Synalloy Corporation (Nasdaq: SYNL), today announced net sales for
the fourth quarter of 2018 of $72.7 million. This represents an
increase of $19.8 million or 38% when compared to net sales for the
fourth quarter of 2017. Excluding the impact of the MUSA-Galvanized
acquisition in July of 2018, fourth quarter net sales were up 27%
over the same period last year. Net sales for the full year 2018
totaled $280.8 million, an increase of $79.7 million or 40% from
the full year 2017. Excluding MUSA-Galvanized, year-to-date net
sales were up 34%.
For the fourth quarter of 2018, the Company
recorded net income of $0.5 million, or $0.06 diluted earnings per
share compared to net income of $1.0 million, or $0.11 diluted
earnings per share for the fourth quarter of 2017. For the full
year 2018, net income was $13.1 million, or $1.48 diluted earnings
per share. This compares to net income of $1.3 million, or $0.15
diluted earnings per share for the full year 2017. The current
quarter was negatively impacted by $2.1 million in mark-to-market
valuation losses on investments in equity securities, compared to
no such losses in the fourth quarter of last year, and $0.2 million
of inventory price change losses compared to the fourth quarter of
last year which incurred inventory price change losses totaling
$1.0 million. In addition, fourth quarter 2018 results were
favorably impacted by earn-out adjustments of $0.8 million compared
to an unfavorable earn-out adjustment of $0.5 million in the fourth
quarter of 2017.
The Company also reports on its performance
utilizing its two non-GAAP financial measures, Adjusted Net Income
and Adjusted EBITDA. The Company's performance, as calculated under
the two measures is as follows:
- Adjusted Net Income for the fourth quarter of 2018 was $2.0
million, or $0.22 adjusted diluted earnings per share, compared to
$1.2 million, or $0.13 adjusted diluted earnings per share for the
fourth quarter of 2017. For the full year 2018, Adjusted Net Income
was $18.3 million, or $2.06 adjusted diluted earnings per share,
compared to $2.6 million, or $0.30 adjusted diluted earnings per
share for the full year 2017; and
- Adjusted EBITDA for the fourth quarter of 2018 was $5.9 million
or 8.1% of sales, compared to $4.0 million or 7.5% of sales for the
fourth quarter of 2017. For the full year 2018, Adjusted EBITDA was
$34.1 million or 12.1% of sales, compared to $12.5 million or 6.2%
of sales for the full year of 2017.
The Company's results are periodically impacted
by factors not included as adjustments to the non-GAAP measures,
but which represent significant items that help to understand
differences in period to period results. The most significant of
these factors impacting the results in 2018 are as follows:
- For the fourth quarter of 2018, inventory price change loss
totaled $0.2 million, compared to a loss of $1.0 million for the
fourth quarter of 2017. Manufacturing variance deferrals favorably
impacted the fourth quarter of 2018 by $0.3 million but did not
have an impact for the fourth quarter of 2017; and
- For the full year, inventory price change gains were $5.0
million in 2018 as compared to a loss of $2.6 million in 2017.
Manufacturing variance deferrals had a favorable impact of $1.2
million for the full year of 2018 and an unfavorable impact of $1.2
million for 2017.
“As noted in our press release this past
January, shipments in the fourth quarter of 2018 were below plan as
distribution customers in the Metals Segment deferred delivery in
efforts to manage their inventories to targeted levels,” said Craig
Bram, President and CEO. “Shipments in January and February
of 2019 have reversed course, with volume and sales exceeding
plan. Average selling prices across our product lines in the
Metals Segment have continued their upward trend, with improved
product mix being the primary driver. The Specialty Chemicals
Segment generated modest organic growth in the fourth quarter of
2018, and we look for continued improvement in 2019,” said
Bram.
Bram continued, "During the fourth quarter, we
completed our due diligence on the American Stainless Tubing, Inc.
("ASTI") acquisition. We closed on this transaction on January 1,
2019. “This business will be an excellent complement to our
Metals Segment and will broaden the customer base beyond our
traditional infrastructure end markets.”
Metals Segment
The Metals Segment's net sales for the fourth
quarter of 2018 totaled $59.4 million, an increase of $18.2 million
or 44% from the fourth quarter of 2017. Excluding MUSA-Galvanized,
fourth quarter net sales were up 31% over the same period last
year. Sales for the full year 2018 were $222.2 million, an increase
of $69.3 million or 45% from 2017. Excluding MUSA-Galvanized, full
year net sales were up 38% over the prior year.
Each product line in the Metals Segment showed
positive sales growth against the prior year’s quarter and on a
year-over-year basis. Sales of seamless carbon pipe and tube were
up 23% over last year’s fourth quarter and up 29% year-to-date.
Storage tank and vessel sales were up 2% over last year’s fourth
quarter and up 15% year-to-date. Stainless steel pipe and tube
sales were up 41% over last year’s fourth quarter and up 46% on an
annual basis.
