Universal Stainless Reports Strong 2005 Third Quarter Results
Oct 20, 2005
Universal Stainless Reports Strong 2005 Third Quarter Results
Universal Stainless Reports Strong 2005 Third Quarter Results- Quarterly earnings per share reach $0.51 on sales of $43 million -
BRIDGEVILLE, Pa., Oct. 20, 2005 -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) reported today that sales for the third quarter of 2005 rose 29% to $43.1 million compared with $33.3 million in the same period of 2004. Third quarter 2005 net income rose 20% to $3.3 million, or $0.51 per diluted share. This compares with $2.7 million, or $0.43 per diluted share, reported in the third quarter of 2004, which included other income of $565,000, or $0.06 per diluted share related to the delayed receipt of prior year import duties. Third quarter 2005 net income rose 38% from the 2004 third quarter before including the other income in that quarter.
The Company's third quarter 2005 results were in line with its forecast of sales in the range of $40 to $45 million and exceeded the diluted EPS forecasted range of $0.45 to $0.50.
President and CEO Mac McAninch commented: "We are very pleased with our continued progress which brought year-to-date sales to $128 million, 6% ahead of total sales for all of 2004, which was a record year for our Company. This progress has been driven by strong demand in our aerospace, power generation, petrochemical and tool steel markets. Customer acceptance of our pricing initiatives, which have been necessary in the current cost environment, has allowed us to maintain our margins. As a result, the operating income we have achieved year to date is 49% ahead of the total operating income we realized for full year 2004."
Mr. McAninch continued: "We are progressing with our current capital investment commitments. The new vacuum arc remelt (VAR) furnace in our Bridgeville, PA facility should be operational in November."
Segment Review
In the third quarter of 2005, the Universal Stainless & Alloy Products segment had sales of $40.0 million and operating income of $4.0 million, yielding an operating margin of 10%. This included a write-off of $363,000 mainly for the retirement of fixed assets replaced or being replaced. The operating margin is in line with the level achieved in the 2005 second quarter when sales were $37.2 million and operating income was $3.6 million. In the third quarter of 2004, sales were $31.2 million and operating income was $2.9 million, or 9% of sales.
The 28% increase in sales compared with the 2004 third quarter reflects higher product prices, offset by lower shipments of low margin products to rerollers and lower revenues generated from conversion services. Third quarter 2005 sales were 8% higher than the prior quarter. The increase in operating income compared to both prior periods reflects the improved mix of product shipped.
The Dunkirk Specialty Steel segment reported record sales of $14.0 million. Operating income was $1.8 million, resulting in an operating margin of 13%. These results compare with sales of $9.5 million and operating income of $1.2 million, or 12% of sales, in the third quarter of 2004. In the second quarter of 2005, sales were $12.4 million and operating income was $1.8 million, or 15% of sales.
Dunkirk's sales, which increased 48% over the 2004 third quarter, also benefited from higher selling prices on a 9% increase in shipments. Operating income increased 51% over the third quarter of 2004 on increased shipments, improvements in pricing and the elimination of products and product lines that did not meet the Company's profitability criteria. Dunkirk's sales were 13% higher than the 2005 second quarter mainly due to higher selling prices resulting from higher material costs. Operating income was 4% lower than the prior quarter of 2005 due to the mix of products shipped.
Business Outlook
The following statements are based on the Company's current expectations. These statements are forward-looking, and actual results may differ materially.
The Company estimates that fourth quarter 2005 sales will range from $33 to $38 million and that diluted EPS will range from $0.37 to $0.42. This compares with sales of $37.0 million and diluted EPS of $0.40 in the fourth quarter of 2004, which included other income of $0.05 per diluted share from 2004 import duties and a bad debt charge equivalent to $0.03 per diluted share. The 2005 fourth quarter EPS estimate does not include any income from import duties that may be received by the Company related to the Continued Dumping and Subsidy Act of 2000 for the current year.
The following factors were considered in developing these estimates:
Webcast
A simultaneous Webcast of the Company's conference call discussing the third quarter of 2005 and the fourth quarter outlook, 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. A telephone replay of the conference call will be available beginning at 12:00 noon (Eastern) today and continuing through October 27th. It can be accessed by dialing 706-645-9291, passcode 1153927. This is a toll call.
