This report contains forward-looking statements, which are subject to inherent uncertainties. These uncertainties include, but are not limited to, variations in weather, changes in the regulatory environment, customer preferences, general economic conditions, increased competition, the outcome of outstanding litigation, and future developments affecting environmental matters. All of these are difficult to predict, and many are beyond the ability of the Company to control.

Certain statements in this Quarterly Report on Form 10-Q that are not historical facts, but rather reflect the Company's current expectations concerning future results and events, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believes", "expects", "intends", "plans", "anticipates", "hopes", "likely", "will", and similar expressions identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from future results, performance or achievements expressed or implied by such forward-looking statements.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's view only as of the date of this Form 10-Q. The Company undertakes no obligation to update the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, conditions or circumstances.





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                                    OVERVIEW


The Company is a leading manufacturer of flexible metal hose, and is currently engaged in a number of different markets, including construction, manufacturing, transportation, petrochemical, pharmaceutical and other industries.

The Company's business is managed as a single operating segment that consists of the manufacture and sale of flexible metal hose, fittings and accessories. The Company's products are concentrated in residential and commercial construction, and general industrial markets, with a comprehensive portfolio of intellectual property and patents issued in various countries around the world. The Company's primary product, flexible gas piping, is used for gas piping within residential and commercial buildings. Through its flexibility and ease of use, the Company's TracPipe® and TracPipe® CounterStrike® flexible gas piping, along with its fittings distributed under the trademarks AutoSnap® and AutoFlare®, allows users to substantially cut the time required to install gas piping, as compared to traditional methods. The Company's newest product line MediTrac® corrugated medical tubing is used for piping medical gases (oxygen, nitrogen, nitrous oxide, carbon dioxide, and medical vacuum) in health care facilities. Building on the recognized strengths and strategies employed in the flexible gas piping market, MediTrac® can be used in place of rigid copper pipe, and due to its long continuous lengths and flexibility, it can be installed approximately five times faster than rigid copper pipe, saving on installation labor and construction schedules. The Company's products are manufactured at its Exton, Pennsylvania and Houston, Texas facilities in the U.S., and in Banbury, Oxfordshire in the U.K. A majority of the Company's sales across all industries are generated through independent outside sales organizations such as sales representatives, wholesalers and distributors, or a combination of both. The Company has a broad distribution network in North America and to a lesser extent in other global markets.





                         CHANGES IN FINANCIAL CONDITION



           For the period ended March 31, 2021 vs. December 31, 2020

Accrued Compensation was $2,007,000 at March 31, 2021, compared to $5,429,000 at December 31, 2020, decreasing $3,422,000 (63.0%). A significant portion of the liability that existed at the previous year end related to incentive compensation earned in 2020. As is customary, the liability was then paid during the first quarter of the following year, or 2021, thus diminishing the balance. The liability now represents amounts earned during the current year.

Taxes Payable were $2,726,000 at March 31, 2021, compared to $979,000 at December 31, 2020, increasing $1,747,000 (178.4%). The estimated tax payments relative to the fourth quarter of 2020 and paid on December 15, 2020, were based upon annualized profits before tax for the first three quarters of the year. The actual profits before tax for the final quarter of 2020 were much stronger than estimated. The overage was not due to be paid until April 15, 2021, and thus was outstanding at both December 31, 2020 and at March 31, 2021. Additionally, the Company's profits before taxes for the first quarter of 2021 were also strong, and also not due to be paid until April 15, 2021. Thus the taxes payable at March 31, 2021 were higher than at December 31, 2020.





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                             RESULTS OF OPERATIONS



              Three-months ended March 31, 2021 vs. March 31, 2020

The Company reported comparative results from operations for the three-month periods ended March 31, 2021 and 2020 as follows:





                           Three-months ended March 31,
                                  (in thousands)
                     2021        2021         2020        2020
                    ($000)         %         ($000)         %
Net Sales          $ 30,863       100.0 %   $ 25,266       100.0 %
Gross Profit       $ 19,559        63.4 %   $ 15,769        62.4 %
Operating Profit   $  8,319        27.0 %   $  5,845        23.1 %



Net Sales. The Company's 2021 first quarter sales of $30,863,000 increased $5,597,000 or 22.2% compared to the first quarter of 2020, which generated sales of $25,266,000. The increase in sales resulted mostly from an increase in unit volume, and to a lesser extent by pricing actions which the Company took to offset material cost pressure and to protect margins. Sales during the first quarter of 2020 were partially impeded by the COVID-19 pandemic.

Gross Profit. The Company's gross profit margins were 63.4% and 62.4% for the three-months ended March 31, 2021 and 2020, respectively.

Selling Expenses. Selling expenses consist primarily of employee salaries and associated overhead costs, commissions, and the cost of marketing programs such as advertising, trade shows and related communication costs, and freight. Selling expense was $4,821,000 and $4,551,000 for the three-months ended March 31, 2021 and 2020, respectively, representing an increase of $270,000 or 5.9%. The increases mostly related to freight and commissions, which are variable costs and thus increased in relation to sales volume. Other less significant increases were noted in staffing, as resources were added, and also advertising. Inversely, travel, tradeshow and sales meeting expenses all decreased primarily due to restrictions imposed by the COVID-19 pandemic. Selling expenses decreased as a percent of net sales compared to last year, being 15.6% for the three-months ended March 31, 2021, and 18.0% for the three-months ended March 31, 2020.

