~~four~~three years following closing. ~~Earn-out~~Pursuant to the asset purchase agreement between ASTI and American Stainless, earn-out payments will equate to ~~three~~six and one-half percent (6.5 percent) of ~~BRISMET’s galvanized steel pipe and tube revenue. As of July 1, 2018,~~ASTI’s revenue over the Company forecasted earn out payments to be $4,244,939, for which the Company established a fair value of $3,800,298 using a probability-weighted expected return method and a discount rate applicable to future revenue of five percent.three-year earn-out period. In determining the appropriate discount rate to apply to the contingent payments, the risk associated with the functional form of the earn-out, and the credit risk associated with the payment of the earn-out were all considered. The fair value of the contingent consideration was estimated by applying the ~~probability-weighted~~probability weighted expected return method using management's estimates of pounds to be shipped and future price per unit. ~~At September 30, 2018~~

During the second quarter of 2019, management revised the initial estimate of the fair value of the contingent consideration, resulting in an increase to the earn-out liability of $218,094. Because this adjustment was determined within the measurement

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

period, goodwill was increased by $218,094. At September 30, 2019 the fair value of the contingent consideration totaled ~~$3,453,040~~$5,478,275 with ~~$960,189~~$2,774,576 of this liability classified as a current liability, since the payments will be made quarterly.

The total purchase price was allocated to the acquired net tangible and identifiable intangible assets based on their estimated fair values as of July 1, 2018 for purposes of the consolidated financial statements. These amounts are subject to change based on the results of the final valuations of assets acquired and liabilities assumed, which are expected to be completed within the twelve months following the acquisition. The fair value assigned to the customer list intangible will be amortized on an accelerated basis over 15 years. ~~The excess~~During the second quarter of 2019, management revised the ~~consideration transferred over~~initial estimate of the fair value of the ~~net tangible and identifiable~~customer list intangible assets is reflected as goodwill. Goodwill consists of manufacturing cost synergies expected from combining MUSA-Galvanized's production capabilities with BRISMET's current operations. All of the goodwill recognized was assignedasset, resulting in a decrease to the ~~Company's Metals Segment~~customer list intangible asset of $496,000. Because this adjustment was determined within the measurement period, goodwill was increased by $496,000.

The following table shows the initial estimate of value and is expected to be deductible for income tax purposes. The preliminary allocation of the total consideration paid to the fair value of the assets acquired and liabilities assumed as of July 1, 2018 is as follows:

~~Table of Contents~~

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

revisions made during 2019:


			Initial estimate			Revisions			Final
Inventories	$	2,746,000	$	5,564,000		$	—		$	5,564,000
Accounts Receivable	2,187,141
Accounts receivable			3,533,921			—			3,533,921
Other current assets - production and maintenance supplies	746,729		605,613			—			605,613
Property, plant and equipment	4,883,847		2,793,173			—			2,793,173
Customer list intangible	1,424,000		10,000,000			(496,000		)	9,504,000
Goodwill	3,545,467		7,043,534			714,094			7,757,628
Contingent consideration	3,800,298
Accounts Payable	1,051,239
Contingent consideration (earn-out liability)			(6,148,230		)	(218,094		)	(6,366,324		)
Accounts payable			(1,400,009		)	—			(1,400,009		)
Other liabilities	303,366		(96,593		)	—			(96,593		)
	$	10,378,281	$	21,895,409		$	—		$	21,895,409

~~MUSA-Galvanized's~~ASTI's results of operations since acquisition are reflected in the Company's consolidated statements of operations as follows:


	Three Months Ended		Nine Months Ended		Three Months Ended		Nine Months Ended
	Sep 30, 2018		Sep 30, 2018		September 30, 2019		September 30, 2019
Net sales	$	6,464,277	$	6,464,277	$	8,468,838	$	26,539,086
Income before income taxes	9,859		9,859		901,562		2,000,725

For the nine month period ended September 30, 2019, cost of sales included $1,147,000representing the fair value above predecessor cost associated with acquired inventory that was sold during the nine month period.

The following unaudited pro-forma information is provided to present a summary of the combined results of the Company's operations with ~~MUSA-Galvanized~~ASTI as if the acquisition had occurred on January 1, ~~2017.~~2018. 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.


Pro-Forma (Unaudited)
	Three Months Ended					Nine Months Ended						Three Months Ended		Nine Months Ended
	Sept 30, 2018		Sept 30, 2017			Sept 30, 2018			Sept 30, 2017			September 30, 2018		September 30, 2018
Pro-forma net sales	$	77,792,878	$	59,731,468		$	220,099,018		$	167,533,174		$	87,303,802	$	235,394,161
Pro-forma net income (loss)	$	5,216,229	$	(1,505,613	)	$	11,442,902		$	(690,066	)
Earnings (loss) per share:
Pro-forma net income												$	5,506,194	$	12,490,937
Earnings per share:
Basic	$	0.59	$	(0.17	)	$	1.30		$	(0.08	)	$	0.62	$	1.42
Diluted	$	0.58	$	(0.17	)	$	1.29	��	$	(0.08	)	$	0.62	$	1.41

~~The pro-forma calculation~~Pro-forma net income was reduced for the following:

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Amortization of American Stainless’ customer list intangible of $297,000 and $891,000 for the three and nine months September 30, 2018, respectively;

Additional rent expense related to the Company’s lease of American Stainless’ real estate from Store Capital of $121,449 and $364,348 for the three and nine months ended September 30, 2018, excludes non-recurring acquisition costs of $180,671 and $666,357, respectively, which were incurred by the Company during 2018. These expenditures included $252,481 for professional fees associated with the preparation of MUSA-Galvanized's historical carved out galvanized financial statements and intangible assets identification and valuation, $132,831 of travel costs, $38,661 of legal fees, $239,065 of closing costs, and $3,319 of miscellaneous other costs. Pro-forma net income was reduced for both years for the amount of amortization on MUSA-Galvanized's customer list intangible and anrespectively;

An estimated amount of interest expense associated with the additional ~~line~~borrowings to fund the American Stainless acquisition of ~~credit borrowings.~~$191,319 and $603,481 for the three and nine months ended September 30, 2018, respectively;

Depreciation of$56,202 and $168,604for the three and nine months endedSeptember 30, 2018, respectively, related to the incremental fair value above historical cost for acquired property, plant and equipment; and

A increase in the provision for income taxes of $127,276 for the three months ended September 30, 2018 and a decrease in the provision for income taxes of $15,737 for the nine months ended September 30, 2018 related to the impact of the other pro-forma adjustments and American Stainless' previous status as a pass-through entity for income tax purposes prior to the acquisition.