The backlog for our subsidiary Bristol Metals,
LLC, as of December 31, 2018 was $31.2 million, while the
backlog for our subsidiary Palmer of Texas Tanks, Inc., totaled
$20.7 million, improvements of 8% and 20%, respectively, over
levels as of December 31, 2017.
The Metals Segment's operating income increased
$1.7 million to $4.7 million for the fourth quarter of 2018
compared to $3.0 million for the fourth quarter of 2017. For the
full year 2018, operating income for the Metals Segment increased
$22.1 million to $27.8 million compared to $5.7 million for the
same period of 2017. Operating results were affected by the
following factors:
- Nickel prices and resulting surcharges for 304 and 316 alloys
ended the fourth quarter of 2018 lower than the previous quarter,
with surcharges for both alloys decreasing by $0.11 and $0.13 per
pound, respectively; average nickel prices for the quarter
generated a net unfavorable operating impact of $0.2 million
related to metal pricing, compared to an unfavorable net impact of
$1.0 million for the fourth quarter of 2017;
- Gross profit margins were maintained at a historically high-end
level of approximately 15% despite the MUSA-Galvanized acquisition
at midyear with its lower average margins, and in the face of steep
tariff-related imported material costs increases, primarily
impacting our subsidiary Specialty Pipe & Tube, Inc.; and
- Seamless carbon pipe and tube showed significant improvement
with a 22.6% increase in sales driving a 36% improvement in
operating income over the prior year, with activity and margins
driven by strong end-markets.
Specialty Chemicals Segment
Net sales for the Specialty Chemicals Segment in
the fourth quarter of 2018 were $13.3 million, representing a $1.6
million or 14% increase from the same quarter of 2017. Net sales
for the full year 2018 were $58.6 million, an increase of $10.4
million or 21.6% from the full year of 2017.
Net sales continued to benefit during
the fourth quarter and full year of 2018 from strategic
organic growth initiatives within the Specialty Chemicals Segment.
The fourth quarter followed the growth trend of previous quarters
in 2018, showing improvements in throughput, average sales price,
and gross profit margin.
Operating income for the Specialty Chemicals
Segment for the fourth quarter of 2018 was $0.6 million, a $0.1
million or 9.3% increase from the fourth quarter of 2017. Operating
income for the Segment for the full year 2018 was $4.0 million, a
$0.4 million or 9% decrease from the same period for 2017. While
the fourth quarter showed modest improvement, the full second-half
2018 operating income results significantly outperformed the prior
year second-half by $0.3 million, or 15%. During the second half of
2018, margins were realigned as new higher margin products were
added to the portfolio. However, that strong second-half
performance could not overcome a first-half shortfall of $0.6
million, or 25%, compared to the prior year, yielding a net decline
on a full-year basis.
Other Items
Unallocated corporate expenses for the fourth
quarter of 2018 increased $0.6 million or 35% to $2.3 million (3.1%
of sales) compared to $1.7 million (3.2% of sales) for the fourth
quarter of 2017. The fourth quarter increase resulted primarily
from higher ASTI-related acquisition costs ($0.3 million), higher
salaries and wages ($0.2 million), and higher dues and
subscriptions ($0.1 million). Unallocated corporate expenses for
the full year of 2018 increased $1.8 million, or 30%, to $7.9
million (3% of sales) compared to $6.1 million for the full year of
2017. The year-over-year increase resulted primarily from higher
incentive bonus costs ($0.5 million), higher acquisition costs
($0.4 million), and higher salaries and wages ($0.3 million).
Acquisition costs were $0.4 million for the
fourth quarter of 2018 (mainly recorded in unallocated SG&A),
and $1.5 million for the full year of 2018 ($0.3 million recorded
in Metals Segment Cost of Sales and $1.2 million in unallocated
SG&A) resulting from costs associated with the 2018
MUSA-Galvanized acquisition (described below), as well as the ASTI
acquisition, for which costs were incurred prior to the January 1,
2019 closing. This compares to no significant acquisition costs
during the fourth quarter of 2017 and $1.2 million for the full
year of 2017 ($0.8 million in unallocated SG&A and $0.4 million
in Metals Segment Cost of Sales), related to the 2017
MUSA-Stainless acquisition.
Interest expense was $0.9 million and $0.3
million for the fourth quarters of 2018 and 2017, respectively, and
$2.2 million and $1.0 million for the full year of 2018 and 2017,
respectively. The increase was primarily related to higher average
debt outstanding in the fourth quarter and full year of 2018, as
additional borrowings were primarily related to acquisitions and to
support working capital requirements associated with increased
business activity.
During the fourth quarter of 2018, the Company recorded a loss
on the investments in equity securities of $2.1 million. Losses on
investments in equity securities totaled $2.6 million for the full
year of 2018.
During the fourth quarter of 2018, the Company
decreased the earn-out liabilities resulting from Bristol Metals,
LLC's 2017 acquisition of the stainless steel pipe and tube assets
and operations of Marcegaglia USA, Inc. ("MUSA-Stainless") and
Bristol Metals, LLC's 2018 acquisition of the galvanized pipe and
tube assets and operations of Marcegaglia USA, Inc.
