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Universal Stainless Reports Second Quarter 2016 Results

Jul 27, 2016
  • Net Sales in the Second Quarter Total $41.0 Million, up 3.6% Sequentially
  • Gross Margin in the Second Quarter Improves to $4.3 million, or 10.6% of Sales
  • Cash Flow From Operating Activities in the Second Quarter Totals $5.2 Million
  • Net Loss in the Second Quarter Totals $0.11 per Diluted Share Versus a Net Loss per Diluted Share of $0.34 in the First Quarter of 2016

BRIDGEVILLE, Pa., July 27, 2016 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) today reported financial results for the second quarter of 2016 showing broad improvements over the first quarter of 2016.

Net sales for the second quarter of 2016 were $41.0 million, up 3.6% sequentially from the first quarter of 2016, with the increase driven primarily by sales to the Aerospace end market.  In the second quarter of 2015, net sales were $49.6 million.  For the first six months of 2016, net sales were $80.6 million, compared with $105.6 million in the same period of 2015. 

The Company's gross margin for the second quarter of 2016 improved to $4.3 million, or 10.6% of sales, compared with $1.3 million, or 3.4% of sales, in the first quarter of 2016.  The improvement reflects the benefit of productivity enhancements, as well as better alignment of customer surcharges and input commodity costs.  In the second quarter of 2015, gross margin was $5.2 million, or 10.5% of sales.

For the second quarter of 2016, the Company generated cash flow from operating activities of $5.2 million, primarily through improved operating results and lower working capital.  Capital expenditures for the second quarter were $0.9 million, and total debt was reduced by $5.1 million.          

The Company's net loss for the second quarter of 2016 was $0.8 million, or $0.11 per diluted share, improved from a net loss of $2.4 million, or $0.34 per diluted share, in the first quarter of 2016.  In the second quarter of 2015, the Company had a net loss of $0.4 million, or $0.05 per diluted share.

Backlog (before surcharges) at June 30, 2016 was $38.5 million, down 3.3% from $39.8 million at the end of the 2016 first quarter.  Shorter customer lead times have continued to keep the Company's backlog lower than normal.

Sales of premium alloys in the second quarter of 2016 totaled $3.8 million, or 9.2% of sales, compared with $4.2 million, or 8.6% of sales, in the second quarter of 2015.   Premium alloy sales in the first six months of 2016 were $7.8 million, or 9.7% of total sales, compared with $9.3 million, or 8.8% of total sales, in the same period of 2015.

Chairman, President and CEO Dennis Oates commented: "The return to double-digit gross profit margin was a key driver to our sequential profitability improvement and the generation of $5.2 million of cash flow from operations in second quarter. Improved operational productivity and better alignment of input commodity costs and surcharges have positioned us to have healthy incremental margins when demand further improves.    

"As expected, 2016 continues to be a transition year and is evolving with modest improvements in market demand.  However, demand is currently tempered by lingering economic uncertainty and short industry lead-times.

"As we start the second half of 2016, we remain fully focused on capturing opportunities in this recovering marketplace while continuing to advance the transformation of Universal Stainless through our move to higher value, higher margin premium alloys." 

Webcast

The Company has scheduled a conference call for today, July 27, at 10:00 a.m. (Eastern) to discuss second quarter 2016 results.  A simultaneous webcast will be available on the Company's website at www.univstainless.com, and thereafter archived on the website through the end of the third quarter of 2016.  

About Universal Stainless & Alloy Products, Inc.

