Finishes 2021 with Third Consecutive Quarter of
Year-Over-Year Growth in Net Sales, Net Income and Adjusted
EBITDA
Full Year 2021 Results Achieved Highest Net
Sales, Net Income and Adjusted EBITDA in Synalloy’s History
Strongly Positioned to Further Capitalize on
Profitable Growth Opportunities in 2022
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 fourth quarter and full year ended
December 31, 2021.
Fourth Quarter 2021
Summary
(in millions, except per share and
margin)
Q4 20211
Q3 2021
Q4 2020
Net Sales
$95.7
$86.2
$55.9
Gross Profit
$19.9
$18.0
$6.1
Gross Profit Margin
20.8%
20.9%
11.0%
Net Income (Loss)
$8.1
$8.2
$(8.6)
Diluted Earnings (Loss) per share
$0.84
$0.87
$(0.93)2
Adjusted EBITDA
$14.9
$14.8
$3.0
Adjusted EBITDA Margin
15.5%
17.2%
5.4%
Full Year 2021 Summary
(in millions, except per share and
margin)
20211
2020
Net Sales
$334.7
$256.0
Gross Profit
$60.8
$22.7
Gross Profit Margin
18.2%
8.8%
Net Income (Loss)
$20.2
$(27.3)
Diluted Earnings (Loss) per share
$2.14
$(2.98)
Adjusted EBITDA
$44.3
$9.2
Adjusted EBITDA Margin
13.2%
3.6%
_____________________________ 1 The fourth quarter of 2021
included $5.7 million in net sales, $0.6 million in net income and
$1.1 million in adjusted EBITDA from the acquisition of DanChem,
which closed on October 22, 2021. 2 Compared to previous filings,
the fourth quarter of 2020 had a $0.01 impact to diluted loss per
share as a result of the Rights Offering that closed on December
17, 2021.
Management Commentary
“In the fourth quarter we experienced another period of
profitable growth over 2020 and sustained the high levels of
performance from the third quarter, capping off a year of
meaningful transformation,” said Chris Hutter, president and CEO of
Synalloy. “We continued to benefit from strong demand in both
business segments, and we were able to capitalize on this with
expanded manufacturing capacity and efficiency. Within our
specialty chemicals segment, the integration of DanChem has
proceeded as we had hoped. In fact, we’ve already begun to benefit
from the efficiencies and opportunities associated with the
combination, enabling us to provide a broader range of
manufacturing capabilities and engineering services to our combined
customers.
“Shifting to 2022, both segments continue to show signs of
strength as product demand remains healthy. We are highly focused
on our operational efficiencies, footprint expansion and
accelerating our business development efforts. Though current
geopolitical events make macroeconomic forecasting difficult, we
anticipate a favorable pricing environment in the first half of
2022 with normalization expected during the middle of the year. As
we continue our efforts to better match our production to our
increased commercial efforts, we are moving closer to accomplishing
our goal of maintaining competitive margins throughout all pricing
environments.
“Reflecting on my first full year at the helm of Synalloy, I’m
proud of the foundation we’ve built and progress we’ve made since
embarking on our turnaround strategy. We are prioritizing sustained
profitable growth by delivering best-in-class products, continuing
to invest in technology and automation to further drive
efficiencies and new product offerings, and being opportunistic
with acquisitions that meet our internal return thresholds. Our
team is committed to delivering long-term value to our shareholders
by building upon a culture of high effort and results-based
performance, and we look forward to delivering upon that
commitment.”
Fourth Quarter 2021 Financial
Results
Net sales increased 71% to $95.7 million compared to $55.9
million in the fourth quarter of 2020. This was primarily
attributable to a continued strong commodities pricing environment
and adjustments made to the Company’s product mix in the metals
segment to better meet end-market demand.
Gross profit increased significantly to $19.9 million, or 20.8%
of net sales, compared to $6.1 million, or 11.0% of net sales, in
the fourth quarter of 2020. Both gross profit and gross margin
benefitted from pricing power as a result of increased customer
demand and operational efficiencies to offset higher raw material
costs.
Net income increased significantly to $8.1 million, or $0.84
diluted earnings per share, compared to a net loss of $(8.6)
million, or $(0.93) diluted loss per share, in the fourth quarter
of 2020. Excluding a $5.5 million non-cash goodwill impairment
charge in the fourth quarter of 2020, net income in the fourth
quarter of 2021 increased $11.2 million over the prior year period.
The increase was primarily attributable to the strong net sales
performance and expense management initiatives. The prior year
period also had a $0.01 impact to diluted loss per share as a
result of the Rights Offering that closed on December 17, 2021,
compared to what the Company had previously reported.
