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| 8-K - FORM 8-K 1QTR 2010 EARNINGS RELEASE - SYNALLOY CORP | body.htm |
NEWS
RELEASE
FOR
IMMEDIATE RELEASE
Synalloy Corporation
Announces First Quarter Results
Spartanburg,
South Carolina, April 23, 2010...Synalloy Corporation (Nasdaq:SYNL), a producer
of stainless steel pipe, fabricator of stainless and carbon steel piping
systems, and producer of specialty chemicals, announces that the first quarter
of 2010 produced net earnings of $400,000, or $.06 per share, on a 16% sales
increase to $35,201,000. This compares to net earnings from continuing
operations of $341,000, or $.05 per share on sales from continuing operations of
$30,393,000, in 2009’s first quarter.
Metals
Segment
Sales
increased 10% in the first quarter of 2010 from the same quarter a year earlier
while operating income declined 87%. The sales increase resulted from a 47%
increase in unit volumes partially offset by a 24% reduction in average selling
prices. The big percentage increase in unit volumes resulted from an aggressive
effort to gain market share in commodity pipe together with the acquisition on
August 31, 2009 of Ram-Fab, LLC. The decrease in first quarter
selling prices, when compared to 2009’s first quarter, reflects lower stainless
steel prices and to a lesser extent a change in product mix to a higher percent
of lower-priced commodity pipe from higher-priced non-commodity pipe and piping
systems.
The
decrease in operating income was mainly due to very competitive market
conditions in commodity pipe that led to a significant decrease in gross profit
margins. Also contributing to the lower margins was fixed costs being a larger
percent of the much lower selling prices. It is encouraging that March showed a
significant improvement in gross profit margins in commodity pipe compared to
the first two months of the quarter. With stainless steel prices increasing, we
are hopeful that pipe prices will be much higher in the second
quarter.
Specialty Chemicals
Segment
Sales and
operating income for the Specialty Chemicals Segment increased 32% and 122%,
respectively, from the first quarter of 2009. The sales increase resulted not
only from a moderate increase in overall demand for our products but there were
new initiatives implemented during the later part of 2009 which resulted in
gaining market share in many of our product categories. The Company experienced
a 46% increase in chemical pounds sold during the first quarter of 2010 when
compared to the first quarter of 2009. This allowed profitability to increase as
a result of higher plant utilization and throughput. This factor, combined with
the stabilization of raw material costs and favorable product mix, resulted in
the surge in operating income for the first quarter of 2010 compared to the same
quarter last year.
Sale of Blackman Uhler
Specialties & Discontinued Operations
On
October 2, 2009, the Company entered into an Asset Purchase Agreement with
SantoLubes Manufacturing, LLC (“SM”) to sell the specialty chemical business of
Blackman Uhler Specialties, LLC (“BU”) for a purchase price of $10,366,000,
along with certain property, plant and equipment held by Synalloy Corporation
for a purchase price of $1,130,000, all located at the Spartanburg, SC location.
The purchase price of approximately $11,496,000, payable in cash, was equal to
the approximate net book values of the assets sold as of October 3, 2009, the
effective date of the sale, and the Company has recorded a loss of approximately
$250,000 resulting primarily from transaction fees and other costs related to
the sale. Divesting BU’s specialty chemicals business, which had annual sales of
approximately $14,500,000, has freed up resources and working capital to allow
further expansion into the Company’s metals businesses. BU along with Organic
Pigment’s (“OP”) pigment dispersion business, which was sold on March 6, 2009
and had annual sales of approximately $7,000,000, were both physically located
at the Spartanburg facility. OP completed all operating activities at the end of
the third quarter. As a result, these operations, which were previously included in
the Specialty Chemicals Segment, are being reported as discontinued operations
in 2009 results.
1
Other
Items
Unallocated
corporate expenses decreased $130,000 for the first quarter 2010 compared to the
same quarter a year ago due to reduced quarterly environmental charges that were
eliminated by the sale of BU at the end of the third quarter of
2009.
The
Company’s cash balance decreased during the quarter from $14,097,000 at the end
of 2009 to $1,884,000 as of April 3, 2010. As a result of the higher sales
activity during the first quarter of 2010, accounts receivable and inventory
levels increased at April 3, 2010 by $11,577,000, when compared to the prior
year end. The Company paid a $0.25 cash dividend during the quarter, amounting
to $1,581,000. The dividend was declared by the Board of Directors based upon
the excellent cash flow generated in the prior year combined with the
elimination of bank debt during 2009. The Company continues to have no bank debt
outstanding as of the end of the first quarter of 2010.
Outlook
The
Metals Segment’s business is highly dependent on capital expenditures which have
been significantly impacted by the economic turmoil. The weak demand
significantly affected pipe products. Surcharges began falling in November 2009
but appear to have bottomed in January 2010 and are scheduled for
increases through June 2010. Sales activity for both commodity and non-commodity
pipe over the first quarter of 2010 has improved, indicating that distributors
may be increasing their inventory levels in advance of further surcharge
increases. Management believes it is benefiting from the stimulus spending by
the Federal Government, which includes a “Buy-American” provision covering iron
and steel, as we have seen increased bidding activity in both the water and
wastewater treatment and power generation areas, significant parts of our piping
systems business. However, business opportunities remain extremely competitive
hurting product pricing in all of our markets. Although management is
disappointed with the level of profitability in the first quarter of 2010, we
remain confident that we are in an excellent position to benefit from the
eventual improvement in economic conditions. While the impact from current
economic conditions both domestically and worldwide makes it difficult to
predict the performance of this Segment for the remainder of 2010, we are seeing
improvements in business conditions within our markets. We believe we are the
largest and most capable domestic producer of non-commodity stainless pipe and
an effective producer of commodity stainless pipe which should serve us well in
the long run. We also continue to be optimistic about the piping systems
business over the long term. Piping systems continues to maintain a strong
backlog, with approximately 90% of the backlog coming from paper, water and
wastewater treatment projects. Piping systems’ backlog was $37,132,000 at April
3, 2010 compared to $41,007,000 at the end of the first quarter of 2009. We
estimate that approximately 80% of the backlog should be completed over the next
12 months.
