Good day, ladies and gentlemen. And welcome to the Synalloy Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] I would now like to introduce your host for today’s conference, Mr. Craig Bram, President and CEO of Synalloy. Please go ahead.

Good morning, everyone. Welcome to Synalloy Corporation’s second quarter 2015 conference call. With me today is Dennis Loughran, our new CFO. In a challenging environment for our metal segment, we were pleased with our performance in Q2 and the first half of this year. Nickel prices were down 7% in Q2 and down 20% through the first six months of this year. Oil and gas low as $472 per pound in July, nickel was recovered recently to $495 per pound, but still remains well below the marginal cost of production. Inventory losses related to falling nickel price is totaled $2.32 million in Q2 and $3.12 million year-to-date. We expect continued inventory losses in Q3. WTI price has showed some strength in Q2 as they moved up to $60 per barrel level, but have recently fallen back to the $48 level. Achieving a level of stability above $60 per barrel will be important for all of our metal’s business units, but particularly for our tank storage and seamless carbon tube businesses. In comparing this year’s financial performance to last year, last year’s results will be for continuing operations only. As usual, the financial results will be presented using three different metrics. Number one, GAAP based EPS, number two, adjusted net income, our non-GAAP measure is defined in the earnings release, and number three, adjusted EBITDA, our non-GAAP measure also defined in the earnings release. Second quarter GAAP based earnings were $2.46 million or $0.28 per share, as compared with earnings of $5.78 million or $0.66 per share in the second quarter of 2014. Q2 of last year included a pre-tax gain of $3.48 million for the Palmer acquisition earn-out adjustment. Also Q2 of last year included an inventory loss of $60,000 as compared with the inventory loss of $2.32 million in…

Thank you. [Operator Instructions] And our first question comes from Kevin Maczka with BB&T Capital Markets. Your line is open.

Thanks. Kevin Maczka.

Hey Kevin. How are you?

Great. First question, can you maybe start with price, lot of talks here about price pressure or price mix anyway in various parts of the business, whether it’s on the pipe side in metals or the chemical side of the business. Can you say a little bit more about that? What your outlook is there on the price mix in second half?

Let me speak to the chemical side. We certainly have had good experience in the past and continued to have good experience, passing along the raw material prices. We look at that on a -- actually on an order-by-order basis. So we've had good success in maintaining what we referred to as our material margin, which is simply the selling price minus the material cost. And so while we have -- we have seen pressure on the price per pound that is a function of what’s going on with raw material costs. Our material margins have held up to the point where we’ve actually increased our EBITDA margins in the chemical segment this year over last year. On the metals side, basically we are talking about three different product lines there. On the tank storage side, we really have not seen any significant price pressure on the fiberglass tanks or steel tanks that we are selling at this point in time. On the carbon seamless product line, the pricing pressure has really been felt at the energy level. You may recall, we have two facilities in that selling carbon seamless too. One of those is in Ohio that's focused on the industrial markets, the pricing and the revenue of the product lines sold into that market has held up very nicely in Q2, as well as the first half of this year. The products that are being sold out of our Houston facility, I would say the pricing pressure has been fairly limited and that our material margins have held up, but it's the size of the orders overall have been diminished out of that facility in the second quarter. What we are seeing happening in that business is our distributor customers have run their inventories down to a level…

Okay. Got it. That’s all very helpful. Another question on the tank business down 40%. You mentioned the fire and the decline in oil prices impacting that. Is oil the bigger issue here? I’m just wondering if you can maybe parse through the contributions from each of those.

Yeah. Kevin, I would say that kind of when we started the year and we saw the direction of oil prices, that we had anticipated that our tanks storage business could see something in the neighborhood of a 25% to 30% reduction in topline. And I’d say that that the impact from the oil has kind of held true to that range. The increased shortfall in sales in Q2 to the 40% range was from the fiberglass shop being down for a good part of that time period. Starting in June, we were able to start building some tanks in other parts of the plant and we will be 100% operational. We are 100% operational as to the start of Q3 on fiberglass side. So, I guess that's a long way to answering the question together. 25% to 30% reduction in topline is the impact that I've seen from the decline in drilling activity out in West Texas.

Got it. And just finally for me. I’m just wondering if you can quantify anything in terms of your new outlook through the year. It sounds like there is puts and takes like always. There's been some good things going on, with some new product introductions coming out in the second half from a chemical side. But net-net, it sounds incrementally a bit more negative with the obvious pressures from oil and nickel. Can you maybe address what you’ve quantified before in terms of sales and EBITDA?

