Synalloy Corporation (Nasdaq: SYNL), today announced net sales for
the second quarter of 2019 of $78.8 million. This represents an
increase of $6.9 million or 9.6% when compared to net sales for the
second quarter of 2018. Excluding net sales of ASTI and
Munhall-Galvanized, net sales for the second quarter of 2019
decreased $7.9 million, or 11.0% compared to net sales for the
second quarter of 2018. Net sales for the first six months of 2019
were $163.6 million, an increase of $33.2
million or 25.5% from the first six months of 2018.
Excluding net sales of ASTI and Munhall-Galvanized, net sales for
the first six months of 2019 increased $2.2 million, or 1.7%
compared to net sales for the first six months of 2018.
For the second quarter of 2019, the Company
recorded a net loss of $0.3 million, or $0.03 loss per diluted
share, compared to net income of $3.7 million, or $0.41 per diluted
share for the second quarter of 2018. Excluding the financial
results of ASTI and Munhall-Galvanized, net income for the second
quarter of 2019 decreased $4.5 million, or 121.8% compared to net
income for the second quarter of 2018. The second quarter of 2019
was negatively impacted by inventory price change losses which, on
a pre-tax basis, totaled $1.8 million, compared to a $1.1 million
gain in the second quarter of 2018.
For the first six months of 2019, net loss was
$1.2 million, or $0.13 loss per diluted earnings per
share. This compares to net income of $7.5 million,
or $0.85 per diluted earnings per share for the first six
months of 2018. Excluding the financial results of ASTI and
Munhall-Galvanized, net income for the first six months of 2019
decreased $9.5 million, or 127.5% compared to net income for the
first six months of 2018. The first six months of 2019 were
negatively impacted by inventory price change losses which, on a
pre-tax basis, totaled $5.2 million, compared to a $3.5 million
gain for the first six months of 2018.
The Company also reports its performance
utilizing 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 Loss for the second quarter of 2019 was $0.3
million, or $0.04 adjusted diluted loss per share, a decrease of
$6.6 million from Adjusted Net Income of $6.3 million, or $0.71
adjusted diluted earnings per share for the second quarter of
2018. For the first six months of 2019, Adjusted Net Income
was $0.3 million, or $0.04 per adjusted diluted
earnings per share, compared to $10.5 million, or $1.19
adjusted diluted earnings per share for the first six months of
2018.
- Adjusted EBITDA decreased $6.9 million for the second quarter
of 2019 to $3.4 million (4.3% of sales), from $10.3 million (14.4%
of sales) for the second quarter of 2018. For the first six months
of 2019, Adjusted EBITDA was $8.2 million (5.0% of
sales) compared to $18.0 million (13.8% of sales)
for the first six months of 2018.
The Company's results are periodically impacted
by factors that are not included as adjustments to our non-GAAP
measures, but which represent items that help explain differences
in period to period results. As mentioned above, for the second
quarter of 2019, the most significant of those was inventory price
change losses which, on a pre-tax basis, totaled $1.8 million,
compared to a $1.1 million gain in the second quarter of 2018,
representing a decrease of $2.9 million in pre-tax income compared
to the second quarter 2018.
“As reported by the Company in its June 19, 2019
press release, the market for welded stainless steel pipe has been
especially challenging over the past several months,” said Craig C.
Bram, President and CEO. “The combination of heavy buying in
the first half of 2018 by distribution customers in advance of
Section 232 tariffs and consolidation within the supply chain, has
resulted in excessive inventories and associated destocking.
While project buys have been reasonably good, inventory buys have
been less frequent and of much smaller volume. The result has
been an aggressive pricing environment, particularly for smaller OD
sizes and commodity alloys. We expect this trend to continue
for the balance of the year,” noted Bram. “Since April,
nickel surcharges have fallen for three consecutive months,
providing further encouragement to distribution customers to defer
purchases into future months. A swing from inventory price
change gains of $3.5 million in the first half of 2018 to inventory
price change losses of $5.2 million in the current six-month
period, more than offset solid contributions from the ASTI
acquisition and improved results at our tank operation in west
Texas,” said Bram.