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

On ~~February 28, 2017, BRISMET~~July 1, 2018, Bristol Metals, LLC ("BRISMET"), a subsidiary of the Company's Metals Segment, acquired ~~the stainless steel pipe and~~Marcegaglia USA, Inc.'s ("MUSA") galvanized tube assets ~~of MUSA~~and operations ("~~MUSA-Stainless"~~MUSA-Galvanized") located in Munhall, PA.

~~Table of Contents~~

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~

~~MUSA-Stainless' results of operations since acquisition are reflected in~~ The purchase price for the ~~Company's consolidated statements of operations as follows:~~

Three Months Ended Nine Months Ended
Sep 30, 2018
Sep 30, 2017
Sep 30, 2018
Sep 30, 2017
Net sales $ 13,553,571
$ 8,675,104
$ 39,292,813
$ 17,087,030
Income (loss) before income taxes 2,011,333
(559,078 ) 5,492,488
(114,601 )

transaction totaled $10,378,281. The assets purchased and liabilities assumed from MUSA include accounts receivable, inventory, equipment, and accounts payable.

~~10.~~

11. Long-term Debt

On ~~June 29,~~December 20, 2018, the Company amended its Credit Agreement with its bank to refinance and increase its Line of Credit (the "Line") from $80,000,000 to $100,000,000 and to create a new 5-year term loan in the ~~limit~~principal amount of $20,000,000 (the “Term Loan”). The Term Loan was used to finance the purchase of substantially all of the ~~asset based line~~assets of ~~credit (the "Line") by $15,000,000 to~~American Stainless (see Note 9). The Term Loan’s maturity date is February 1, 2024 and shall be repaid in 60 consecutive monthly installments. Interest on the Term Loan is calculated using the One Month LIBOR Rate (as defined in the Credit Agreement), plus 1.90 percent. The Line will be used for working capital needs and as a ~~maximum of $80,000,000. As a result~~source for funding future acquisitions. The maturity date of the ~~amendment, the interest rate~~Line has been extended to December 20, 2021. Interest on the Line remains unchanged and is ~~now~~ calculated using the One Month LIBOR Rate, plus ~~a spread of~~ 1.65 percent. ~~None~~Borrowings under the Line are limited to an amount equal to a Borrowing Base calculation that includes eligible accounts receivable and inventory. As of September 30, 2019, the ~~other provisions~~Company had $16.9 million of ~~the Credit Agreement were changed as a result~~remaining available capacity under its line of ~~this amendment.~~

credit.

Pursuant to the Credit Agreement, the Company is subject to certain covenants including maintaining a minimum fixed charge coverage ratio, maintaining a minimum tangible net worth, 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, ~~2018,~~2019, the Company was in compliance with all debt covenants.

~~11.~~12. Contingencies

The Company is from time-to-time subject to various claims, possible legal actions for product liability and other damages, and other matters arising out of the normal conduct of the Company's business.

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

~~12.~~13. Leases

Adoption of ASC Topic 842, "Leases"

On ~~June 29, 2018,~~January 1, 2019, the Company adopted Topic 842 using the modified retrospective method applied to leases that were in place as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 840. The Company's portfolio of leases contains both finance and operating leases that relate primarily to real estate agreements and manufacturing equipment agreements. Substantially all of the value of the Company's lease portfolio relates to a real estate master lease agreement with Store Master Funding XII, LLC, an affiliate of Store Capital Corporation ~~(“Store”~~("Store Capital"), that was entered

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

into in 2016 and amended with the 2018 MUSA-Galvanized and 2019 American Stainless acquisitions. As of September 30, 2019, operating lease liabilities related to the master lease agreement with Store Capital totaled $36,911,421, or 97 percent of the total lease liabilities on the accompanying condensed consolidated balance sheet.

Practical Expedients and Elections

The Company elected the package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that exist prior to adoption of the new standard. We did not elect the hindsight practical expedient to determine the reasonably certain lease term for existing leases. We also elected to combine lease and non-lease components and elected the short-term lease recognition exemption for all leases that qualify.

Deferred Gain on Sale Leaseback

On January 1, 2019, the Company recorded cumulative-effect adjustments to increase equity and deferred tax assets totaling $4,622,500 and $1,310,850, respectively, related to the derecognition of the deferred gain on its sale leaseback, consistent with transition guidance set forth in ASC 842-10-65-1.

Discount Rate

To determine the present value of minimum future lease payments for operating leases at January 1, 2019, the Company was required to estimate a rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the "incremental borrowing rate" or "IBR"). The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, treasury rates for five years, 10 years, and 30 years were used as they cover the periods of the leases. The Company additionally used the Damodaran Credit Rating Model, which assesses a credit rating based on the interest coverage ratio and relates this to credit ratings of other large public manufacturers. Inputs required include EBIT, interest expense, future minimum lease payments, outstanding debt, and a reference rate. Based on this assessment of the aforementioned qualitative and quantitative factors, the Company determined that 7.32 percent was an appropriate incremental borrowing rate to apply to its portfolio of real-estate operating leases. The Company elected to utilize a single discount rate for its portfolio of operating leases because of similar lease characteristics; the resulting calculation does not differ materially from applying the standard to the individual leases.

Weighted average discount rates for operating and finance leases are as follows:



Operating Leases	7.32	%
Finance Leases	11.90	%

Balance Sheet Presentation

Operating and finance lease amounts included in the Consolidated Balance Sheet are as follows:



Classification	Financial Statement Line Item	September 30, 2019
Assets	Right-of-use assets, operating leases	$	36,102,240
Assets	Property, plant and equipment	444,634
Current liabilities	Current portion of lease liabilities, operating leases	3,543,866
Current liabilities	Current portion of lease liabilities, finance leases	252,896
Non-current liabilities	Non-current portion of lease liabilities, operating leases	33,942,080
Non-current liabilities	Non-current portion of lease liabilities, finance leases	397,815

Total Lease Cost

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

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)



	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Operating lease cost	$	1,027,998	$	3,083,993
Finance lease cost:
Amortization of right-of-use assets	43,714		131,143
Interest on finance lease liabilities	20,526		66,270
Total lease cost	$	1,092,238	$	3,281,406

Amortization of 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.