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.
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 resolution of the labor issues at the Titusville, PA facility, 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 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. 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 Strong 2005 Third Quarter Results
- Quarterly earnings per share reach $0.51 on sales of $43 million -
- Full year sales to reach new company record -
BRIDGEVILLE, Pa., Oct. 20, 2005 -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) reported today that sales for the third quarter of 2005 rose 29% to $43.1 million compared with $33.3 million in the same period of 2004. Third quarter 2005 net income rose 20% to $3.3 million, or $0.51 per diluted share. This compares with $2.7 million, or $0.43 per diluted share, reported in the third quarter of 2004, which included other income of $565,000, or $0.06 per diluted share related to the delayed receipt of prior year import duties. Third quarter 2005 net income rose 38% from the 2004 third quarter before including the other income in that quarter. The Company's third quarter 2005 results were in line with its forecast of sales in the range of $40 to $45 million and exceeded the diluted EPS forecasted range of $0.45 to $0.50.
President and CEO Mac McAninch commented: "We are very pleased with our continued progress which brought year-to-date sales to $128 million, 6% ahead of total sales for all of 2004, which was a record year for our Company. This progress has been driven by strong demand in our aerospace, power generation, petrochemical and tool steel markets. Customer acceptance of our pricing initiatives, which have been necessary in the current cost environment, has allowed us to maintain our margins. As a result, the operating income we have achieved year to date is 49% ahead of the total operating income we realized for full year 2004."
Mr. McAninch continued: "We are progressing with our current capital investment commitments. The new vacuum arc remelt (VAR) furnace in our Bridgeville, PA facility should be operational in November."
Segment Review
In the third quarter of 2005, the Universal Stainless & Alloy Products segment had sales of $40.0 million and operating income of $4.0 million, yielding an operating margin of 10%. This included a write-off of $363,000 mainly for the retirement of fixed assets replaced or being replaced. The operating margin is in line with the level achieved in the 2005 second quarter when sales were $37.2 million and operating income was $3.6 million. In the third quarter of 2004, sales were $31.2 million and operating income was $2.9 million, or 9% of sales.
The 28% increase in sales compared with the 2004 third quarter reflects higher product prices, offset by lower shipments of low margin products to rerollers and lower revenues generated from conversion services. Third quarter 2005 sales were 8% higher than the prior quarter. The increase in operating income compared to both prior periods reflects the improved mix of product shipped.
The Dunkirk Specialty Steel segment reported record sales of $14.0 million. Operating income was $1.8 million, resulting in an operating margin of 13%. These results compare with sales of $9.5 million and operating income of $1.2 million, or 12% of sales, in the third quarter of 2004. In the second quarter of 2005, sales were $12.4 million and operating income was $1.8 million, or 15% of sales.
Dunkirk's sales, which increased 48% over the 2004 third quarter, also benefited from higher selling prices on a 9% increase in shipments. Operating income increased 51% over the third quarter of 2004 on increased shipments, improvements in pricing and the elimination of products and product lines that did not meet the Company's profitability criteria. Dunkirk's sales were 13% higher than the 2005 second quarter mainly due to higher selling prices resulting from higher material costs. Operating income was 4% lower than the prior quarter of 2005 due to the mix of products shipped.
Business Outlook
The following statements are based on the Company's current expectations. These statements are forward-looking, and actual results may differ materially.
The Company estimates that fourth quarter 2005 sales will range from $33 to $38 million and that diluted EPS will range from $0.37 to $0.42. This compares with sales of $37.0 million and diluted EPS of $0.40 in the fourth quarter of 2004, which included other income of $0.05 per diluted share from 2004 import duties and a bad debt charge equivalent to $0.03 per diluted share. The 2005 fourth quarter EPS estimate does not include any income from import duties that may be received by the Company related to the Continued Dumping and Subsidy Act of 2000 for the current year.
