Universal Stainless Reports Profitable Third Quarter 2009 Results
Oct 27, 2009
Universal Stainless Reports Profitable Third Quarter 2009 Results
Universal Stainless Reports Profitable Third Quarter 2009 Results
Cash flow from operations for the third quarter of 2009 totaled $10.0 million, an increase of 44% from the third quarter of 2008. Capital expenditures were $2.7 million including expenditures of $2.1 million for a melt shop upgrade project, which remains on time and on budget. At September 30, 2009, the Company had cash of $42.2 million, working capital of $97.1 million, and long-term debt of $11.5 million.
For the first nine months of 2009, sales were $98.2 million and the Company incurred a net loss of $3.9 million or $0.58 per share. This included a negative tax adjustment in the second quarter of $742,000, equivalent to $0.11 per diluted share, and unusual charges in the first quarter of $3.6 million equivalent to $0.53 per diluted share after-tax, in response to economic conditions. Before the tax adjustment and unusual charges, the Company's net income for the first nine months of 2009 was $408,000 or $0.06 per diluted share. In the first nine months of 2008, sales were $178.0 million and net income was $12.7 million, or $1.87 per diluted share.
President and CEO Dennis Oates commented: "Our ability to generate earnings and strong cash flow despite continued weak demand is due to the tight cost control and working capital management initiatives we began in the first quarter. At the same time, we have continued to execute our long-term plan including our melt shop investment, which has already improved yields on semi-finished products even though the project is not scheduled for completion until mid-2010.
"Each of our end markets remained challenged in the third quarter, although there were some signs of stabilization. Order entry continued to improve sequentially, rising 30% from the second quarter, but it was not sufficient to replenish our backlog, which totaled $33 million at September 30 compared with $38 million at the end of June. However, our backlogs of aerospace products increased for the first time since 2008. Our backlog of service center plate products also rose largely driven by increased automotive production and model changeover. We expect demand in the petrochemical and power generation markets will improve in 2010.
"We are further positioning ourselves to take advantage of opportunities that arise from stronger market demand as well as to capture additional market share. The most important part of this effort is maintaining our focus on unparalleled customer service, operational excellence and maintaining a strong balance sheet to permit strategic capital investment."
Segment Review
For the third quarter of 2009, the Universal Stainless & Alloy Products segment had sales of $21.7 million and operating income of $60,000, yielding an operating margin of 0.3% of sales. This compares with sales of $52.2 million and operating income of $3.3 million, or 6.3% of sales, in the third quarter of 2008. In the second quarter of 2009, sales were $26.9 million and operating income was $949,000, or 3.5% of sales.
Segment sales declined 59% from the third quarter of 2008 primarily due to a 49% decrease in tons shipped. Shipments to service centers, rerollers and forgers declined substantially from the 2008 third quarter offsetting a strong increase in shipments to OEMs. Segment sales decreased 19% from the second quarter of 2009 on 24% fewer tons shipped.
The Dunkirk Specialty Steel segment recorded sales of $8.5 million and operating income of $397,000 for the third quarter of 2009, yielding an operating margin of 4.7% of sales. This compares with sales for the third quarter of 2008 of $16.9 million and an operating loss of $172,000, which included the $586,000 charge for the relocation of the round bar finishing line and a $416,000 increase to the segment's LCM reserve. In the second quarter of 2009, sales were $10.2 million and the segment incurred an operating loss of $384,000.
Dunkirk's sales declined 50% from the third quarter of 2008 while tons shipped decreased 33% due to lower shipments to all customer categories and lower surcharges. Dunkirk's sales were 17% lower than in the second quarter of 2009 on a 23% decrease in tons shipped.
Webcast
A simultaneous Webcast of the Company's conference call discussing the third quarter of 2009, scheduled at 10:00 a.m. (Eastern) today, will be available on the Company's website at www.univstainless.com, and thereafter archived on the website.
About Universal Stainless & Alloy Products, Inc.
Universal Stainless & Alloy Products, Inc., headquartered in Bridgeville, Pa., manufactures and markets a broad line of semi-finished and finished specialty steels, including stainless steel, tool steel and certain other alloyed steels. The Company's products are sold to rerollers, forgers, service centers, original equipment manufacturers and wire redrawers. More information is available at www.univstainless.com.