Maturity of Leases

The amounts of undiscounted future minimum lease payments under leases as of September 30, 2019 are as follows:



	Operating		Finance
Remainder of 2019	$	885,966	$	59,472
2020	3,562,092		275,101
2021	3,635,376		315,529
2022	3,672,731		11,998
2023	3,563,383		—
Thereafter	52,188,270		—
Total undiscounted minimum future lease payments	67,507,818		662,100
Imputed Interest	30,021,872		11,389
Total lease liabilities recorded as of September 30, 2019	$	37,485,946	$	650,711

Additional Information

Weighted average remaining lease terms for operating and finance leases as of September 30, 2019 are as follows:



Operating Leases	16.79 years
Finance Leases	2.27 years

During the nine-month period ended September 30, 2019, right-of-use assets recognized in exchange for new operating lease liabilities totaled $4,900,243.

On January 1, 2019, the Company and Store Capital entered into an Amended and Restated Master Lease Agreement (the “Master Lease”), pursuant to which the Company ~~will lease~~leases the ~~Munhall, PA facility,~~Statesville and Troutman, NC facilities, purchased by Store Capital from ~~MUSA~~American Stainless on ~~June 29, 2018,~~January 1, 2019, for the remainder of the initial term of 20 years set forth in the Master Lease, with two renewal options of ten years each. Because the Company is reasonably certain to not exercise these renewal options, the options are not considered in determining the lease term and associated potential option payments are excluded from lease payments. The Master Lease includes a rent escalator equal to the lesser of 1.25 times the percentage increase in the Consumer Price Index since the previous increase or 2 percent.

~~The amount of future minimum lease payments under operating leases are as follows:~~

Remainder of 2018 $ 711,409
2019 2,859,865
2020 2,917,062
2021 2,975,404
2022 3,034,912
2023 3,095,610
Thereafter 45,337,403

~~Table of Contents~~

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements ~~(unaudited)~~(Unaudited)

~~13.~~Undiscounted future minimum lease payments under non-cancellable operating and capital leases as of December 31, 2018 accounted for under ASC 840 "Leases" were as follows:



	Operating		Capital
2019	$	3,207,053	$	354,299
2020	3,243,694		329,534
2021	3,238,745		335,462
2022	3,224,810		11,998
2023	3,102,815		—
Thereafter	45,337,403		—
Total undiscounted minimum future operating lease payments			1,031,293
Imputed Interest			164,826
Total lease liabilities recorded as of December 31, 2018			$	866,467

14. Goodwill and Intangible Assets

As a result of the ~~July 1, 2018 MUSA-Galvanized~~2019 American Stainless acquisition, the Company recognized ~~$3,545,467~~$7,757,628 in Goodwill for the excess of consideration transferred over the fair value of the acquired net tangible and identifiable intangible assets.

The Company also recorded a ~~$1,424,000~~$9,504,000 intangible asset for the fair value of the customer relationships that were acquired, to be amortized on an accelerated basis over 15 years.

The balance of intangible assets subject to amortization at September 30, ~~2018~~2019 and December 31, ~~2017~~2018 is as follows:


	September 30, 2018			December 31, 2017			September 30, 2019			December 31, 2018
Intangible assets, gross	$	22,873,000		$	21,449,000		$	32,126,000		$	22,622,000
Accumulated amortization of intangible assets	(12,326,049		)	(10,568,479		)	(15,540,065		)	(12,925,888		)
Intangible assets, net	$	10,546,951		$	10,880,521		$	16,585,935		$	9,696,112

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


Remainder of 2018	$	615,523
2019	2,327,899
Remainder of 2019			$	871,392
2020	2,157,765		3,238,328
2021	2,047,632		3,051,086
2022	1,814,415		2,740,761
2023	350,378		1,199,616
2024			1,042,641
Thereafter	1,233,339		4,442,111

~~Table of Contents~~

Synalloy Corporation

Notes to Condensed Consolidated Financial Statements ~~(unaudited)~~(Unaudited)

~~14. At the Market Offering~~

15. Stock Repurchase Program

On ~~August 9, 2018,~~February 21, 2019, the ~~Company entered into an Equity Distribution Agreement pursuant~~Board of Directors authorized a stock repurchase program for up to ~~which the Company may issue and sell,~~850,000 shares of its outstanding common stock over twenty-four months. The shares will be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. Under the program, the purchases will be funded from available working capital, and the repurchased shares will be returned to the status of authorized, but unissued shares of ~~the Company’s~~ common stock ~~(the "Shares"), par value $1.00 per share, with aggregate gross sales proceeds~~or held in treasury. There is no guarantee as to the exact number of ~~up to $10 million, through an “at-the-market” equity offering program under which BB&T Capital Markets, a division of BB&T Securities, LLC~~shares that will be repurchased by the Company, and ~~Ladenburg Thalmann & Co. Inc. (the "Agents") will act as sales agents (the “ATM Program”).~~the Company may discontinue purchases at any time that management determines additional purchases are not warranted.

~~As of~~During the nine-month period ended September 30, ~~2018,~~2019 the Company ~~had issued and sold 44,378~~did not purchase any shares ~~in connection with~~under the ~~ATM Program, with total net proceeds of $1,002,712. The Agents received $20,470 in commission on the sales.~~stock repurchase program.

