Synalloy Corp (SYNL) Q2 2021 Earnings Conference Call August 9, 2021 5:00 PM ET Company Participants Cody Cree - Gateway Group Ben Rosenzweig - Interim President & CEO Christopher Hutter - Interim President, CEO & Director Sally Cunningham - SVP & CFO Conference Call Participants Michael Hughes - SGF Capital Management Operator Good afternoon, everyone, and thank you for participating in today's conference call to discuss Synalloy's financial results for the second quarter ended June 30, 2021. Joining us to ...

Synalloy Corporation (SYNL) Q1 2021 Earnings Conference Call May 10, 2021 4:30 PM ET Company Participants Cody Cree - Investor Relations Christopher Hutter - Interim President & Chief Executive Officer Sally Cunningham - Chief Financial Officer Conference Call Participants Mike Hughes - SGF Capital Operator Good afternoon, everyone and thank you for participating in today's conference call to discuss Synalloy's Financial Results for the First Quarter Ended March 31, 2021. Joining us today are Synalloy's Int ...

Synalloy Corporation (SYNL) Q4 2020 Earnings Conference Call March 9, 2021 5:00 PM ET Company Participants Sally Cunningham - SVP and CFO Christopher Hutter - Interim CEO Sean Mansouri - IR Conference Call Participants David Secrid - Mike Hughes - SGF Capital Charles Gold - Truist Charles Neuhauser - Mainwall Investment Ronald Braam - Operator Good afternoon everyone. And thank you for participating in today’s conference call to discuss Synalloy's Financial Results for the Fourth Quarter and Full Year end ...

Financial Performance - Consolidated net sales for Q3 2020 were $59.3 million, a decrease of $14.4 million or 19.5% compared to Q3 2019[93] - The Metals Segment's net sales for Q3 2020 totaled $47.1 million, a decrease of $13.0 million or 21.7% from Q3 2019[96] - The Company recorded a net loss of $10.5 million for Q3 2020, compared to a net loss of $1.0 million for Q3 2019[94] - For the first nine months of 2020, consolidated net sales were $200.1 million, a decrease of $37.1 million or 15.6% compared to the same period in 2019[93] - The Metals Segment's net sales for the first nine months of 2020 totaled $159.8 million, a decrease of $36.0 million or 18.4% from the same period in 2019[96] - The company reported a net loss of $18.7 million for the first nine months of 2020, compared to a net loss of $2.1 million for the same period in 2019[121] Segment Performance - Specialty Chemicals Segment net sales for Q3 2020 totaled $12.2 million, a decrease of $1.3 million, or 9.9%, from Q3 2019[101] - Operating income for the Specialty Chemicals Segment increased by $0.2 million, or 25.4%, to $1.1 million in Q3 2020 compared to Q3 2019[103] - Metals Segment reported a net loss of $11,417 thousand for the three months ended September 30, 2020, compared to a net income of $1,671 thousand in the same period of 2019[113] - Adjusted EBITDA for the Metals Segment was $1,355 thousand, representing 2.9% of segment sales, down from $3,004 thousand and 5.0% in the prior year[113] - Specialty Chemicals Segment net income increased to $1,061 thousand for the three months ended September 30, 2020, compared to $846 thousand in the same period of 2019[114] - Adjusted EBITDA for the Specialty Chemicals Segment was $1,498 thousand, which is 12.3% of segment sales, up from $1,309 thousand and 9.7% in the prior year[114] Expenses and Profitability - Consolidated gross profit for Q3 2020 decreased 31.5% to $5.0 million, or 8.4% of sales, compared to $7.3 million, or 9.9% of sales in Q3 2019[94] - Consolidated selling, general, and administrative expenses decreased by $2.1 million to $6.3 million, or 10.6% of sales in Q3 2020[95] - Selling, general, and administrative expenses decreased by 20.6% to $4.0 million for Q3 2020 compared to $5.0 million in Q3 2019[100] - Unallocated corporate expenses decreased by $0.9 million, or 35.6%, to $1.5 million in Q3 2020 compared to $2.4 million in Q3 2019[105] Cash Flow and Liquidity - Cash balance decreased by $0.4 million to $0.2 million as of September 30, 2020, compared to $0.6 million at December 31, 2019[108] - Cash flows from operating activities decreased to $5,970 thousand for the nine months ended September 30, 2020, down from $17,927 thousand in the prior year[120] - Total cash used in financing activities was $(8,141) thousand for the nine months ended September 30, 2020, compared to cash provided of $4,105 thousand in the same period of 2019[120] - The company had $71.3 million of total borrowings outstanding as of September 30, 2020, down $4.2 million from the balance at December 31, 2019[125] - The current ratio was 3.9 at September 30, 2020, compared to 3.6 at December 31, 2019[131] Impairments and Adjustments - Non-cash goodwill impairment in the Metals Segment amounted to $10.7 million for Q3 2020[94] - Adjusted EBITDA for Q3 2020 was $1.64 million, representing 2.8% of sales[112] - Adjusted net loss for the three months ended September 30, 2020, was $(1,032) thousand, compared to $(739) thousand in the same period of 2019[117] Debt and Credit Facilities - The Company has a $100 million asset-backed revolving line of credit with a maturity date of December 21, 2021[125] - The long-term debt to capital ratio increased to 45% at September 30, 2020, from 41% at December 31, 2019[131] - The Company entered into multiple amendments to its Credit Agreement to address technical defaults related to the fixed charge coverage ratio[126] Shareholder Actions - The Company repurchased 59,617 shares at an average price