Adjusted EBITDA increased significantly to $14.9 million
compared to $3.0 million in the fourth quarter of 2020. Adjusted
EBITDA as a percentage of net sales improved 1,010 basis points to
15.5% compared to 5.4% in the prior year period.
Full Year 2021 Financial
Results
Net sales increased 31% to $334.7 million compared to $256.0
million in 2020. The increase was primarily the result of a strong
pricing and customer demand environment throughout the year, along
with the execution of various initiatives to refocus the Company on
capturing growth opportunities.
Gross profit increased significantly to $60.8 million or 18.2%
of net sales, compared to $22.7 million or 8.8% of net sales in
2020. This was primarily attributable to the aforementioned net
sales growth and the Company’s efforts to drive operational
efficiencies throughout the year.
Net income increased significantly to $20.2 million or $2.14
diluted earnings per share, compared to a net loss of $(27.3)
million or $(2.98) diluted loss per share in 2020. The increase was
driven by the strong pricing and customer demand the Company
experienced throughout the year, which offset labor and supply
chain constraints.
Adjusted EBITDA increased significantly to $44.3 million
compared to $9.2 million in 2020. Adjusted EBITDA as a percentage
of net sales increased 960 basis points to 13.2% compared to 3.6%
in the prior year.
Segment Results
Metals – net sales in the fourth quarter of 2021
increased 65% to $73.8 million compared to $44.7 million in the
fourth quarter of 2020. Net income in the fourth quarter increased
significantly to $11.3 million compared to a net loss of ($4.6)
million in the prior year period. Adjusted EBITDA in the fourth
quarter also increased substantially to $13.8 million compared to
$2.9 million in the prior year period. As a percentage of segment
net sales, adjusted EBITDA improved 1,210 basis points to 18.7%
compared to 6.6% in the fourth quarter of 2020.
Net sales in 2021 increased 30% to $267.2 million compared to
$204.5 million in 2020. Net income in 2021 increased significantly
to $31.9 million compared to a net loss of $(22.4) million in the
prior year. Adjusted EBITDA in 2021 also increased substantially to
$43.0 million compared to $8.0 million in the prior year. As a
percentage of segment net sales, adjusted EBITDA increased 1,220
basis points to 16.1% compared to 3.9% in 2020.
Specialty Chemicals – net sales in the fourth quarter of
2021 increased 95% to $21.9 million compared to $11.2 million in
the fourth quarter of 2020, with $5.7 million of net sales in the
fourth quarter of 2021 being attributable to the acquisition of
DanChem. Net income in the fourth quarter increased significantly
to $1.6 million compared to $0.5 million in the prior year period,
with $0.6 million of net income in the fourth quarter of 2021 being
attributable to the acquisition of DanChem. Adjusted EBITDA in the
fourth quarter increased significantly to $2.5 million compared to
$0.9 million in the prior year period, with $1.1 million of
adjusted EBITDA in the fourth quarter of 2021 being attributable to
the acquisition of DanChem. As a percentage of segment net sales,
adjusted EBITDA improved 303 basis points to 11.7% compared to 8.4%
in the fourth quarter of 2020.
Net sales in 2021 increased 31% to $67.5 million compared to
$51.5 million in 2020. Net income in 2021 was $3.6 million compared
to $4.0 million in the prior year. Adjusted EBITDA in 2021
increased 12% to $6.5 million compared to $5.8 million in the prior
year. As a percentage of segment net sales, adjusted EBITDA was
9.7% compared to 11.3% in 2020.
Liquidity
As of December 31, 2021, total debt under the Company’s
revolving credit facility was $70.4 million, compared to $61.4
million at December 31, 2020, with the increase attributable to the
Company’s acquisition of DanChem in October 2021 for approximately
$33 million. As of the end of 2021, the Company had $39.4 million
of remaining available borrowing capacity under its revolving
credit facility, compared to $11.0 million at December 31,
2020.
Conference Call
Synalloy will conduct a conference call today at 5:00 p.m.
Eastern time to discuss its results for the fourth quarter and full
year ended December 31, 2021.
Synalloy management will host the conference call, followed by a
question-and-answer period.