Metals Segment
The Metals Segment's net sales for the second
quarter of 2019 totaled $64.5 million, an increase of $8.1 million
or 14.4% from the second quarter of 2018. Excluding the net sales
of ASTI and Munhall-Galvanized, Metals Segment net sales for the
second quarter of 2019 decreased $6.7 million, or 11.8%, compared
to net sales for the second quarter of 2018.
Net sales for the first six months of 2019 were
$135.6 million, an increase of $33.7
million or 33% from the first six months of
2018. Excluding the net sales of ASTI and Munhall-Galvanized,
Metals Segment net sales for the first six months of 2019 increased
$2.7 million, or 2.7%, compared to net sales for the first six
months of 2018.
Sales of seamless carbon pipe and tube were down
20.2% from last year’s second quarter. Storage tank and vessel
sales increased 13.0% over last year’s second quarter. Excluding
ASTI and Munhall-Galvanized, pipe and tube sales were down 15.8%
from the second quarter of 2018.
The backlog for our subsidiary, Bristol Metals,
LLC, as of June 30, 2019 was $31.4 million, a decrease of
11.5% when compared to the same date in 2018. The decline is
primarily related to lower customer pricing, with total pounds
backlog down only 2%, but indexed components of pricing off between
19% and 25% from prior year levels, as well as some reduction in
base metal pricing. The backlog for our subsidiary, Palmer of
Texas Tanks, Inc., as of June 30, 2019 was $8.9 million, a decrease
of 61.1%, when compared to the same date in 2018. The decrease in
backlog is attributable to increased throughput by over 25% from
the prior year quarter, which has supported the second quarter of
2019 shipping levels at 16% higher than second quarter of 2018, as
well as compression of customer lead times between commitment and
ship dates.
The Metals Segment's operating income
decreased $7.9 million to $1.2 million for
the second quarter of 2019 compared to $9.1
million for the second quarter of 2018. For
the first six months of 2019, operating income decreased for the
Metals Segment by $12.5 million to an operating income of $2.6
million compared to operating income of $15.1 million for
the same period of 2018.
Current quarter operating results were affected
by the following factors:
a) |
Nickel prices and resulting surcharges for 304 and 316 alloys ended
the second quarter of 2019 at continued low levels. The reduction
in the nickel indices resulted in substantially lower selling
prices in the second quarter, generating a net unfavorable
operating impact of $1.8 million related to metal pricing. Compared
to a period of rising nickel prices in the second quarter of 2018,
which generated metal pricing gains of $1.1 million, the second
quarter of 2019 was unfavorable by $2.9 million compared to the
second quarter of 2018; |
|
|
b) |
Operating profits for welded
stainless pipe and galvanized tube operations declined
approximately $5.3 million in the second quarter of 2019 compared
to the prior year period. The decline is primarily related to the
average pricing declines outlined in our updated 2019 guidance
issued on June 19, 2019. We are expecting some improvement in
pricing and margins for galvanized as hot-dipped galvanized input
cost normalizes through the remainder of the year. However, our
second half projections continue to include negative pricing
impacts in stainless pipe, in line with an extended period of
months during which we expect to eliminate excess inventories in
the market; |
|
|
c) |
The acquisition of American
Stainless increased second quarter of 2019 operating income by $1.2
million, with no comparable results in the prior year period;
and |
|
|
d) |
Seamless carbon pipe and tube
showed a decline of 20.2% in sales, primarily related to reduced
energy market sales of larger diameter tube, lowering operating
profit by approximately $1.1 million. We do expect energy market
based sales to remain low for the remainder of the year, but
anticipate higher levels of special projects, specifically in the
alternative energy sector. |
Specialty Chemicals Segment
Net sales for the Specialty Chemicals Segment in
the second quarter of 2019 totaled $14.3 million, representing a
$1.2 million or 8.0% decrease from the second quarter of
2018. Sales for the first six months of 2019 were $28.0
million, a decrease of $0.5
million or 1.9% from 2018 results.
