2022 Starts Strong with Second Consecutive
Quarter of Record Results for Net Sales, Net Income and Adjusted
EBITDA
Poised to Continue Executing on Strategic
Priorities Throughout the Year
Synalloy Corporation (Nasdaq: SYNL) (“Synalloy” or the
“Company”), an industrials company focused on the production and
distribution of piping, tubing and specialty chemicals, is
reporting its results for the first quarter ended March 31,
2022.
First Quarter 2022
Summary
(in millions, expect per share and
margin)
Q1 20221
Q1 2021
Change
Net Sales
$116.2
$69.8
67%
Gross Profit
$22.5
$8.7
158%
Gross Profit Margin
19.4%
12.5%
690bps
Net Income (Loss)
$10.3
$1.1
838%
Diluted Earnings (Loss) per share
$0.99
$0.12
725%
Adjusted EBITDA
$17.0
$4.9
248%
Adjusted EBITDA Margin
14.6%
7.0%
760bps
Management Commentary
“We started the year off strong with a second consecutive
quarter of record results as we continued to make significant
progress with our turnaround strategy,” said Chris Hutter,
president and CEO of Synalloy. “The pricing environment remained
strong for both business segments and we excelled at expanding our
sales funnel and integrating operations of our chemicals segment.
The improvements we’re in the process of making create a more
efficient operating structure, allowing us to better capitalize on
the dynamics within our end markets.
“Looking at the balance of the year, we are in a strong position
to continue executing on the priorities we’ve laid out. While the
macro-environment remains dynamic, we have confidence in the steps
we’ve taken to operate more efficiently and achieve our goal of
maintaining competitiveness throughout all environments. We remain
committed to driving long-term shareholder value and are pleased
that our strong results position us well to continue to build a
robust and valuable platform.”
_______________________
1 The first quarter of 2022 included $7.5
million in net sales, $0.2 million in net income and $0.8 million
in adjusted EBITDA from the acquisition of DanChem, which closed on
October 22, 2021.
First Quarter 2022 Financial
Results
Net sales increased 67% to $116.2 million compared to $69.8
million in the prior year period. The increase was primarily driven
by continued strong demand from end-markets across both business
segments leading to higher average selling prices.
Gross profit increased significantly to $22.5 million, or 19.4%
of net sales, compared to $8.7 million, or 12.5% of net sales, in
the first quarter of 2021. Gross profit and gross margin continued
to benefit from increased customer demand of higher margin products
and a favorable surcharge market environment, offset by increased
raw material and freight costs.
Net income increased significantly to $10.3 million, or $0.99
diluted earnings per share, compared to a net income of $1.1
million, or $0.12 diluted earnings per share, in the first quarter
of 2021. The increase was primarily a result of the continued
strong net sales and commensurate gross profit performance.
Adjusted EBITDA increased significantly to $17.0 million
compared to $4.9 million in the first quarter of 2021. Adjusted
EBITDA margin also improved 760 basis points to 14.6% compared to
7.0% in the prior year period.
Segment Results
Metals – Net sales in the first quarter of 2022 increased
60% to $88.5 million compared to $55.2 million in the first quarter
of 2021. Operating income in the first quarter increased
significantly to $14.5 million compared to $2.6 million in the
prior year period. Adjusted EBITDA in the first quarter increased
significantly to $16.4 million compared to $4.9 million in the
prior year period. As a percentage of segment net sales, adjusted
EBITDA improved 970 basis points to 18.5% compared to 8.8% in the
first quarter of 2021.
Specialty Chemicals – Net sales in the first quarter of
2022 increased 90% to $27.7 million compared to $14.6 million in
the first quarter of 2021. Operating income in the first quarter
increased significantly to $2.4 million compared to $1.1 million in
the prior year period. Adjusted EBITDA in the first quarter
increased significantly to $3.4 million compared to $1.5 million in
the prior year period. Adjusted EBITDA margin improved 210 basis
points to 12.2% compared to 10.1% in the first quarter of 2021.
Liquidity
As of March 31, 2022, total debt was $71.1 million under the
Company’s revolving credit facility, compared to $70.4 million in
debt at December 31, 2021. As of the end of the first quarter of
2022, the Company had $38.6 million of remaining available
borrowing capacity under its revolving credit facility, compared to
$39.4 million at December 31, 2021.
Conference Call
Synalloy will conduct a conference call today at 5:00 p.m.
Eastern time to discuss its results for the first quarter ended
March 31, 2022.
Synalloy management will host the conference call, followed by a
question-and-answer period.
Date: Tuesday, May 10, 2022 Time: 5:00 p.m. Eastern time
Toll-free dial-in number: 1-866-374-5140 International dial-in
number: 1-404-400-0571 Conference ID: 38157095
Please call the conference telephone number 5-10 minutes prior
to the start time. An operator will register your name and
organization. If you have any difficulty connecting with the
conference call, please contact Gateway Group at
1-949-574-3860.