Date: Tuesday, March 29, 2022 Time: 5:00 p.m. Eastern time
Toll-free dial-in number: 1-877-303-6648 International dial-in
number: 1-970-315-0443 Conference ID: 2845778
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)
December 31, 2021
December 31, 2020
Assets
Cash
$
2,021
$
236
Accounts receivable, net of allowance for
credit losses of $216 and $496, respectively
50,126
28,183
Inventories, net
103,249
85,080
Prepaid expenses and other current
assets
3,728
13,384
Assets held for sale
855
Total current assets
159,979
126,883
Property, plant and equipment, net
43,720
35,096
Right-of-use assets, operating leases,
net
30,811
31,769
Goodwill
12,637
1,355
Intangible assets, net
14,382
11,426
Deferred charges, net
302
455
Other non-current assets
4,171
$
—
Total assets
$
266,002
$
206,984
Liabilities and Shareholders'
Equity
Accounts payable
$
32,318
$
19,732
Accounts payable - related parties
2
—
Accrued expenses and other current
liabilities
12,407
6,123
Current portion of long-term debt
2,464
875
Current portion of earn-out liability
1,961
3,434
Current portion operating lease
liabilities
1,104
867
Current portion of finance lease
liabilities
233
19
Total current liabilities
50,489
31,050
Long-term debt
67,928
60,495
Long-term portion of earn-out
liability
—
287
Long-term portion of operating lease
liabilities
32,059
32,771
Long-term portion of finance lease
liabilities
1,414
37
Deferred income taxes
2,433
1,957
Other long-term liabilities
89
92
Shareholders' equity
111,590
80,295
Total liabilities and shareholders'
equity
$
266,002
$
206,984
Note: The condensed consolidated balance sheet at December 31,
2021 and 2020 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
December 31,
Year Ended December
31,
2021
2020
2021
2020
Net sales
Metals Segment
$
73,799
$
44,698
$
267,238
$
204,459
Specialty Chemicals Segment
21,868
11,203
67,477
51,541
$
95,667
$
55,901
$
334,715
$
256,000
Operating income (loss)
Metals Segment
$
11,767
$
(4,815
)
$
33,561
$
(24,599
)
Specialty Chemicals Segment
1,658
525
3,656
4,033
Unallocated expense (income)
Corporate
1,690
2,784
6,828
7,917
Acquisition costs and other
800
42
1,001
845
Proxy contest costs and recoveries
—
—
168
3,105
Earn-out adjustments
442
(226
)
1,872
(1,195
)
Gain on lease modification
—
—
—
(171
)
Operating income (loss)
10,493
(6,890
)
27,348
(31,067
)
Interest expense
418
406
1,486
2,110
Change in fair value of interest rate
swap
—
(14
)
(2
)
51
Loss on extinguishment of debt
—
—
223
—
Other, net
(10
)
(10
)
143
(1,255
)
Income (loss) before income
taxes
10,085
(7,272
)
25,498
(31,973
)
Income tax provision (benefit)
2,018
1,320
5,253
(4,706
)
Net income (loss)
$
8,067
$
(8,592
)
$
20,245
$
(27,267
)
Net income (loss) per common
share
Basic
$
0.85
$
(0.93
)
$
2.17
$
(2.98
)
Diluted
$
0.84
$
(0.93
)
$
2.14
$
(2.98
)
Average shares outstanding1
Basic
9,518
9,198
9,340
9,141
Diluted
9,617
9,198
9,456
9,141
Other data:
Adjusted EBITDA2
$
14,861
$
3,017
$
44,308
$
9,247
1During the fourth quarter of 2021, the Company distributed
subscription rights to holders of common stock, which were priced
at a discount to the market value, to acquire additional common
shares. The Rights Offering, because of the discount, contains a
bonus element that is similar to a stock dividend. As such, the
basic and diluted EPS has been retroactively adjusted for the bonus
element for all prior periods presented. 2The 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)
Year Ended December
31,
2021
2020
Operating activities
Net income (loss)
$
20,245
$
(27,267
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation expense
7,547
7,572
Amortization expense
2,794
3,028
Amortization of debt issuance costs
95
177
Asset impairments
233
6,214
Goodwill impairment
—
16,203
Loss on extinguishment of debt
223
—
Unrealized gain on equity securities
—
(208
)
Deferred income taxes
(2,071
)
1,167
Proceeds from business interruption
insurance
—
1,040
Loss on sale of equity securities
—
38
Earn-out adjustments
1,872
(1,195
)
Payments of earn-out liabilities in excess
of acquisition date fair value
(138
)
(292
)
(Reduction of) provision for losses on
accounts receivable
(398
)
890
Provision for losses on inventories
1,649
271
(Gain) loss on disposal of property, plant
and equipment
(848
)
237
Non-cash lease expense
481
510
Non-cash lease termination loss
5
24
Gain on lease modification
