Ascent Industries Co. · NASDAQ:ACNT
Ascent Industries — Synalloy — Midwest IDEAS Investor Conference 2018
33 slides from Ascent Industries's conference presentation, Aug 31, 2018
Slide 1: Midwest IDEAS Investor Conference August 30, 2018
Midwest IDEAS Investor Conference August 30, 2018
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation 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”, "bel
Slide 3: Non-GAAP Financial Information
Non-GAAP Financial Information Statements included in this presentation include non-GAAP (Generally Accepted Accounting Principles) measures and should be read along with the accompanying Appendix 1, which provides a reconciliation of non-GAAP measures to GAAP measures. Adjusted Net Income (Loss) an
Slide 4: Important Note
IMPORTANT NOTE Throughout this presentation, “EBITDA” means Adjusted EBITDA as defined and reported by Synalloy.
Slide 5: Presenters
PRESENTERS Craig C. Bram – CEO & President Synalloy Board Member since 2004 CEO & President since January 2011 Dennis Loughran – SVP & CFO Joined Synalloy in 2015 Previous: Citadel Plastics (CFO), Rogers Corporation (CFO), Alcoa, Reynolds Metals
Slide 6: Today's Discussion
TODAY’S DISCUSSION Company Overview Financial Performance Investment Opportunity
Slide 7: Company Overview
Synalloy Company Overview
Slide 8: Holding Co. Focused on Manufacturing & Distribution
HOLDING CO. FOCUSED ON MANUFACTURING & DISTRIBUTION Munhall, PA Specialty Seamless Mineral Ridge, OH Carbon Steel Welded Pipe and Pipe & Tube Tube (Stainless Bristol, TN Steel, Alloy & Liquid Galvanized ) Storage Tanks & Cleveland, TN Pressure Vessels Andrews, TX Fountain Inn, SC Specialty Houston,
Slide 9: Synalloy Growth Since June 2011
SYNALLOY GROWTH SINCE JUNE 2011 Aug 2012 Acquired Palmer Aug 2013 of Texas Acquired CRI Tolling Nov 2014 Mar 2017 Acquired Specialty Acquired Munhall Stainless Steel Pipe & Pipe & Tube Tube 2011 2012 Jul 2018 2013 Acquired Munhall 2014 Galvanized Pipe & Tube, Launched Ornamental Jun 2011 2015 Launch
Slide 10: Welded Pipe & Tube (Stainless Steel, Alloy & Galvanized)
WELDED PIPE & TUBE (STAINLESS STEEL, ALLOY & GALVANIZED) Manufacturer “BRISMET” Founded in 1946; Acquired in 2014 Synalloy’s Legacy Metals Business March 2017 - Expanded Stainless Capability with acquisition of Marcegaglia – Stainless July 1, 2018 – Acquired Marcegaglia Galvanized Operations July 1,
Slide 11: Liquid Storage Tanks & Pressure Vessels
LIQUID STORAGE TANKS & PRESSURE VESSELS Manufacturer “Palmer of Texas” Founded in 1987; Acquired in 2012 Differentiated by: One-stop for steel tanks, fiberglass tanks, and ASME code vessels; semi-automated line for 21’6” diameter steel tanks; API quality certified; Permian Basin location Markets: Oi
Slide 12: Specialty Seamless Carbon Steel Pipe & Mechanical Tubing
SPECIALTY SEAMLESS CARBON STEEL PIPE & MECHANICAL TUBING Master Distributor “Specialty Pipe & Tube” Founded in 1964; Acquired in 2014 Differentiated by: The go-to provider for large diameter, heavy wall hot finish seamless carbon steel pipe & tube; Immediate availability of long lead-time items; Ful
Slide 13: Specialty Chemicals Products
SPECIALTY CHEMICALS PRODUCTS Manufacturing and Product Development “Manufacturers Chemicals” “CRI Tolling” Founded in 1919; Acquired in 1996 Founded in 1993; Acquired in 2013 Synalloy’s Legacy Chemicals Business Differentiated by: Expertise in surfactants, defoamers, lubricants and other widely appl
Slide 14: Largest Institutional Shareholders
LARGEST INSTITUTIONAL SHAREHOLDERS (as of 6/30/18) Holder Shares % of Outstanding Privet Fund Management 960,948 10.9% Royce & Associates 943,783 10.7% BlackRock 505,910 5.7% Century Management 479,374 5.4% Dimensional Fund Advisors 421,815 4.8% Markel Corp 414,804 4.7% Vanguard Group 312,160 3.5% 2
Slide 15: Financial Performance
Synalloy Financial Performance
Slide 16: Metals Segment Revenue
METALS SEGMENT REVENUE* Revenue (in millions) 16.2% CAGR * Excluding discontinued Fabrication Division 16
Slide 17: Metals Segment EBITDA
METALS SEGMENT EBITDA* EBITDA ** * Excluding discontinued Fabrication Division ** Compared to prior periods, 2017 and forward reduced by $1.1 million as result of Sale Lease Back transaction in 2016 17