Forward-Looking Information Safe Harbor
Except for historical information contained herein, the statements in this release are forward-looking statements that are made pursuant to the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, among others, risks associated with the receipt, pricing and timing of future customer orders, risks associated with significant fluctuations that may occur in raw material and energy prices, risks associated with the manufacturing process, labor and production yields, risks related to property, plant and equipment, and risks related to the ultimate outcome of the Company's current and future litigation and regulatory matters. The Company's actual results in future periods also may be impacted by various economic and market risk and uncertainties, many of which are beyond the Company's control. Certain of these risks and other risks are described in the Company's filings with the Securities and Exchange Commission (SEC) over the last 12 months, copies of which are available from the SEC or may be obtained upon request from the Company.
Universal Stainless Reports Profitable Third Quarter 2009 Results
Company Generates EPS of $0.05 on Sales of $25.3 Million Cash Flow from Operations in 3Q09 is $10.0 Million Cash Increases to $42.2 Million vs. Total Debt of $13.1 Million
BRIDGEVILLE, Pa., Oct. 27, 2009 -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) reported today that it achieved net income for the third quarter of 2009 of $312,000, or $0.05 per diluted share, on sales of $25.3 million. This compares with sales of $57.6 million and net income of $2.7 million, or $0.40 per diluted share, in the third quarter of 2008, which included a charge of $586,000, equivalent to $0.06 per diluted share, for the relocation of the Company's round bar finishing line.Cash flow from operations for the third quarter of 2009 totaled $10.0 million, an increase of 44% from the third quarter of 2008. Capital expenditures were $2.7 million including expenditures of $2.1 million for a melt shop upgrade project, which remains on time and on budget. At September 30, 2009, the Company had cash of $42.2 million, working capital of $97.1 million, and long-term debt of $11.5 million.
For the first nine months of 2009, sales were $98.2 million and the Company incurred a net loss of $3.9 million or $0.58 per share. This included a negative tax adjustment in the second quarter of $742,000, equivalent to $0.11 per diluted share, and unusual charges in the first quarter of $3.6 million equivalent to $0.53 per diluted share after-tax, in response to economic conditions. Before the tax adjustment and unusual charges, the Company's net income for the first nine months of 2009 was $408,000 or $0.06 per diluted share. In the first nine months of 2008, sales were $178.0 million and net income was $12.7 million, or $1.87 per diluted share.
President and CEO Dennis Oates commented: "Our ability to generate earnings and strong cash flow despite continued weak demand is due to the tight cost control and working capital management initiatives we began in the first quarter. At the same time, we have continued to execute our long-term plan including our melt shop investment, which has already improved yields on semi-finished products even though the project is not scheduled for completion until mid-2010.
"Each of our end markets remained challenged in the third quarter, although there were some signs of stabilization. Order entry continued to improve sequentially, rising 30% from the second quarter, but it was not sufficient to replenish our backlog, which totaled $33 million at September 30 compared with $38 million at the end of June. However, our backlogs of aerospace products increased for the first time since 2008. Our backlog of service center plate products also rose largely driven by increased automotive production and model changeover. We expect demand in the petrochemical and power generation markets will improve in 2010.
"We are further positioning ourselves to take advantage of opportunities that arise from stronger market demand as well as to capture additional market share. The most important part of this effort is maintaining our focus on unparalleled customer service, operational excellence and maintaining a strong balance sheet to permit strategic capital investment."
Segment Review
For the third quarter of 2009, the Universal Stainless & Alloy Products segment had sales of $21.7 million and operating income of $60,000, yielding an operating margin of 0.3% of sales. This compares with sales of $52.2 million and operating income of $3.3 million, or 6.3% of sales, in the third quarter of 2008. In the second quarter of 2009, sales were $26.9 million and operating income was $949,000, or 3.5% of sales.
Segment sales declined 59% from the third quarter of 2008 primarily due to a 49% decrease in tons shipped. Shipments to service centers, rerollers and forgers declined substantially from the 2008 third quarter offsetting a strong increase in shipments to OEMs. Segment sales decreased 19% from the second quarter of 2009 on 24% fewer tons shipped.
The Dunkirk Specialty Steel segment recorded sales of $8.5 million and operating income of $397,000 for the third quarter of 2009, yielding an operating margin of 4.7% of sales. This compares with sales for the third quarter of 2008 of $16.9 million and an operating loss of $172,000, which included the $586,000 charge for the relocation of the round bar finishing line and a $416,000 increase to the segment's LCM reserve. In the second quarter of 2009, sales were $10.2 million and the segment incurred an operating loss of $384,000.
