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Form 8-K

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

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): January 25, 2017

 

 

Universal Stainless & Alloy Products, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   000-25032   25-1724540

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

600 Mayer Street, Bridgeville, Pennsylvania   15017
(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 January 25, 2017, Universal Stainless and Alloy Products, Inc. issued a press release regarding its earnings for the quarter and year ended December 31, 2016. A copy of the press release is attached hereto as Exhibit 99.1.

The information in this Current Report on Form 8-K, including the attached press release regarding the Company’s earnings for the quarter and year ended December 31, 2016, 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 January 25, 2017


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/ Ross C. Wilkin

  Ross C. Wilkin
  Vice President of Finance,
  Chief Financial Officer and Treasurer

Dated: January 25, 2017

EX-99.1

Exhibit 99.1

 

LOGO

 

CONTACTS:   Dennis M. Oates    Ross C. Wilkin    Brian M. Rayle
  Chairman,    VP Finance, CFO    Managing Director
  President and CEO    and Treasurer    Libertatis Consulting
  (412) 257-7609    (412) 257-7662    (440) 827-2019

FOR IMMEDIATE RELEASE:

UNIVERSAL STAINLESS REPORTS FOURTH QUARTER 2016 RESULTS

 

    Fourth Quarter Net Sales Total $34.2 Million, up 7.8% Versus the Fourth Quarter of 2015

 

    Fourth Quarter Net Loss Totals $0.22 per Diluted Share, Improved from a Net Loss per Diluted Share of $0.48 in the Fourth Quarter of 2015

 

    Fourth Quarter Gross Margin was 9.1% of Sales, Improved From a Negative 2.8% of Sales in the Fourth Quarter of 2015

 

    Order Entry Increases 16.7% from the Fourth Quarter of 2015

 

    Quarter-End Backlog of $43.8 Million Increases 14.5% from the Fourth Quarter of 2015

BRIDGEVILLE, PA January 25th, 2017 – Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported results for the fourth quarter of 2016 showing broad-based improvement on several measures compared with the fourth quarter of 2015, including increases in sales, order entry, backlog, and gross margin. The marketplace in which we operate continued to be challenging with cautious buying and customer year-end inventory management. However, we have achieved alignment of our input costs and surcharges, improved operating margins, and have positioned the Company for growth and return to profitability as market conditions improve.

Net sales for the fourth quarter of 2016 were $34.2 million, up 7.8% compared with the fourth quarter of 2015, but down 13.9% sequentially from the third quarter of 2016, with the sequential decrease primarily from lower sales to the Aerospace end market, driven by customers’ planned reductions of year-end inventory levels.

Backlog (before surcharges) at December 31, 2016 was $43.8 million, up 11.2% from $39.4 million at the end of the 2016 third quarter, and up 14.5% from $38.2 million at the end of the 2015 fourth quarter. Backlog at December 31, 2016 specific to premium alloys was up 66% compared with the end of the 2016 third quarter, and up 49% compared with the end of the 2015 fourth quarter. Sales of premium alloys in the fourth quarter of 2016 totaled $3.1 million, or 9.1% of sales, compared with $3.9 million, or 12.3% of sales, in the fourth quarter of 2015, and $3.4 million, or 8.6% of sales, in the third quarter of 2016.

For full year 2016, net sales were $154.4 million, compared with $180.7 million in 2015. Premium alloy sales in 2016 were $14.4 million, or 9.3% of sales, compared with $17.6 million, or 9.7% of sales, in 2015.

The Company’s gross margin for the fourth quarter of 2016 was $3.1 million, or 9.1% of sales, improved from a negative $0.9 million, or a negative 2.8% of sales, in the fourth quarter of 2015. The dramatic improvement from the fourth quarter of 2015 reflects the benefit of operational efficiencies and productivity, and better alignment of melt costs and surcharges. In the third quarter of 2016, gross margin was $4.7 million, or 11.9% of sales, reflecting the benefit of higher sales.

 

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For full year 2016, gross margin improved to $13.5 million, or 8.8% of sales, compared with $9.6 million, or 5.3% of sales, in 2015. The improvement for the full year also reflects the benefit of operational efficiencies and productivity, and better alignment of melt costs and surcharges.

The Company’s net loss for the fourth quarter of 2016 was $1.6 million, or $0.22 per diluted share, significantly improved from a net loss of $3.4 million, or $0.48 per diluted share, in the fourth quarter of 2015. For full year 2016, the net loss was $5.3 million, or $0.74 per diluted share, improved from a net loss of $20.7 million, or $2.92 per diluted share, in 2015. The net loss in 2015 included an after tax goodwill impairment charge of $13.1 million, or $1.85 per diluted share.