~~15. Announcement of Dividend~~16. Subsequent Events

~~On August 7, 2018,~~Kyle Pennington, President of Synalloy Metals, notified Synalloy Corporation (the “Company”) of his decision to retire from the Company ~~announced that its Board of Directors had approved a cash dividend of $0.25 per share on the issued and outstanding shares of the Common Stock of~~effective October 31, 2019. Mr. Pennington’s Employment Agreement with the Company ~~payable in December 2018 to shareholders~~dated March 1, 2019 (the “Employment Agreement”) was terminated as of ~~record of such shares.~~October 31, 2019. The ~~Company estimates that it will pay out $2,216,193 in~~Employment Agreement, filed with the ~~fourth quarter related~~Securities and Exchange Commission as an exhibit to the ~~dividend,~~Company’s 2018 Annual Report on Form 10-K, provides Mr. Pennington with salary and ~~recorded a liability for the full amount in "Accrued expenses~~incentive cash and ~~other current liabilities" on the accompanying Condensed Consolidated Balance Sheets~~restricted stock compensation continuation through March 1, 2020 as well as immediate vesting of ~~September 30, 2018.~~his awarded restricted stock and stock options.

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

The following is management's discussion of certain significant factors that affected the Company during the three-month and nine-month periods ended September 30, ~~2018.~~2019.

Consolidated net sales for the third quarter of ~~2018 totaled $77,792,878, an increase~~2019 were $73.6 million. This represents a decrease of ~~$23,196,954~~$4.2 million or 425.3 percent when compared to net sales for the third quarter of 2018. Excluding net sales of ASTI, net sales for the third quarter of 2019 decreased $12.6 million, or 16.2 percent compared to net sales for the third quarter of 2017 of $54,595,924. The Company recorded net income of $5,035,558, or $0.56 per share (diluted) for the third quarter of 2018, compared to a net loss of $1,206,752 or $0.14 per share for the same quarter in the prior year.2018.

Consolidated net sales for the first nine months of ~~2018 totaled $208,167,243,~~2019 were $237.2 million, an increase of ~~$59,856,695~~$29.1 million or 4014.0 percent from the first nine months of 2018. Excluding net sales of ASTI (for the nine months ended September 30, 2019) and Munhall-Galvanized (for the first six months of 2019), net sales for the first nine months of 2019 decreased $10.4 million, or 5.0 percent compared to net sales for the first nine months of ~~2017~~2018.

For the third quarter of ~~$148,310,548. The~~2019, the Company recorded a net loss of $1.0 million, or $0.11 loss per diluted share, compared to net income of ~~$12,547,993,~~$5.0 million, or ~~$1.42~~$0.56 per diluted share ~~(diluted)~~ for the third quarter of 2018. Excluding the financial results of ASTI, net income for the third quarter of 2019 decreased $6.8 million, or 134.9 percent compared to net income for the third quarter of 2018. The third quarter of 2019 was negatively impacted by inventory price change losses which, on a pre-tax basis, totaled $0.6 million, compared to a $1.6 million gain in the third quarter of 2018, as well as non-recurring items, described in more detail below, which totaled $1.6 million.

For the first nine months of ~~2018, compared~~2019, net loss was $2.1 million, or $0.24 loss per diluted earnings per share. This compares to net income of ~~$324,667~~$12.5 million, or ~~$0.04~~$1.42 per diluted earnings per share for the first nine months of ~~2017.~~2018. Excluding the financial results of ASTI (for the first six months of 2019) and Munhall-Galvanized (for the first six months of 2019), net income for the first nine months of 2019 decreased $16.4 million, or 130.4 percent compared to net income for the first nine months of 2018. The first nine months of 2019 were negatively impacted by inventory price change losses which, on a pre-tax basis, totaled $5.7 million, compared to a $5.1 million gain for the first nine months of 2018, as well as non-recurring items, described in more detail below, which totaled $1.9 million.

The Company's results are periodically impacted by factors that are not included as adjustments to our non-GAAP measures, but which represent items that help explain differences in period to period results. As mentioned above, for the third quarter of 2019, the most significant of those was inventory price change losses which, on a pre-tax basis, totaled $0.6 million, compared to a $1.6 million gain in the third quarter of 2018, representing a decrease of $2.2 million in pre-tax income compared to the third quarter 2018. Additionally, during the third quarter, other significant non-recurring items occurred with an estimated pre-tax impact of $1.6 million in the third quarter and $1.9 million for the first nine months of 2019, and included the following:

Three year Long-Term Incentive Plan performance shares non-cash awards for 2017-2019 were accrued in the third quarter of 2019, at a cost of $0.7 million;

Several stop loss medical claims that resulted in charges in excess of $0.6 million in the third quarter of 2019;

Downtime associated with the heavy wall press outage; $0.3 million and $0.6 million, for the third quarter of 2019 and for the first nine months of 2019, respectively, of pre-tax earnings loss; anticipate additional pre-tax loss of $0.4 million in the fourth quarter of 2019. We have a filed claim with the insurance carrier.

Impact of ~~2018~~2019 and ~~2017~~2018 Acquisitions on Financial Results

The ~~third quarter and~~ first nine months of ~~2018 include financial results in the Company's Metals Segment related to the MUSA-Stainless acquisition (which closed on February 28, 2017) as follows:~~

~~For the third quarters of 2018 and 2017, net sales for MUSA-Stainless totaled $13,553,571 and $8,675,104, respectively, with pre-tax income of $2,011,333 and a loss of $559,078, respectively.~~

~~For the first nine months of 2018 and 2017, net sales for MUSA-Stainless totaled $39,292,813 and $17,087,030, respectively, with pre-tax income of $5,492,488 and a loss of $114,601, respectively.~~

~~The third quarter and first nine months of 2018~~2019 include financial results in the Company's Metals Segment related to the MUSA-Galvanized acquisition (which closed on July 1, 2018) (for the first six months of 2019) as follows:

~~For both the three-month and nine-month periods ended September 30, 2018:~~


◦a.	~~Net~~For the first six months of 2019, net sales for Munhall-Galvanized totaled $12.9 million, with pre-tax income of ~~$6,464,277~~$0.2 million.

The third quarter and the first nine months of 2019 include financial results in the Company's Metals Segment related to the American Stainless acquisition (which closed on January 1, 2019) as follows:


a.	For the third quarter of 2019, net sales for ASTI totaled $8.5 million, with pre-tax income of $0.9 million.


◦b.	~~Pre-tax~~For the first nine months of 2019, net sales for ASTI totaled $26.5 million, with pre-tax income of ~~$9,859~~$2.0 million.