The following factors were considered in developing these estimates:
-- The Company's total backlog at September 30, 2005 approximated
$106 million compared to $105 million at June 30, 2005, reflecting
continued strong aerospace, power generation, petrochemical and
tool steel markets. The Company noted that this continued high
backlog level is mainly comprised of electro-slag and vacuum-arc
remelted products scheduled for shipment beyond 2005, as customers
take into account future needs and current remelt capacity
constraints industry-wide.
-- The Company expects that shipments to its reroller customers in
the 2005 fourth quarter will continue to decline, as anticipated,
due to the Company's expanded focus on supplying value-added
products.
-- The Company expects fourth quarter 2005 sales of special shape
products to be slightly lower than normal due to the previously
announced hourly employee work stoppage at its Titusville, PA
facility. Salaried employees have restored partial operation of
the facility, including the five vacuum-arc remelt (VAR) furnaces
located there. The interrupted operation of the VAR furnaces is
not expected to have a material effect on 2005 fourth quarter
results.
-- Sales from the Dunkirk Specialty Steel segment are expected to
approximate $13 to $14 million. Additional sales are dependent
upon the level of inventory management initiatives implemented by
the service center industry near the end of the year.
Mr. McAninch concluded: "We have made substantial progress this year in meeting our commitments to customers, employees and shareholders, and are committed to continuing that progress." Webcast
A simultaneous Webcast of the Company's conference call discussing the third quarter of 2005 and the fourth quarter outlook, 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. A telephone replay of the conference call will be available beginning at 12:00 noon (Eastern) today and continuing through October 27th. It can be accessed by dialing 706-645-9291, passcode 1153927. This is a toll call.
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.
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 resolution of the labor issues at the Titusville, PA facility, 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 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. 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 For the
Quarter Ended Nine-Months Ended
September 30, September 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Net Sales
Stainless steel $ 35,573 $ 26,529 $ 103,397 $ 65,586
Tool steel 4,805 4,277 15,181 11,185
High-strength low
alloy steel 1,506 1,160 4,270 3,085
High-temperature
alloy steel 587 473 2,323 1,795
Conversion services 569 707 2,533 1,635
Other 57 151 275 344
--------- --------- --------- ---------
Total net sales 43,097 33,297 127,979 83,630
Cost of products sold 35,692 27,701 106,299 71,576
Selling and
administrative expenses 2,043 1,873 6,335 5,348
--------- --------- --------- ---------
Operating income 5,362 3,723 15,345 6,706
Interest expense (223) (108) (595) (302)
Other income -- 566 63 577
--------- --------- --------- ---------
Income before taxes 5,139 4,181 14,813 6,981
Income tax provision 1,850 1,436 5,333 2,443
--------- --------- --------- ---------
Net income $ 3,289 $ 2,745 $ 9,480 $ 4,538
========= ========= ========= =========
Earnings per share
- Basic $ 0.52 $ 0.44 $ 1.49 $ 0.72
========= ========= ========= =========
Earnings per share
- Diluted $ 0.51 $ 0.43 $ 1.47 $ 0.71
========= ========= ========= =========
Weighted average shares
of Common Stock
outstanding
Basic 6,383,464 6,305,456 6,365,947 6,300,229
Diluted 6,490,056 6,400,188 6,469,953 6,363,656
MARKET SEGMENT INFORMATION
For the For the
Quarter Ended Nine-Months Ended
September 30, September 30,
2005 2004 2005 2004
-------- -------- -------- --------
Net Sales
Service centers $ 18,039 $ 13,443 $ 53,396 $ 35,616
Rerollers 9,762 9,208 33,040 21,465
Forgers 8,572 6,232 22,742 15,181
Original equipment
manufacturers 3,149 2,263 8,070 6,101
Wire redrawers 2,949 1,307 7,934 3,346
Conversion services 568 707 2,533 1,635
Other 58 137 264 286
-------- -------- -------- --------