General and Administrative Expenses. General and administrative expenses consist primarily of employee salaries, benefits for administrative, executive and finance personnel, legal and accounting, and corporate general and administrative services. General and administrative expenses were $5,418,000 and $4,253,000 for the three-months ended March 31, 2021 and 2020, respectively, thus increasing by $1,165,000 or 27.4%. Incentive compensation increased $1,394,000 over last year. This was primarily due to an $908,000 increase in the phantom stock portion of incentive compensation expense between years, driven by the change in the Company's stock price between periods, as discussed in detail in Note 6, Stock Based Plans, to the condensed consolidated financial statements included in this report. Director fees were also higher due to a revised arrangement resulting from an independent study performed to align board compensation with comparable peers. A reduction in expense was however noted in legal and product liability related defense costs. As a percentage of sales, general and administrative expenses increased to 17.6% for the three months ended March 31, 2021 from 16.8% for the three-months ended March 31, 2020.





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Engineering Expense. Engineering expenses consist of development expenses associated with the development of new products and enhancements to existing products, and manufacturing engineering costs. Engineering expenses were $1,001,000 and $1,120,000 for the three-months ended March 31, 2021 and 2020, respectively, decreasing by $119,000 or 10.6%, partially associated with a reduction in travel. Engineering expenses decreased as a percentage of sales, being 3.2% for the three-months ended March 31, 2021, and 4.4% for the same period in 2020.

Operating Profits. Reflecting all of the factors mentioned above, operating profits were $8,319,000 and $5,845,000 for the quarters ending March 31, 2021 and 2020, respectively, increasing by $2,474,000 or 42.3%.

Interest Income (Expense)-Net. Interest income is recorded on cash investments, and interest expense is recorded at times when the Company has debt amounts outstanding on its line of credit. The Company recorded $9,000 and $45,000 of interest income during the first quarters of 2021 and 2020, respectively.

Other Income (Expense)-Net. Other Income (Expense)-net primarily consists of foreign currency exchange gains (losses) on transactions settled in currencies other than the Company's local currency, typically related to the Company's foreign U.K. subsidiaries. There was income of $18,000 recorded during the first quarter 2021, but expense of $108,000 during the first quarter of 2020. The British Pound had weakened during March 2020 as the pandemic began to impact the economy.

Income Tax Expense. Income Tax Expense was $2,049,000 for the first three months of 2021, compared to $1,416,000 for the same period in 2020, increasing $633,000 or 44.7%, mostly the result of the increase in income before taxes.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

Financial Reporting Release No. 60, released by the Securities and Exchange Commission, requires all companies to include a discussion of critical accounting policies or methods and use of estimates used in the preparation of financial statements. Note 2 of the Notes to the condensed consolidated financial statements includes a summary of the significant accounting policies and methods used in the preparation of our condensed consolidated financial statements. The Company considers all of its significant accounting policies and estimates to be critical.





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The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Management develops, and changes periodically, these estimates and assumptions based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual amounts could differ significantly from these estimates.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company's primary cash needs have been related to working capital items, which the Company has largely funded through cash generated from operations.

As of March 31, 2021, the Company had a cash balance of $22,674,000. Additionally, the Company has a $15,000,000 line of credit available, as discussed in detail in Note 4, which had no borrowings outstanding upon it at March 31, 2021. At December 31, 2020, the Company had a cash balance of $23,633,000, with no borrowings against the line of credit.





Operating Activities


Cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities, such as those included in working capital.

For the three months ended March 31, 2021, the Company's operating activities provided cash of $2,207,000, compared to the three months ended March 31, 2020 which provided cash of $751,000, a difference of $1,456,000. For details of the operating cash flows refer to the unaudited condensed consolidated statements of cash flows in Part I - Financial Information on page seven.

As a general trend, the Company tends to deplete or generate lower amounts of cash early in the year, as significant payments are typically made for accrued promotional incentives, incentive compensation, and taxes. Cash has then historically shown a tendency to be restored and accumulated during the latter portion of the year.





Investing Activities



Cash used in investing activities during the three months ended March 31, 2021 and 2020 was $362,000 and $145,000, respectively for capital expenditures.





Financing Activities


A dividend was declared in both December of 2020 and 2019, amounting to $2,826,000 each, with payment due and paid during January of the following year.





Liquidity


We believe our existing cash and cash equivalents, along with our borrowing capacity, will be sufficient to meet our anticipated cash needs for at least the next twelve months. Our future capital requirements will depend upon many factors including our rate of revenue growth, the timing and extent of any expansion efforts, the potential for investments in, or the acquisition of any complementary products, businesses or supplementary facilities for additional capacity, and the COVID-19 pandemic.





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CONTINGENT LIABILITIES AND GUARANTEES

See Note 5 to the Company's condensed consolidated financial statements.

OFF-BALANCE SHEET ARRANGEMENTS

None

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