—
(171
)
Change in fair value of interest rate
swap
(2
)
51
Payments for termination of interest rate
swap
(46
)
—
Issuance of treasury stock for director
fees
132
345
Stock-based compensation expense
799
1,791
Changes in operating assets and
liabilities:
Accounts receivable
(16,185
)
5,552
Inventories
(18,873
)
9,122
Other assets and liabilities
(55
)
(912
)
Accounts payable
10,835
(1,418
)
Accounts payable - related parties
2
—
Accrued expenses
1,506
86
Accrued income taxes
9,253
(4,877
)
Net cash provided by operating
activities
19,055
17,978
Investing activities
Purchases of property, plant and
equipment
(1,497
)
(3,748
)
Proceeds from disposal of property, plant
and equipment
1,400
312
Proceeds from sale of equity
securities
—
4,430
Acquisitions, net of cash acquired
(32,564
)
—
Net cash (used in) provided by
investing activities
(32,661
)
994
Financing activities
Borrowings from long-term debt
215,528
—
Proceeds from the issuance of common stock
related to Rights Offering
10,010
—
Proceeds from the exercise of stock
options
109
—
Payments on long-term debt
(206,505
)
(4,000
)
Payments on BB&T line of credit
—
(10,184
)
Principal payments on finance lease
obligations
(92
)
(109
)
Payments for finance lease
terminations
—
(204
)
Payments on earn-out liabilities
(3,494
)
(3,946
)
Repurchase of common stock
—
(635
)
Payments for deferred financing costs
(165
)
(284
)
Net cash provided by (used in)
financing activities
15,391
(19,362
)
Increase (decrease) in cash and cash
equivalents
1,785
(390
)
Cash and cash equivalents, beginning of
period
236
626
Cash and cash equivalents, end of
period
$
2,021
$
236
SYNALLOY CORPORATION
Non-GAAP Financial Measures
Reconciliation
Reconciliation of Net Income (Loss) to
Adjusted EBITDA (Unaudited)
($ in thousands)
Three Months Ended
December 31,
Year Ended December
31,
($ in thousands)
2021
2020
2021
2020
Consolidated
Net income (loss)
$
8,067
$
(8,592
)
$
20,245
$
(27,267
)
Adjustments:
Interest expense
418
406
1,486
2,110
Change in fair value of interest rate
swap
—
(14
)
(2
)
51
Income taxes
2,018
1,320
5,253
(4,706
)
Depreciation
2,088
1,820
7,547
7,572
Amortization
754
705
2,794
3,028
EBITDA
13,345
(4,355
)
37,323
(19,212
)
Acquisition costs and other
800
53
1,001
861
Proxy contest costs and recoveries1
—
—
168
3,105
Loss on extinguishment of debt
—
—
223
—
Earn-out adjustments
442
(226
)
1,872
(1,195
)
Loss (gain) on investment in equity
securities and other investments
—
—
363
(170
)
Asset impairments
—
135
233
6,214
Goodwill impairment
—
5,455
—
16,203
Gain on lease modification
—
—
—
(171
)
Stock-based compensation
103
755
799
1,791
Non-cash lease expense
108
124
481
510
Retention expense
6
—
500
235
Restructuring and severance costs
57
1,076
1,345
1,076
Adjusted EBITDA
$
14,861
$
3,017
$
44,308
$
9,247
% sales
15.5
%
5.4
%
13.2
%
3.6
%
1Proxy 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.
SYNALLOY CORPORATION
Non-GAAP Financial Measures
Reconciliation
Reconciliation of Net Income (Loss) to
Adjusted EBITDA (Unaudited)
($ in thousands)
Three Months Ended
December 31,
Year Ended December
31,
2021
2020
2021
2020
Metals Segment
Net income (loss)
$
11,335
$
(4,590
)
$
31,893
$
(22,388
)
Adjustments:
Interest expense
—
—
—
11
Depreciation expense
1,293
1,398
5,485
5,855
Amortization expense
680
705
2,721
3,028
EBITDA
13,308
(2,487
)
40,099
(13,494
)
Acquisition costs and other
—
13
—
16
Earn-out adjustments
442
(226
)
1,872
(1,195
)
Asset impairments
—
135
—
6,214
Goodwill impairment
—
5,455
—
16,203
Stock-based compensation
54
54
129
303
Retention expense
6
—
500
—
Restructuring and severance costs
—
—
363
—
Metals Segment Adjusted EBITDA
$
13,810
$
2,944
$
42,963
$
8,047
% segment sales
18.7
%
6.6
%
16.1
%
3.9
%
Specialty Chemicals Segment
Net income
$
1,588
$
525
$
3,589
$
4,046
Adjustments:
Interest expense
9
—
11
9
Depreciation expense
768
381
1,932
1,552
Amortization expense
73
—
73
—
EBITDA
2,438
906
5,605
5,607
Acquisition costs and other
61
—
61
—
Asset impairments
—
—
233
—
Stock-based compensation
(8
)
29
165
207
Restructuring and severance costs
57
—
484
—
Specialty Chemicals Segment Adjusted
EBITDA
$
2,548
$
935
$
6,548
$
5,814
% segment sales
11.7
%
8.4
%
9.7
%
11.3
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220329005777/en/
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
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