("MUSA-Galvanized") acquisitions by $0.8 million. The net change
represents a decline in the fair value of the liabilities due to
forecast changes in pricing and/or volume of small diameter
stainless-steel pipe and tube (outside diameter of ten inches or
less) and galvanized pipe and tube for the remainder of the
measurement periods, which end in February, 2021 (stainless
products) and June, 2022 (galvanized products). For the full year
of 2018, earn-out liability adjustments totaled $1.4 million
related to an overall increase in the fair value of the
liabilities.
The effective tax rate was (18.2%) and 20.5% for
the three-month and twelve-month periods ended December 31, 2018,
respectively. The Company’s effective tax rate is materially
equivalent compared to the U.S. statutory rate of 21%. The
effective tax rate was 1% and 9% for the three-month and
twelve-month periods ended December 31, 2017. The 2017 effective
tax rate was lower than the statutory rate
of 34% primarily due to the adoption of various
provisions related to U.S. Federal Tax Reform.
The Company's cash balance increased $2.21
million as of December 31, 2018 compared to $15,000 at
December 31, 2017. Fluctuations during the period were
comprised of the following:
- Net inventories increased $42.1 million at December 31, 2018 as
compared to December 31, 2017. The increase, primarily related to
the Metals Segment, included higher levels of pounds due to
business activity (37% of the total or $15.0 million), the
inventories related to the completed MUSA-Galvanized acquisition on
July 1, 2018 ($4.3 million), stainless steel surcharges ($4.5
million), higher special alloy content due to strong backlog ($4.6
million), advance buys of seamless carbon steel pipe and tube
inventory to ensure supply in the face of strong demand ($14.2
million) and generally higher replacement costs during the first
nine months of 2018. Inventory turns decreased from 2.51 turns at
December 31, 2017, calculated on a three-month average basis,
to 1.81 turns at December 31, 2018;
- Accounts payable increased $0.8 million as of December 31,
2018 as compared to December 31, 2017. The majority of the
increase is related to increased levels of purchasing activity
across all sectors of the business, including late third quarter
receipts of inventory that were still unpaid on normal terms at the
end of the quarter. Accounts payable days outstanding were
approximately 46 days at December 31, 2018 compared to 60 days
at December 31, 2017;
- Net accounts receivable increased $12.4 million at
December 31, 2018 as compared to December 31, 2017, which
primarily resulted from a 38% increase in sales for the last two
months of the fourth quarter 2018 compared to the last two months
of the fourth quarter of 2017. Days sales outstanding, calculated
using a three-month average basis, increased from 51 days
outstanding at the end of December 2017 to 52 days at the end of
the fourth quarter 2018;
- On July 1, 2018, the Company paid $10.4 million to complete the
MUSA-Galvanized acquisition;
- The Company purchased $5.0 million in equity securities during
the full year of 2018;
- Capital expenditures for the full year of 2018 were $7.8
million;
- The Company paid out $1.8 million during 2018 related to the
earn-out liability from the 2017 MUSA-Stainless acquisition;
and
- The Company issued and sold 44,378 treasury shares at a net
price of $22.60 per share during the first nine months of 2018 in
connection with the at-the-market program, raising total net
proceeds of $1.0 million.
The Company drew down $50.5 million against its
line of credit during 2018, primarily related to acquisitions and
increased activity related to working capital needs, ending with
$76.4 million of borrowings outstanding as of December 31, 2018.
Covenants under the Credit Agreement include maintaining a minimum
fixed charge coverage ratio and a limitation on the Company’s
maximum amount of capital expenditures per year, which is in line
with currently projected needs. As of December 31, 2018, the
Company had $17.5 million of remaining available capacity under its
Line. The Company was in compliance with all covenants as of
December 31, 2018.
Outlook
While 2018 set records for sales and earnings,
our expectations for 2019 are even higher. As is typical
after completing an acquisition, our pipeline of opportunities
continues to increase as we are contacted by investment bankers
with new prospects. Our leverage following the ASTI
acquisition was a bit higher than our historical metrics, but we
expect to be well positioned by mid-year to take on another
acquisition, should we find a suitable partner.
Synalloy Corporation (Nasdaq: SYNL) is a
growth-oriented company that engages in a number of diverse
business activities including the production of stainless steel
pipe and tubing, galvanized pipe and tube, fiberglass and steel
storage tanks, specialty chemicals, and the master distribution of
seamless carbon pipe and tubing. For more information about
Synalloy Corporation, please visit our web site at
www.synalloy.com.
