Good afternoon everyone. And thank you for participating in today’s conference call to discuss Synalloy's Financial Results for the Fourth Quarter and Full Year ended December 31, 2020. Joining us today is our Synalloy's Interim President and CEO Chris Hutter. CFO, Sally Cunningham, and the Company’s outside Investor Relations Advisor Sean Mansouri. Following the remarks, we will open the call for your questions. Before we go further, I’d now like to turn the call over to Mr. Mansouri as he reads the Company’s Safe Harborstatements within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Seanplease go ahead.

Thank you. Good afternoon everyone. And thank you all for joining our conference call to discuss the Synalloy's fourth quarter and full year 2020 financial results. Before we continue, we would like to remind all participants that the discussion today may contain certain forward-looking statements pursuant to the Safe Harbor provisions of the Federal Securities Laws. These statements are based on information currently available to us and are subject to various risks and uncertainties that could cause actual results to differ materially. Synalloy advises all of those listening to this call to review the latest 10-Q and 10-K posted on its website for summary of these risks and uncertainties. Synalloy does not undertake the responsibility to update any forward-looking statements. Further, the discussion today may include non-GAAP measures. In accordance with regulation G, the company has reconciled these amounts back to the closest GAAP based measurement. The reconciliations can be found in the earnings press release issued earlier today and posted on the investor section of the company's website at synalloy.com. Please note that this call is available for replay via a webcast link that is also posted on the investors section of the company's website. With that, I'll turn the call over to the Interim President and CEO of Synalloy Chris Hutter, Chris.

Thank you, Sean. Good afternoon everyone and thank you for joining today's call. I hope you have all continued to stay safe and well and maybe the ongoing challenges of the COVID-19 pandemic. I wanted to start-off by saying that I'm incredibly honored to be leading the team here at Synalloy and have gained significant insight regarding our operations and capabilities since joining as the Interim President and CEO just a few months ago. I've been particularly impressed by the dedicated employees throughout the organization who have persevered through this unique time and continue to work hard every day to deliver high quality products and services to our customers. While this has certainly been a challenging year, the commitment of our hard-working team ensured that Synalloy not only survived 2020, but is now positioned to thrive for years to come. Looking at how we close out the year, our fourth quarter net sales came in as expected given our customers continue to be affected by the uncertainty resulting from the pandemic. However, this did not prevent us from making progress and the things within our control. We were able to take proactive steps to improve efficiency across our operations, production and purchasing along with implementing new cost containment measures. Though many of these initiatives are either just being identified or only in their early stages. I am pleased to report that our efforts resulted in improving profitability across our businesses, as we reported modest year-over-year and sequential increases in adjusted EBITDA and adjusted EBITDA margin for the fourth quarter. As just one example of our intent to remove costs that do not provide an economic payback, we have terminated our aircraft lease and our intent on selling that as soon as possible. We don't expect to realize meaningful upfront proceeds, but we will see savings on an ongoing basis. In a similar approach, through the tireless efforts of Sally in the finance department, we have already begun to forecast meaningful savings from our approach to outside service providers. These efforts will be ongoing and parallel to our work on the sales, resource planning, and manufacturing efficiency fronts. While I'm proud of the progress we've made thus far, this is truly just the beginning of our work to transform this business and drive long-term shareholder value. We have plenty of room for improvement, and I'm excited to be a part of this organization as we grow together. I'll dive deeper into each of our segments. But first, I'd like to turn the call over to our CFO Sally Cunningham, who will walk you through our fourth quarter financial results in more detail. Sally.