Total net sales $ 43,097 $ 33,297 $127,979 $ 83,630
======== ======== ======== ========
Tons shipped 11,952 13,470 40,565 34,667
======== ======== ======== ========
BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the For the
Quarter Ended Nine-Months Ended
September 30, September 30,
2005 2004 2005 2004
-------- -------- -------- --------
Net Sales
Stainless steel $ 23,551 $ 18,373 $ 68,864 $ 45,469
Tool steel 4,569 4,155 14,723 10,902
High-strength low alloy steel 574 575 1,887 1,387
High-temperature alloy steel 507 451 2,235 1,526
Conversion services 466 632 2,122 1,356
Other 57 146 217 298
-------- -------- -------- --------
29,724 24,332 90,048 60,938
Intersegment 10,248 6,867 25,506 14,588
-------- -------- -------- --------
Total net sales 39,972 31,199 115,554 75,526
Material cost of sales 20,876 14,999 59,156 33,923
Operation cost of sales 13,651 11,990 41,734 32,733
Selling and
administrative expenses 1,428 1,310 4,324 3,672
-------- -------- -------- --------
Operating income $ 4,017 $ 2,900 $ 10,340 $ 5,198
======== ======== ======== ========
Dunkirk Specialty Steel Segment
For the For the
Quarter Ended Nine-Months Ended
September 30, September 30,
2005 2004 2005 2004
-------- -------- -------- --------
Net Sales
Stainless steel $ 12,022 $ 8,156 $ 34,533 $ 20,117
Tool steel 236 122 458 283
High-strength low alloy steel 932 585 2,383 1,698
High-temperature alloy steel 80 22 88 269
Conversion services 103 75 411 279
Other -- 5 58 46
-------- -------- -------- --------
13,373 8,965 37,931 22,692
Intersegment 617 519 2,098 1,572
-------- -------- -------- --------
Total net sales 13,990 9,484 40,029 24,264
Material cost of sales 8,190 4,716 21,746 12,095
Operation cost of sales 3,428 3,042 10,817 8,645
Selling and
administrative expenses 615 563 2,011 1,676
-------- -------- -------- --------
Operating income $ 1,757 $ 1,163 $ 5,455 $ 1,848
======== ======== ======== ========
CONSOLIDATED BALANCE SHEET
September 30, December 31,
2005 2004
------------- ------------
Assets
Cash $ 1,520 $ 241
Accounts receivable, net 29,092 24,562
Inventory 51,207 38,318
Other current assets 2,374 3,418
-------- --------
Total current assets 84,193 66,539
Property, plant & equipment, net 42,960 40,716
Other assets 618 585
-------- --------
Total assets $127,771 $107,840
======== ========
Liabilities and Stockholders' Equity
Accounts payable $ 11,634 $ 11,666
Bank overdrafts 2,886 2,638
Accrued employment costs 3,296 1,830
Current portion of long-term debt 1,555 2,044
Other current liabilities 1,411 442
-------- --------
Total current liabilities 20,782 18,620
Bank revolver 8,438 8,635
Long-term debt 11,339 3,555
Deferred taxes 10,068 10,093
-------- --------
Total liabilities 50,627 40,903
Stockholders' equity 77,144 66,937
-------- --------
Total liabilities and stockholders' equity $127,771 $107,840
======== ========
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Nine-Months Ended September 30,
2005 2004
-------- --------
Cash flows from operating activities:
Net income $ 9,480 $ 4,538
Adjustments to reconcile to net cash
used in operating activities:
Depreciation and amortization 2,301 2,336
Loss on retirement of fixed assets 705 --
Deferred taxes 193 480
Tax benefit from exercise of stock options 173 8
Changes in assets and liabilities:
Accounts receivable, net (4,530) (9,939)
Inventory (12,889) (11,527)
Trade accounts payable (32) 4,995
Accrued employment costs 1,466 1,985
Other, net 1,793 1,958
-------- --------
Cash flow used in operating activities (1,340) (5,166)
-------- --------
Cash flow from investing activities:
Capital expenditures (5,233) (2,377)
-------- --------
Cash flow used in investing activities (5,233) (2,377)
-------- --------
Cash flows from financing activities:
Deferred financing costs (48) --
Net borrowings under revolving line of credit (197) 4,597
Proceeds from long-term debt 8,050 --
Repayments of long-term debt (755) (1,462)
Net change in bank overdrafts 248 126
Proceeds from issuance of common stock 554 96
-------- --------
Cash flow provided by financing activities 7,852 3,357
-------- --------
Net cash flow $ 1,279 $ (4,186)
======== ========
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
(203) 972-0186