The Company’s adjusted EBITDA for the fourth quarter of 2016 was $3.6 million, substantially improved from a negative $0.5 million in the fourth quarter of 2015, but lower compared with $5.0 million in the third quarter of 2016. The sequential decline in the fourth quarter of 2016 is primarily a result of lower sales compared with the third quarter of 2016. For full year 2016, adjusted EBITDA was $15.5 million, an improvement from $10.2 million in 2015.

The Company’s fourth quarter total debt of $72.6 million increased by $1.0 million, compared with the third quarter of 2016, but declined by $3.3 million for full year 2016. Capital expenditures for the fourth quarter were $1.3 million, and for the full year 2016 were $4.4 million.

Chairman, President and CEO Dennis Oates commented: “Despite the expected slow finish to 2016, we are pleased to see improving trends in bookings and backlog coupled with a more favorable domestic specialty steel demand outlook going forward. As previously noted, 2016 was a transition year and business evolved with modest improvements in market demand from the cycle lows. In the latter part of 2016, demand was tempered by uncertainty surrounding the outcome of the election and inventory reductions by several customers.

“As we start 2017, we are fully focused on capturing opportunities presented to us by the improving marketplace while continuing to advance the transformation of Universal Stainless through our move to higher value, higher margin premium alloys. We are optimistic that increased sales volume and further productivity initiatives will translate into improved profitability as business conditions improve and we further utilize our mills going forward. We remain committed to returning the business to sustained profitability through topline improvement and operational enhancements.”

Webcast

The Company has scheduled a conference call for today, January 25, 2017, at 10:00 a.m. (Eastern) to discuss fourth 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 first quarter of 2017.

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

 

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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.

Non-GAAP Financial Measures

This press release includes discussions of financial measures that have not been determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). These measures include earnings (loss) before interest, income taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA. We include these measurements to enhance the understanding of our operating performance. We believe that EBITDA, considered along with net earnings (loss), is a relevant indicator of trends relating to cash generating activity of our operations. Adjusted EBITDA excludes the effect of share-based compensation expense and other non-cash generating activity such as impairments and the write-off of deferred financing costs. We believe excluding these costs provides a consistent comparison of the cash generating activity of our operations. We believe that EBITDA and Adjusted EBITDA are useful to investors as they facilitate a comparison of our operating performance to other companies who also use EBITDA and Adjusted EBITDA as supplemental operating measures. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measures. A reconciliation of these non-GAAP financial measures to their most directly comparable financial measure prepared in accordance with GAAP is included in the tables that follow.

-TABLES FOLLOW-

 

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UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

FINANCIAL HIGHLIGHTS

(Dollars in Thousands, Except Per Share Information)

(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

 

     Three Months Ended
December 31,
    Year Ended
December 31,
 
     2016     2015     2016     2015  

Net Sales

        

Stainless steel

   $ 23,048      $ 21,965      $ 112,118      $ 135,945   

High-strength low alloy steel

     2,241        2,775        13,180        16,045   

Tool steel

     6,469        3,064        19,179        16,197   

High-temperature alloy steel

     1,415        2,576        6,057        7,557   

Conversion services and other sales

     986        1,316        3,900        4,916   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net sales

     34,159        31,696        154,434        180,660   

Cost of products sold

     31,060        32,587        140,921        171,065   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     3,099        (891     13,513        9,595   

Selling, general and administrative expenses

     4,549        4,533        17,482        19,406   

Goodwill impairment

     —          —          —          20,268   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (1,450     (5,424     (3,969     (30,079

Interest expense

     928        511        3,659        2,324   

Deferred financing amortization

     64        199        1,015        566   

Other (income) expense

     20        (241     230        (153
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (2,462     (5,893     (8,873     (32,816

Benefit for income taxes

     (877     (2,497     (3,526     (12,144
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (1,585   $ (3,396   $ (5,347   $ (20,672
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share—Basic

   $ (0.22   $ (0.48   $ (0.74   $ (2.92
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share—Diluted

   $ (0.22   $ (0.48   $ (0.74   $ (2.92
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares of common stock outstanding

        

Basic

     7,206,753        7,092,233        7,193,300        7,069,954   

Diluted

     7,206,753        7,092,233        7,193,300        7,069,954   

 

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MARKET SEGMENT INFORMATION

 

     Three Months Ended
December 31,
     Year Ended
December 31,
 
     2016      2015      2016      2015  

Net Sales

           

Service centers

   $ 23,744       $ 19,133       $ 108,582       $ 121,090   

Forgers

     2,557         2,691         13,441         15,143   

Rerollers

     3,125         4,161         12,481         17,848   

Original equipment manufacturers

     3,747         4,395         16,030         21,663   

Conversion services and other sales

     986         1,316         3,900         4,916   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 34,159       $ 31,696       $ 154,434       $ 180,660   
  