of $10.65, totaling $636,940 in the nine months ended September 30, 2020[129] - As of September 30, 2020, the Company had 790,383 shares remaining under its stock repurchase authorization[127] Tax and Allowances - The effective tax rate for Q3 2020 was 19.4%, compared to 10.6% for Q3 2019[106] - The Company maintains an allowance for credit losses on accounts receivable, adjusting it based on current expected credit losses[135] Other Information - The Company anticipates continued lower customer demand in Q4 2020 compared to Q4 2019 due to the ongoing impacts of COVID-19[87] - The Company has no off-balance sheet arrangements that could materially affect its financial position[132] - No dividends were declared or paid by the Company in 2019[130] - The Company had a minimum fixed charge coverage ratio of 1.47 and a minimum tangible net worth of $67.7 million as of September 30, 2020[126] - The return on average equity was (10.8)% at September 30, 2020, compared to (2.9)% at December 31, 2019[131]

Synalloy Corporation (SYNL) Q3 2020 Earnings Conference Call November 9, 2020 9:00 AM ET Company Participants Craig C. Bram - President and CEO Sally M. Cunningham - SVP and CFO Christopher Hutter - Board Member Conference Call Participants Unidentified Analyst - Private Investor Operator Ladies and gentlemen, thank you for standing by and welcome to the Synalloy's Third Quarter 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, th ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the period ended June 30, 2020, reflect a decline in total assets and shareholders' equity, a significant net loss, and negative operating cash flow [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2020, total assets decreased to **$251.4 million** from **$257.2 million**, while shareholders' equity declined to **$98.1 million** due to net losses Condensed Consolidated Balance Sheets Summary (in thousands) | Balance Sheet Items (in thousands) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $147,687 | $147,115 | | **Total Assets** | $251,424 | $257,197 | | **Total Current Liabilities** | $40,109 | $40,578 | | **Total Liabilities** | $153,367 | $150,686 | | **Total Shareholders' Equity** | $98,057 | $106,511 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2020, net sales fell to **$66.1 million**, resulting in a **$7.0 million** net loss, exacerbated by **$6.1 million** in asset impairments and **$2.7 million** in proxy contest costs Condensed Consolidated Statements of Operations Summary (in thousands) | Statement of Operations (in thousands) | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $66,136 | $78,778 | $140,833 | $163,582 | | **Gross Profit** | $4,361 | $7,838 | $11,512 | $16,522 | | **Operating (Loss) Income** | $(10,674) | $573 | $(11,602) | $17 | | **Net Loss** | $(6,957) | $(262) | $(8,135) | $(1,189) | | **Diluted Loss Per Share** | $(0.77) | $(0.03) | $(0.90) | $(0.13) | - Significant expenses in Q2 2020 included **$2.7 million** in proxy contest costs and **$6.1 million** in asset impairments, which were not present in 2019[9](index=9&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For H1 2020, net cash used in operating activities was **$0.2 million**, a significant downturn from the **$13.2 million** provided in the prior year, while investing activities provided **$0.8 million** Condensed Consolidated Statement of Cash Flows Summary (in thousands) | Cash Flow Activities (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(173) | $13,225 | | Net cash provided by (used in) investing activities | $798 | $(23,232) | | Net cash provided by financing activities | $161 | $7,810 | | **Increase (Decrease) in cash** | **$786** | **$(2,197)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the adoption of new accounting standards, a **$6.1 million** asset impairment, a goodwill impairment risk, a technical debt covenant default, and **$2.9 million** in proxy contest costs - The company adopted ASU 2016-13 (Credit Losses), recording a cumulative effect adjustment of **$0.4 million** to Retained Earnings on January 1, 2020[20](index=20&type=chunk) - Due to the COVID-19 pandemic's impact, the company recorded asset impairment charges of **$6.1 million** related to its Palmer business, writing down inventory and long-lived assets[37](index=37&type=chunk) - A goodwill impairment test for the Welded Pipe & Tube reporting unit concluded no impairment was necessary, but the estimated fair value exceeded its carrying value by only **1.7%**, indicating it is at risk[42](index=42&type=chunk) - The company experienced a technical default on its fixed charge coverage ratio covenant as of June 30, 2020, which was addressed through two amendments to its Credit Agreement in July and August 2020[49](index=49&type=chunk)[84](index=84&type=chunk) - Total costs incurred relating to a proxy contest with Privet Fund Management and UPG Enterprises were **$2.9 million** for the six months ended June 30, 2020[82](index=82&type=chunk)[83](index=83&type=chunk) [Management's Discussion and Analysis (MD&A)](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **16.0%** decline in Q2 2020 consolidated net sales primarily to the Metals Segment, while the Specialty Chemicals Segment showed resilience, despite a technical debt covenant default and identified material weakness in internal controls [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Consolidated net sales for Q2 2020 fell **16.0%** to **$66.1 million**, leading to a **$7.0 million** net loss, primarily due to