The conference call will be broadcast live and available for
replay here and via the investor relations section of the company’s
website at www.synalloy.com.
About Synalloy
Corporation
Synalloy Corporation (Nasdaq: SYNL) is a company that engages in
a number of diverse business activities including the production of
stainless steel and galvanized pipe and tube, the master
distribution of seamless carbon pipe and tube, and the production
of specialty chemicals. For more information about Synalloy
Corporation, please visit its web site at www.synalloy.com.
Forward-Looking
Statements
This press release includes "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995
and other applicable federal securities laws. All statements that
are not historical facts are forward-looking statements. Forward
looking statements can be identified through the use of words such
as "estimate," "project," "intend," "expect," "believe," "should,"
"anticipate," "hope," "optimistic," "plan," "outlook," "should,"
"could," "may" and similar expressions. 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,
including risks relating to the impact and spread of and the
government’s response to COVID-19; inability to weather an economic
downturn; the impact of competitive products and pricing; product
demand and acceptance risks; raw material and other increased
costs; raw material availability; financial stability of the
Company’s customers; customer delays or difficulties in the
production of products; loss of consumer or investor confidence;
employee relations; ability to maintain workforce by hiring trained
employees; labor efficiencies; risks associated with acquisitions;
environmental issues; negative or unexpected results from tax law
changes; inability to comply with covenants and ratios required by
the Company’s debt financing arrangements; and other risks detailed
from time-to-time in Synalloy Corporation's Securities and Exchange
Commission filings, including our Annual Report on Form 10-K, which
filings are available from the SEC. Synalloy Corporation assumes no
obligation to update any forward-looking 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 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 excluded 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 excludes in Adjusted EBITDA two
categories of items: 1) Base EBITDA components, including: interest
expense (including change in fair value of interest rate swap),
income taxes, depreciation and amortization, and 2) Material
transaction costs including: goodwill impairment, asset impairment,
gain on lease modification, stock-based compensation, non-cash
lease cost, acquisition costs and other fees, proxy contest costs
and recoveries, loss on extinguishment of debt, earn-out
adjustments, realized and unrealized (gains) and losses on
investments in equity securities and other investments, retention
costs and restructuring & severance 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.
SYNALLOY CORPORATION
Condensed Consolidated Balance Sheets
($ in thousands)
(Unaudited)
March 31, 2022
December 31, 2021
Assets
Cash
$
1,241
$
2,021
Accounts receivable, net of allowance for
credit losses of $456 and $216, respectively
67,819
50,126
Inventories, net
112,114
103,249
Prepaid expenses and other current
assets
3,808
3,728
Assets held for sale
797
855
Total current assets
185,779
159,979
Property, plant and equipment, net
42,720
43,720
Right-of-use assets, operating leases,
net
30,431
30,811
Goodwill
12,637
12,637
Intangible assets, net
13,661
14,382
Deferred charges, net
278
302
Other non-current assets
4,127
4,171
Total assets
$
289,633
$
266,002
Liabilities and Shareholders'
Equity
Accounts payable
$
44,268
$
32,318
Accounts payable - related parties
2
2
Accrued expenses and other current
liabilities
13,609
12,407
Current portion of long-term debt
2,464
2,464
Current portion of earn-out liability
891
1,961
Current portion operating lease
liabilities
1,140
1,104
Current portion of finance lease
liabilities
248
233
Total current liabilities
62,622
50,489
Long-term debt
68,610
67,928
Long-term portion of operating lease
liabilities
31,748
32,059
Long-term portion of finance lease
liabilities
1,362
1,414
Deferred income taxes
2,861
2,433
Other long-term liabilities
76
89
Shareholders' equity
122,354
111,590
Total liabilities and shareholders'
equity
$
289,633
$
266,002
Note: The condensed consolidated balance
sheet at December 31, 2021 has been derived from the audited
consolidated financial statements at that date.
SYNALLOY CORPORATION
Condensed Consolidated Statement of
Operations - Comparative Analysis (Unaudited)
($ in thousands, except per share
data)
Three Months Ended March
31,
2022
2021
Net sales
Metals Segment
$
88,497
$
55,213
Specialty Chemicals Segment
27,721
14,565
$
116,218
$
69,778
Operating income
Metals Segment
$
14,492
$
2,577
Specialty Chemicals Segment
2,387
1,056
Unallocated expense (income)
Corporate
3,029
1,767
Acquisition costs and other
531
—
Proxy contest costs and recoveries
—
(464
)
Earn-out adjustments
102
225
Operating income
13,217
2,105
Interest expense
403
387
Change in fair value of interest rate
swap
—
(2
)
Loss on extinguishment of debt
—
223
Other, net
(35
)
162
Income before income taxes
12,849
1,335
Income tax provision
2,589
241
Net income
$
10,260
$
1,094
Net income per common share
Basic
$
1.00
$
0.12
Diluted
$
0.99
$
0.12
Average shares outstanding
Basic
10,209
9,191
Diluted
10,320
9,288
Other data:
Adjusted EBITDA1
$
16,961
$
4,875
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 excluded 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 excludes in Adjusted
EBITDA two categories of items: 1) Base EBITDA components,
including: interest expense (including change in fair value of
interest rate swap), income taxes, depreciation and amortization,
and 2) Material transaction costs including: goodwill impairment,
asset impairment, gain on lease modification, stock-based
compensation, non-cash lease cost, acquisition costs and other
fees, proxy contest costs and recoveries, loss on extinguishment of
debt, earn-out adjustments, realized and unrealized (gains) and
losses on investments in equity securities and other investments,
retention costs and restructuring & severance costs from net
income. For a reconciliation of this non-GAAP measure to the most
comparable GAAP equivalent, refer to the Reconciliation of Net
Income (Loss) to Adjusted EBITDA.
