Fifth Consecutive Quarter of Year-Over-Year Growth in Net Sales, Net Income, and Adjusted EBITDA
Upcoming Rebrand to Ascent Industries Co. Better Aligns Go-to-Market Strategy with Long-Term Strategic Vision
OAK BROOK, Ill.--(BUSINESS WIRE )--Synalloy Corporation (Nasdaq: SYNL) (“Synalloy” or the “Company”), an industrials company focused on the production and distribution of industrial tubular products and specialty chemicals, is reporting its results for the second quarter ended June 30, 2022.
(in millions, expect per share and margin)
“After a strong start to the year, we sustained our momentum and generated a fifth consecutive quarter of year-over-year growth across the top and bottom line,” said Chris Hutter, president and CEO of Synalloy. “We continued to make progress on our transformation efforts through diversifying our supply chain, widening our sales funnel, and steadily growing our footprint and manufacturing capacity. In our metals segment, or what we will be referring to as tubular products going forward, we added new international suppliers which strengthened and diversified our supply chain network, resulting in lower lead times and incremental margin improvements. In specialty chemicals, we strengthened our sales team with key talent, allowing us to better cross-sell, build deeper relationships and provide higher quality customer service. We also enhanced our manufacturing capabilities with upgrades to existing equipment, the implementation of 24/7 operations in multiple facilities and investments in automation to better address the growing demand and long-term expansion goals for this segment.
“As recently announced, our rebrand to Ascent Industries Co.(‘Ascent’) better reflects our go-forward strategic vision. Since the start of our transformation journey, our goal has always been to build best-in-class industrial manufacturing companies through maximizing efficiency across our operations and relentlessly innovating our production capabilities and portfolio of products. Rebranding to Ascent better aligns the company with our refreshed mission statement, our focus on unlocking the full potential of our existing operations, and identifying value-additive acquisition opportunities with strong research and development capabilities.
“For the back half of the year, we expect to continue executing on our strategic priorities: refining and progressing our commercial strategy, identifying and investing in automation and technology, further integrating our facilities to promote cross-functional work processes, and improving labor and asset mixes to maximize our working capital use. We remain steadfast in our commitment towards driving long-term, sustainable growth through our robust platform and creating value for our shareholders.”
1 The second quarter of 2022 included $8.4 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.
Net sales increased 40% to $116.2 million compared to $83.1 million in the prior year period, primarily driven by favorable product mix shifts and broad-based pricing increases.
Gross profit increased 48% to $20.9 million, or 18.0% of net sales, compared to $14.1 million, or 17.0% of net sales, in the second quarter of 2021. Gross profit and gross margin benefited from a shift to higher margin products, increased selling prices and an expanded supplier base, which offset the impact of increased raw material and freight costs.
Net income increased significantly to $11.1 million, or $1.06 diluted earnings per share, compared to $2.9 million, or $0.31 diluted earnings per share, in the second quarter of 2021. The increase was primarily a result of the strong sales and gross profit performance.
Adjusted EBITDA increased 58% to $15.5 million compared to $9.8 million in the second quarter of 2021. Adjusted EBITDA margin also improved 160 basis points to 13.3% compared to 11.7% in the prior year period.
Metals – Net sales in the second quarter of 2022 increased 28% to $87.2 million compared to $68.1 million in the second quarter of 2021. Operating income in the second quarter increased 72% to $12.9 million compared to $7.5 million in the prior year period. Adjusted EBITDA in the second quarter increased 46% to $14.7 million compared to $10.1 million in the prior year period. As a percentage of segment net sales, adjusted EBITDA improved 210 basis points to 16.9% compared to 14.8% in the second quarter of 2021.
Specialty Chemicals – Net sales in the second quarter of 2022 increased 94% to $29.0 million compared to $15.0 million in the second quarter of 2021. Operating income in the second quarter increased significantly to $2.6 million compared to $(0.4) million in the prior year period. Adjusted EBITDA in the second quarter increased significantly to $3.6 million compared to $0.8 million in the prior year period. Adjusted EBITDA margin improved 740 basis points to 12.6% compared to 5.2% in the second quarter of 2021.
As of June 30, 2022, total debt was $68.3 million under the Company’s credit facility, compared to $70.4 million in debt at December 31, 2021. As of the end of the second quarter of 2022, the Company had $41.2 million of remaining available borrowing capacity under its credit facility, compared to $39.4 million at December 31, 2021.
Rebrand to Ascent Industries Co.
