7 .	Commitments and Contingencies

Portland Harbor Superfund

December

2000,

a section of the lower Willamette River known as the Portland Harbor Site was included on the National Priorities List at the request of the United States Environmental Protection Agency (the “EPA”). While the Company’s Portland, Oregon manufacturing facility does

not

border the Willamette River, an outfall from the facility’s stormwater system drains into a neighboring property’s privately owned stormwater system and slip. Since the listing of the site, the Company was notified by the EPA and the Oregon Department of Environmental Quality (“ODEQ”) of potential liability under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). In

2008,

the Company was asked to file information disclosure reports with the EPA (CERCLA

104

(e) information request). A remedial investigation and feasibility study of the Portland Harbor Site has been directed by a group of

potentially responsible parties known as the Lower Willamette Group under agreement with the EPA. The remedial investigation report was finalized in

February 2016.

The feasibility study was finalized in

June 2016

by the EPA, and identified multiple remedial alternatives. The EPA issued the Record of Decision in

January 2017

selecting the remedy for cleanup at the Portland Harbor Site, which it believes will cost approximately

billion and

years to complete. The Record of Decision did

not

determine who is responsible for the costs of cleanup or how the cleanup costs will be allocated among the potentially responsible parties.

2001,

groundwater containing elevated volatile organic compounds was identified in

one

localized area of leased property adjacent to the Portland facility furthest from the river. Assessment work was conducted in

2002

and

2003

to further characterize the groundwater. In

February 2005,

the Company entered into a Voluntary Agreement for Remedial Investigation and Source Control Measures (the “Voluntary Agreement”) with

the ODEQ. The Company performed remedial investigation work required under the Voluntary Agreement and in

2016

the EPA and the ODEQ requested additional sampling to be conducted. The Company provided a Final Supplemental Groundwater Sampling Work Plan in the

third

quarter of

2016,

and in

September 2016

the ODEQ approved work to proceed. The Company completed the groundwater sampling in the

third

quarter of

2017.

The results, which were communicated to the ODEQ and the EPA in

August 2017,

have been generally consistent with previous sampling and modeling work.

Concurrent with the activities of the EPA and

the ODEQ, the Portland Harbor Natural Resources Trustee Council (“Trustees”) sent some or all of the same parties, including the Company, a notice of intent to perform a Natural Resource Damage Assessment (“NRDA”) for the Portland Harbor Site to determine the nature and extent of natural resource damages under CERCLA Section

107.

The Trustees for the Portland Harbor Site consist of representatives from several Northwest Indian Tribes,

three

federal agencies and

one

state agency. The Trustees act independently of the EPA and the ODEQ. The Trustees have encouraged potentially responsible parties to voluntarily participate in the funding of their injury assessments and several of those parties have agreed to do so. In

June 2014,

the Company agreed to participate in the injury assessment process, which included funding

$0.4

million of the assessment; of this amount,

$0.2

million was paid in

July 2014

and the remainder was paid in

January 2015.

The Company has

not

assumed any additional payment obligations or liabilities with the participation with the NRDA. In

January 2017,

the Confederated Tribes and Bands of the Yakama Nation, a Trustee until they withdrew from the council in

2009,

filed a complaint against the potentially responsible parties including the Company to recover costs related to their own injury assessment and compensation for natural resources damages.

The Company

’s potential liability is a portion of the costs of the remedy for the entire Portland Harbor Superfund Site. The cost of that remedy is expected to be allocated among more than

100

potentially responsible parties. Because of the large number of responsible parties and the variability in the range of remediation alternatives, the Company is unable to estimate an amount or an amount within a range of costs for its obligation with respect to the Portland Harbor Site matters, and

further adjustment to the Consolidated Financial Statements has been recorded as of the date of this filing. The Company has insurance policies for defense costs, as well as indemnification policies it believes will provide reimbursement for any share of the remediation assessed. However, the Company can provide

assurance that those policies will cover all of the costs which the Company

may

incur.

Houston Environmental Issue

In connection with the Company

’s sale of its oil country tubular goods (“OCTG”) business, a Limited Phase II Environmental Site Assessment was conducted at the Houston, Texas plant and completed in

March 2014,

which revealed the presence of volatile organic compounds in the groundwater and certain metals in the soil. In

June 2014,

the Company was accepted into the Texas Commission on Environmental Quality (“TCEQ”) Voluntary Cleanup Program (“VCP”) to address these issues and obtain a Certificate of Completion from the TCEQ. The cost of any potential assessment and cleanup will

not

be covered by insurance. The Company believes these costs are likely to be recovered from the purchaser of the OCTG business upon future sale of the Houston property.

The

Company implemented a remediation plan that included a groundwater assessment, which was completed in

December 2016,

as well as obtaining a municipal setting designation ordinance to prevent consumption of shallow groundwater from beneath the property, thereby eliminating the need for more costly remediation measures. Additionally, in late

October 2016,

the TCEQ notified the Company that a neighboring facility has asbestos contamination in its soil. In

December 2016,

the Company was notified that it will need to assess asbestos contamination before the TCEQ will proceed with a Certificate of Completion. In

April 2017,

the Company completed the asbestos sampling assessment reviewed by the TCEQ and the EPA. In

May 2017,

the Company submitted the results of the assessment and anticipates receiving an approval in late

2017.

August

and

September 2017,

the EPA and the TCEQ, respectively, informed the Company that

further action in regards to the asbestos in the property’s soil is required. The Company anticipates the TCEQ will issue the Certificate of Completion in late

2017

or early

2018.

The Company currently estimates that the future costs associated with the VCP will be between

approximately

and

$1.5

million. As of

September

30,

2017,

the Company has a nominal amount accrued for remediation costs based on the low-end estimate of future costs using a probability-weighted analysis of remediation approaches, and estimates that completion of the VCP process will occur between the

fourth

quarter of

2017

and the

first

quarter of

2018.

All Sites

The Company operates its facilities under numerous governmental permits and licenses relating to air emissions, stormwater runoff and other environmental matters. The Company

’s operations are also governed by many other laws and regulations, including those relating to workplace safety and worker health, principally the Occupational Safety and Health Act and regulations there under which, among other requirements, establish noise and dust standards. The Company believes it is in material compliance with its permits and licenses and these laws and regulations, and the Company does

not

believe that future compliance with such laws and regulations will have a material adverse effect on its financial position, results of operations or cash flows.

Other Contingencies and Legal Proceedings

From time to time, the Company is involved in litigation relating to claims arising out of its operations in the normal course of its business. The Company maintains insurance coverage against potential claims in amounts that are believed to be adequate. To the extent that insurance does

not

cover legal, defense and indemnification costs associated with a loss contingency, the Company records accruals when such losses are

considered probable and reasonably estimable. The Company believes that it is

not

presently a party to litigation, the outcome of which would have a material adverse effect on its business, financial condition, results of operations or cash flows.

Guarantees

The Company has entered into certain letters of credit that total $

2.0

million as of

September

30,

2017.

The letters of credit relate to workers’ compensation insurance.