Management
of the Specialty Chemicals Segment was successful in increasing revenues and
profitability during the first quarter of 2010 and expects this trend to
continue during the remainder of 2010. With the absence of raw material or
utility cost increases, profitability should also continue to surpass prior year
results. Even though management is confident that the initiatives implemented in
2009 and 2010 will continue to generate favorable results, current economic
conditions could affect operating performance negatively during the remainder of
2010.
For more
information about Synalloy Corporation, please visit our web site at www.synalloy.com.
Safe
Harbor Statement under the Private Securities Litigation Reform Act of
1995
All
statements contained in this release that are not historical facts are
"forward-looking statements." The words "estimate," "project," "intend,"
"expect," "believe," "anticipate," "plan" 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,
customer delays or difficulties in the production of products, 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 and other risks detailed from time-to-time in Synalloy's
Securities and Exchange Commission filings. Synalloy Corporation assumes no
obligation to update the information included in this release.
Contact: Rick
Sieradzki at (864) 596-1558
2
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SYNALLOY CORPORATION
COMPARATIVE ANALYSIS
|
||||||||
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THREE
MONTHS ENDED
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Apr
3, 2010
|
Apr
4, 2009
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|
Net
sales
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|
Metals
Segment
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$ | 24,963,000 | $ | 22,627,000 | ||||
|
Specialty Chemicals Segment
|
10,238,000 | 7,766,000 | ||||||
| $ | 35,201,000 | $ | 30,393,000 | |||||
|
Operating
income
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||||||||
|
Metals
Segment
|
$ | 98,000 | $ | 774,000 | ||||
|
Specialty Chemicals Segment
|
1,086,000 | 490,000 | ||||||
| 1,184,000 | 1,264,000 | |||||||
|
Unallocated
expenses
|
||||||||
|
Corporate
|
562,000 | 692,000 | ||||||
|
Interest
and debt expense
|
2,000 | 105,000 | ||||||
|
Change in fair value of interest
|
||||||||
|
rate
swap
|
- | (49,000 | ) | |||||
|
Other
expense
|
(9,000 | ) | - | |||||
|
Income
from continuing
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||||||||
|
operations
before income taxes
|
629,000 | 516,000 | ||||||
|
Provision
for income taxes
|
229,000 | 175,000 | ||||||
|
Net
income from
|
||||||||
|
continuing
operations
|
400,000 | 341,000 | ||||||
|
Net
loss from
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||||||||
|
discontinued
operations
|
- | (147,000 | ) | |||||
|
Net
income
|
$ | 400,000 | $ | 194,000 | ||||
|
Net
income (loss) per basic common share:
|
||||||||
|
Continuing
operations
|
$ | .06 | $ | .05 | ||||
|
Discontinued
operations
|
$ | .00 | $ | (.02 | ) | |||
|
Net
income
|
$ | .06 | $ | .03 | ||||
|
Net
income (loss) per diluted common share:
|
||||||||
|
Continuing
operations
|
$ | .06 | $ | .05 | ||||
|
Discontinued
operations
|
$ | .00 | $ | (.02 | ) | |||
|
Net
income
|
$ | .06 | $ | .03 | ||||
|
Average
shares outstanding
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||||||||
|
Basic
|
6,271,788 | 6,249,357 | ||||||
|
Diluted
|
6,296,715 | 6,250,983 | ||||||
|
Backlog-Piping
Systems & Process Equipment
|
$ | 37,132,334 | $ | 41,007,000 | ||||
3
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Balance
Sheet
|
Apr
3, 2010
|
Jan
2, 2010
|
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|
Assets
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||||||||
|
Cash
|
$ | 1,884,000 | $ | 14,097,000 | ||||
|
Accounts
receivable, net
|
20,002,000 | 14,041,000 | ||||||
|
Inventories
|
31,120,000 | 25,504,000 | ||||||
|
Sundry
current assets
|
3,124,000 | 3,259,000 | ||||||
|
Total
current assets
|
56,130,000 | 56,901,000 | ||||||
|
Property,
plant and equipment, net
|
15,939,000 | 15,797,000 | ||||||
|
Other
assets
|
5,566,000 | 5,554,000 | ||||||
|
Total
assets
|
$ | 77,635,000 | $ | 78,252,000 | ||||
|
Liabilities
and shareholders' equity
|
||||||||
|
Accounts
payable
|
$ | 7,380,000 | $ | 6,582,000 | ||||
|
Accrued
expenses
|
5,899,000 | 6,195,000 | ||||||
|
Total
current liabilities
|
13,279,000 | 12,777,000 | ||||||
|
Other
long-term liabilities
|
2,753,000 | 2,754,000 | ||||||
|
Shareholders'
equity
|
61,603,000 | 62,721,000 | ||||||
|
Total
liabilities & shareholders' equity
|
$ | 77,635,000 | $ | 78,252,000 | ||||
4