SYNALLOY CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
($ in thousands)
Three Months Ended March
31,
2022
2021
Operating activities
Net income
$
10,260
$
1,094
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation expense
2,116
1,817
Amortization expense
721
680
Amortization of debt issuance costs
25
21
Loss on extinguishment of debt
—
223
Deferred income taxes
428
(41
)
Earn-out adjustments
102
225
Payments of earn-out liabilities in excess
of acquisition date fair value
(372
)
—
Provision for losses on accounts
receivable
240
12
Provision for losses on inventories
496
184
(Gain) loss on disposal of property, plant
and equipment
(5
)
28
Non-cash lease expense
107
124
Change in fair value of interest rate
swap
—
(2
)
Issuance of treasury stock for director
fees
254
—
Stock-based compensation expense
132
187
Changes in operating assets and
liabilities:
Accounts receivable
(17,933
)
(11,181
)
Inventories
(9,302
)
(3,866
)
Other assets and liabilities
(27
)
38
Accounts payable
11,950
6,357
Accrued expenses
(959
)
(569
)
Accrued income taxes
2,161
3,901
Net cash provided by (used in)
operating activities
394
(768
)
Investing activities
Purchases of property, plant and
equipment
(1,117
)
(245
)
Proceeds from disposal of property, plant
and equipment
5
18
Net cash used in investing
activities
(1,112
)
(227
)
Financing activities
Borrowings from long-term debt
122,068
14,730
Proceeds from the exercise of stock
options
118
—
Payments on long-term debt
(121,386
)
(12,333
)
Principal payments on finance lease
obligations
(62
)
(10
)
Payments on earn-out liabilities
(800
)
(1,029
)
Payments for termination of interest rate
swap
—
(46
)
Payments for deferred financing costs
—
(155
)
Net cash provided by financing
activities
(62
)
1,157
(Decrease) increase in cash and cash
equivalents
(780
)
162
Cash and cash equivalents, beginning of
period
2,021
236
Cash and cash equivalents, end of
period
$
1,241
$
398
SYNALLOY CORPORATION
Non-GAAP Financial Measures
Reconciliation
Reconciliation of Net Income to
Adjusted EBITDA (Unaudited)
($ in thousands)
Three Months Ended March
31,
($ in thousands)
2022
2021
Consolidated
Net income
$
10,260
$
1,094
Adjustments:
Interest expense
403
387
Change in fair value of interest rate
swap
—
(2
)
Income taxes
2,589
241
Depreciation
2,116
1,817
Amortization
721
680
EBITDA
16,089
4,217
Acquisition costs and other
531
—
Proxy contest costs and recoveries1
—
(464
)
Loss on extinguishment of debt
—
223
Earn-out adjustments
102
225
Loss on investment in equity securities
and other investments
—
363
Stock-based compensation
132
187
Non-cash lease expense
107
124
Adjusted EBITDA
$
16,961
$
4,875
% sales
14.6
%
7.0
%
Metals Segment
Net income
$
14,424
$
2,538
Adjustments:
Interest expense
—
—
Depreciation expense
1,213
1,393
Amortization expense
625
680
EBITDA
16,262
4,611
Earn-out adjustments
102
225
Stock-based compensation
35
38
Metals Segment Adjusted EBITDA
$
16,399
$
4,874
% segment sales
18.5
%
8.8
%
Specialty Chemicals Segment
Net income
$
2,378
$
1,055
Adjustments:
Interest expense
9
—
Depreciation expense
886
386
Amortization expense
96
—
EBITDA
3,369
1,441
Stock-based compensation
6
31
Specialty Chemicals Segment Adjusted
EBITDA
$
3,375
$
1,472
% segment sales
12.2
%
10.1
%
1 Proxy contest costs and recoveries for
the year ended December 31, 2021 are reimbursements of documented,
out-of-pocket costs to Privet and UPG partially offset by insurance
recoveries for costs related to the 2020 shareholder activism.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220510006296/en/
Company Contact
Aaron Tam Chief Financial Officer 1-804-822-3260
Investor Relations
Cody Slach and Cody Cree Gateway Group, Inc. 1-949-574-3860
SYNL@gatewayir.com
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