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Synalloy Announces Updated Net Sales and Earnings Guidance for the Full Year 2015

SPARTANBURG, S.C., Aug. 21, 2015 (GLOBE NEWSWIRE) -- Synalloy Corporation (Nasdaq:SYNL), a growth oriented company that engages in a number of diverse business activities including the production of stainless steel pipe, fiberglass and steel storage tanks and specialty chemicals and the master distribution of seamless carbon pipe and tube, announces updated guidance for full year 2015 (year ending January 2, 2016) expected results, with net sales from continuing operations expected between $182.0 million and $192.0 million, with the midpoint of the range ($187.0 million) representing a decrease of $12.5 million or 6.3% when compared to net sales from continuing operations for the year ended January 3, 2015 of $199.5 million. The Company expects to report full year 2015 net earnings from continuing operations of between $5.5 million and $7.5 million, or $0.64 per share to $0.86 per share, the midpoint of that range ($0.75 per share) representing a 48% decrease when compared to net earnings from continuing operations of $12.6 million, or $1.45 per share for the full year prior year.

The Company's performance utilizing its two standard non-GAAP financial measures, Adjusted Net Income and Adjusted EBITDA (as defined below), is expected to be as follows:

  • The Adjusted Net Income for the full year 2015 is expected to be between $7.2 million and $9.2 million, or $0.83 per share to $1.06 per share, the midpoint of that range ($0.94 per share) representing a 19% decrease when compared to Adjusted Net Income from continuing operations of $10.1 million, or $1.16 per share for the same full prior year.
  • The Adjusted EBITDA for the full year 2015 is expected to be between $19.5 million and $22.5 million, or $2.30 per share to $2.52 per share, the midpoint of that range ($2.41 per share) representing a 5% decrease when compared to Adjusted EBITDA of $22.0 million, or $2.53 per share for the same full prior year.

Outlook

As discussed in our press release on July 27, 2015 which announced our second quarter 2015 results, the two main factors that will affect the Company's outlook for the remainder of 2015 are low nickel and oil prices. We continue to see weakness in these two critical components impacting our second half prognosis. In the four weeks since our second quarter earnings call, nickel prices have declined by 5%, while WTI prices are down by almost 14%. Also, distribution customers of the Metals Segment continue their destocking strategies, putting downward pressure on prices and volume. In this full year update, we are predicting nickel price declines to impact our results by $5.1 million for the full year, an increase of $1.9 million, if pricing remains flat at current levels. The previously disclosed outlook for a weak second half for our Metals Segment is reflected in the financials presented, with a predicted 27% decline in net sales in the second half of 2015 as compared to first half 2015 actual results. The Specialty Chemicals Segment's net sales projection for the second half is showing the improvement discussed in the July 27, 2015 press release, with an expected 7% improvement in the second half as compared to the first half 2015 actual results. Multiple pending, large volume projects in the Specialty Chemicals Segment could have a major impact during the third and fourth quarters, resulting in better results than those built into the guidance update projections.

Looking at our revised projections for 2015, we are reasonably pleased with the strength of our Adjusted EBITDA performance, particularly in light of the headwinds faced by the Metals Segment. The pipeline of new products in the Specialty Chemicals Segment is as promising as we have seen in the last several years and should generate above average organic growth for that business unit for the balance of this year and into 2016. We continue to make excellent progress with the heavy wall pipe shop in Bristol and look for a material contribution from that project in 2016. We remain confident that the Company is well positioned to continue its trend of increased profitability once the market and customers' buying patterns in the Metals Segment return to more normal activity.

For more information about Synalloy Corporation, please visit our web site at www.synalloy.com.

Forward-Looking Statements

This 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; 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

Statements included in this release include non-GAAP (Generally Accepted Accounting Principles) measures and should be read along with the accompanying tables which provide a reconciliation of non-GAAP measures to GAAP measures.