Forward-Looking Statements
This earnings release includes and incorporates
by reference "forward-looking statements" within the meaning of the
federal securities laws. All statements that are not historical
facts are "forward-looking statements." The words "estimate,"
"project," "intend," "expect," "believe," "should," "anticipate,"
"hope," "optimistic," "plan," "outlook," "should," "could," "may"
and similar expressions identify forward-looking statements. The
forward-looking statements are subject to certain risks and
uncertainties, including without limitation those identified below,
which could cause actual results to differ materially from
historical results or those anticipated. Readers are cautioned not
to place undue reliance on these forward-looking statements. The
following factors could cause actual results to differ materially
from historical results or those anticipated: adverse economic
conditions; the impact of competitive products and pricing; product
demand and acceptance risks; raw material and other increased
costs; raw materials availability; employee relations; ability to
maintain workforce by hiring trained employees; labor efficiencies;
customer delays or difficulties in the production of products; new
fracking regulations; a prolonged decrease in oil and nickel
prices; unforeseen delays in completing the integrations of
acquisitions; risks associated with mergers, acquisitions,
dispositions and other expansion activities; financial stability of
our customers; environmental issues; negative or unexpected results
from tax law changes; unavailability of debt financing on
acceptable terms and exposure to increased market interest rate
risk; inability to comply with covenants and ratios required by our
debt financing arrangements; ability to weather an economic
downturn; loss of consumer or investor confidence and other risks
detailed from time-to-time in the Company's Securities and Exchange
Commission filings. The Company assumes no obligation to update the
information included in this release.
Non-GAAP Financial
Information
Financial statements included in this earnings
release include non-GAAP (Generally Accepted Accounting Principles)
measures and should be read along with the accompanying tables
which provide a reconciliation of non-GAAP measures to GAAP
measures.
Adjusted Net Income and Adjusted Diluted
Earnings per Share are non-GAAP measures and exclude discontinued
operations, goodwill impairment, stock option / grant costs,
acquisition costs, shelf registration costs, earn-out adjustments,
gain on excess death benefit, all (gains) losses associated with a
Sale-Leaseback, realized and unrealized gains (losses) on
investments in equity securities, casualty insurance gains,
straight-line lease costs, and retention costs from net income.
They also utilize a constant effective tax rate to reflect tax
neutral results.
Adjusted EBITDA is a non-GAAP measure and
excludes discontinued operations, goodwill impairment, interest
expense, change in fair value of interest rate swap, income taxes,
depreciation, amortization, stock option / grant costs, acquisition
costs, shelf registration costs, earn-out adjustments, gain on
excess death benefit, all (gains) losses associated with the
Sale-Leaseback, realized and unrealized gains (losses) on
investments, casualty insurance gains, straight-line lease costs,
and retention costs from net income.
Management believes that these non-GAAP measures
provide additional useful information to allow readers to compare
the financial results between periods. Non-GAAP measures should not
be considered as an alternative to any measure of performance or
financial condition as promulgated under GAAP, and investors should
consider the Company's performance and financial condition as
reported under GAAP and all other relevant information when
assessing the performance or financial condition of the Company.
Non-GAAP measures have limitations as analytical tools, and
investors should not consider them in isolation or as a substitute
for analysis of the Company's results or financial condition as
reported under GAAP.
Contact: Dennis Loughran at (804) 822-3266
SYNALLOY CORPORATION COMPARATIVE
ANALYSIS |
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
TWELVE MONTHS ENDED |
(unaudited) |
Dec 31, 2018 |
|
Dec 31, 2017 |
|
Dec 31, 2018 |