Thank you, Chris and good afternoon, everyone. In an effort to be more efficient with our conference calls, I will focus on key financial takeaways. Detailed information can be found in our earnings press release issued earlier today. With that, let's jump into our fourth quarter results. Net sales were down to $55.9 million, with the decline primarily driven by the curtailment of our Palmer operations earlier in the year, as well as lower pipe and tube shipments. As a reminder, we made the decision to curtail the Palmer Texas business in April 2020. As it no longer met our internal return threshold. We have since allocated any cash generated from that business, we’ve reduced our line of credit, which I will touch on in a moment. Gross margin during the quarter increased 80 basis points over the prior year to 11%. As a result of operational efficiencies and raw material price increases that we successfully passthrough to our customers. We also saw some impact of our ongoing operating cost reduction initiatives in [Q4] so that progress was hidden by some noise in our financial statements due to one-time mostly non-cash charges. In the fourth quarter, we continue to scrutinize the carrying values of the goodwill on our balance sheet, which resulted in an impairment of $5.5 million related to our Welded Pipe and Tube reporting unit. We also had $1.1 million of charges related to the severance payments to our former CEO. The result was a net loss in Q4 of $8.6 million or $0.94 per share compared to a net loss of $9 million or $0.10 per share for the fourth quarter of 2019. Adjusted EBITDA in Q4 increased 19% to $3 million and adjusted EBITDA margin also improved 170 basis points to 5.4% compared to the prior year period. The increases were primarily driven by improved operational execution and the benefit of cost containment measures. Lastly, looking at our liquidity position as of December 31, 2020. total debt was $61.4 million consisting of $49 million outstanding under our revolving credit facility and $12.3 million outstanding under the term loan, representing nearly 20% reduction in debt compared to December 31, 2019. Subsequent to the end of the quarter, we entered into an agreement for a new revolving credit facility with BMO Harris Bank on January 15, 2021. A new agreement provides us with a full year revolving credit facility that includes up to $150 million of borrowing capacity. As a result, we have $30.9 million of available borrowing capacity under the new facilities as of January 31, 2021, and are not currently subject to any financial covenants. For further details, please see our press release and corresponding 8-K filings disseminated and filed on January 19, 2021. I'll now turn it back over to Chris.

Thanks, Sally. As I mentioned earlier, since taking the helm as Interim President and CEO just a few months ago, we have already begun making strides in improving operational efficiency and effectiveness across the organization. All is still too early in the process to introduce a complete go forward strategy, I would like to share what we've been doing to put together a strategic plan that we believe will significantly increase shareholder value and maximize the potential of our business. The Management Team and the Board of Directors have been looking at our businesses with fresh eyes, analyzing our strengths as well as our weaknesses and the areas that we can improve upon. I've always believed that before we can begin reengineering our processes, we need to invest in our employees and foster a culture of accountability and transparency across our organization. During my visits to our facilities, I've heard some great ideas from our team about how we can continue to do better for our customers, while creating a culture that our employees are proud to give their best to. We have already begun taking their feedback into account and combining it with some operational best practices around scheduling, procurement and resource planning with a specific aim of improving throughput and asset efficiency. Further, we are working toward capitalizing on the diverse experiences and relationships of our employees across our different businesses. As we see many opportunities to work together to better service our customers and leverage our intern individual and internal strengths for the broader organization. My hope is that we can build on some of our early wins to create a renewed sense of alignment throughout the organization, and have us functioning as one unified team. During this period, it has become clear to me that there…

Thank you, sir. [Operator Instructions]. Please stand-by while we compile the Q&A roster. And our first question will come from David Secrid. Your line is open.

Hey, congratulations on the new credit facility.

Thanks, David. It's nice to see.

So just a question here. I noticed with the change lenders, how much are you saving each month on interest expense with the new flexibility that you have?

Sally, that may be a question for you.

And that's a great question. I don't have that exact number off the top of my hand right here. But I can tell you that our interest rate is lower. So there is significant savings going forward. I just don't have the exact numbers in front of me.

Okay. Yes, no problem. Thank you. Another question. So I noticed in the credit agreement, it mentioned that we -- that you could make acquisitions up to $25 million, not to exceed $100 million over four years. So I guess, Chris, in conjunction with your comments, we could expect at some point, some inorganic acquisitions that kind of what I read into.

Yes, we want to obviously plan for the future and provide the goal of the new credit facility was to provide Synalloy with as much flexibility as possible for our future growth. And they were willing to accommodate an already pre-negotiated bucket for acquisition opportunities versus having to go through and re-amend the loan agreement and incur amendment fees. We just wanted to say, hey, give us some flexibility to accomplish our mission. Should something be attractive to the board for a growth opportunity, so yes.

That makes sense. Good. Now, I noticed, headquarters is in Richmond, 275 miles you’re your manufacturing facility. Any plans to consolidate corporate infrastructure? That seems like a -- maybe a good place to start. Is that something that's been considered?

Yes, that's a great question. There's a very large, dedicated team at Richmond that Sally's built that is functioning extremely well. Obviously, with the pandemic the world has moved to somewhat of a remote structure and the functions of our finance, accounting, HR, IT team are centralized in Richmond and operating efficiently at the moment.

Got it. Okay. Well that make sense. Full year 2020 EBITDA was $9.2 million. So in a better business cycle are you comfortable giving us like a reasonable goal as to what we could expect in improving business cycle?

Yes, it's a great question. Obviously, with -- there's improving general economy with the pandemic, I would say winding down. And you have on our metal segment, a tailwind in overall commodity pricing increasing. So I would -- without giving a specific number. I would say the conditions are right for improved performance in ‘21.