asset impairments, proxy contest costs, and metal pricing losses, though Specialty Chemicals operating income more than doubled Segment Performance Summary (in millions) | Performance Summary | Q2 2020 | Q2 2019 | | :--- | :--- | :--- | | **Consolidated Net Sales** | $66.1M | $78.8M | | **Consolidated Net Loss** | $(7.0)M | $(0.3)M | | **Metals Segment Sales** | $52.0M | $64.5M | | **Metals Segment Operating (Loss)/Income** | $(9.2)M | $1.2M | | **Specialty Chemicals Segment Sales** | $14.1M | $14.3M | | **Specialty Chemicals Segment Operating Income** | $2.0M | $0.9M | - The decline in the Metals Segment was most severe in fiberglass and steel liquid storage tanks, with sales dropping **89.9%** in Q2 2020 vs Q2 2019 due to the curtailment of operations and the downturn in the oil and gas industry[96](index=96&type=chunk) - The Specialty Chemicals Segment's strong performance was driven by increased production of hand sanitizer and cleaning aids, along with cost-cutting initiatives that improved margins and lowered manufacturing costs[102](index=102&type=chunk)[103](index=103&type=chunk) [Non-GAAP Financial Measures](index=27&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like EBITDA and Adjusted EBITDA, with consolidated Adjusted EBITDA for Q2 2020 at **$1.9 million**, down from **$3.4 million** in Q2 2019, primarily due to the Metals Segment decline Adjusted EBITDA Summary (in thousands) | Adjusted EBITDA (in thousands) | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | **Consolidated Adjusted EBITDA** | $1,947 | $3,408 | $4,587 | $8,175 | | **Metals Segment Adjusted EBITDA** | $450 | $3,645 | $3,749 | $9,046 | | **Specialty Chemicals Segment Adjusted EBITDA** | $2,450 | $1,322 | $3,379 | $2,375 | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity was impacted by a **$13.4 million** decrease in cash from operations in H1 2020, a technical debt covenant default that was subsequently cured, and **$0.6 million** in stock repurchases - Cash from operating activities decreased by **$13.4 million** in H1 2020 compared to H1 2019, primarily due to changes in working capital[119](index=119&type=chunk)[120](index=120&type=chunk) - The company notified its bank of a technical default on its fixed charge coverage ratio, which was addressed by amending the credit agreement to adjust the ratio's calculation to include proxy contest costs and the Palmer asset impairment charge[124](index=124&type=chunk)[126](index=126&type=chunk) - During H1 2020, the company purchased **59,617** shares under its stock repurchase program for an aggregate amount of **$0.6 million**[77](index=77&type=chunk)[128](index=128&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reported no material quantitative or qualitative changes in its market risk exposure since the filing of its Annual Report on Form 10-K for the year ended December 31, 2019 - There have been no material changes in market risk exposure since the end of fiscal 2019[136](index=136&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of June 30, 2020, due to a material weakness in the control environment, for which a remediation plan is being developed - The CEO and CFO concluded that disclosure controls and procedures were not effective as of the end of the quarter[137](index=137&type=chunk) - A material weakness was identified in the company's control environment, stemming from aggregated control deficiencies including improper management tone and delays in reporting a whistleblower complaint to the Audit Committee[140](index=140&type=chunk) - A remediation plan is in development, which includes leadership training, aligning job descriptions, improving the ethics hotline process, and enhancing transition processes for new executives and audit committee members[141](index=141&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions in the ordinary course of business, with no material changes since the 2019 year-end report, and believes outcomes will not have a material adverse effect - There were no material changes in legal proceedings from those disclosed in the Annual Report on Form 10-K for the period ending December 31, 2019[145](index=145&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) The company added several new risk factors, highlighting potential adverse impacts from recent leadership transitions, asset impairment risks, ongoing COVID-19 effects, and potential disruption from activist shareholders - New risk factors were added concerning the management of leadership transitions, including a new CFO and three new Board members[146](index=146&type=chunk) - The company identified a risk of impairment to the carrying value of fixed assets, intangible assets, or goodwill, which could adversely affect financial results[147](index=147&type=chunk) - A significant new risk factor relates to the adverse effects of global pandemics, specifically COVID-19, on business, financial condition, and cash flows[148](index=148&type=chunk) - The potential for negative impacts from the actions of activist shareholders was added as a risk factor[152](index=152&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including amendments to the Rights Agreement and Loan Agreement, CEO/CFO certifications, and XBRL data files - Key exhibits filed include the Third and Fourth Amendments to the company's Loan Agreement with Truist Bank, which addressed the technical debt covenant default[155](index=155&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to SEC rules were filed as exhibits[155](index=155&type=chunk)