Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Completed remediation projects to clean up all 14 SWMUs on the Spartanburg plant site at a cost of approximately $968,000.
• Completed and certified closure of the surface impoundment at the former Augusta, GA plant site during 2002.
• Removed contaminated soil and backfilled with clean material at the former Augusta, GA plant site in 2011.

Social Achievements

• Relations with employees considered satisfactory.
• Completed acquisition of Palmer of Texas, adding approximately 130 employees.

Governance Achievements

• Board of Directors adopted a Code of Ethics.
• Established a separately designated standing Audit Committee.

Climate Goals & Targets

Environmental Challenges

• Cyclical nature of customer industries causing demand fluctuations.
• Intense domestic competition and excess manufacturing capacity leading to price reductions.
• Increased imports of products at significantly reduced prices.
• Volatility in raw material costs.
• Dependence on a small number of suppliers for raw materials.
• Significant portion of sales dependent on a limited number of customers.
• Sensitivity of operating results to energy and freight costs.
• Volatility in oil prices affecting Palmer's revenues.
• Fluctuations in nickel prices impacting Metals Segment sales.
• Lengthy sales cycle for Specialty Chemicals Segment.
• Significant portion of sales from competitive bidding.
• Exposure to environmental, health, and safety liabilities.
• Collective bargaining agreements with union employees.
• Restrictive covenants in credit facilities.
• Need for future financing.
• Exclusions and limitations in property and liability insurance coverages.
• Risks related to operational and product changes.
• Risks associated with acquisitions and dispositions.
• Potential loss of key management and technical personnel.
• Governmental reviews of hydraulic fracturing activities.
• Potential goodwill impairments.
• Inadequate allowance for doubtful accounts.
• Dependence on third parties for product distribution.
• High freight costs restricting Palmer's sales area.
• New regulations related to conflict minerals.
• Inability to completely protect intellectual property rights.
• Potential failures in internal controls over financial reporting.
• Cyber security risks and cyber incidents.

Mitigation Strategies

• Passing through surcharges to customers to mitigate rising raw material costs.
• Anticipating no difficulties in fulfilling raw material requirements due to readily available alternatives.
• Growing base stainless steel pipe sales to offset loss of Bechtel nuclear project revenues.
• Focusing on gaining production efficiencies and improving product mix at Palmer.
• Penetrating new markets in the Specialty Chemicals Segment.
• Improving bidding process for large projects.
• Strengthening IT support team and improving reporting software functionality.
• Implementing personnel reductions to improve labor efficiencies.
• Filing an antidumping petition to address foreign imports.
• Implementing price increases to address foreign imports.
• Maintaining various forms of insurance.
• Seeking specialty niches and acquiring complementary businesses.
• Entering into an employment agreement with the President and CEO.
• Addressing staffing levels, customer requirements, and outsourcing opportunities to complete backlog profitably and on schedule.
• Using net proceeds from stock offering to pay off outstanding line of credit balance.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Environmental
• Safety

Environmental Achievements

• Installed an energy-efficient furnace at BRISMET, minimizing natural gas usage.
• System improvements in pickling at BRISMET to maintain the proper chemical composition of the pickling acid.

Social Achievements

• Relations with employees are considered strong.
• Completed the acquisition of the stainless steel pipe and tube assets of Marcegaglia USA, Inc. (MUSA), enhancing business with additional capacity and technological advantages.

Governance Achievements

• Board of Directors adopted a Code of Ethics that applies to the Company's Chief Executive Officer, Chief Financial Officer and corporate and divisional controllers.

Climate Goals & Targets

Environmental Challenges

• Cyclical nature of industries in which customers operate causes demand for products to be cyclical, creating uncertainty regarding future profitability.
• Intense competition and excess manufacturing capacity in the commodity stainless steel industry resulted in reduced selling prices.
• Business is susceptible to the import of products from other countries, particularly steel products.
• Significant portion of overall sales is dependent upon a limited number of customers.
• Operating results are sensitive to the availability and cost of energy and freight.
• Oil prices are extremely volatile.
• Significant changes in nickel prices could have an impact on sales by the Metals Segment.
• Operations expose the company to the risk of environmental, health and safety liabilities and obligations.
• Production facilities are subject to hazards associated with the manufacture, handling, storage and transport of chemical materials and products.
• Certain employees in the Metals Segment are covered by collective bargaining agreements, and the failure to renew these agreements could result in labor disruptions and increased labor costs.
• Current capital structure includes indebtedness, which is secured by all or substantially all of assets and which contains restrictive covenants.
• May need new or additional financing in the future to expand business or refinance existing indebtedness.
• Existing property and liability insurance coverages contain exclusions and limitations on coverage.
• May not be able to make the operational and product changes necessary to continue to be an effective competitor.
• Strategy of using acquisitions and dispositions to position businesses may not always be successful.
• Loss of key members of management team, or difficulty attracting and retaining experienced technical personnel, could reduce competitiveness.
• Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing could result in delays or eliminate new wells from being started.
• Results of operations could be adversely affected by goodwill impairments.
• Results of operations could be adversely affected by intangible asset impairments.
• Allowance for doubtful accounts may not be adequate to cover actual losses.
• Depend on third parties to distribute certain products.
• Freight costs for products produced in Palmer operations restrict sales area for this facility.
• New regulations related to “conflict minerals” may force additional expenses.
• Inability to sufficiently protect intellectual property rights could adversely affect business.
• Internal controls over financial reporting could fail to prevent or detect misstatements.
• Cyber security risks and cyber incidents could adversely affect business and disrupt operations.
• Loss of key supplier authorizations, lack of product availability, or changes in supplier distribution programs could adversely affect sales and earnings.
• Purchasing incentives we earn from product suppliers can be impacted if we reduce our purchases in response to declining customer demand.