Good, thank you. I don't want to take all the all the questions here, but I do have a few more. Can I give you some more questions?

Go ahead, David.

Okay. So I noticed CRI Tolling they're at 50% capacity, if I remember correctly in previous calls. So is there a renewed focus to like pursue toll manufacturing so that we have more of our capacity being used and that fixed expense being taken advantage off?

That's a timely question for me, since I'm sitting here at manufacturers actually right now, and really looking at our product mix for what we are producing and whether it's a reaction or a blend. And what we can do with CRI, it’s definitely, there are significant opportunities to have our two chemicals businesses work more streamlined together. And that's why I'm here on the floor, just really looking under the covers on what we can do to optimize our asset efficiency and throughput and utilization. We do have a tremendous asset base here that can create a lot of great products. And the R&D team at both facilities are dedicated to coming up with products and solutions for our customers that we just have to go out and sell it and are in the business. And I'm fully confident we'll be able to do that.

Got it. Thank you. Why don't competitors to Synalloy Olympic steel mentioned, I don't know, a week or two ago that they were having some shortage in trucking. And there's some challenges connected with that. Has Synalloy been able to -- has there been any optimization in like, freight logistics with UPG been able to use some of their trucking. Is there any -- I mean, have you run into that same problem that Olympic steel mentioned or are we -- how are you doing in that area?

I would say I mean, I guess that's a couple of questions there.

Yes, it is.

Though we not entered into any agreement with UPG on any short service, throughput or efficiency to-date. So with respect to Synalloy’s logistic needs and I don't know what Mr. Siegel said at Olympic, but there is a supply constrained with flatbed trucking, which is our primary use on our metal segment, chemical segment, it's more our -- for tolling or freighting for third-party customer freight. So they're really negotiating the freights in and outbound of our plants. But we haven't seen that that has not been the constraint of our business for us.

Okay. All right. With all the emphasis towards green energy, does Synalloy have any product that they could sell into that -- those initiatives?

Yes, it's funny, I got a very another timely question. It's almost you were sitting here with me, it feels like it was our surfactant business is a product that goes into a significant amount of green chemicals. And I was talking to one of our lab technicians, there's a large backlog growing of surfactants. And the application of surfactants, whether it be antimicrobial for clothing, antimicrobial for surface applications, whether it be glass cleaners, table cleaners, obviously sanitizer was a large pickup and tailwind in the business last year. So absolutely the world has a heavy focus on that.

Got it. Maybe just one or two questions more. So I noticed in the 10-K, as of December 31 526 employees, with your cost containment measures? Would that affect Synalloy’s ability to execute in an improving business cycle?

No, absolutely not. I would argue that you've again, as I mentioned earlier, we're not going to cost cut our way to prosperity, we are going to invest in the right people processes. And that is what our primary focus is finding the eliminating the operational inefficiencies and the costs associated with that. And redeploying that into productive uses to increase our margin profile and uncover additional business opportunities.

That makes sense. And then just one other thing, nickel is up 13% in the fourth quarter. It went even higher through March. I know it's corrected some recently, but I think that probably helps with inventory profits, I would think in first quarter, but how have you -- had a team can figured out a hedging strategy so that we're not -- we don't have inventory losses quarter-after-quarter-after-quarter.

Yes, that's an interesting question. Again, I want to level set on nickel. Nickel is a component in our stainless products. But when you look at the percent of nickel within the products, it's not a significant driver of inventory increases or decreases. The global commodity market and you look at hot roller coal real steel it is a large driver of that. And the additional thing that we have and can passthrough it does become a timing issue is the surcharges that we had to passthrough from the middle and we passthrough to our customers or not. So at the end of the day, regardless of nickel prices, if you look back in history, nickel was 50,000 a ton and 16ish 1,000 a ton today. Our job is to have the right inventory on the floor, in the production queue and out to our customers on time. So we can minimize regardless of the market condition, we can minimize the effects of global commodity prices on our income statement balance sheet.

That makes sense. Well, that's all I have. Thank you. Good hearing your voice and look forward to months ahead.

Thanks, David. Have a great night.

You too.

And, David, just to circle back on your one of your earlier questions that the interest savings per month is approximately $100,000 per month.

Okay, excellent. Well, thank you.

And your next question will come from Mike Hughes with SGF Capital. Please proceed.

Thanks for taking my questions. First one the prior management teams said during a good cycle, EBITDA could approach I think they said $40 million. And I assume Palmer accounted for maybe $5 million of that. So does this $35 million does that still seem like a right number to you in a good environment for EBITDA?