~~Pre-tax income for~~For ASTI, the ~~three-month~~first nine months of 2019 include amortization of acquisition fair value markup of inventory totaling $1.3 million and ~~nine-month periods ended September 30, 2018 includes non-recurring~~other acquisition related one-time costs ~~of $259,788 that were recorded in Metals Segment Cost of Sales.~~totaling $46,100.

Metals Segment

The Metals Segment's net sales for the third quarter of 2019 totaled $60.1 million, a decrease of $0.9 million or 1.5 percent from the third quarter of 2018. Excluding the net sales of ASTI, Metals Segment net sales for the third quarter of ~~2018 totaled $61,024,373, an increase of $18,001,540~~2019 decreased $9.4 million, or 4215.4 percent, ~~from~~compared to net sales for the third quarter of ~~2017.~~ 2018.

Net sales for the first nine months of ~~2018~~2019 were ~~$162,891,099,~~$195.7 million, an increase of ~~$51,069,984~~$32.8 million or 4620.2 percent from ~~2017.~~the first nine months of 2018. Excluding the net sales of ASTI and Munhall-Galvanized (for the first six months of 2019), Metals Segment net sales for the first nine months of 2019 decreased $6.6 million, or 4.1 percent, compared to net sales for the first nine months of 2018.

Sales for the third quarter and first nine months of ~~2018~~2019 compared to the prior year are summarized as follows:


	Sales Increase (decrease) from prior year period					Sales increase (decrease) from prior year period
	$		%	Average selling price ⁽¹⁾	Units shipped	$			%	Average selling price ⁽¹⁾	Units shipped
Third quarter
Storage tank and vessel	$	1,366,716	17.9%	38.0%	(20.1)%	$	(3,464,604	)	(38.4)%	(3.5)%	(42.0)%
Seamless carbon steel pipe and tube	1,217,049		18.2%	25.9%	(7.7)%	75,432			1.0%	(11.1)%	12.1%
Stainless steel pipe	8,953,498		31.2%	25.8%	4.3%
Stainless steel pipe - Excluding ASTI						(5,144,354		)	(13.7)%	(16.2)%	2.5%
Stainless steel pipe - ASTI						8,468,838			n/a
Galvanized pipe	6,464,277		n/a			(838,540		)	(13.0)%	(17.6)%	4.6%
Total third quarter change	$	18,001,540				$	(903,228	)

First nine months
Storage tank and vessel	$	3,882,431	19.4%	29.3%	(9.9)%	$	1,764,008		7.4%	21.7%	(14.3)%
Seamless carbon steel pipe and tube	5,940,263		31.6%	23.3%	8.3%	(1,471,183		)	(6.0)%	0.2%	(6.2)%
Stainless steel pipe	34,783,011		47.6%	19.5%	23.5%
Stainless steel pipe - Excluding ASTI						(6,092,676		)	(5.6)%	(7.8)%	(2.2)%
Stainless steel pipe - ASTI						26,539,086			n/a
Galvanized pipe	6,464,277		n/a			12,097,265			187.1%	(14.9)%	231.9%
Total first nine months change	$	51,069.982				$	32,836,500

⁽¹⁾¹⁾Average price ~~increases~~decreases for the third quarter of ~~2018~~2019 as compared to the third quarter of ~~2017~~2018 primarily relate to the following:

•Storage tank and vessels - product mix change to larger, more complex tanks;

Seamless carbon steel pipe and tube - ~~pass through of higher input material costs primarily related to the imposition of Section 232 Aluminum~~decline in pricing based on market conditions; and, ~~Steel Import Tariffs;~~

•Stainless steel pipe (excluding ASTI) - pass through of input and cost ~~increases~~changes related to:

a.Alloy surcharges ~~increase~~decrease of ~~17%;~~three percent; and,

b.~~Decrease of alloy mix with higher nickel content of 2%; and~~

c.Base raw material input mill pricing, ~~increase~~product mix and other competitive pricing, decrease of ~~11%~~12.7 percent.

For the overall Metals Segment, ~~pricing averages,~~with the addition of the galvanized product line pricing (from the ~~July 1,~~ 2018 MUSA-Galvanized acquisition) ~~was~~, pricing averages were impacted by the lower average selling prices of galvanized products as compared to other product lines in the Metals Segment. The inclusion of galvanized products lowered average pricing for the third quarter ~~and nine months~~ ended September 30, ~~2018~~2019 by ~~21% and 9%, respectively.~~23.0 percent.

Average price ~~increases~~decreases for the first nine months of ~~2018~~2019 as compared to the first nine months of ~~2017~~2018 primarily relate to the ~~same factors indicated above, however~~following:

•Storage tank and vessels - product mix change to larger, more complex tanks;

Seamless carbon steel pipe and tube - decline in pricing based on market conditions related to second quarter, offset by price increases related to pass through of tariffs implemented in the second quarter of 2018; and,

•Stainless steel pipe (excluding ASTI) - pass through of input and cost changes related to:

a.Alloy surcharges decrease of five percent; and,

b.Base raw material input mill pricing, product mix and other competitive pricing, decrease of 2.7 percent.

For the overall Metals Segment, with the addition of the galvanized product line pricing (from the 2018 MUSA-Galvanized acquisition), pricing averages were impacted by the lower average ~~impacts due~~selling prices of galvanized products as compared to ~~lower material cost inputs~~other product lines in the ~~first quarter~~Metals Segment. The inclusion of ~~2018.~~galvanized products lowered average pricing for the nine months ended September 30, 2019 by 32 percent.

The Metals Segment's operating income ~~increased $9,248,017~~decreased $7.6 million to ~~$7,984,117~~$0.5 million for the third quarter of ~~2018~~2019 compared to ~~an operating loss of $1,263,900~~$8.0 million for the third quarter of ~~2017.~~2018. For the first nine months of ~~2018,~~2019, operating income decreased for the Metals Segment ~~increased $20,431,498~~by $20.0 million to ~~$23,091,164~~an operating income of $3.1 million compared to operating income of ~~$2,659,666~~$23.1 million for the same period of ~~2017.~~

2018.

