SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 23, 2008
Universal Stainless & Alloy Products, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 000-25032 25-1724540
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
600 Mayer Street, Bridgeville, Pennsylvania 15017
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (412) 257-7600
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On October 23, 2008, Universal Stainless and Alloy Products, Inc. issued a
press release regarding its earnings for the third quarter ended September 30,
2008. A copy of the press release is attached hereto.
The information in this Current Report on Form 8-K, including the attached
press release, shall not be deemed "filed" for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that section, nor shall it be deemed incorporated by reference in
any filing under the Securities Act of 1933, as amended, except as shall be
expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release dated October 23, 2008
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
By: /s/ Richard M. Ubinger
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Vice President of Finance,
Chief Financial Officer and Treasurer
Dated: October 23, 2008
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
CONTACTS: Richard M. Ubinger June Filingeri
Vice President of Finance, President
Chief Financial Officer and Treasurer Comm-Partners LLC
(412) 257-7606 (203) 972-0186
FOR IMMEDIATE RELEASE
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UNIVERSAL STAINLESS REPORTS 2008 THIRD QUARTER RESULTS
IN LINE WITH REVISED FORECAST
BRIDGEVILLE, PA, OCTOBER 23, 2008 - UNIVERSAL STAINLESS & ALLOY PRODUCTS,
INC. (NASDAQ: USAP) reported today that sales for the third quarter of 2008 were
$57.6 million compared with $62.0 million in the third quarter of 2007. Net
income for the third quarter of 2008 was $2.7 million, or $0.40 per diluted
share, and included a charge of $586,000, equivalent to $0.06 per diluted share,
for the relocation of the Company's round bar finishing line from its
Bridgeville facility to its Dunkirk facility. In the third quarter of 2007, net
income was $5.5 million, or $0.81 per diluted share.
The results for the third quarter of 2008 were in line with the Company's
revised forecast of sales in the range of $57 to $58 million and diluted EPS in
the range of $0.35 to $0.40.
The Company's estimated annual effective income tax rate for 2008 was
adjusted to 32% at September 30 from 33% at June 30 as a result of current
income expectations for the year. The benefit of this rate change was equivalent
to $0.03 per diluted share in the 2008 third quarter.
For the first nine months of 2008, sales were $178.0 million while net
income was $12.7 million, or $1.87 per diluted share, compared with sales of
$180.3 million and net income of $18.1 million, or $2.67 per diluted share, in
the same period of 2007.
Cash flow from operations was $6.9 million for the third quarter of 2008, a
$2.2 million increase from the 2008 second quarter, as the Company continues to
manage working capital aggressively. Capital expenditures for the third quarter
of 2008 were $4.2 million, and included completion of a new high temperature
annealing facility as well as certain planned infrastructure investments and
equipment upgrades related to the round bar finishing line in Dunkirk.
President and CEO Dennis Oates commented: "As we previously reported, our
third quarter performance was impeded by reduced demand for aerospace grades of
steel due to the Boeing labor situation, by conservative service center
purchasing in anticipation of lower surcharges due to falling commodity prices,
and by production inefficiencies at our Bridgeville facility during labor
negotiations. The resulting lower shipment volume combined with a 20% decline in
raw material prices that decreased margins on finished products shipped reduced
our third quarter earnings. With our success in reaching a five-year collective
bargaining agreement with our Bridgeville hourly employees on October 8th, we
are ready to face the challenges that continue in the specialty steel supply
chain as well as new ones created by the recent shocks to our economy."
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Mr. Oates continued: "The diversity of our end markets is an important
asset that will help us offset the issues in aerospace demand that are expected
to continue at least through the end of the year. Our backlog confirms that our
most immediate opportunities are in power generation and in tool steel where we
have a strong market position. We also plan to build upon the inroads we have
made into the oil and gas markets and on the international relationships we have
begun to establish."
Mr. Oates concluded: "In this time of heightened uncertainty, we will
remain fully focused on executing our plan, with our highest priority on
improving customer service levels and our operating efficiency."
SEGMENT REVIEW
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For the third quarter of 2008, the UNIVERSAL STAINLESS & ALLOY PRODUCTS
SEGMENT had sales of $52.2 million and operating income of $3.3 million,
yielding an operating margin of 6%. Favorable product mix shifts in inventory at
September 30 more than offset further declines in nickel and other commodity
prices in the quarter and resulted in a net decrease in the lower of cost or
market (LCM) reserve of $300,000. In the third quarter of 2007, sales were $55.9
million and operating income was $4.3 million, or 8% of sales. This included an
increase to the LCM reserve of $772,000. In the second quarter of 2008, sales
were $53.1 million and operating income was $5.6 million, or 11% of sales, and
included a $1.2 million charge to the LCM reserve primarily related to the
decline in nickel prices at the end of the quarter.
Segment sales were down 7% from the third quarter of 2007 primarily due to
a 6% decline in tons shipped and lower surcharges. Higher shipments of tool
steel plate to service centers were offset by lower shipments of
aerospace-related vacuum-arc remelted (VAR) products to service centers and to
Dunkirk. This mix shift, as well as an increase in material costs as a
percentage of sales, reduced the operating margin compared with the 2007 third
quarter.