The decline of net sales belie the overall
strength in Chemicals volumes sold, as pounds shipped increased by
6.5% and 10.5% for the comparisons to prior year for the second
quarter and the first six months, respectively. The decline in net
sales is simply a factor of more tolled product being shipped in
2019 compared to 2018, with tolled revenue not including material
cost as a component.
Operating income for the Specialty Chemicals
Segment for the second quarter of 2019 was $0.9 million, a decrease
of $0.2 million from the same quarter of 2018. While the product
mix was slightly unfavorable compared to prior year, on a
sequential basis, the result represents a 51.0% improvement in
profit over the first quarter of 2019. For the first six
months of 2019, operating income for the Specialty Chemicals
Segment was $1.5 million compared to operating income of $2.0
million for the same period of 2018. The prior year's first
six months included a one-time claim settlement gain of $0.3
million.
Other Items
Unallocated corporate expenses for the second
quarter of 2019 decreased $0.3 million or 12% to $1.9 million (2.5%
of sales) compared to $2.2 million (3.1% of sales) for the same
period in the prior year comparative period. The second quarter
decrease resulted primarily from lower professional fees, employee
benefits and incentive bonus expense. For the
first six months of 2019, unallocated corporate expenses
increased $0.5 million or 14.2% to $4.3
million (2.6% of sales) from $3.7 million (2.9% of
sales) in the prior year comparative period. For the first
six months of 2019, the increase to unallocated corporate expenses
resulted primarily from higher professional fees and stock option
expense.
Acquisition costs were $32,400 for the second
quarter of 2019 ($12,300 recorded in Metals Segment Cost of Sales
and $20,100 in unallocated SG&A), resulting from costs
associated with the January 1, 2019 American Stainless acquisition.
This compares to $0.7 million in acquisition cost ($0.7 million in
unallocated SG&A and $31,100 in Metals Segment Cost of Sales)
during the second quarter of 2018, which resulted primarily from
costs associated with the Bristol Metals-Munhall galvanized
acquisition.
Interest expense was $1.0 million and $0.4
million for the second quarters of 2019 and 2018,
respectively. Interest expense was $2.0 million and $0.7
million for the first six months of 2019 and 2018,
respectively. The increase was related to higher average debt
outstanding in the second quarter and the first six months of 2019,
as additional borrowings were primarily related to acquisitions and
to support increased working capital requirements.
The effective tax rate was 35.0% and 31.5% for
the three and six-month periods ended June 30, 2019. The June
30, 2019 effective tax rate was higher than the statutory rate of
21.0% due to state taxes, net of the federal benefit, and discrete
tax benefits on our stock compensation plans.
The effective tax rate was 21.0% and 21.3% for
the three and six-month periods ended June 30, 2018,
respectively. The Company’s effective tax rate was approximately
equal to the U.S. statutory rate of 21.0%.
The Company's cash balance decreased $2.2
million to $23,800 as of June 30, 2019 compared to $2.2