|
Dec 31, 2017 |
|
|
|
|
|
|
|
|
Net
sales |
|
|
|
|
|
|
|
|
Metals Segment |
$ |
59,351,000 |
|
|
$ |
41,136,000 |
|
|
$ |
222,242,000 |
|
|
$ |
152,957,000 |
|
|
Specialty Chemicals
Segment |
13,323,000 |
|
|
11,701,000 |
|
|
58,599,000 |
|
|
48,191,000 |
|
|
|
$ |
72,674,000 |
|
|
$ |
52,837,000 |
|
|
$ |
280,841,000 |
|
|
$ |
201,148,000 |
|
Operating income |
|
|
|
|
|
|
|
Metals Segment
operations |
$ |
4,632,000 |
|
|
$ |
2,945,000 |
|
|
$ |
27,544,000 |
|
|
$ |
5,425,000 |
|
|
Gain on
sale-leaseback |
60,000 |
|
|
60,000 |
|
|
239,000 |
|
|
239,000 |
|
|
Total Metals
Segment |
4,692,000 |
|
|
3,005,000 |
|
|
27,783,000 |
|
|
5,664,000 |
|
|
|
|
|
|
|
|
|
|
|
Specialty Chemicals
Segment operations |
625,000 |
|
|
570,000 |
|
|
3,879,000 |
|
|
4,296,000 |
|
|
Gain on
sale-leaseback |
24,000 |
|
|
24,000 |
|
|
95,000 |
|
|
95,000 |
|
|
Total Specialty
Chemicals Segment |
649,000 |
|
|
594,000 |
|
|
3,974,000 |
|
|
4,391,000 |
|
|
|
|
|
|
|
|
|
|
Unallocated expense (income) |
|
|
|
|
|
|
|
|
Unallocated straight
line lease cost |
169,000 |
|
|
92,000 |
|
|
445,000 |
|
|
397,000 |
|
|
Corporate |
2,092,000 |
|
|
1,716,000 |
|
|
7,433,000 |
|
|
6,118,000 |
|
|
Earn-out
adjustments |
(762,000 |
) |
|
543,000 |
|
|
1,431,000 |
|
|
689,000 |
|
|
Acquisition costs |
341,000 |
|
|
13,000 |
|
|
1,212,000 |
|
|
795,000 |
|
|
Operating
income |
3,502,000 |
|
|
1,235,000 |
|
|
21,237,000 |
|
|
2,056,000 |
|
|
Interest expense |
907,000 |
|
|
270,000 |
|
|
2,211,000 |
|
|
985,000 |
|
|
Change in fair value of
interest rate swap |
80,000 |
|
|
(64,000 |
) |
|
(19,000 |
) |
|
(97,000 |
) |
|
Loss (gain) on equity
securities |
2,050,000 |
|
|
— |
|
|
2,573,000 |
|
|
(310,000 |
) |
|
|
|
|
|
|
|
|
|
Net
income |
|
|
|
|
|
|
|
before income taxes |
465,000 |
|
|
1,029,000 |
|
|
16,473,000 |
|
|
1,478,000 |
|
|
(Benefit from)
provision for income taxes |
(85,000 |
) |
|
12,000 |
|
|
3,376,000 |
|
|
137,000 |
|
|
|
|
|
|
|
|
|
|
Net
income |
549,000 |
|
|
1,017,000 |
|
|
13,097,000 |
|
|
1,341,000 |
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
Unrealized (loss) gain
on available for sale securities, net of tax |
— |
|
|
(11,000 |
) |
|
— |
|
|
355,000 |
|
|
Reclassification
adjustment for gains included in net |
|
|
|
|
|
|
|
|
income, net of
tax |
— |
|
|
— |
|
|
— |
|
|
(366,000 |
) |
Comprehensive income |
$ |
549,000 |
|
|
$ |
1,006,000 |
|
|
$ |
13,097,000 |
|
|
$ |
1,330,000 |
|
|
|
|
|
|
|
|
|
|
Net
income per common share |
|
|
|
|
|
|
|
Basic |
$ |
0.06 |
|
|
$ |
0.11 |
|
|
$ |
1.49 |
|
|
$ |
0.15 |
|
|
Diluted |
$ |
0.06 |
|
|
$ |
0.11 |
|
|
$ |
1.48 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
Average shares outstanding |
|
|
|
|
|
|
|
|
Basic |
8,872,000 |
|
|
8,728,000 |
|
|
8,807,000 |
|
|
8,705,000 |
|
|
Diluted |
8,941,000 |
|
|
8,774,000 |
|
|
8,878,000 |
|
|
8,727,000 |
|
|
|
|
|
|
|
|
|
|
Other data: |
|
|
|
|
|
|
|
|
Adjusted EBITDA
(1) |
$ |
5,886,000 |
|
|
$ |
3,986,000 |
|
|
$ |
34,120,000 |
|
|
$ |
12,545,000 |
|
(1) The term Adjusted EBITDA is a
non-GAAP financial measure that the Company believes is useful to
investors in evaluating its results to determine the value of a
company. An item is included in the measure if its periodic value
is inconsistent and sufficiently material that not identifying the
item would render period comparability less meaningful to the
reader or if including the item provides a clearer representation
of normalized periodic earnings. The Company includes in
Adjusted EBITDA two categories of items: 1) Base EBITDA components,
including: earnings before discontinued operations, interest
(including change in fair value of interest rate swap), income
taxes, depreciation and amortization, and 2) Material transaction
based items that have no relationship to earnings from operations
of past, current or future periods, including: goodwill impairment,
acquisition costs, acquisition related retention costs, shelf
registration costs, earn-out adjustments, gain on excess death
benefit, (gains) losses associated with Sale-leaseback, stock
option/grant costs, and other adjustments (lesser value items
meeting the criteria, where cumulative impact in a period is
material). For a reconciliation of this non-GAAP measure to the
most comparable GAAP equivalent, refer to the Reconciliation of Net
Income to Adjusted EBITDA as shown on next page.