As a reminder, Synalloy’s rebrand to Ascent Industries Co. will go into effect on August 10, 2022. The Company’s stock ticker symbol will change from “SYNL” to “ACNT” on the Nasdaq stock exchange, and trading under the new stock ticker symbol will commence on August 10th.
The Company’s corporate website, including the investor relations portion of the site, will be relocating to www.ascentco.com. Additionally, the public will be able to reach the investor relations department at ACNT@gatewayir.com.
In celebration of the Company’s rebrand, the executive leadership team will be visiting the Nasdaq MarketSite in Times Square, New York to ring the Nasdaq Stock Market Closing Bell on August 15, 2022. On the day of the ceremony, a live stream of the Nasdaq Closing Bell will be available at https://www.nasdaq.com/marketsite/bell-ringing-ceremony.
To view a video of the Company’s rebranded vision coming to life, please click here.
Synalloy will conduct a conference call today at 5:00 p.m. Eastern time to discuss its results for the second quarter ended June 30, 2022.
Synalloy management will host the conference call, followed by a question-and-answer period.
Date: Tuesday, August 09, 2022 Time: 5:00 p.m. Eastern time Live Call Registration Link: Here Webcast Registration Link: Here
To access the call by phone, please register via the live call registration link above or here and you will be provided with dial-in instructions and details. If you have any difficulty connecting with the conference call, please contact Gateway Group at 1-949-574-3860.
The conference call will also be broadcast live and available for replay via the webcast registration link above or here. The webcast will be archived for one year in the investor relations section of the Company’s website at www.synalloy.com.
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 distribution of seamless tubular products, and the production of specialty chemicals. For more information about Synalloy Corporation, please visit its website at www.synalloy.com.
This press release may include "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 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 and to review the risks. as set forth in more detail in Synalloy Corporation's Securities and Exchange Commission filings, including our Annual Report on Form 10-K, which filings are available from the SEC or on our website. Synalloy Corporation assumes no obligation to update any forward-looking information included in this release.
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.
Accounts receivable, net of allowance for credit losses of $748 and $216, respectively
Prepaid expenses and other current assets
Property, plant and equipment, net
Right-of-use assets, operating leases, net
Accounts payable - related parties
Accrued expenses and other current liabilities
Current portion of note payable
Current portion of long-term debt
Current portion of earn-out liabilities
Current portion of operating lease liabilities
Current portion of finance lease liabilities
Long-term portion of operating lease liabilities
Long-term portion of finance lease liabilities
Common stock, par value $1 per share; authorized 24,000,000 shares; issued 11,085,000 shares
Capital in excess of par value
Less: cost of common stock in treasury - 825,570 and 918,471 shares, respectively
Total liabilities and shareholders' equity
Note: The condensed consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date. See accompanying notes to condensed consolidated financial statements.
Condensed Consolidated Statements of Income - Comparative Analysis (Unaudited)
($ in thousands, except per share data)
Proxy contest costs and recoveries
Change in fair value of interest rate swap
Loss on extinguishment of debt
Net income per common share
1The 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.
Consolidated Statements of Cash Flows (Unaudited)
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of debt issuance costs
Loss on extinguishment of debt
Payments of earn-out liabilities in excess of acquisition date fair value
Provision for (reduction of) losses on accounts receivable
Provision for losses on inventories
Gain on disposal of property, plant and equipment
Change in fair value of interest rate swap
Issuance of treasury stock for director fees
Changes in operating assets and liabilities:
Accounts payable - related parties
Net cash provided by operating activities
Purchases of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Proceeds from the exercise of stock options
Principal payments on finance lease obligations
Payments for termination of interest rate swap
Payments for deferred financing costs
Net cash used in financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental Disclosure of Cash Flow Information
Capital expenditures, not yet paid
Reconciliation of Net Income to Adjusted EBITDA (Unaudited)
Change in fair value of interest rate swap
Proxy contest costs and recoveries1
Loss on extinguishment of debt
Loss on investment in equity securities and other investments
1Proxy contest costs and recoveries for the three months ended June 30, 2021 are reimbursements of documented, out-of-pocket costs to Privet and UPG related to the 2020 shareholder activism. Proxy contest costs and recoveries for the six months ended June 30, 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.
Reconciliation of Net Income to Adjusted EBITDA (Unaudited)
Specialty Chemicals Segment Adjusted EBITDA
Company 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
Synalloy Reports Strong Second Quarter 2022 Results
Company 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