Adjusted Net Income and Adjusted Earnings per Share are non-GAAP measures and exclude discontinued operations, inventory gain/(loss) due to changes in nickel prices, lower of cost or market inventory adjustment, Specialty's aged inventory adjustment, stock option / grant costs, acquisition costs, shelf registration costs, Palmer earn-out adjustment, gain on excess death benefit 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, interest expense, change in fair value of interest rate swap, income taxes, depreciation, amortization, inventory gain/(loss) due to changes in nickel prices, lower of cost or market inventory adjustment, Specialty's aged inventory adjustment, stock option / grant costs, acquisition costs, shelf registration costs, Palmer earn-out adjustment, gain on excess death benefit 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.

SYNALLOY CORPORATION COMPARATIVE ANALYSIS
SIX MONTHS ENDED YEAR ENDED
(unaudited) July 4, 2015 June 28, 2014 January 2, 2016 January 3, 2015
(Actual) (Actual) (Guidance Midpoint) (Actual)
Net sales from continuing operations
Metals Segment $ 69,404,000 $ 69,193,000 $ 120,000,000 $ 134,304,000
Specialty Chemicals Segment 32,408,000 33,291,000 67,000,000 65,201,000
$ 101,812,000 $ 102,484,000 $ 187,000,000 $ 199,505,000
Operating income from continuing operations
Metals Segment $ 5,468,000 $ 7,159,000 $ 4,291,000 $ 13,511,000
Specialty Chemicals Segment 3,026,000 3,357,000 6,578,000 6,130,000
8,494,000 10,516,000 10,869,000 19,641,000
Unallocated expenses
Corporate 2,269,000 1,961,000 3,667,000 3,292,000
Acquisition costs 445,000 (3,000) 461,000 302,000
Interest expense 657,000 528,000 1,437,000 1,092,000
Change in fair value of interest rate swap (14,000) 294,000 (14,000) 426,000
Palmer earn-out adjustment (2,483,000) (3,476,000) (2,483,000) (3,476,000)
Business interruption insurance proceeds (480,000) (928,000)
Other income (137,000) (7,000) (137,000)
Net income from continuing operations
before income taxes 8,237,000 11,219,000 8,866,000 18,005,000
Provision for income taxes 2,144,000 3,186,000 2,359,000 5,386,000
Net income from continuing operations 6,093,000 8,033,000 6,507,000 12,619,000
Loss from discontinued operations, net of tax (5,856,000) (7,157,000)
Net income $ 6,093,000 $ 2,177,000 $ 6,507,000 $ 5,462,000
Net income per common share from
continuing operations
Basic $ 0.70 $ 0.92 $ 0.75 $ 1.45
Diluted $ 0.70 $ 0.92 $ 0.75 $ 1.45
Net loss per common share from
discontinued operations $ — $ (0.67) $ — $ (0.82)
Basic $ — $ (0.67) $ — $ (0.82)
Diluted
Weighted average shares outstanding
Basic 8,719,000 8,696,000 8,719,000 8,702,000
Diluted 8,735,000 8,705,000 8,735,000 8,715,000
Reconciliation of Net Income from Continuing Operations to Adjusted EBITDA
SIX MONTHS ENDED YEAR ENDED
(unaudited) July 4, 2015 June 28, 2014 January 2, 2016 January 3, 2015
(Actual) (Actual) (Guidance Midpoint) (Actual)
Consolidated
Net income from continuing operations $ 6,093,000 $ 8,033,000 $ 6,507,000 $ 12,619,000
Adjustments:
Interest expense 657,000 528,000 1,437,000 1,092,000
Change in fair value of interest rate swap (14,000) 294,000 (14,000) 426,000
Income taxes 2,144,000 3,186,000 2,359,000 5,386,000
Depreciation 2,387,000 1,908,000 4,774,000 3,723,000
Amortization 1,181,000 685,000 2,353,000 1,466,000