Universal Stainless & Alloy Products, Inc., headquartered in Bridgeville, PA, manufactures and markets semi-finished and finished specialty steels, including stainless steel, nickel alloys, tool steel and certain other alloyed steels. The Company's products are used in a variety of industries, including aerospace, power generation, oil and gas, and heavy equipment manufacturing. Established in 1994, the Company, with its experience, technical expertise, and dedicated workforce, stands committed to providing the best quality, delivery, and service possible. 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, the concentrated nature of the Company's customer base to date and the Company's dependence on its significant customers; the receipt, pricing and timing of future customer orders; changes in product mix; the limited number of raw material and energy suppliers and significant fluctuations that may occur in raw material and energy prices; risks related to property, plant and equipment, including the Company's reliance on the continuing operation of critical manufacturing equipment; risks associated with labor matters; the Company's ongoing requirement for continued compliance with laws and regulations, including applicable safety and environmental regulations; the ultimate outcome of the Company's current and future litigation and matters; risks related to acquisitions that the Company may make; and the impact of various economic, credit and market risk uncertainties. Many of these factors are not within the Company's control and involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to be materially different from any future performance suggested herein.  Any unfavorable change in the foregoing or other factors could have a material adverse effect on the Company's business, financial condition and results of operations.  Further, the Company operates in an industry sector where securities values may be volatile and may be influenced by economic and other factors 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

-TABLES FOLLOW -

 
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except Per Share Information)
(Unaudited)
 
             
CONSOLIDATED STATEMENTS OF OPERATIONS
             
  Three months ended Six months ended
  June 30, June 30,
  2016 2015 2016 2015
Net Sales            
Stainless steel  $  30,172   $  36,955   $  59,449   $  81,353  
High-strength low alloy steel    3,784      4,154      7,563      9,432  
Tool steel    4,305      5,086      8,207      8,893  
High-temperature alloy steel    1,626      2,051      3,266      3,469  
Conversion services and other sales    1,143      1,364      2,139      2,446  
             
Total net sales    41,030      49,610      80,624      105,593  
             
Cost of products sold    36,691      44,424      74,944      94,697  
             
Gross margin    4,339      5,186      5,680      10,896  
             
Selling, general and administrative expenses    4,591      4,961      8,429      9,655  
             
Operating (loss) income    (252)    225      (2,749)    1,241  
             
Interest expense    (887)    (605)    (1,870)    (1,227)
Deferred financing amortization    (61)    (160)    (888)    (320)
Other (expense) income, net    (39)    11      (92)    (33)
             
Loss before income taxes    (1,239)    (529)    (5,599)    (339)
             
Benefit for income taxes    (437)    (173)    (2,357)    (108)
             
Net loss $  (802) $  (356) $  (3,242) $  (231)
             
Net loss per common share -Basic $  (0.11) $  (0.05) $  (0.45) $  (0.03)
Net loss per common share -Diluted $  (0.11) $  (0.05) $  (0.45) $  (0.03)
             
Weighted average shares of common            
stock outstanding            
Basic    7,196,891      7,061,545      7,179,746      7,058,026  
Diluted    7,196,891      7,061,545      7,179,746      7,058,026  




             
             
MARKET SEGMENT INFORMATION
             
  Three months ended Six months ended
  June 30,  June 30,
  2016 2015  2016  2015
Net Sales            
Service centers $ 29,817  $ 34,393  $ 57,331  $ 71,804 
Original equipment manufacturers   3,395    5,790    7,690    12,736 
Rerollers   3,281    4,162    6,496    10,819 
Forgers   3,394    3,901    6,968    7,788 
Conversion services and other sales   1,143    1,364    2,139    2,446 
             
Total net sales $ 41,030  $ 49,610  $ 80,624  $ 105,593 
             
Tons shipped   8,313    8,909    15,884    18,801 
             
MELT TYPE INFORMATION
             
  Three months ended Six months ended
  June 30, June 30,
  2016 2015 2016 2015
Net Sales            
Specialty alloys $ 36,108  $ 44,001  $ 70,644  $ 93,863 
Premium alloys *   3,779    4,245    7,841    9,284 
Conversion services and other sales   1,143    1,364    2,139    2,446 
             
Total net sales $ 41,030  $ 49,610  $ 80,624  $ 105,593 
             
END MARKET INFORMATION **
             
  Three months ended Six months ended
  June 30, June 30,
  2016 2015 2016 2015
Net Sales            
Aerospace $ 26,293  $ 30,379  $ 51,659  $ 64,140 
Power generation   3,427    5,074    6,924    12,398 
Oil & gas   2,834    4,113    6,179    10,214 
Heavy equipment   4,371    4,975    8,404    8,967 
General industrial, conversion services and other sales   4,105    5,069    7,458    9,874 
             
Total net sales $ 41,030  $ 49,610  $ 80,624  $ 105,593 
             

* Premium alloys represent all vacuum induction melted (VIM) products.