Hey, Mike, thanks for the question. Obviously, we want to maximize our EBITDA in any cycle. And in order to give you a specific number and I can't speak to the prior management and how they calculated that number. But we are positioned to significantly improve our EBITDA with the business improvements and operational efficiencies and working capital management that we are implementing. I can -- I can't give you the exact number at this point, but I can tell you first strategic division strategic -- for strategic throughput, it should improve.

Okay. Do you have any forward-looking metrics like backlog that maybe bottomed out that you'd be willing to provide or have they maybe they have not bottomed out at this point?

I can -- regarding our fourth quarter backlog, there is a -- what I would define a significant improvement in backlog. But at the end of the day, in any business, it's what product -- what are you actually delivering to customers that count? So the product delivered to customers what generates revenue not backlog, yes.

But -- are you referring sequentially or year-over-year?

From third quarter to fourth quarter.

Okay. And I assume you mean on a volume -- on a unit basis not in dollar terms, because you just purely would have benefited from higher nickel and higher steel in the fourth quarter. Is that correct?

Correct. And I think Sally you may be able to answer the sequential problem, the sequential question with Q4 of ‘19 to Q4 of ‘20. Or we may have to ask Mike to get you that answer.

Yes, I have to get back to that answer. But we can certainly do that.

Okay, that's fine. One of your private competitors has, I think taken three base metal price increases over the last few months have you done the same?

Yes. We're looking at pricing giving. I'm sure you're aware of what's going on with ATI and the [indiscernible] group and the two primary domestic producers [indiscernible]. We're looking at pricing on a daily basis for passing through pricing as fast as we're seeing it come through us.

Okay, okay.

And so we have a [indiscernible] pricing daily will passthrough daily.

Okay. And then a lot of manufacturers are having a difficult time attracting and retaining employees. So what's your employee retention look like? And is there any unusual wage inflation that we should think about for this coming year?

We're not seeing significant wage inflation. I would say our -- the ability to hire and retain talented employees is a challenge everywhere [indiscernible] difficult depending on the employer base around a plant and we are having some issues finding and keeping and retaining talent, where it's a highly competitive market. In terms of wage inflation, we don't see with standard cost of living situation that we're seeing right now.

Okay and then just two more questions for you. I think in the 10-K it's stated that you reauthorize the buyback on February 17. So what's your ability to buy back stock at this point?

If you look, we do have some restrictions in our loan agreement in terms of the amount we can buyback and that is obviously subject to our availability within our revolving credit agreement. So there is capacity should the board decide to pursue some buybacks.

Is it like a restricted payments basket? Is that how it works?

Yes, that would have to give you the exact amount in terms of what the number is.

Okay. And then my last question is kind of a follow up to one of the prior questions. I think in the 10-K it indicates that just the fluctuations in nickel last year, resulted in unfavorable operating impact to $5.3 million and in the prior year was $6.4 million. There's a big move up in nickel in the fourth quarter. And then as you pointed out an even larger move up in steel. So does that kind of reverse itself in the first quarter, I remember, over the last few years, when nickel [indiscernible] or steel [indiscernible] you have that big inventory profits was that -- is that happen in the first quarter as the accounting methodology changed?

There's typically a tail on it in terms of -- either a price increase or price decrease and obviously steel or nickel. So as we're cycling through that and if you have inventory on the floor that you're selling, you're selling that into a higher market, given in general commodity pricing. So you typically see that anywhere from three to six month lag in terms of the reflection on the income statement.

Okay, so you should be sitting on a better first half, hopefully, as long as demand holds up?

The demand is very robust right now.

And what about on the because we've been focusing on the mental side, can you -- what about just demand on the chemical side?

It's a similar, it's the amount of opportunities we're seeing from new customers and existing customers. Think of the chemicals business [indiscernible] reduction in volume, when all of our customers increased their internal capacity because of their overall reduction in demand. Now, as demand is increasing, they're limited to their production capacity. That's when manufacturers and CRI start to see a tremendous amount of opportunity, because we have the -- we have capacity to help solve our customers’ needs.

Okay, good. One last one for you. Just do you have a CapEx number for 2021?

We do have an approved CapEx number. Sally, you may have that in front of you.

Yes, we have -- the approved CapEx number is $4 million for 2021.

Okay, thank you. I appreciate it.

Thanks, Mike.

And your next question will come from Charles Gold with Truist. Your line is open.