Inventory loss from change in nickel prices 3,117,000 697,000 5,075,000 118,000
Lower of cost or market inventory adjustment 172,000 (11,000) 172,000 (11,000)
Aged inventory adjustment (190,000) (190,000)
Acquisition costs 445,000 (3,000) 461,000 302,000
Shelf registration costs 16,000 23,000 16,000 23,000
Palmer earn-out adjustment (2,483,000) (3,476,000) (2,483,000) (3,476,000)
Gain on excess death benefit (134,000) (134,000)
Stock option / grant costs 271,000 165,000 534,000 363,000
Retention expense 75,000 150,000 9,000
Adjusted EBITDA $ 13,737,000 $ 12,029,000 $ 21,017,000 $ 22,040,000
% sales 13.5% 11.7% 11.2% 11.0%
Adjusted EBITDA per share, diluted $ 1.57 $ 1.38 $ 2.41 $ 2.53
Metals Segment
Net income from continuing operations $ 5,468,000 $ 7,159,000 $ 4,291,000 $ 13,511,000
Adjustments:
Depreciation expense 1,542,000 1,385,000 3,082,000 2,692,000
Amortization expense 1,128,000 645,000 2,256,000 1,385,000
Inventory loss from change in nickel prices 3,117,000 697,000 5,076,000 118,000
Lower of cost or market inventory adjustment 172,000 (11,000) 172,000 (11,000)
Aged inventory adjustment (190,000) (190,000)
Stock option / grant costs 63,000 21,000 128,000 49,000
Retention expense 75,000 150,000 9,000
Metals Segment Adjusted EBITDA $ 11,375,000 $ 9,896,000 $ 14,965,000 $ 17,753,000
% segment sales 16.4% 14.3% 12.5% 13.2%
Specialty Chemicals Segment
Net income $ 3,026,000 $ 3,357,000 $ 6,578,000 $ 6,130,000
Adjustments:
Depreciation expense 804,000 479,000 1,608,000 952,000
Amortization expense 11,000 11,000 22,000 22,000
Stock option / grant costs 20,000 19,000 42,000 41,000
Specialty Chemicals Segment Adjusted EBITDA $ 3,861,000 $ 3,866,000 $ 8,250,000 $ 7,145,000
% segment sales 11.9% 11.6% 12.3% 11.0%
Reconciliation of Net Income and Earnings Per Share to
Adjusted Net Income and Adjusted Earnings per Share
SIX MONTHS ENDED YEAR ENDED
(unaudited) July 4, 2015 June 28, 2014 January 2, 2016 January 3, 2015
(Actual) (Actual) (Guidance Midpoint) (Actual)
Income from continuing operations before
taxes, as reported $ 8,237,000 $ 11,219,000 $ 8,866,000 $ 18,005,000
Adjustments:
Inventory loss from change in nickel prices 3,117,000 697,000 5,075,000 118,000
Lower of cost or market inventory adjustment 172,000 (11,000) 172,000 (11,000)
Aged inventory adjustment (190,000) (190,000)
Stock option / grant cost 271,000 165,000 534,000 363,000
Acquisition costs 445,000 (3,000) 461,000 302,000
Shelf registration costs 16,000 23,000 16,000 23,000
Palmer earn-out adjustment (2,483,000) (3,476,000) (2,483,000) (3,476,000)
Gain on excess death benefit (134,000) (134,000)
Retention expense 75,000 150,000 9,000
Adjusted income from continuing operations before
income taxes 9,526,000 8,614,000 12,467,000 15,333,000
Provision for income taxes at 34% 3,239,000 2,929,000 4,239,000 5,213,000
Adjusted net income from continuing operations $ 6,287,000 $ 5,685,000 $ 8,228,000 $ 10,120,000
Weighted average shares outstanding
Basic 8,719,000 8,696,000 8,719,000 8,702,000
Diluted 8,735,000 8,705,000 8,735,000 8,715,000
Adjusted net income from continuing operations
per common share
Basic $ 0.72 $ 0.65 $ 0.94 $ 1.16
Diluted $ 0.72 $ 0.65 $ 0.94 $ 1.16

CONTACT: Dennis Loughran at (804) 822-3266

Source:Synalloy Corporation