Synalloy Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Sinaloa Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to Mr. Craig Bram, President and CEO. Thank you. Please go ahead, sir.

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

Good morning. As is usual practice, I will present the financial results using three different methods. Gap-based EPS, adjusted net income, a non-gap measure as defined in the earnings release, and adjusted EBITDA, a non-gap measure also defined in the earnings release. Starting with gap-based EPS, for the third quarter, the company reported a net loss of $10.5 million, or $1.16 diluted loss per share as compared with a net loss of $1 million, or 11 cents diluted loss per share for the third quarter of 2019. The primary factors contributing to the current quarter losses were a non-cash goodwill impairment in our metals segment of $10.7 million, operating losses at Palmer totaling $0.9 million, and inventory price change losses, which on a pre-tax basis totaled $1.6 million. For the nine-month period, the company reported a net loss of $18.7 million, or $2.06 diluted loss per share, as compared with a net loss of $2.1 million, or $0.24 diluted loss per share, for the first nine months of 2019. The primary factors contributing to the current year-to-date losses were a non-cash goodwill impairment in our metals segment of $10.7 million, a non-cash impairment charge at Palmer of $6.1 million, operating losses at Palmer totaling $3.6 million, proxy contest costs of $3.1 million, and inventory price change losses, which on a pre-tax basis totaled $5.5 million. Third quarter non-GAAP adjusted net loss was $1 million, or 11 cents diluted loss per share, compared with an adjusted net loss of $0.7 million, or 8 cents diluted loss per share for the third quarter of 2019. For the nine-month period, the adjusted net loss was $2.9 million, or 31 cents diluted loss per share, compared with the adjusted net loss of $0.4 million, or 4 cents diluted loss per share for the first nine months of 2019. Third quarter non-GAAP adjusted EBITDA was $1.6 million, down from $2.8 million in the third quarter of 2019. For the first nine months of 2020, adjusted EBITDA was $6.2 million, down from $10.9 million for the first nine months of 2019. Both the adjusted net income and the adjusted EBITDA metrics for the first nine months of 2020 include add-backs of the non-cash goodwill impairment of $10.7 million in our metals segment, the $6.1 million in non-cash asset impairment for the Palmer operation, and $3.1 million in costs associated with the company's proxy contest. As pointed out in the earnings release, Operating losses at Palmer totaled $0.9 million and $3.6 million for the third quarter and first nine months of 2020, respectively. Additionally, results were negatively impacted by the inventory price change losses, which on a pre-tax basis totaled $1.6 million and $5.5 million for the third quarter and first nine months of 2020, respectively. Net debt at the end of the third quarter totaled approximately $71.3 million down from $77 million at the end of the second quarter. I will now turn the call back over to Craig.