Slide 18: Chemicals Segment Revenue
CHEMICALS SEGMENT REVENUE Revenue (in millions) 4.0% CAGR 18
Slide 19: Chemicals Segment EBITDA
CHEMICALS SEGMENT EBITDA EBITDA * * Compared to prior periods, 2017 and forward reduced by $0.8 million as result of Sale Lease Back transaction in 2016 19
Slide 20: Synalloy EBITDA
SYNALLOY EBITDA (excluding discontinued Fabrication Division) EBITDA * * Compared to prior periods, 2017 and forward reduced by $1.9 million as result of Sale Lease Back transaction in 2016 20
Slide 21: Projected 2018 Financial Metrics
PROJECTED 2018 FINANCIAL METRICS (at year-end) EBITDA $37MM Net Debt $43.8MM Net Debt to EBITDA 1.44x Book Value $107.1MM BV per share $12.06 Tangible Book Value $88.5MM TBV per share $9.96 Balance Sheet Remains Strong; Sufficient Liquidity for Organic and Acquisitive Growth Plans 21
Slide 22: Earnings Potential
EARNINGS POTENTIAL Nickel prices Nickel depressed/ Stable for declining 5+ Months Pro Forma Annual EBITDA Infrastructure Pipe distributors With Nickel Neutral destocking spend at (in millions) normalized levels Infrastructure Pipe product mix spend weak includes higher component of Pipe product mix
Slide 23: Earnings Potential Components
EARNINGS POTENTIAL EARNINGS POTENTIAL COMPONENTS 2018 to 2021 (in Millions) 23
Slide 24: Investment Opportunity
Synalloy Investment Opportunity
Slide 25: Value Creation – Organic Growth Potential
VALUE CREATION – ORGANIC GROWTH POTENTIAL • Infrastructure spending driving improved product mix at Bristol Metals • Capital spending in downstream energy markets returns after recessionary levels of 2015- 2017 • U.S. Chemical Industry projects annual capital spending of $45-$48 billion annually thr
Slide 26: Value Creation – Acquisitive Growth
VALUE CREATION – ACQUISITIVE GROWTH • Bolt-on acquisitions available in both the Metals and Chemicals Segments • Targeting other public micro-caps for acquisition • Goal is to complete at least one acquisition each year 26
Slide 27: Acquisitive Growth
ACQUISITIVE GROWTH Five Acquisitions Since Aug 2012 Each EBITDA-Accretive in Year One Purchase Price 2018 EBITDA $90MM $23MM (Includes only 6mth of (including earn-out potential) Galvanized Acq.) 1.44x Net Debt to EBITDA (projected year-end 2018) Active and disciplined in M&A; Committed to balance s
Slide 28: Acquisition of Marcegaglia Galvanized & Expansion into Ornamental Market
ACQUISITION OF MARCEGAGLIA GALVANIZED & EXPANSION INTO ORNAMENTAL MARKET • Completed Acquisition – July 1, 2018 • Synalloy investment - $14.5 million, primarily for equipment, working capital and earn out • Completes entry into small diameter pipe market in NA, with existing galvanized portfolio and
Slide 29: Margin Contribution – Current Projection
MARGIN CONTRIBUTION – CURRENT PROJECTION 2018 EBITDA Legacy Businesses Composition & Margin Acquisitions* (Continuing Operations) (Since 2011) 14.8% EBITDA Margin 15.1% EBITDA Margin (up from 8.9% in 2011) 54% of Total EBITDA 46% of Total EBITDA * 2018 Projected assuming ½ year of Galvanized 29
Slide 30: Margin Contribution – With Organic Growth
MARGIN CONTRIBUTION – WITH ORGANIC GROWTH 2021 PROJECTED EBITDA Legacy Businesses Composition & Margin Acquisitions (Continuing Operations) (Since 2011) 14.0% EBITDA Margin 13.8% EBITDA Margin (up from 8.9% in 2011) 56% of Total EBITDA 44% of Total EBITDA 30
Slide 31: Enterprise Value & EV to EBITDA
ENTERPRISE VALUE & EV to EBITDA 2018 2021 2014* 2015* 2016* 2017* Projected ** Projected *** EBITDA (As Reported Ex Disc Ops) $ 21.76 $ 11.87 $ 2.06 $ 12.55 $ 37.00 $ 42.50 Annual High Stock Price $ 18.84 $ 18.49 $ 11.70 $ 15.30 $ 24.55 $ 35.68 Proj at 7.5x EV/EBITDA Year-End Market Cap in Millions
Slide 32: Appendix 1: Reconciliation of Forecasted 2018 and 2021 Net Income to Adjusted EBITDA
Appendix 1: Reconciliation of Forecasted 2018 and 2021 Net Income to Adjusted EBITDA
Slide 33: Reconciliations of Net Income to Adjusted EBITDA
RECONCILIATIONS OF NET INCOME TO ADJUSTED EBITDA (unaudited) 2018 Forecast 2021 Forecast Consolidated Net income $ 17,020,000 $ 24,504,000 Adjustments: Interest expense 1,741,000 599,000 Income taxes 4,688,000 6,872,000 Depreciation 6,408,000 7,071,000 Amortization 2,336,000 2,366,000 EBITDA $ 32,19