Thank you. Chris, just one question. And hello, Sally, I hope you're doing well. Thank you for stepping into the job and keeping the sprit [indiscernible] on the uptick and getting the company ready to take advantage of the opportunities that will come with the stimulus and hopefully an infrastructure bill. My question involves your title as Interim before your title, and what is the game plan and I know you can hit the exact date but what is the Board's goal in having a permanent CEO?

Thanks, Charles and hope you're doing well appreciate the question. As you know, that's not up to me. It's up to the Board. What I can tell you is I'm having an absolute blast and loving every day and working my tail-off here and really love the people at Synalloy. As we continue to make progress and obviously, I'm a major shareholder. I'll be actively involved in working with the Board to assess what makes the most sense for long-term value creation. So there hasn't been immediate direction given yet.

So that -- so are you saying there's a possibility that you could become the permanent CEO, if the Board ask you?

If the Board likes me enough, yes. And I'm loving it. So it's obviously I have to perform.

Thank you.

Thanks, Charles.

You’re welcome.

[Operator Instructions] And your next question comes from the line of Charles Neuhauser. With Mainwall Investment. Please proceed.

Hi, your -- there was a lot of time and money spent on the proxy contest. And I assume that you must have had to provide fairly detailed projections to the bank to get your new credit line established. You've said that you've come into the job and you feel that you see things are better than you thought maybe six, nine months ago, I can't remember exactly what you said. But that was the gist of your comment. And so I don't understand why you're having difficulty quantifying the margin potential earning power, upside, whatever that you're looking forward to make all this time and effort worthwhile. I'm sure a $9 stock price is not what you would consider desirable. And so, the question becomes when are you going to feel comfortable putting some numbers out in the public realm to get people to come to the same conclusions that the company's stock is undervalued in a desirable investment?

Yes, Charles, that's a great question. And I've been a leader that you have got to understand and thoroughly investigate and confirm and validate what we believe. And if you've read, the presentations that were released last year, I firmly stand-by those numbers. We've obviously have gateway involved here is our new IR firm. We are planning roadshows getting in more investors excited about the business and but at the end of the day, we need to build credibility. And I want to make sure that we can deliver the results that we say, and once we say I need absolute confidence that that I can deliver on those numbers. And I don't think we're talking years from now for giving specific numbers and guidance. I think we're talking quarters from now, I’m so fully committed to getting us to a point where we can provide more future clarity on EBITDA guidance for all of our investors, including myself as a major shareholder.

Okay, very good. Thank you.

Thanks, Charles.

.:

Hello, Chris. And welcome to Cleveland, Tennessee. As you may know, I was the former owner of manufacturers chemicals. And I served as CEO from 2006 until 2011 for Synalloy. I think the things that you're doing are a breath of fresh air. And I appreciate you are being where you are and the new board. One of the comments I wanted to make regarding the chemical business, which, as you know has been a solid performer, since we sold the business to Synalloy in 1997. We have three types of business [coal], chemical intermediates to other chemical companies, and then to the end users and the profitability gets better as you go down the line to finally the end users. So my question is, given the current situation regarding the salesforce at manufacturers, chemicals, and CRI are there plans to intensify the salesforce by addition of some good folks. It's a very sales intensive business as you're finding out, compared to the steel business. We had many, many competitors. And so it's very important that there's a strong sales effort?

Yes, Ronald that's obviously a great question. And this is unbelievable business with -- I've probably talked to 15 individuals today that were employed by you, when you own the business and the longevity of the workforce here the commitment of the workforce here, and the passion they have. I mean, this is a team and really everywhere I've seen at Synalloy, they have the will to win. And it's extremely exciting to be around a group of energetic people like that. But I think you're absolutely right. We, we have to have a truly reinvigorated sales effort within the business, the sales cycle is completely different here. There is a lot of that -- a lot of process that goes into it from customer acceptance to having their chemists approved product. And there's a long lead time. So there is going to be a renewed effort in customer -- new customer growth, customer retention and overall customer service that we're going to put into the chemicals business.

That's wonderful news.

I loved to meet you one day whenever next time I'm down here, I'd love to meet you.

Okay, that sounds like a good plan. I'd love to meet you, too. I've had lots of conversations with Ben over the last few months, but look forward to meeting you as well.

Thanks, Ronald. Same here.

Excuse me, speakers. I'm not showing any further questions. At this time, this concludes our question and answer session. I would now like to turn the call back over to Mr. Hutter for closing remarks.

Great, thank you. We'd like to thank everyone for listening to today's call and we look forward to speaking with you again when we report our first quarter 2021 results in May. Now I'm going to get back to work. Everyone have a good night.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.