million at December 31, 2018. Fluctuations affecting cash
flows during the six months ended June 30, 2019 were comprised of
the following:
a) |
Net inventories decreased $3.8 million at June 30, 2019 when
compared to December 31, 2018, mainly due to efforts to balance
inventory with projected business levels. Excluding the impact of
ASTI acquired inventory, the Company generated $8.5 million of
operating cash flows from the relief of inventory during the six
months ended June 30, 2019. Inventory turns increased slightly from
1.81 turns at December 31, 2018, calculated on a three-month
average basis, to 1.89 turns at June 30, 2019; |
|
|
b) |
Accounts payable increased $3.9
million as of June 30, 2019 as compared to December 31,
2018. The majority of the increase is related to levels of
purchasing activity near the end of the quarter, including second
quarter receipts of inventory that were still unpaid on normal
terms at the end of the quarter. Accounts payable days
outstanding were approximately 33 days at June 30, 2019
compared to 37 days at December 31, 2018; |
|
|
c) |
Net accounts receivable increased
$2.6 million at June 30, 2019 as compared to December 31,
2018, which primarily resulted from the addition of ASTI’s sales
and receivables following the January 1, 2019 acquisition, offset
partially by a reduction in days outstanding of four days due to
better collection experience at the end of the second
quarter. Days sales outstanding, calculated using a six-month
average basis, decreased from 52 days outstanding at the end of
December 2018 to 48 days at the end of the June 2019; |
|
|
d) |
On January 1, 2019, the Company
paid $21.9 million to complete the American Stainless
acquisition; |
|
|
e) |
The Company purchased and sold
equity securities during the six-month period ended June 30, 2019,
which resulted in net cash proceeds of $0.5 million; |
|
|
f) |
Capital expenditures for the
first six months of 2019 were $1.9 million; and |
|
|
g) |
The Company paid $1.8 million
during the first six months of 2019 related to the earn-out
liabilities from the 2019 American Stainless, 2018 MUSA-Galvanized
and 2017 MUSA-Stainless acquisitions. |
The Company increased its overall debt balance
by $9.3 million during the first six months of 2019 and had $85.7
million of total borrowings outstanding with its lender as of
June 30, 2019. Covenants under the Credit Agreement include
maintaining a minimum fixed charge coverage ratio, maintaining a
minimum tangible net worth, and a limitation on the Company’s
maximum amount of capital expenditures per year, which is in line
with currently projected needs. As of June 30, 2019, the Company
had $20.0 million of remaining available capacity under its line of
credit. The Company was in compliance with all covenants as of
June 30, 2019.
Outlook
While we have faced an aggressive pricing
environment in recent months, particularly for smaller OD sizes and
commodity alloys, as well as carbon steel pipe and tube, our
volumes have held up well, evidenced by increasing market share.
This is further evidence that our expanded product capabilities
make us the preferred supplier and that we are well positioned for