Current ~~year~~quarter operating results were affected by the following factors:

a.a)

Nickel prices and resulting surcharges for 304 and 316 alloys ended the third quarter at the high point of ~~2018~~2019, with a late third quarter increase in surcharges between 15.0 percent to 18.0 percent, but still lower than prior year third quarter levels by between 6.0 percent and 11.0 percent. With much of the ~~previous~~pricing in the third quarter ~~with surcharges for both alloys decreasing by $0.03 per pound; however, average nickel prices for~~based on prior lower surcharge levels, the third quarter generated a net ~~favorable~~unfavorable operating impact of ~~$1.6~~$0.6 million related to metal ~~pricing;~~


b.	~~Year over year net improvements in volume, pricing, and product mix combined for~~pricing. Compared to a ~~241% improvement in gross profit margins~~period of rising nickel prices in the third quarter of 2018, which generated metal pricing gains of $1.6 million, the third quarter of 2019 was unfavorable by $2.2 million compared to the ~~same~~third quarter ~~in 2017; and~~of 2018;

c.b)

Operating profits for welded stainless pipe and galvanized tube operations (excluding ASTI commented on in note c below) declined approximately $5.3 million in the third quarter of 2019 compared to the prior year period. The decline is primarily related to the average pricing declines of approximately 16.0 percent that took place in the second quarter of 2019 and sustained at lower levels in the third quarter of 2019. While pounds increased an encouraging 3.0%, overall revenue declined $6.0 million, with a majority of that decline passing through to lower operating profit, offset only by a slightly lower average cost of goods sold of $.10 per pound. For the remainder of the year, we expect to see order book pricing increase as a reflection of recent October and November surcharge increases; however, due to timing of backlog shipments, we believe most of that benefit will come in the first quarter of 2020;


c)	The American Stainless acquisition increased third quarter of 2019 operating income by $0.9 million, with no comparable results in the prior year period; and

Seamless carbon pipe and tube showed ~~significant improvement~~an increase of 12.1 percent pounds shipped, with ~~a 18.2% increase~~energy related project business up 19.0 percent and general industrial up 9.0 percent. However, pricing pressures in the third quarter lowered the overall average selling price by 11.1 percent, lowering operating profit by approximately $1.2 million. We do expect energy market-based sales ~~driving a 330% improvement~~to remain low for the remainder of the year, and anticipate slightly lower general industrial sales in ~~operating income over~~ the ~~prior year, with activity and margins driven by strong end markets and increased project related orders.~~fourth quarter based on normal year-end seasonal declines.

Specialty Chemicals Segment

Net sales for the Specialty Chemicals Segment in the third quarter of ~~2018~~2019 totaled ~~$16,768,505,~~$13.5 million, representing a ~~$5,195,414~~$3.2 million or 4519.4 percent ~~increase~~decrease from the third quarter of ~~2017.~~2018. Sales for the first nine months of ~~2018~~2019 were ~~$45,276,144, up $8,786,711~~$41.5 million, a decrease of $3.8 million or 248.4 percent from ~~2017~~2018 results.

~~Net~~The decline of net sales ~~continued to benefit~~ during the third quarter ~~and~~is primarily attributable to opportunistic volume acquired in 2018 for seasonal asphalt additive products totaling $2.4 million that did not repeat in 2019. Lower raw material input costs negatively affected third quarter sales revenue by $0.8 million when compared to third quarter 2018 for customers that receive quarterly pricing. Through the first nine months of ~~2018 primarily from the initial ramp up of seven significant customers, a new fire retardant~~2019, those same factors, non-repeating asphalt volume and ~~new asphalt additive customers at our subsidiary, CRI Tolling, LLC, two new oil~~lower raw material input costs, negatively affected sales revenue by $4.5 million and ~~gas customers and two new pulp/paper customers at our subsidiary, Manufacturers Chemicals, LLC, and a new product launch from an existing customer at Manufacturers Chemicals.~~$1.2 million, respectively.

Operating income for the Specialty Chemicals Segment for the third quarter of 2019 was $0.8 million, a decrease of $0.5 million from the same quarter of 2018. The decline in operating income is directly related to the lower sales revenue and more tolled product being shipped in 2019 compared to 2018. Based on our 2018 ~~was $1,354,617, an increase~~and 2019 YTD analysis at the end of ~~$203,956 or 18 percent. This result was an improvement over the~~ third quarter, revenue per pound is flat and material margin per pound is down by $0.01. For the first nine months of ~~2017 on a dollar basis, but slightly lower profit as a percent of sales, at eight percent versus prior year third quarter at 10 percent. Similar to last quarter,~~2019, operating income for the ~~primary difference in operating profit performance~~Specialty Chemicals Segment was $2.4 million compared to operating income of $3.3 million for the same period of 2018. The prior year third quarter is the relative product mix experience experienced with material margins approximately 245 bps lower than the prior year third quarter, as more production in 2018 represented products with full material cost absorbed, compared to higher percentageyear's first nine months included a one-time claim settlement gain of ~~tolled, no material cost products in 2017.~~$0.3 million.

Other Items

Unallocated corporate expenses for the third quarter of ~~2018~~2019 increased ~~$340,411,~~$0.5 million or 2225.0 percent to ~~$1,894,775 (two~~$2.4 million (3.2 percent of sales) compared to ~~$1,554,364 (three~~$1.9 million (2.4 percent of sales) for the ~~third quarter of 2017.~~same period in the prior year comparative period. The third quarter increase resulted primarily from higher ~~incentive bonus accruals ($201,036). Unallocated corporate expenses for~~stock compensation expense and professional fees. For the first nine months of ~~2018~~2019, unallocated corporate expenses increased ~~$904,652,~~$1.0 million or 1917.9 percent to ~~$5,617,113 (three~~$6.6 million (2.8 percent of sales) ~~compared to $4,712,461 for~~from $5.6 million (2.7 percent of sales) in the prior year comparative period. For the first nine months of ~~2017. The year-over-year~~2019, the increase to unallocated corporate expenses resulted primarily from higher ~~incentive bonus accruals ($1,546,685), offset by lower bad-debt expense ($206,896).~~professional fees and stock compensation expense.