Reconciliation of Net Income to Adjusted
EBITDA |
|
|
|
THREE MONTHS ENDED |
|
TWELVE MONTHS ENDED |
(unaudited) |
Dec 31, 2018 |
|
Dec 31, 2017 |
|
Dec 31, 2018 |
|
Dec 31, 2017 |
Consolidated |
|
|
|
|
|
|
|
Net
income |
$ |
549,000 |
|
|
$ |
1,017,000 |
|
|
$ |
13,097,000 |
|
|
$ |
1,341,000 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Interest expense |
907,000 |
|
|
270,000 |
|
|
2,211,000 |
|
|
985,000 |
|
|
Change in fair value of
interest rate swap |
80,000 |
|
|
(64,000 |
) |
|
(19,000 |
) |
|
(97,000 |
) |
|
Income taxes |
(85,000 |
) |
|
12,000 |
|
|
3,376,000 |
|
|
137,000 |
|
|
Depreciation |
1,828,000 |
|
|
1,379,000 |
|
|
6,412,000 |
|
|
5,295,000 |
|
|
Amortization |
600,000 |
|
|
616,000 |
|
|
2,363,000 |
|
|
2,443,000 |
|
EBITDA |
3,879,000 |
|
|
3,230,000 |
|
|
27,440,000 |
|
|
10,104,000 |
|
|
Acquisition costs |
394,000 |
|
|
11,000 |
|
|
1,525,000 |
|
|
1,199,000 |
|
|
Shelf registration
costs |
— |
|
|
— |
|
|
54,000 |
|
|
— |
|
|
Earn-out
adjustments |
(762,000 |
) |
|
543,000 |
|
|
1,431,000 |
|
|
689,000 |
|
|
Loss (gain) on
investments in equity securities |
2,050,000 |
|
|
— |
|
|
2,573,000 |
|
|
(310,000 |
) |
|
Stock option / grant
costs |
205,000 |
|
|
152,000 |
|
|
827,000 |
|
|
638,000 |
|
|
Straight line lease
cost |
169,000 |
|
|
92,000 |
|
|
445,000 |
|
|
397,000 |
|
|
Amortized gain on sale
of assets - sale-leaseback |
(84,000 |
) |
|
(84,000 |
) |
|
(334,000 |
) |
|
(334,000 |
) |
|
Retention expense |
34,000 |
|
|
42,000 |
|
|
159,000 |
|
|
162,000 |
|
Adjusted
EBITDA |
$ |
5,886,000 |
|
|
$ |
3,986,000 |
|
|
$ |
34,120,000 |
|
|
$ |
12,545,000 |
|
|
% sales |
8.1 |
% |
|
7.5 |
% |
|
12.1 |
% |
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
Other
(unfavorable) favorable impacts to income (2): |
|
|
|
|
|
|
|
|
Inventory price change
gain (loss) |
$ |
(174,000 |
) |
|
$ |
(997,000 |
) |
|
$ |
4,959,000 |
|
|
$ |
(2,634,000 |
) |
|
Inventory cost
adjustments |
33,000 |
|
|
226,000 |
|
|
204,000 |
|
|
168,000 |
|
|
Aged inventory
adjustment |
72,000 |
|
|
72,000 |
|
|
94,000 |
|
|
24,000 |
|
|
Manufacturing
variances |
263,000 |
|
|
— |
|
|
1,246,000 |
|
|
(1,229,000 |
) |
|
Total other
(unfavorable) favorable impacts |
$ |
194,000 |
|
|
$ |
(699,000 |
) |
|
$ |
6,503,000 |
|
|
$ |
(3,671,000 |
) |
|
|
|
|
|
|
|
|
|
Metals Segment |
|
|
|
|
|
|
|
Operating
income |
$ |
4,692,000 |
|
|
$ |
3,005,000 |
|
|
$ |
27,784,000 |
|
|
$ |
5,664,000 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Depreciation
expense |
1,437,000 |
|
|
1,014,000 |
|
|
4,840,000 |
|
|
3,860,000 |
|
|
Amortization
expense |
600,000 |
|
|
610,000 |
|
|
2,357,000 |
|
|
2,420,000 |
|
EBITDA |
6,729,000 |
|
|
4,629,000 |
|
|
34,981,000 |
|
|
11,944,000 |
|
|
Acquisition costs |
53,000 |
|
|
(2,000 |
) |
|
313,000 |
|
|
404,000 |
|
|
Stock option / grant
costs |
52,000 |
|
|
41,000 |
|
|
204,000 |
|
|
168,000 |
|
|
Amortized gain on sale
of assets - sale-leaseback |
(60,000 |
) |
|
(60,000 |
) |
|
(240,000 |
) |
|
(239,000 |
) |
|
Retention expense |
34,000 |
|
|
42,000 |
|
|
159,000 |
|
|
162,000 |
|
Metals
Segment Adjusted EBITDA |
$ |
6,808,000 |
|
|
$ |
4,650,000 |
|
|
$ |
35,418,000 |
|
|
$ |
12,439,000 |
|
|
% segment sales |
11.5 |
% |
|
11.3 |
% |
|
15.9 |
% |
|
8.1 |
% |
|
|
|
|
|
|
|
|
|
Other
(unfavorable) favorable impacts to income (2): |
|
|
|
|
|
|
|
|
Inventory price change
(loss) gain |
$ |
(174,000 |
) |
|
$ |
(925,000 |
) |
|
$ |
4,959,000 |
|
|
$ |
(2,633,000 |
) |
|
Inventory cost
adjustments |
30,000 |
|
|
230,000 |
|
|
214,000 |
|
|
174,000 |
|
|
Aged inventory
adjustment |
61,000 |
|
|
29,000 |
|
|
20,000 |
|
|
(56,000 |
) |
|
Manufacturing
variances |
(32,000 |
) |
|
99,000 |
|
|
1,178,000 |
|
|
(1,371,000 |
) |
|
Total other
(unfavorable) favorable impacts |