Segment sales decreased 2% over the second quarter of 2008 even though tons
shipped were level. This was due to lower shipments of aerospace-related VAR
products and of tool steel plate to service centers offset by higher shipments
to forgers. The resulting shift in product mix and higher material costs as a
percentage of sales reduced the operating margin sequentially.
The DUNKIRK SPECIALTY STEEL SEGMENT reported sales of $16.9 million and an
operating loss of $172,000 for the third quarter of 2008, including the $586,000
charge for the relocation of the round bar finishing line. Before giving effect
to the relocation charge, Dunkirk's operating income was $414,000 for the third
quarter of 2008, resulting in an operating margin of 2%. The operating results
for the quarter also include a $416,000 increase to the segment's LCM reserve.
In the third quarter of 2007, sales were $21.3 million and operating income was
$3.0 million, or 14% of sales, which included an increase to the LCM reserve of
$635,000, which was more than offset by an estimated FIFO benefit of $1.5
million from the timing of surcharges and the changing price of nickel. In the
second quarter of 2008, sales were $21.2 million and operating income of $2.1
million for the second quarter of 2008, or 10% of sales, and included a $259,000
charge to the LCM reserve.
Dunkirk's sales declined 20% while tons shipped decreased 16% compared with
the third quarter of 2007 mainly due to lower shipments of aerospace-related VAR
finished bar products to service centers and lower surcharges. The lower
shipment volume, shift in product mix and the effect of the inventory charge led
to the operating margin decline in the third quarter of 2008.
Dunkirk's sales decreased 20% and tons shipped decreased 21% compared with
the second quarter of 2008 due to lower shipments of aerospace-related VAR
finished bar products to both service centers and OEMs.
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BUSINESS OUTLOOK
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The Company currently estimates that sales for the fourth quarter of 2008
will range from $45 to $55 million and that diluted EPS will range from $0.20 to
$0.35, which includes the remaining expense, equivalent to $0.02 per diluted
share, for the relocation of the round bar finishing facility. In the fourth
quarter of 2007, sales were $49.6 million and diluted EPS was $0.65, and
included other income from the receipt of import duties equivalent to $0.06 per
diluted share.
The following factors were considered in developing the estimates for the
fourth quarter of 2008:
o The Company's total backlog at September 30, 2008 was $101 million compared
with $97 million at June 30, 2008. The increased backlog is primarily
attributable to tool steel plate and electro-slag remelted products.
o The Company's forecast is based on average September raw material costs.
The Company noted that raw material costs have continued to decline since
the end of the third quarter. The forecast also does not include any
receipts from import duties for 2008, which the Company is seeking.
o Sales from the Dunkirk Specialty Steel segment are expected to approximate
$10 to 12 million in the fourth quarter of 2008 on lower pounds shipped
compared with the fourth quarter of 2007 due to the effect of the Boeing
labor situation on demand for aerospace products and very conservative
buying patterns of service centers. At the forecasted sales levels, Dunkirk
is expected to be breakeven for the quarter after including the remaining
expense related to the relocation of the round bar finishing line.
o The Company reached a new five-year collective bargaining agreement with
its hourly employees at its Bridgeville facility on October 8. The Company
is fully focused on resuming production levels, which were adversely
affected during labor negotiations, to meet its customer commitments.
WEBCAST
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A simultaneous Webcast of the Company's conference call discussing the
third quarter of 2008 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.
ABOUT UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
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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
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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.
- FINANCIAL TABLES FOLLOW -
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UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share information)
(Unaudited)
CONSOLIDATED STATEMENT OF OPERATIONS
For the Quarter Ended For the Nine-Months Ended
September 30, September 30,
2008 2007 2008 2007
---- ---- ---- ----
NET SALES
Stainless steel $ 42,095 $ 45,510 $ 127,883 $ 130,208
Tool steel 10,393 7,281 31,159 20,822
High-strength low alloy steel 2,564 6,006 9,509 19,812
High-temperature alloy steel 1,763 2,637 6,253 7,737
Conversion services 541 446 1,514 1,427
Other 283 128 1,648 297
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Total net sales 57,639 62,008 177,966 180,303
Cost of products sold 51,040 50,875 150,837 143,337
Selling and administrative expenses 2,852 2,990 8,561 8,951
------- -------- -------- --------
Operating income 3,747 8,143 18,568 28,015
Interest expense (26) (181) (81) (603)
Other income 68 26 217 36
------- -------- -------- --------
Income before taxes 3,789 7,988 18,704 27,448
Income tax provision 1,063 2,521 5,985 9,332
------- ------- -------- --------
Net income $ 2,726 $ 5,467 $ 12,719 $ 18,116