Dunkirk's sales declined 50% from the third quarter of 2008 while tons shipped decreased 33% due to lower shipments to all customer categories and lower surcharges. Dunkirk's sales were 17% lower than in the second quarter of 2009 on a 23% decrease in tons shipped.
Webcast
A simultaneous Webcast of the Company's conference call discussing the third quarter of 2009, scheduled at 10:00 a.m. (Eastern) today, will be available on the Company's website at www.univstainless.com, and thereafter archived on the website.
About Universal Stainless & Alloy Products, Inc.
Universal Stainless & Alloy Products, Inc., headquartered in Bridgeville, Pa., manufactures and markets a broad line of semi-finished and finished specialty steels, including stainless steel, tool steel and certain other alloyed steels. The Company's products are sold to rerollers, forgers, service centers, original equipment manufacturers and wire redrawers. More information is available at www.univstainless.com.
Forward-Looking Information Safe Harbor
Except for historical information contained herein, the statements in this release are forward-looking statements that are made pursuant to the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, among others, risks associated with the receipt, pricing and timing of future customer orders, risks associated with significant fluctuations that may occur in raw material and energy prices, risks associated with the manufacturing process, labor and production yields, risks related to property, plant and equipment, and risks related to the ultimate outcome of the Company's current and future litigation and regulatory matters. The Company's actual results in future periods also may be impacted by various economic and market risk and uncertainties, many of which are beyond the Company's control. Certain of these risks and other risks are described in the Company's filings with the Securities and Exchange Commission (SEC) over the last 12 months, copies of which are available from the SEC or may be obtained upon request from the Company.
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share information)
(Unaudited)
CONSOLIDATED STATEMENT OF OPERATIONS
For the Quarter For the Nine-Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
---- ---- ---- ----
Net Sales
Stainless steel $ 18,622 $ 42,094 $ 78,032 $ 127,882
Tool steel 1,136 10,393 6,028 31,159
High-strength low alloy
steel 2,565 2,564 7,675 9,509
High-temperature alloy
steel 1,488 1,763 4,383 6,253
Conversion services 277 541 873 1,514
Other 1,198 284 1,244 1,649
--------- --------- --------- ---------
Total net sales 25,286 57,639 98,235 177,966
Cost of products sold 22,571 51,040 94,527 150,837
Selling and administrative
expenses 2,258 2,852 9,101 8,561
--------- --------- --------- ---------
Operating income (loss) 457 3,747 (5,393) 18,568
Interest expense (19) (26) (70) (81)
Other income 71 68 136 217
--------- --------- --------- ---------
Income (loss) before taxes 509 3,789 (5,327) 18,704
Income tax provision
(benefit) 197 1,063 (1,413) 5,985
--------- --------- --------- ---------
Net income (loss) $ 312 $ 2,726 $ (3,914) $ 12,719
========= ========= ========= =========
Earnings (loss) per share
- Basic $ 0.05 $ 0.41 $ (0.58) $ 1.90
========= ========= ========= =========
Earnings (loss) per share
- Diluted $ 0.05 $ 0.40 $ (0.58) $ 1.87
========= ========= ========= =========
Weighted average shares of
Common Stock outstanding
Basic 6,769,086 6,727,677 6,751,036 6,699,471
Diluted 6,818,040 6,832,070 6,751,036 6,807,699
MARKET SEGMENT INFORMATION
For the Quarter For the Nine-Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
---- ---- ---- ----
Net Sales
Service centers $ 8,393 $ 26,826 $ 39,042 $ 89,910
Forgers 7,778 14,299 31,169 34,459
Rerollers 1,940 9,532 9,904 30,011
Original equipment
manufacturers 4,980 3,751 13,176 14,987
Wire redrawers 720 2,406 2,827 5,467
Conversion services 277 541 873 1,514
Other 1,198 284 1,244 1,618
-------- -------- -------- --------
Total net sales $ 25,286 $ 57,639 $ 98,235 $177,966
======== ======== ======== ========
Tons shipped 5,562 10,808 22,010 33,998
======== ======== ======== ========
BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the Quarter For the Nine-Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
---- ---- ---- ----
Net Sales
Stainless steel $ 13,123 $ 29,168 $ 57,352 $ 85,379
Tool steel 1,096 10,161 5,835 29,863
High-strength low alloy steel 1,084 729 2,746 2,956
High-temperature alloy steel 514 818 1,641 2,316
Conversion services 152 329 546 982
Other 1,185 252 1,225 1,524
-------- -------- -------- --------
17,154 41,457 69,345 123,020
Intersegment 4,515 10,777 15,888 30,504
-------- -------- -------- --------
Total net sales 21,669 52,234 85,233 153,524
Material cost of sales 8,999 30,722 39,710 82,715
Operation cost of sales 11,060 16,314 41,651 51,040
Selling and administrative
expenses 1,550 1,933 6,777 5,940
-------- -------- -------- --------
Operating income (loss) $ 60 $ 3,265 $ (2,905) $ 13,829
======== ======== ======== ========
Dunkirk Specialty Steel Segment
For the Quarter For the Nine-Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
---- ---- ---- ----
Net Sales
Stainless steel $ 5,499 $ 12,926 $ 20,680 $ 42,503
Tool steel 40 232 193 1,296
High-strength low alloy steel 1,481 1,835 4,929 6,553
High-temperature alloy steel 974 945 2,742 3,937
Conversion services 125 212 327 532
Other 13 32 19 125
-------- -------- -------- --------
8,132 16,182 28,890 54,946
Intersegment 354 758 1,184 3,220
-------- -------- -------- --------
Total net sales 8,486 16,940 30,074 58,166
Material cost of sales 4,524 11,219 19,663 36,184
Operation cost of sales 2,857 4,974 10,575 14,622
Selling and administrative
expenses 708 919 2,324 2,621
-------- -------- -------- --------
Operating income (loss) $ 397 $ (172) $ (2,488) $ 4,739
======== ======== ======== ========
CONSOLIDATED BALANCE SHEET
Sept. 30, Dec. 31,
2009 2008
---- ----
Assets
Cash $ 42,172 $ 14,812
Accounts receivable, net 15,905 33,057
Inventory, net 42,544 63,222
Other current assets 8,694 8,239
-------- --------
Total current assets 109,315 119,330
Property, plant & equipment, net 69,355 62,626
Other assets 1,362 988
-------- --------
Total assets $180,032 $182,944
======== ========
Liabilities and Stockholders' Equity
Trade accounts payable $ 6,832 $ 19,350
Outstanding checks in excess of bank balance 885 540
Accrued employment costs 2,303 3,795
Current portion of long-term debt 1,620 403
Other current liabilities 583 421
-------- --------
Total current liabilities 12,223 24,509
Long-term debt 11,529 1,046
Deferred taxes 13,165 11,689
Other liabilities 189 --
-------- --------
Total liabilities 37,106 37,244
Stockholders' equity 142,926 145,700
-------- --------
Total liabilities and stockholders' equity $180,032 $182,944
======== ========
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Nine-month Period Ended September 30,
2009 2008
---- ----
Cash flows provided by operating activities:
Net income (loss) $ (3,914) $ 12,719
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization 3,583 3,030
Deferred income tax 1,015 191
Stock based compensation expense 766 591
Tax benefit from share-based payment arrangements (86) (534)
Changes in assets and liabilities:
Accounts receivable, net 17,152 (6,366)
Inventory, net 20,678 (4,852)
Trade accounts payable (12,518) 7,898
Accrued employment costs (1,492) (343)
Other, net 60 (487)
-------- --------
Cash flow provided by operating activities 25,244 11,847
-------- --------
Cash flow used in investing activities:
Proceeds from sale of fixed assets 60 --
Capital expenditures (10,304) (9,585)
-------- --------
Cash flow used in investing activities (10,244) (9,585)
-------- --------
Cash flows provided by financing activities:
Long-term debt issuance 12,000 --
Long-term debt repayments (30) (290)
Net change in outstanding checks in excess of
bank balance 345 (279)
Deferred financing costs (84) --
Proceeds from issuance of common stock 313 723
Tax benefit from share-based payment arrangements 86 534
-------- --------
Cash flow provided by financing activities 12,360 688
-------- --------
Net cash flow $ 27,360 $ 2,950
======== ========
CONTACT: Universal Stainless & Alloy Products, Inc.
Richard M. Ubinger, Vice President of Finance,
Chief Financial Officer and Treasurer
(412) 257-7606
Comm-Partners LLC
June Filingeri, President
(203) 972-0186
