Good day ladies and gentlemen and welcome to the Synalloy First 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] As reminder this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Craig Bram, President and CEO. Sir you may begin.

Good morning everyone. Welcome to Synalloy Corporation's first quarter 2016 conference call. With me today is Dennis Loughran, our CFO. For today's agenda, Dennis will provide a review of the first quarter financials and then I will offer some general comments about the quarter and the current climate for each of our business segments. Following my comments we'll open the call to questions. Dennis.

Hello everyone. As usual the financial results will be presented using three different methods. First, GAAP based earnings per share; second adjusted net income and non-GAAP measure as defined in the earnings release; and third adjusted EBITDA, a non-GAAP measure, also defined in the earnings release. First quarter GAAP based losses were $1.37 million or $0.16 per share as compared with earnings of $3.64 million or $0.42 per share in the first quarter of 2015. Significant differences in the year-over-year performance include; Q1 of this year had a pretax inventory loss of $1.12 million as compared with an inventory loss of $0.8 million in Q1 of last year. The lower cost or market adjustment for this year reduced the inventory loss by $0.97 million as compared to the LCM adjustment last year, increasing the inventory loss by $0.04 million. Q1 of this year included one-time adjustment and amortization of prior year manufacturing variances totaling $181,000. Q1 of last year included a pretax gain on the Palmer earn-out adjustment of $2.48 million. Q1 of last year also included $440,000 of acquisition-related expenses. First quarter non-GAAP adjusted net income was $0.04 million or less than half a penny per share, down 99% as compared with the adjusted net income of $2.93 million or $0.34 per share in the first quarter of 2015. First quarter non-GAAP adjusted EBITDA totaled $2.36 million or $0.27 per share, a decrease of 65% from the prior year's first quarter total of $6.77 million or $0.78 per share. The combined adjusted EBITDA margin for the operating businesses in the first quarter was 9.7%. This excludes the parent company cost. Term debt at the end of the first quarter was $25.1 million, on the line of credit was $6 million. Total net debt at the end of the Q1 was $30.8 million. As described in the earnings release at March 31, 2016, the company was not in compliance with one of its bank covenants. The total funded debt-to-EBITDA ratio covenant, primarily due to nickel price losses. The company obtained a waiver to the credit agreement and company [indiscernible] bank and the bank executed amendment was modified to total funded debt-to-EBITDA covenant definition to include the add back of nickel price losses for any future test periods. Based on current forecast and projections the company expects to remain in compliance with revised debt covenant calculations. The company has been aggressive in its cost cutting efforts over the past several quarters, labor manufacturing and SG&A expenses in Q1, 2016 were $2 million less than the same period last year. Headcount is down from 471 in Q1 2015 to 376 in Q1 2016. I’ll now turn the call back to Craig.

Let me start with some comments about the Metal segment. Sales of stainless steel pipe were down 31% from Q1, 2015 as project activity in last year’s quarter was very strong. Sales in the current quarter were in line with the last two quarters of 2015 as we anticipated in the 2016 plan. Total pounds shipped in the current quarter were down 8.5% in line with the domestic industries overall performance. We did see an increase in pounds shipped in the smaller diameter pipe as a result of the Indian dumping suit [ph]. Our six inch and smaller pipe shipments were up 13.5% over the prior year. However, pounds shipped of 12 inch and larger pipe were down 33% over the same period last year reflecting an absence of project work. On May 4th we had a preliminary ruling on the dumping duties that set the dumping duties at 19% and the countervailing duties at the 22% and 6%. So the total duty is between 21% and 25%. The stainless pipe operation has done a good job of aligning controllable cost with the level of business activity. Adjusted EBITDA margins for this product category were 14.1% in the current quarter down from 17.4% in the same period last year. Nickel prices and resulting surcharges appear to have stabilized. Assuming an average six months sales cycle from purchase of raw material to shipment of the finished pipe, we have seen 20 consecutive months of declining surcharges. Should surcharges in July hold at the current levels we will have the first price uptick in almost two years. With nickel breaking at above $4 per pound and visibility that pricing will hold we have increased booking activity in recent weeks. Bookings of stainless pipe in April exceeded $6 million, almost half of total…

Thank you. [Operator Instructions] Our first question comes from the line of Kevin Maczka of BB&T Capital Markets. Your line is now open. Please go ahead.

Thanks. Good morning.

Hi, Kevin. How are you?

Great. Craig, I guess when we look at Q1 and it sounds like you are feeling better about the rest of the year. We've got oil and nickle more cooperative, you've seen your stainless orders pick up, your chemical outlook for the back half of the year is better. I'm wondering if you could just give a little more color around your outlook for the year, has there been any notable change and kind of the cadence from here, do we see a somewhat material pick up even in Q2?

Kevin, we have not at this point updated the forecast for 2016. I think that's something that Dennis and I will probably do after we get Q2 in the books. But yes, there is no question that the second half in particular we feel much more optimistic about. Q2 we are seeing order activity pickup, particularly in the pipe category. We are also seeing some positive level of pick-up and increase in our seamless carbon business. So yes, generally the feeling is more optimism about the second-half of the year. The chemical business in particular this 14 million pounds of new product coming online is going to be very beneficial to their results and the chemical group really wasn’t too far off of the 2016 plan for the first quarter. And if we have had the lithium carbonate raw material for CRI they would have been right at plan if not slightly above plan. So we’re feeling good about it. We like to get the second quarter in the books and then we’ll revise the forecast at that point.