======= ======= ======== ========
Earnings per share - Basic $ 0.41 $ 0.82 $ 1.90 $ 2.73
======= ======= ======== ========
Earnings per share - Diluted $ 0.40 $ 0.81 $ 1.87 $ 2.67
======= ======= ======== ========
Weighted average shares of
Common Stock outstanding
Basic 6,727,677 6,656,753 6,699,471 6,640,238
Diluted 6,832,070 6,783,147 6,807,699 6,772,963
MARKET SEGMENT INFORMATION
For the Quarter Ended For the Nine-Months Ended
September 30, September 30,
2008 2007 2008 2007
---- ---- ---- ----
NET SALES
Service centers $ 26,826 $ 31,451 $ 89,910 $ 93,154
Forgers 14,299 13,852 34,459 40,170
Rerollers 9,532 10,199 30,011 26,049
Original equipment manufacturers 3,751 4,452 14,987 13,869
Wire redrawers 2,406 1,424 5,467 5,337
Conversion services 541 446 1,514 1,427
Other 284 184 1,618 297
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Total net sales $ 57,639 $ 62,008 $ 177,966 $ 180,303
======= ======== ========= =========
Tons shipped 10,808 11,372 33,998 33,856
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BUSINESS SEGMENT RESULTS
UNIVERSAL STAINLESS & ALLOY PRODUCTS SEGMENT
For the Quarter Ended For the Nine-Months Ended
September 30, September 30,
2008 2007 2008 2007
---- ---- ---- ----
NET SALES
Stainless steel $ 29,168 $ 31,211 $ 85,379 $ 87,011
Tool steel 10,161 6,748 29,863 19,018
High-strength low alloy steel 729 2,560 2,956 10,382
High-temperature alloy steel 818 1,207 2,316 3,353
Conversion services 329 305 982 957
Other 252 107 1,524 229
-------- -------- -------- --------
41,457 42,138 123,020 120,950
Intersegment 10,777 13,797 30,504 38,244
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Total net sales 52,234 55,935 153,524 159,194
Material cost of sales 30,722 32,170 82,715 83,085
Operation cost of sales 16,314 17,506 51,040 52,556
Selling and administrative expenses 1,933 2,022 5,940 6,311
-------- -------- -------- --------
Operating income $ 3,265 $ 4,237 $ 13,829 $ 17,242
======== ======== ======== ========
DUNKIRK SPECIALTY STEEL SEGMENT
For the Quarter Ended For the Nine-Months Ended
September 30, September 30,
2008 2007 2008 2007
---- ---- ---- ----
NET SALES
Stainless steel $ 12,926 $ 14,299 $ 42,503 $ 43,197
Tool steel 232 533 1,296 1,804
High-strength low alloy steel 1,835 3,446 6,553 9,430
High-temperature alloy steel 945 1,430 3,937 4,384
Conversion services 212 141 532 470
Other 32 21 125 68
-------- -------- -------- --------
16,182 19,870 54,946 59,353
Intersegment 758 1,398 3,220 3,676
-------- -------- -------- --------
Total net sales 16,940 21,268 58,166 63,029
Material cost of sales 11,219 13,130 36,184 36,374
Operation cost of sales 4,974 4,145 14,622 13,451
Selling and administrative expenses 919 968 2,621 2,640
-------- -------- -------- --------
Operating income (loss) $ (172) $ 3,025 $ 4,739 $ 10,564
======== ======== ======== ========
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CONSOLIDATED BALANCE SHEET
September 30, December 31,
2008 2007
---- ----
ASSETS
Cash $ 13,598 $ 10,648
Accounts receivable, net 33,867 27,501
Inventory 70,424 65,572
Other current assets 6,008 5,537
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Total current assets 123,897 109,258
Property, plant & equipment, net 60,503 54,271
Other assets 980 767
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Total assets $ 185,380 $ 164,296
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable $ 21,881 $ 13,983
Outstanding checks in excess of bank balance 1,785 2,064
Accrued employment costs 4,964 5,307
Current portion of long-term debt 400 383
Other current liabilities 423 1,600
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Total current liabilities 29,453 23,337
Long-term debt 1,146 1,453
Deferred taxes 10,612 9,904
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Total liabilities 41,211 34,694
Stockholders' equity 144,169 129,602
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Total liabilities and stockholders' equity $ 185,380 $ 164,296
========= =========
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CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Nine-month Period Ended September 30,
2008 2007
---- ----
Cash flows provided by operating activities:
Net income $ 12,719 $ 18,116
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 3,030 2,764
Deferred tax decrease 191 (448)
Stock based compensation expense 591 332
Tax benefit from share-based
payment arrangements (534) (976)
Changes in assets and liabilities:
Accounts receivable, net (6,366) (5,977)
Inventory (4,852) 3,070
Trade accounts payable 7,898 552
Accrued employment costs (343) 1,772
Other, net (487) 293
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Cash flow provided by operating activities 11,847 19,498
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Cash flow used in investing activities:
Capital expenditures (9,585) (6,429)
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Cash flow used in investing activities (9,585) (6,429)
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Cash flows used in financing activities:
Revolving credit net repayments - (8,392)
Long-term debt repayments (290) (1,771)
Net change in outstanding checks in excess
of bank balance (279) 364
Proceeds from issuance of common stock 723 975
Tax benefit from share-based payment
arrangements 534 976
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Cash flow (used in) provided by financing activities 688 (7,848)
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Net cash flow $ 2,950 $ 5,221
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