when excess industry inventories are reduced and stock buying
returns to normal levels. Our expectations for the remainder of the
year are consistent with our previous guidance of an Adjusted
EBITDA of approximately $22 million. The Company’s focus for
the remainder of 2019 will be on continuing to control costs
tightly across all businesses, increasing operating cash flow and
reducing total debt. We do not anticipate completing any
acquisitions during the remainder of the year.
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 tubing, 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 statement information included in this
earnings release includes 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, realized and unrealized (gains) and losses on investments
in equity securities, casualty insurance gain, all (gains) losses
associated with a Sale-Leaseback, 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, realized and unrealized (gains) and losses on investments
in equity securities, casualty insurance gain, all (gains)
losses associated with a Sale-Leaseback, 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 |
Condensed Consolidated Statement of
Operations |
|
(Amounts in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(unaudited) |
2019 |
|
2018 |
|
2019 |
|
2018 |
Net
sales |
|
|
|
|
|
|
|
|
Metals Segment |
$ |
64,503 |
|
|
$ |
56,374 |
|
|
$ |
135,606 |
|
|
$ |
101,867 |
|
|
Specialty Chemicals
Segment |
14,275 |
|
|
15,519 |
|
|
27,975 |
|
|
28,508 |
|
|
|
$ |
78,778 |
|
|
$ |
71,893 |
|
|
$ |
163,581 |
|
|
$ |
130,375 |
|
Operating
income |
|
|
|
|
|
|
|
Metals Segment |
$ |
1,193 |
|
|
$ |
9,091 |
|
|
$ |
2,629 |
|
|
$ |
15,107 |
|
|
Specialty Chemicals
Segment |
926 |
|
|
1,107 |
|
|
1,540 |
|
|
1,970 |
|
|
|
|
|
|
|
|
|
|
Unallocated expense (income) |
|
|
|
|
|
|
|
|
Corporate |
1,944 |
|
|
2,220 |
|
|
4,253 |
|
|
3,722 |
|
|
Acquisition costs |
20 |
|
|
690 |
|
|
302 |
|
|
690 |
|
|
Earn-out adjustments |
(418 |
) |
|
2,308 |
|
|
(401 |
) |
|
2,462 |
|
|
Operating income |
573 |
|
|
4,980 |
|
|
16 |
|
|
10,203 |
|
|
Interest expense |
1,010 |
|
|
404 |
|
|
2,034 |
|
|
718 |
|
|
Change in fair value of
interest rate swap |
77 |
|
|
(19 |
) |
|
124 |
|
|
(92 |
) |
|
Other (income) expense |
(110 |
) |
|
(59 |
) |
|
(404 |
) |
|
29 |
|
Net (loss)
income before income taxes |
(404 |
) |
|
4,654 |
|
|
(1,737 |
) |
|
9,548 |
|
|
|
|
|
|
|
|
|
|
(Benefit) provision for income
taxes |
(142 |
) |
|
977 |
|
|
(548 |
) |
|
2,036 |
|
|
|
|
|
|
|
|
|
|
Net (loss)
income |
$ |
(262 |
) |
|
$ |
3,677 |
|
|
$ |
(1,189 |
) |
|
$ |
7,512 |
|
|
|
|
|
|
|
|
|
|
Net (loss)
income per common share |
|
|
|
|
|
|
|
|
Basic |
$ |
(0.03 |
) |
|
$ |
0.42 |
|
|
$ |
(0.13 |
) |
|
$ |
0.86 |
|
|
Diluted |
$ |
(0.03 |
) |
|
$ |
0.41 |
|
|
$ |
(0.13 |
) |
|
$ |
0.85 |
|
|
|
|
|
|
|
|
|
|
Average
shares outstanding |
|
|
|
|
|
|
|
|
Basic |
8,974 |
|
|
8,776 |
|
|
8,951 |
|
|
8,761 |
|
|
Diluted |
8,974 |
|
|
8,864 |
|
|
8,951 |
|
|
8,834 |
|
|
|
|
|
|
|
|
|
|
Other
data: |
|
|
|
|
|
|
|
|
Adjusted EBITDA (1) |
3,407 |
|
|
10,324 |
|
|
8,174 |
|
|
17,951 |
|
(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 costs 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 |
|
|
|
|
|
|
|
|
|
Dollars in