** The majority of our products are sold to service centers rather than the ultimate end market customers.  The end market information in this press release is our estimate based upon our knowledge of our customers and the grade of material sold to them, that they will in-turn sell to the ultimate end market customer.

       
       
 CONDENSED CONSOLIDATED BALANCE SHEETS
       
  June 30, December 31,
  2016 2015
Assets      
       
Cash $ 68  $ 112 
Accounts receivable, net   20,033    17,683 
Inventory, net   84,749    83,373 
Other current assets   2,585    2,584 
       
Total current assets   107,435    103,752 
Property, plant and equipment, net   188,246    193,505 
Other long-term assets1   84    45 
       
Total assets $ 295,765  $ 297,302 
       
Liabilities and Stockholders' Equity      
       
Accounts payable $ 18,539  $ 11,850 
Accrued employment costs   3,442    3,256 
Current portion of long-term debt   4,564    3,000 
Other current liabilities   934    640 
       
Total current liabilities   27,479    18,746 
Long-term debt1   67,036    72,884 
Deferred income taxes   18,301    20,666 
Other long-term liabilities   30    29 
       
Total liabilities   112,846    112,325 
Stockholders' equity   182,919    184,977 
       
Total liabilities and stockholders' equity $ 295,765  $ 297,302 
       
1Reflects the retrospective adoption of ASC 2015-3, "Simplifying the Presentation of Debt Issuance Costs" which resulted in the reclassification of $1,253 of deferred financing costs from other long-term assets to a reduction of debt at December 31, 2015 to be consistent with the current period presentation.


       
       
CONSOLIDATED STATEMENTS OF CASH FLOW
       
  Six months ended
  June 30,
  2016 2015
       
Operating activities:      
Net loss $  (3,242) $  (231)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Depreciation and amortization    9,147      9,181  
Deferred income tax     (2,365)    (2)
Write-off of deferred financing costs    768      - 
Share-based compensation expense    684      961  
Net gain on asset disposals    (349)    - 
Changes in assets and liabilities:      
Accounts receivable, net    (2,350)    (1,123)
Inventory, net    (2,141)    1,011  
Accounts payable    6,140      (5,831)
Accrued employment costs    186      (2,782)
Income taxes    265      (272)
Other, net    19      (1,039)
       
Net cash provided by (used in) operating activities    6,762      (127)
       
Investing activities:      
Capital expenditures    (1,736)    (5,819)
Proceeds from sale of property, plant and equipment    1,571      - 
       
Net cash used in investing activities    (165)    (5,819)
       
Financing activities:      
Borrowings under revolving credit facility    131,030      63,848  
Payments on revolving credit facility    (152,298)    (56,512)
Borrowings under term loan facility    30,000      - 
Payments on term loan facility, capital leases, and convertible notes    (15,171)    (1,500)
Payments of deferred financing costs    (702)    - 
Proceeds from the issuance of common stock    500      388  
       
Net cash (used in) provided by financing activities    (6,641)    6,224  
       
Net (decrease) increase in cash    (44)    278  
Cash at beginning of period    112      142  
       
Cash at end of period $  68   $  420  
       

 

CONTACTS: 

Dennis M. Oates	
Chairman, 
President and CEO
(412) 257-7609

Ross C. Wilkin	
VP Finance, CFO	
and Treasurer	
(412) 257-7662

Brian M. Rayle	
Managing Director
Libertatis Consulting
(440) 827-2019