$ |
(115,000 |
) |
|
$ |
(567,000 |
) |
|
$ |
6,371,000 |
|
|
$ |
(3,886,000 |
) |
|
|
|
|
|
|
|
|
|
Specialty Chemicals Segment |
|
|
|
|
|
|
|
Operating
income |
$ |
649,000 |
|
|
$ |
594,000 |
|
|
$ |
3,974,000 |
|
|
$ |
4,391,000 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Depreciation
expense |
353,000 |
|
|
328,000 |
|
|
1,422,000 |
|
|
1,280,000 |
|
|
Amortization
expense |
— |
|
|
6,000 |
|
|
6,000 |
|
|
23,000 |
|
EBITDA |
1,002,000 |
|
|
928,000 |
|
|
5,402,000 |
|
|
5,694,000 |
|
|
Stock option / grant
costs |
26,000 |
|
|
16,000 |
|
|
103,000 |
|
|
83,000 |
|
|
Amortized gain on sale
of assets - sale-leaseback |
(24,000 |
) |
|
(24,000 |
) |
|
(95,000 |
) |
|
(95,000 |
) |
Specialty
Chemicals Segment Adjusted EBITDA |
$ |
1,005,000 |
|
|
$ |
920,000 |
|
|
$ |
5,410,000 |
|
|
$ |
5,682,000 |
|
|
% segment sales |
7.5 |
% |
|
7.9 |
% |
|
9.2 |
% |
|
11.8 |
% |
|
|
|
|
|
|
|
|
|
Other
(unfavorable) favorable impacts to income (2): |
|
|
|
|
|
|
|
|
Inventory price change
loss |
$ |
— |
|
|
$ |
(72,000 |
) |
|
$ |
— |
|
|
$ |
(1,000 |
) |
|
Inventory cost
adjustments |
3,000 |
|
|
(4,000 |
) |
|
(10,000 |
) |
|
(6,000 |
) |
|
Aged inventory
adjustment |
11,000 |
|
|
43,000 |
|
|
74,000 |
|
|
80,000 |
|
|
Manufacturing
variances |
295,000 |
|
|
(99,000 |
) |
|
68,000 |
|
|
142,000 |
|
|
Total other
(unfavorable) favorable impacts |
$ |
309,000 |
|
|
$ |
(132,000 |
) |
|
$ |
132,000 |
|
|
$ |
215,000 |
|
(2) Other favorable (unfavorable)
impacts to income - listed to provide investors with insight into
financial impacts, that cannot be included in the Non-GAAP measure
Adjusted EBITDA, but management believes can provide insight into
underlying operational earnings associated with the respective
period's activity level. The items include a) inventory price
change - the calculated value that profits improved (declined) due
to the increase (decrease) in metal and alloy pricing indices
during the period, and b)inventory valuation adjustments - value of
periodic adjustment to inventory carrying value unrelated to
periodic earnings including i) reserve for lower of cost or net
realizable value, ii) reserve for aged inventory and iii)
manufacturing variances - the calculated value of manufacturing
absorption deferred into inventory to be amortized in a later
period, rather than being shown in the period that created the
benefit or cost.
Reconciliation of Net Income and Earnings Per
Share to |
Adjusted Net Income and Adjusted Earnings per
Share |
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
TWELVE MONTHS ENDED |
(unaudited) |
Dec 31, 2018 |
|
Dec 31, 2017 |
|
Dec 31, 2018 |
|
Dec 31, 2017 |
|
|
|
|
|
|
|
|
|
Income
before taxes |
$ |
465,000 |
|
|
$ |
1,029,000 |
|
|
$ |
16,474,000 |
|
|
$ |
1,478,000 |
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
Acquisition costs |
394,000 |
|
|
11,000 |
|
|
1,525,000 |
|
|
1,199,000 |
|
|
Shelf registration
costs |
— |
|
|
— |
|
|
54,000 |
|
|
— |
|
|
Earn-out
adjustments |
(762,000 |
) |
|
543,000 |
|
|
1,431,000 |
|
|
689,000 |
|
|
Loss (gain) on
investments in equity securities |
2,050,000 |
|
|
— |
|
|
2,573,000 |
|
|
(310,000 |
) |
|
Stock option / grant
costs |
205,000 |
|
|
152,000 |
|
|
827,000 |
|
|
638,000 |
|
|
Straight line lease
cost |
169,000 |
|
|
92,000 |
|
|
445,000 |
|
|
397,000 |
|
|
Amortized gain on sale
of assets - sale-leaseback |
(84,000 |
) |
|
(84,000 |
) |
|
(334,000 |
) |
|
(334,000 |
) |
|
Retention expense |
34,000 |
|
|
42,000 |
|
|
159,000 |
|
|
162,000 |
|
|
|
|
|
|
|
|
|
|
Adjusted
income before income taxes |
2,471,000 |
|
|
1,785,000 |
|
|
23,154,000 |
|
|
3,919,000 |
|
|
Provision for income
taxes at 21% in 2018 and 34% in 2017 |
519,000 |
|
|
607,000 |
|
|
4,862,000 |
|
|
1,332,000 |