thousands |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(unaudited) |
2019 |
|
2018 |
|
2019 |
|
2018 |
Consolidated |
|
|
|
|
|
|
|
Net (loss)
income |
$ |
(263 |
) |
|
$ |
3,677 |
|
|
$ |
(1,189 |
) |
|
$ |
7,512 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Interest expense |
1,010 |
|
|
404 |
|
|
2,034 |
|
|
718 |
|
|
Change in fair value of
interest rate swap |
77 |
|
|
(19 |
) |
|
124 |
|
|
(92 |
) |
|
Income taxes |
(142 |
) |
|
977 |
|
|
(548 |
) |
|
2,036 |
|
|
Depreciation |
1,943 |
|
|
1,457 |
|
|
3,832 |
|
|
2,874 |
|
|
Amortization |
819 |
|
|
571 |
|
|
1,743 |
|
|
1,148 |
|
EBITDA |
3,444 |
|
|
7,067 |
|
|
5,996 |
|
|
14,196 |
|
|
Acquisition costs (1) |
32 |
|
|
721 |
|
|
1,672 |
|
|
734 |
|
|
Shelf registration costs |
10 |
|
|
— |
|
|
10 |
|
|
— |
|
|
Earn-out adjustments |
(418 |
) |
|
2,308 |
|
|
(401 |
) |
|
2,462 |
|
|
(Gain) loss on equity
securities |
(100 |
) |
|
(59 |
) |
|
(373 |
) |
|
29 |
|
|
Stock option / grant
costs |
237 |
|
|
224 |
|
|
853 |
|
|
416 |
|
|
Straight line lease cost |
151 |
|
|
92 |
|
|
288 |
|
|
184 |
|
|
Amortized gain on sale of
assets - sale-leaseback |
— |
|
|
(84 |
) |
|
— |
|
|
(167 |
) |
|
Retention expense |
51 |
|
|
55 |
|
|
130 |
|
|
97 |
|
Adjusted
EBITDA |
$ |
3,407 |
|
|
$ |
10,324 |
|
|
$ |
8,174 |
|
|
$ |
17,951 |
|
|
% sales |
4.3 |
% |
|
14.4 |
% |
|
5.0 |
% |
|
13.8 |
% |
|
|
|
|
|
|
|
|
|
Other
(unfavorable) favorable impacts to income (2): |
|
|
|
|
|
|
|
|
Inventory price change (loss) gain |
$ |
(1,788 |
) |
|
$ |
1,073 |
|
|
$ |
(5,164 |
) |
|
$ |
3,526 |
|
|
Inventory cost
adjustments |
39 |
|
|
371 |
|
|
150 |
|
|
186 |
|
|
Aged inventory adjustment |
24 |
|
|
21 |
|
|
8 |
|
|
(36 |
) |
|
Manufacturing variances |
519 |
|
|
(379 |
) |
|
24 |
|
|
399 |
|
|
Total other (unfavorable)
favorable impacts |
$ |
(1,206 |
) |
|
$ |
1,086 |
|
|
$ |
(4,982 |
) |
|
$ |
4,075 |
|
|
|
|
|
|
|
|
|
|
Metals
Segment |
|
|
|
|
|
|
|
Operating
income |
$ |
1,193 |
|
|
$ |
9,091 |
|
|
$ |
2,629 |
|
|
$ |
15,107 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Depreciation expense |
1,533 |
|
|
1,060 |
|
|
3,014 |
|
|
2,083 |
|
|
Amortization expense |
819 |
|
|
571 |
|
|
1,743 |
|
|
1,142 |
|
EBITDA |
3,545 |
|
|
10,722 |
|
|
7,386 |
|
|
18,332 |
|
|
Acquisition costs |
12 |
|
|
31 |
|
|
1,370 |
|
|
44 |
|
|
Stock option / grant
costs |
63 |
|
|
52 |
|
|
210 |
|
|
100 |
|
|
Amortized gain on sale of
assets - sale-leaseback |
— |
|
|
(60 |
) |
|
— |
|
|
(120 |
) |
|
Retention expense |
26 |
|
|
55 |
|
|
80 |
|
|
97 |
|
Metals Segment
Adjusted EBITDA |
$ |
3,646 |
|
|
$ |
10,800 |
|
|
$ |
9,047 |
|
|
$ |
18,453 |
|
|
% segment sales |
5.7 |
% |
|
19.2 |
% |
|
6.7 |
% |
|
18.1 |
% |
|
|
|
|
|
|
|
|
|
Other
(unfavorable) favorable impacts to income (2): |
|
|
|
|
|
|
|
|
Inventory price change (loss)
gain |
$ |
(1,788 |
) |
|
$ |
1,073 |
|
|
$ |
(5,164 |
) |
|
$ |
3,526 |
|
|
Inventory cost
adjustments |
39 |
|
|
371 |
|
|
135 |
|
|
181 |
|
|
Aged inventory adjustment |
34 |
|
|
22 |
|
|
17 |
|
|
(35 |
) |
|
Manufacturing variances |
513 |
|
|
(292 |
) |
|
207 |
|
|
595 |
|
|
Total other (unfavorable)
favorable impacts |
$ |
(1,202 |
) |
|
$ |
1,174 |
|
|
$ |
(4,805 |
) |
|
$ |
4,267 |
|
|
|
|
|
|
|
|
|
|
Specialty