Acquisition costs were ~~$396,426~~$0.1 million for the third quarter of 2019 (all in unallocated SG&A), resulting from costs associated with the January 1, 2019 American Stainless acquisition. This compares to $0.4 million in acquisition cost ($0.2 million in unallocated SG&A and $0.2 million in Metals Segment SG&A) during the third quarter of 2018 resulting from costs associated with the 2018 MUSA-Galvanized acquisition. For the first nine months of 2019 acquisition costs were $1.8 million ($~~215,755~~1.4 million recorded in Metals Segment Cost of Sales and ~~$180,671~~$0.4 million in unallocated SG&A)~~, and $1,130,676~~ compared to $1.1 million for the first nine months of 2018 ($~~259,788~~0.3 million recorded in Metals Segment Cost of Sales and ~~$870,888~~$0.8 million in unallocated SG&A) resulting from costs associated with the 2018 MUSA-Galvanized acquisition. This compares to $186,763 (mainly in Metals Segment Cost of Sales) during the third quarter of 2017 and $1,188,171 during the first nine months of 2017 ($782,397 in unallocated SG&A and $406,000 in Metals Segment Cost of Sales), related to the 2017 MUSA-Stainless acquisition.

Interest expense was ~~$585,888~~$0.9 million and ~~$279,598~~$0.6 million for the third quarters of 2019 and 2018, respectively. Interest expense was $3.0 million and ~~2017, respectively, and $1,303,724 and $715,131~~$1.3 million for the first nine months of ~~2018~~2019 and ~~2017,~~2018, respectively. The increase was ~~primarily~~ related to higher average debt outstanding in the third quarter and the first nine months of ~~2018~~2019, as additional borrowings were ~~required~~primarily related to acquisitions and to support increased working capital ~~requirements associated with increased business activity.~~

During the third quarter of 2018, the Company decreased the earn-out liabilities resulting from the 2017 MUSA-Stainless and 2018 MUSA-Galvanized acquisitions, by $269,083. The net change represents a decline in the fair value of the liabilities due to forecast changes in pricing and/or volume of small diameter stainless-steel pipe and tube (outside diameter of ten inches or less) and galvanized pipe and tube for the remainder of the measurement periods, which end in February, 2021 (stainless products) and June, 2022 (galvanized products).requirements.

The effective tax rate was 2210.6 percent and 23.6 percent for the ~~three-month~~three and nine-month periods ended September 30, 2019. The effective tax rate for the three month period ended September 30, 2019 was lower than the statutory rate of 21.0 percent due to state taxes, net of the federal benefit, and discrete tax benefits on our stock compensation plan. The Company’s effective tax rate was approximately equal to the U.S. statutory rate of 21.0 percent for the nine months ended September 30, 2019

The effective tax rate was 22.0 percent for the three and nine-month periods ended September 30, 2018, respectively. The Company’s effective tax rate ~~is materially equivalent compared~~was approximately equal to the U.S. statutory rate of 2121.0 percent. The effective tax rate was 30 percent and 28 percent for the three and nine-month periods ended September 30, 2017. The 2017 effective tax rate was lower than the 34 percent federal statutory rate primarily due to state tax expense, net of the federal benefit and other permanent differences, including the manufacturer's exemption.

The Company's cash balance ~~increased $1,857,654~~decreased $1.9 million to ~~$1,872,360~~$0.3 million as of September 30, ~~2018~~2019 compared to ~~$14,706~~$2.2 million at December 31, ~~2017.~~2018. Fluctuations affecting cash flows during the ~~period~~nine months ended September 30, 2019 were comprised of the following:

a.a)

Net inventories ~~increased $43,904,470~~decreased $8.0 million at September 30, ~~2018 as~~2019 when compared to December 31, ~~2017. The increase, primarily related to the Metals Segment, included higher levels of pounds~~2018, mainly due to efforts to balance inventory with projected business ~~activity (40%~~levels. Excluding the impact of acquired inventory as a result of the ~~total or $17.4 million),~~American Stainless acquisition, the ~~inventories related to~~Company generated $14.0 million of operating cash flows from the completed MUSA- Galvanized acquisition on July 1, 2018 ($4.3 million), stainless steel surcharges ($5.6 million), higher special alloy content due to strong backlog ($4.1 million), seasonal replenishmentrelief of ~~seamless carbon steel pipe and tube~~ inventory ~~($8.4 million) and generally higher replacement costs~~ during the ~~first~~ nine months ~~of 2018.~~ended September 30, 2019. Inventory turns decreased slightly from ~~2.51~~1.81 turns at December 31, ~~2017,~~2018, calculated on a three-month average basis, to ~~2.43~~1.78 turns at September 30, 2019;


b)	Accounts payable increased $0.5 million as of September 30, 2019 as compared to December 31, 2018. Accounts payable days outstanding were approximately 32 days at September 30, 2019 compared to 37 days at December 31, 2018;

b.c)

~~Accounts payable~~Net accounts receivable increased ~~$22,439,256 as of~~$0.8 million at September 30, ~~2018~~2019 as compared to December 31, ~~2017. The majority~~2018, which primarily resulted from the addition of ASTI’s sales and receivables following the ~~increase is related~~January 1, 2019 acquisition, offset partially by a reduction in days outstanding of four days due to ~~increased levels of purchasing activity across all sectors of the business, including late third quarter receipts of inventory that were still unpaid on normal terms~~better collection experience at the end of the third quarter. ~~Accounts payable~~Days sales outstanding, calculated using a nine-month average basis, was 48 days outstanding ~~were approximately 44 days~~ at September 30, 2019 and for the year ended December 2018, ~~compared to 60 days at December 31, 2017;~~respectively;

c.d)

~~Net accounts receivable increased $20,851,000 at September 30, 2018 as compared~~On January 1, 2019, the Company paid $21.9 million to ~~December 31, 2017, which primarily resulted from a 49% increase in sales for~~complete the last two months of the third quarter 2018 compared to the last two months of the fourth quarter of 2017. Days sales outstanding, calculated using a three-month average basis, decreased from 51 days outstanding at the end of December 2017 to 49 days at the end of the third quarter 2018;American Stainless acquisition;


d.	~~On July 1, 2018, the Company paid $10,378,281 to complete the MUSA-Galvanized acquisition (refer to Note 9 for further details);~~


e.e)	The Company purchased ~~$4,970,470 in~~and sold equity securities during the nine-month period ended September 30, ~~2018;~~2019, which resulted in net cash proceeds of $0.5 million;


f.f)	Capital expenditures for the first nine months of ~~2018~~2019 were ~~$4,482,427;~~


g.	~~The Company paid out $1,813,229 during the first nine months of 2018 related to the earn-out liability from the 2017 MUSA-Stainless acquisition;~~$2.8 million; and


h.g)	The Company ~~issued and sold 44,378 treasury shares at a net price of $22.60 per share~~paid $2.9 million during the first nine months of 2019 related to the earn-out liabilities from the 2019 American Stainless, 2018 ~~in connection with the at-the-market ("ATM") program, raising total net proceeds of $1,002,712.~~MUSA-Galvanized and 2017 MUSA-Stainless acquisitions.