|
|
|
|
|
|
|
|
|
|
Adjusted
net income |
$ |
1,952,000 |
|
|
$ |
1,178,000 |
|
|
$ |
18,292,000 |
|
|
$ |
2,587,000 |
|
|
|
|
|
|
|
|
|
|
Average
shares outstanding, as reported |
|
|
|
|
|
|
|
|
Basic |
8,872,000 |
|
|
8,728,000 |
|
|
8,807,000 |
|
|
8,705,000 |
|
|
Diluted |
8,941,000 |
|
|
8,774,000 |
|
|
8,878,000 |
|
|
8,727,000 |
|
|
|
|
|
|
|
|
|
|
Adjusted
net income per common share |
|
|
|
|
|
|
|
|
Basic |
$ |
0.22 |
|
|
$ |
0.13 |
|
|
$ |
2.08 |
|
|
$ |
0.30 |
|
|
Diluted |
$ |
0.22 |
|
|
$ |
0.13 |
|
|
$ |
2.06 |
|
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
|
Other
favorable (unfavorable) impacts to income (2): |
|
|
|
|
|
|
|
Inventory price change
(loss) gain |
$ |
(174,000 |
) |
|
$ |
(997,000 |
) |
|
$ |
4,959,000 |
|
|
$ |
(2,634,000 |
) |
|
Inventory cost
adjustment |
33,000 |
|
|
226,000 |
|
|
204,000 |
|
|
168,000 |
|
|
Aged inventory
adjustment |
72,000 |
|
|
72,000 |
|
|
94,000 |
|
|
24,000 |
|
|
Manufacturing
variance |
263,000 |
|
|
— |
|
|
1,246,000 |
|
|
(1,229,000 |
) |
|
|
|
|
|
|
|
|
|
Total other
favorable (unfavorable) impacts |
$ |
194,000 |
|
|
$ |
(699,000 |
) |
|
$ |
6,503,000 |
|
|
$ |
(3,671,000 |
) |
|
Other impacts, net of
tax |
$ |
153,000 |
|
|
$ |
(461,000 |
) |
|
$ |
5,137,000 |
|
|
$ |
(2,423,000 |
) |
(2) Other favorable (unfavorable)
impacts to income - listed to provide investors with insight into
financial impacts, that cannot be included in the Non-GAAP measure
Adjusted Net Income, but management believes can provide insight
into underlying operational earnings associated with the respective
period's activity level. The items include a) inventory price
change - the calculated value that profits improved (declined) due
to the increase (decrease) in metal and alloy pricing indices
during the period, and b)inventory valuation adjustments - value of
periodic adjustment to inventory carrying value unrelated to
periodic earnings including i) reserve for lower of cost or net
realizable value, ii) reserve for aged inventory and iii)
manufacturing variances - the calculated value of manufacturing
absorption deferred into inventory to be amortized in a later
period, rather than being shown in the period that created the
benefit or cost.
Condensed Consolidated Balance
Sheets |
(unaudited) |
Dec 31, 2018 |
|
Dec 31, 2017 |
|
|
|
|
Assets |
|
|
|
|
Cash |
$ |
2,220,000 |
|
|
$ |
15,000 |
|
|
Accounts receivable,
net |
41,065,000 |
|
|
28,704,000 |
|
|
Inventories, net |
114,201,000 |
|
|
72,125,000 |
|
|
Other current
assets |
9,983,000 |
|
|
6,802,000 |
|
|
Total
current assets |
167,469,000 |
|
|
107,646,000 |
|
|
|
|
|
|
|
Property, plant and
equipment, net |
40,925,000 |
|
|
35,080,000 |
|
|
Goodwill |
9,800,000 |
|
|
6,004,000 |
|
|
Intangible assets,
net |
9,696,000 |
|
|
10,880,000 |
|
|
Other assets |
508,000 |
|
|
264,000 |
|
|
|
|
|
Total assets |
$ |
228,398,000 |
|
|
$ |
159,874,000 |
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
Accounts payable |
$ |
25,074,000 |
|
|
$ |
24,257,000 |
|
|
Accrued expenses |
12,163,000 |
|
|
8,993,000 |
|
|
Total
current liabilities |
37,237,000 |
|
|
33,250,000 |
|
|
|
|
|
|
|
Long-term debt |
76,405,000 |
|
|
25,914,000 |
|
|
Long-term portion of
deferred sale-leaseback gain |
5,599,000 |
|
|
5,933,000 |
|
|
Other long-term
liabilities |
1,970,000 |
|
|
1,907,000 |
|
|
Long-term portion of
earn-out liability |
4,703,000 |
|
|
3,170,000 |
|
Shareholders' equity |
102,484,000 |
|
|
89,700,000 |
|
|
|
|
|
Total liabilities and shareholders' equity |
$ |
228,398,000 |
|
|
$ |
159,874,000 |
|
Note: The condensed consolidated balance sheet at December 31,
2017 has been derived from the audited consolidated financial
statements at that date.
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