Chemicals Segment |
|
|
|
|
|
|
|
Operating
income |
$ |
926 |
|
|
$ |
1,107 |
|
|
$ |
1,540 |
|
|
$ |
1,970 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Depreciation expense |
370 |
|
|
359 |
|
|
739 |
|
|
717 |
|
|
Amortization expense |
— |
|
|
— |
|
|
— |
|
|
6 |
|
EBITDA |
1,296 |
|
|
1,466 |
|
|
2,279 |
|
|
2,693 |
|
|
Stock option / grant
costs |
26 |
|
|
26 |
|
|
96 |
|
|
50 |
|
|
Amortized gain on sale of
assets - sale-leaseback |
— |
|
|
(24 |
) |
|
— |
|
|
(47 |
) |
Specialty
Chemicals Segment Adjusted EBITDA |
$ |
1,322 |
|
|
$ |
1,468 |
|
|
$ |
2,375 |
|
|
$ |
2,696 |
|
|
% segment sales |
9.3 |
% |
|
9.5 |
% |
|
8.5 |
% |
|
9.5 |
% |
|
|
|
|
|
|
|
|
|
Other
(unfavorable) favorable impacts to income (2): |
|
|
|
|
|
|
|
|
Inventory cost
adjustments |
$ |
— |
|
|
$ |
— |
|
|
$ |
15 |
|
|
$ |
6 |
|
|
Aged inventory adjustment |
(10 |
) |
|
(1 |
) |
|
(9 |
) |
|
(1 |
) |
|
Manufacturing variances |
7 |
|
|
(87 |
) |
|
(183 |
) |
|
(196 |
) |
|
Total other (unfavorable)
favorable impacts |
$ |
(3 |
) |
|
$ |
(88 |
) |
|
$ |
(177 |
) |
|
$ |
(191 |
) |
(1) |
Acquisition costs include the
amortization of the incremental fair value above predecessor cost
associated with acquired inventory that was sold during the
quarter. |
|
|
(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 (Loss) Income and (Loss) Earnings Per
Share toAdjusted Net (Loss) Income and Adjusted
(Loss) Earnings Per Share (Amounts in thousands,
except per share data) |
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Three Months Ended June 30, |
(unaudited) |
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
(Loss) income
before taxes |
$ |
(404 |
) |
|
$ |
4,654 |
|
|
$ |
(1,737 |
) |
|
$ |
9,548 |
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
Acquisition costs |
32 |
|
|
721 |
|
|
1,672 |
|
|
734 |
|
|
Shelf registration costs |
10 |
|
|
— |
|
|
10 |
|
|
— |
|
|
Earn-out adjustments |
(418 |
) |
|
2,308 |
|
|
(401 |
) |
|
2,462 |
|
|
(Gain) loss on investments in
equity securities |
(100 |
) |
|
(59 |
) |
|
(373 |
) |
|
29 |
|
|
Stock option / grant
costs |
237 |
|
|
224 |
|
|
853 |
|
|
416 |
|
|
Straight line lease cost |
151 |
|
|
92 |
|
|
288 |
|
|
184 |
|
|
Amortized gain on sale of
assets - sale-leaseback |
— |
|
|
(84 |
) |
|
— |
|
|
(167 |
) |
|
Retention expense |
51 |
|
|
55 |
|
|
130 |
|
|
97 |
|
Adjusted (loss)
income before income taxes |
(441 |
) |
|
7,911 |
|
|
441 |
|
|
13,303 |
|
|
(Benefit) provision for income
taxes at 21% |
(93 |
) |
|
1,661 |
|
|
93 |
|
|
2,794 |
|
|
|
|
|
|
|
|
|
|
Adjusted net
(loss) income |
$ |
(348 |
) |
|
$ |
6,250 |
|
|
$ |
348 |
|
|
$ |
10,509 |
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding, as reported |
|
|
|
|
|
|
|
|
Basic |
8,974 |
|
|
8,776 |
|
|
8,951 |
|
|
8,761 |
|
|
Diluted |
8,974 |
|
|
8,864 |
|
|
8,951 |
|
|
8,834 |
|
|
|
|
|
|
|
|
|
|
Adjusted net
income per common share |
|
|
|
|
|
|
|
|
Basic |
$ |
(0.04 |
) |
|
$ |
0.71 |
|
|
$ |
0.04 |
|
|
$ |
1.20 |
|
|
Diluted |
$ |
(0.04 |
) |
|
$ |
0.71 |
|
|
$ |
0.04 |
|
|
$ |
1.19 |
|
|
|
|
|
|
|
|
|
|
Other
(unfavorable) favorable impacts to income (2): |
|
|
|
|
|
|
|
Inventory price change (loss)
gain |
$ |
(1,788 |
) |
|
$ |
1,073 |
|
|
$ |
(5,164 |
) |
|
$ |
3,526 |
|