Okay, on the chemical side with the £14 million on new product coming we did in that segment a little over $12 million in sales this quarter. Can you talk about in dollar terms what that would mean in the second half, what kind of step up comes from that new product?

Dennis, do you have the chemical sales forecast for 2016. We’ll pull that up, Kevin. I think the sense is with these new pounds, and with the departure of some of those pounds that we’re going in-house, that we do expect the chemical gas to reach their plan for 2016. So we’ll pull that up and…

Net income -- net sales of $59 million.

Yes, so the net sales for the full year of $59 million.

We did $12.4 million in the first quarter and that would be an average of little over $15 million for the final three quarters.

Right.

Okay, great, great and on that point about customers taking some product back in house and seeing some other delays. Can you maybe give a little more color around that, does that bounce around, these customers taking things in house or outsourcing or is that something that a headwind, that’s new that’s not going away?

No, there’s always some of that taking place. You get net gains and net losses from certain customers. What we’re feeling most recently has to do specifically with some water products for a company called Solenis. Solenis was spun out of Ashland a couple of years ago and it was acquired by private equity group, Clayton, Dubilier and they had a very heavy presence in the oil and gas market. And so when those -- when the drilling activity slowed down, Solenis, some of the facilities that were serving the oil and gas industry, with those down hole chemicals, had a lot of unused capacity. So when that occurs the first thing they do is they look to bring some product in house. And so they did that with some water products that previously before the last two, three years would have been Ashland related product. So that over the course of about two years there was a significant amount of pounds, I don’t have the exact number in front of me, but it’s probably in the $12 billion to $14 billion range. And so that’s gradually -- they started pulling some of that product out in the fourth quarter of last year. They continued into the first quarter of this year and it should be wrapped up by the second quarter of this year.

Okay, separately Craig on the Heavy Wall project, it sounds like you’re having some success with running the test pipe now. I think you said the first real program is coming soon. Can you talk about when the first shipments are expected and how much that is expected to contribute this year? And then Dennis, if you have a similar forecast for the year for the Metal segment that you could share?

Yes, Kevin the second half of the year in our forecast we built about $3.5 million of true Heavy Wall work. And when I say true Heavy Wall work, one of the things that we’ve realized very quickly is that there’s pipe that we have historically run on the smaller press, that is lighter wall pipe, that when the Heavy Wall shop is has capacity we will actually start running some of that lighter wall pipe up on the heavy wall press simply because it's so much more efficient. Depending on the pipe diameter size it could take, the improved efficiency could be as much as eight to one on that new press. So there are types of pipe that we have historically taken to-date produced on the smaller press that we could complete in an hour on the new press. So when I talk about true heavy wall be in $3.5 million. That does not take into consideration running some lighter wall pipe at much greater efficiencies on that new press when we have capacity available here.

Okay, great. And was there -- is there a Metals forecast for the year that you can share, how you're thinking about that?

The -- similar to the Chemicals we haven't done an update of the numbers since we put the plan together back in the early fourth quarter. But we were looking for a little over $100 million for the Metals segment. We did by $24 million for the first quarter. So to achieve that, we'd have to have a little bit better run-rate on a quarterly basis than what we've achieved in the first quarter. Given the trends and things that seems to be reasonably -- I mean conservative kind of approach. So as Craig said at the end of the second quarter, we'll be providing an update for the full year in detail from the bottoms up. So we'll probably have little bit better view to it.

Okay, great. Thank you.

Thank you. [Operator Instructions] And our next question comes from the line of Bill Dezellem of Tieton Capital Management. Your line is now open. Please go ahead

Thank you. Relative to the heavy wall press, do you need to receive customer approval or some sort of qualification? Or is there just been assumption that once the pipe has made into distributor or sold to then that it's of proper quality?

Bill, this is Craig. There is no particular certification or accreditation associated with producing that Heavy Wall pipe. I mean certainly, we'll have customers come in, and we've actually have some customers come in already to look at the facility. And the quality obviously has to meet certain standards. But the quality level of what this machine produces is dramatically better than what the smaller press can do. Everything on this new press is computerized. Some of the guys joke a little bit internally that the old press is like working in the stone age as compared to the new press. So we've been really, really pleased with the level of quality of the pipe, even in the testing periods where we're going to get a lot better in terms of the art of producing this pipe as we get more experience. But the early runs if you go and look at -- Sal is that -- is some of these videos up from the annual meeting.

We don't have it yet, but we can.

We'll put some of those up on the website. But it really speaks to the level of quality that this press can produce.

Thank you. And then kind of continuing down this path, is there an awareness factor that you need to work on so that perspective customers know that you're providing Heavy Wall. Or it's just a small enough industry that, that awareness is already in place?

It is a relatively small industry, so there is some awareness. But we've already actually started putting out some very preliminary marketing pieces. We did a trade show in Dusseldorf, Germany. It's the pipe show which is conducted every two years, very well attended. So we've got several pieces that we put together for that. Our trade show booth kind of introduced the heavy wall capabilities. But we'll be doing more of that over the next several months.

Thank you.

Thank you. [Operator Instructions]. And I am showing no further questions at this time. I would now like to turn the call back over to Mr. Craig Bram for closing remarks.

As always, we thank you for your interest in Synalloy and appreciate you joining the call this morning. Thank you very much.