Our visibility on the metal side is diminished right now because of the points that you’ve made. If Nickel and WTI prices stay depressed, there's no question that I would see the metal side being less robust in the second half of this year versus the first half. On the chemical side, we do anticipate that both the topline and EBITDA will be improved over the first half of this year based on what we have in the pipeline. We did on an annualized run rate. In the chemical side, we shift about a 108 million pounds of product equivalent of a 108 million pounds annualized in the first half of this year. So if we can pick up another 8.5 million pounds, that’s a pretty sizeable pickup in the growth on the chemical business. I do expect that our seamless carbon sales into the energy sector will be improved over the second half -- excuse me over the first half of this year. Right now the big question mark for us is what BRISMET will do in the second half of the year. And can we see a pickup in some of our distributor customers doing some larger stock buys? They have been pretty timid in terms of the size of their orders, most recently in Q2 and we don’t have some of the large project orders that we’re working on in the first half of this year that helped BRISMET’s overall performance. So Kevin, I’d say the big question mark we have is BRISMET and the lack of visibility we have on the order book right now.

Okay. Got it. Thank you.

Thank you. Our next question comes from Todd Vencil with Sterne, Agee. Your line is open.

Hi, good morning, Craig.

Hey, Todd, how are you?

I am doing good.

Very good. Thanks.

Dennis, welcome aboard.

Thank you very much. Good to be here. Appreciate it.

Craig, circling up on Kevin’s last question. So you just said I think the big swing factor is going to be BRISMET. I mean, can you give us kind of a range of outcomes if nickel and WTI stay depressed versus if they recover a big? I mean, what’s the revenue sort of swing there?

Todd, I don’t have a clear number for you at this point. We could probably do some work on that. But to answer that question with any clarity, I would have to ask some insight into exactly what our distributor customers are thinking. And obviously, you can follow the activity with MRC and Shell England and some of those gas, those are distributors that we sell to on a regular basis. And they have been purposely trying to keep a fairly lean inventory. And what would cause that behavior to change I think would require an uptick in the nickel price in a trend that they believe was something they could bank along that, hey, it’s time to go out and make some significant buys before nickel prices get away from us. We keep reading about how nickel was going to go into a deficit position later this year. Obviously, that has not yet happened. There is still a ton of inventory in the LME storehouse. And I think demand generally has not lived upto the expectations that we had going into this year. So at this point, I think I would be really cowing a number for yet a thin air without having a little more insight on what our customers are thinking. But I think it’s clear from their behavior in the last several months that until they see a trend upward in nickel prices that they are going to kind of sit on their wallets.

Fair enough. And I guess last quarter you talked about consolidated topline of $210 million to $215 million, over a $100 million first half of the year. Fair to say that in order to hit that $210 million to $215 you are going to have to see that bounce in nickel.

That’s right.

Okay. Thanks for that. On the import situation, thanks for the color there, I was going to ask about that. Can you relative to a couple years ago when you went through this with the Southeast Asian manufacturers, kind of where are you in that process if you can -- I don’t know, namely a month in 2013 where you were sort of in this same situation -- sort of spring 2013?

Yes. Todd, we saw a couple of things. The imports particularly from India picked up in Q4 of last year and then they fell off in the first quarter of this year. So we were kind of at a position at that point that we thought well, it's not a deadlock that we could get something done based on the level of imports we saw in Q1. In Q2, those imports picked up quite a bit. And so I think we're at a point now where we started to feel some of the pressure in the early part of Q2 on our commodity pipe. And I’m talking primarily to 8 inch to 10 inch in diameter. We started feeling the presence of those imports more dramatically. And keep in mind that we had a lot of good project stuff that we were working on. So we were less concerned about it as long as we had that solid mix in the plan. But starting in the early parts of Q2, we started feeling the pressure of some of those imports in the buyers that we were seeing. And I’d say that we’re kind of in a mode where it gets similar to where we were with the Malaysian, Vietnamese and the imports from Thailand, in terms of both the quantity of imports, the funds that are coming in and the level of pricing that we are seeing. So, I think we’re reasonably encouraged at this point based on the data that we have in hand that we would be in a strong position if we decide to move forward.

Got it. All right. Thanks for that. And then just remind me, given all that color, what fraction of metals is BRISMET these days on the topline basis?

In terms of topline?

Yeah.

Yeah. The BRISMET operation, you can think of that as, including all of their pipe products with the exception of the heavy wall, which obviously is an up and going. That’s on an annualized run rate of, in the $90 million to $95 million range right now.

Got it. Perfect. And then I guess, if I'm thinking about what's most important there, would you rather see no change in WTI and a bounce in Nickel or the reverse?

I think I’d rather see a bounce in Nickel right now if I had to pick one.

Okay.

I’d like to see a bounce in both levels of the course.

All right. Okay. I think that’s got me. I was going to ask some questions about chemicals but I think you gave me enough to be dangerous but I don't want to go with that mission. And so I guess, we will count this is my mention. Thanks a lot.

Sure. Thanks.

Thank you. [Operator Instructions] And I’m showing no further questions in the queue. I would like to turn the call back to Craig Bram for any closing remarks.

All right, everybody. We appreciate your time this morning and hope that everyone's doing well. Thanks again.