|
Inventory cost adjustment |
39 |
|
|
371 |
|
|
150 |
|
|
186 |
|
|
Aged inventory adjustment |
24 |
|
|
21 |
|
|
8 |
|
|
(36 |
) |
|
Manufacturing variance |
519 |
|
|
(379 |
) |
|
24 |
|
|
399 |
|
|
|
|
|
|
|
|
|
|
Total other
(unfavorable) favorable impacts |
$ |
(1,206 |
) |
|
$ |
1,086 |
|
|
$ |
(4,982 |
) |
|
$ |
4,075 |
|
|
Other impacts, net of tax |
$ |
(953 |
) |
|
$ |
858 |
|
|
$ |
(3,936 |
) |
|
$ |
3,219 |
|
(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(Dollars in thousands) |
|
(unaudited) |
June 30, 2019 |
|
December 31, 2018 |
|
|
|
|
Assets |
|
|
|
|
Cash |
$ |
24 |
|
$ |
2,220 |
|
Accounts receivable, net |
43,685 |
|
41,065 |
|
Inventories, net |
110,416 |
|
114,201 |
|
Other current assets |
13,299 |
|
9,983 |
|
Total current
assets |
167,424 |
|
167,469 |
|
|
|
|
|
|
Property, plant and equipment,
net |
41,770 |
|
40,925 |
|
Right-of-use assets, operating
leases |
36,429 |
|
— |
|
Goodwill |
17,558 |
|
9,800 |
|
Intangible assets, net |
17,457 |
|
9,696 |
|
Other assets |
428 |
|
508 |
Total
assets |
$ |
281,066 |
|
$ |
228,398 |
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
Accounts payable |
$ |
28,960 |
|
$ |
25,074 |
|
Accrued expenses and other
current liabilities |
13,376 |
|
12,163 |
|
Current portion of long-term
debt |
4,000 |
|
— |
|
Current portion operating
lease liabilities |
3,526 |
|
— |
|
Current portion of finance
lease liabilities |
249 |
|
— |
|
Total current
liabilities |
50,111 |
|
37,237 |
|
|
|
|
|
|
Long-term debt |
81,670 |
|
76,405 |
|
Long-term portion of earn-out
liability |
6,060 |
|
4,703 |
|
Long-term portion of operating
lease liabilities |
34,140 |
|
— |
|
Long-term portion of finance
lease liabilities |
458 |
|
— |
|
Long-term portion of deferred
sale-leaseback gain |
— |
|
5,599 |
|
Other long-term
liabilities |
163 |
|
1,717 |
|
Deferred income taxes |
1,389 |
|
253 |
Shareholders' equity |
107,074 |
|
102,484 |
Total
liabilities and shareholders' equity |
$ |
281,066 |
|
$ |
228,398 |
Note: The condensed consolidated balance sheet at December 31,
2018 has been derived from the audited consolidated financial
statements at that date.
|
Reconciliation of Forecasted 2019 Net Income to Forecasted
2019 Adjusted EBITDA |
Dollars in
thousands |
|
(unaudited) |
2019 Forecast |
Consolidated |
|
Net income |
$ |
2,900 |
|
Adjustments: |
|
|
Interest expense |
3,926 |
|
|
Income taxes |
663 |
|
|
Depreciation |
7,658 |
|
|
Amortization |
3,486 |
|
|
EBITDA |
18,633 |
|
|
Earn-out
adjustments |
(283 |
) |
|
Acquisition costs |
1,672 |
|
|
Stock option / grant
costs |
1,279 |
|
|
Shelf registration costs |
10 |
|
|
(Gain) Loss on investments |
(273 |
) |
|
Straight line lease
cost |
363 |
|
|
Retention expense |
223 |
|
Adjusted
EBITDA |
$ |
21,624 |
|
|
|
|
Other favorable
(unfavorable) impacts to income (2) |
|
|
Inventory price change loss |
$ |
(5,292 |
) |
|
Inventory cost
adjustments |
192 |
|
|
Aged inventory adjustment |
8 |
|
|
Manufacturing variances |
(491 |
) |
|
Total other unfavorable
impacts |
$ |
(5,583 |
) |
(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. |
Synalloy (NASDAQ:SYNL)
Historical Stock Chart
From Aug 2024 to Sep 2024
Synalloy (NASDAQ:SYNL)
Historical Stock Chart
From Sep 2023 to Sep 2024