The Company ~~drew $36,869,006 against~~had $83.1 million of total borrowings outstanding with its ~~Line during the first nine months of 2018 and had $62,782,563 of borrowings outstanding~~lender as of September 30, ~~2018.~~2019. Since January 1, 2019 when the Company borrowed $22.7 million to fund the American Stainless acquisition ($20.0 million term loan and $2.7 million against the Company’s line of credit), the Company has reduced borrowings by $16.0 million ($2.7 million term loan and $13.3 million line of credit). Covenants under the Credit Agreement include maintaining a minimum fixed charge coverage ratio, maintaining a minimum tangible net worth, and a limitation on the Company’s maximum amount of capital expenditures per year, which is in line with currently projected needs. As of September 30, ~~2018,~~2019, the Company had ~~$16,730,672~~$16.9 million of remaining available capacity under its ~~Line.~~line of credit. The Company was in compliance with all covenants as of September 30, ~~2018.~~2019.

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

This quarterly report includes and incorporates by reference "forward-looking statements" within the meaning of the federal securities laws. All statements that are not historical facts are "forward-looking statements." The words "estimate," "project," "intend," "expect," "believe," "should," "anticipate," "hope," "optimistic," "plan," "outlook," "should," "could," "may" and similar expressions identify forward-looking statements. The forward-looking statements are subject to certain risks and uncertainties, including without limitation those identified below, which could cause actual results to differ materially from historical results or those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements. The following factors could cause actual results to differ materially from historical results or those anticipated: adverse economic conditions; the impact of competitive products and pricing; product demand and acceptance risks; raw material and other increased costs; raw materials availability; employee relations; ability to maintain workforce by hiring trained employees; labor efficiencies; customer delays or difficulties in the production of products; new fracking regulations; a prolonged decrease in oil and nickel prices; unforeseen delays in completing the integrations of acquisitions; risks associated with mergers, acquisitions, dispositions and other expansion activities; financial stability of our customers; environmental issues; 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-time in the Company's SEC filings. The Company assumes no obligation to update the information included in this report.

Item 3. Quantitative and Qualitative Disclosures about Market Risks

Information about the Company's exposure to market risk was disclosed in its Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, which was filed with the SEC on March ~~13, 2018.~~18, 2019. There have been no material quantitative or qualitative changes in market risk exposure since the date of that filing.

Item 4. Controls and Procedures

Based on the evaluation required by 17 C.F.R. Section 240.13a-15(b) or 240.15d-15(b) of the Company's disclosure controls and procedures (as defined in 17 C.F.R. Sections 240.13a-15(e) and 240.15d-15(e)), the Company's Chief Executive Officer and Chief Financial Officer concluded that that such controls and procedures, as of the end of the period covered by this quarterly report, were effective.

Changes in Internal Control over Financial Reporting

The Company's management, including the Chief Executive Officer and Chief Financial Officer, identified no change in the Company's internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's control over financial reporting.

PART II

Item 1. Legal Proceedings

It is not unusual for us and our subsidiaries to be involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of business involving, among other things, product liability, commercial, employment, workers' compensation, and environmental matters. We establish reserves in a manner that is consistent with accounting principles generally accepted in the U.S. for costs associated with such matters when a liability is probable and those costs are capable of being reasonably estimated. We cannot predict with any certainty the outcome of these unresolved legal actions or the range of possible loss or recovery. Based on current information, however, we believe that the eventual outcome of these unresolved legal actions, either individually or in the aggregate, will not have a material adverse effect on our financial position, results of operations or cash flows. There were no material changes in our Legal Proceedings, as discussed in Part I, Item 3 in the Company's Annual Report on Form 10-K for the period ending December 31, ~~2017.~~2018.

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, ~~2017.~~2018.

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

None.

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~~		Equity Distribution Agreement, dated August 9, 2018, by and between Synalloy Corporation and BB&T Capital Markets, a division of BB&T Securities, LLC, and Ladenburg Thalmann & Co. Inc. (filed as Exhibit 1.1 to the Current Report on Form 8-K filed August 10, 2018).
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
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
*		In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed "furnished" and not "filed."

SIGNATURES

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




	SYNALLOY CORPORATION
	(Registrant)


Date:	November ~~6, 2018~~12, 2019	By:	/s/ Craig C. Bram
			Craig C. Bram
			President and Chief Executive Officer
			(principal executive officer)

Date:	November ~~6, 2018~~12, 2019	By:	/s/ Dennis M. Loughran
			Dennis M. Loughran
			Senior Vice President and Chief Financial Officer
			(principal accounting officer)

2227



2017 MUSA-Stainless Earn-Out
Balance at December 31, 2017	$	4,833,850
Earn-out payments to MUSA	(1,685,519		)
Change in fair value during the period	2,412,122
Balance at September 30, 2018	$	5,560,453



2018 MUSA-Galvanized Earn-Out
Balance at December 31, 2017	$	—
Fair value of the earn-out liability associated with the MUSA-Galvanized acquisition	3,800,298
Earn-out payments to MUSA	(127,710		)
Change in fair value during the period	(219,548		)
Balance at September 30, 2018	$	3,453,040



Remainder of 2018	$	711,409
2019	2,859,865
2020	2,917,062
2021	2,975,404
2022	3,034,912
2023	3,095,610
Thereafter	45,337,403