Mitigation Strategies

• Company is committed to a long-term strategy of reinvesting capital in current business segments, disposing of underperforming business segments, and completing acquisitions.
• Company began hedging its nickel exposure during 2016.
• Company maintains various forms of insurance.
• Company must continue to enhance existing products and develop new products.
• Company has historically utilized acquisitions and dispositions in an effort to strategically position businesses and improve ability to compete.
• Company has entered into employment agreements with key members of management team.
• Company performed the step zero qualitative test during the fourth quarter of 2016 which resulted in no goodwill impairment for the year ended December 31, 2016.
• Company maintains an allowance for doubtful accounts for estimated losses.
• Company uses third parties to distribute certain products.
• Company is working to mitigate risks related to conflict minerals.
• Company is working to improve its internal controls over financial reporting and disclosure controls.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Changes to laws and environmental issues, including climate change, are made or proposed with some frequency and some of the proposals, if adopted, might directly or indirectly result in a material reduction in the operating results of one or more of our operating units.
• Our operations entail the risk of violations of environmental laws and regulations.

Mitigation Strategies

• Liabilities are recorded when environmental assessments and/or cleanups are probable and the costs of these assessments and/or cleanups can be reasonably estimated.
• We have incurred, and expect to continue to incur, additional capital expenditures in addition to ordinary costs to comply with applicable environmental laws

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Social Achievements

• Implemented new health-related measures, including social distancing, restrictions on visitors to our facilities, limiting in-person meetings and other gatherings, limiting company travel, increasing cleanings of our facilities and providing personal protective equipment and disinfecting agents to employees to keep employees safe and maintain operations during the COVID-19 pandemic.
• Voluntary turnover rate in 2020 was approximately three percent. Average tenure of employees is approximately 10 years, driven by competitive total rewards package and development opportunities.

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic significantly impacted global economy, disrupted supply chains, lowered equity market valuations, created volatility in financial markets, and increased unemployment.
• Continued curtailment of operations at Palmer facility due to impact of COVID-19 on oil and gas industry.
• Technical defaults of debt covenants in second and third quarter of 2020.
• Significant competition in all areas of business.
• Allowance for credit losses may not be adequate to cover actual losses.
• Internal controls over financial reporting could fail to prevent or detect misstatements.
• Activist shareholder activities.

Mitigation Strategies

• Implemented new health-related measures to safeguard employee health during COVID-19 pandemic.
• Inventory rationalization efforts to enhance liquidity position during COVID-19 pandemic.
• Obtained waivers for compliance with debt covenants.
• Remediation efforts to address material weakness in internal control over financial reporting, including executive coaching, job description alignment, communication protocol reaffirmation, and implementation of a third-party ethics and compliance hotline.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Social Achievements

• The health and safety of our workforce is fundamental to the success of our business. We have a long-standing commitment to the safety and health of every employee that works in our facilities. We are working to eliminate all injuries and incidents and our employees are making a daily commitment to follow safe work practices, look out for the safety of co-workers and ensuring safe working conditions for all employees.
• We are an Equal Opportunity Employer and all qualified applicants for positions with the Company receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender, identity, national origin, disability, or veteran status. We strive to provide an equitable and inclusive environment for all our employees with representation across all levels of our workforce that reflects the diversity of the communities in which we live and work.

Climate Goals & Targets

Environmental Challenges

• Changes to laws and environmental issues, including climate change, are made or proposed with some frequency and some of the proposals, if adopted, might directly or indirectly result in a material reduction in the operating results of one or more of our operating units.
• Inflationary pressures have negatively impacted our revenue, operating margins and net income in 2023, including increased costs of labor, raw materials and freight.
• During the year, we also experienced reduced demand from inventory management measures being pursued by our customers driving reductions in volume.
• The ongoing factors driving volatility in global markets that could impact our business' earnings and cash flows include, but are not limited to, the misalignment of supply and demand for labor, energy, raw materials and other inputs, the inflation of (or unavailability of) raw material inputs and transportation and logistics services, currency fluctuations, rising interest rates and extreme weather, the purchasing of commodities and relative commodity prices.

Mitigation Strategies

• The Company continues efforts to offset these inflationary pressures and continues to take action to improve working capital and evaluate other opportunities to maintain and improve financial performance in the short and long term

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Proxy contest culminating at the June 30, 2020 annual meeting of shareholders.
• Resignation of the former Chief Financial Officer and transition to a new CFO.
• Devastating impact of the COVID-19 pandemic on the global oil and gas industry, leading to the suspension of manufacturing operations at Palmer of Texas Tanks, Inc. and requiring evaluation of Palmer’s prospects and potential asset disposition.
• Material non-cash charge to impair certain of Palmer’s assets and intangibles.
• Technical default of the Fixed Charge Coverage Ratio in its Credit Agreement with Truist Bank.
• Goodwill impairment analysis triggered in the Welded Pipe & Tube reporting unit.
• Independent law firm investigation into a complaint regarding accounting treatment of Palmer and other matters.

Mitigation Strategies

• Agreement in principle with Truist Bank to amend the definition of the Fixed Charge Coverage Ratio.
• Ongoing impairment analysis.
• Independent law firm investigation.

Supply Chain Management

Climate-Related Risks & Opportunities