 

 

    

 

 

    

 

 

    

 

 

 

Tons shipped

     7,582         5,966         31,372         32,388   
  

 

 

    

 

 

    

 

 

    

 

 

 

MELT TYPE INFORMATION

 

     Three Months Ended
December 31,
     Year Ended
December 31,
 
     2016      2015      2016      2015  

Net Sales

           

Specialty alloys

   $ 30,074       $ 26,481       $ 136,178       $ 158,145   

Premium alloys*

     3,099         3,899         14,356         17,599   

Conversion services and other sales

     986         1,316         3,900         4,916   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 34,159       $ 31,696       $ 154,434       $ 180,660   
  

 

 

    

 

 

    

 

 

    

 

 

 

END MARKET INFORMATION **

 

     Three Months Ended
December 31,
     Year Ended
December 31,
 
     2016      2015      2016      2015  

Net Sales

           

Aerospace

   $ 16,692       $ 16,615       $ 91,979       $ 108,791   

Power generation

     3,242         2,997         14,175         19,212   

Oil & gas

     3,147         4,098         12,392         17,094   

Heavy equipment

     6,833         2,937         20,109         15,961   

General industrial, conversion services and other sales

     4,245         5,049         15,779         19,602   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 34,159       $ 31,696       $ 154,434       $ 180,660   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

* 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.

 

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CONDENSED CONSOLIDATED BALANCE SHEETS

 

     December 31,  
     2016      2015  

Assets

     

Cash

   $ 75       $ 112   

Accounts receivable, net

     19,437         17,683   

Inventory, net

     91,342         83,373   

Other current assets

     2,729         2,584   
  

 

 

    

 

 

 

Total current assets

     113,583         103,752   

Property, plant and equipment, net

     182,398         193,505   

Other long-term assets

     64         45   
  

 

 

    

 

 

 

Total assets

   $ 296,045       $ 297,302   
  

 

 

    

 

 

 

Liabilities and Stockholders’ Equity

     

Accounts payable

   $ 19,906       $ 11,850   

Accrued employment costs

     3,803         3,256   

Current portion of long-term debt

     4,579         3,000   

Other current liabilities

     898         640   
  

 

 

    

 

 

 

Total current liabilities

     29,186         18,746   

Long-term debt1

     67,998         72,884   

Deferred income taxes

     17,629         20,666   

Other long-term liabilities

     12         29   
  

 

 

    

 

 

 

Total liabilities

     114,825         112,325   

Stockholders’ equity

     181,220         184,977   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 296,045       $ 297,302   
  

 

 

    

 

 

 

 

1  Reflects 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.

 

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CONSOLIDATED STATEMENTS OF CASH FLOW

 

     Year Ended
December 31,
 
     2016     2015  

Operating activities:

    

Net (loss) income

   $ (5,347   $ (20,672

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

    

Depreciation and amortization

     18,533        18,608   

Deferred income tax

     (3,525     (12,060

Write-off of deferred financing costs

     768        —     

Share-based compensation expense, net

     1,405        1,865   

Net gain on asset disposals

     (340     —     

Goodwill impairment

     —          20,268   

Changes in assets and liabilities:

    

Accounts receivable, net

     (1,754     11,374   

Inventory, net

     (9,155     15,929   

Accounts payable

     7,096        (13,009

Accrued employment costs

     547        (2,755

Income taxes

     200        (248

Other, net

     (22     (130
  

 

 

   

 

 

 

Net cash provided by operating activities

     8,406        19,170   

Investing activities:

    

Capital expenditures

     (4,376     (9,551

Proceeds from sale of property, plant and equipment

     1,571        —     

Proceeds from insurance recovery

     —          218   
  

 

 

   

 

 

 

Net cash used in investing activities

     (2,805     (9,333

Financing activities:

    

Borrowings under revolving credit facility

     241,152        73,515   

Payments on revolving credit facility

     (259,243     (80,253

Borrowings under term loan facility

     30,000        —     

Payments on term loan facility, capital leases, and convertible notes

     (17,448     (3,000

Proceeds from the issuance of common stock

     651        455   

Payment of deferred financing costs

     (750     (584
  

 

 

   

 

 

 

Net cash used in financing activities

     (5,638     (9,867
  

 

 

   

 

 

 

Net decrease in cash

     (37     (30

Cash at beginning of period

     112        142   
  

 

 

   

 

 

 

Cash at end of period

   $ 75      $ 112   
  

 

 

   

 

 

 

 

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RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED EBITDA

 

     Three Months Ended
December 31,
    Year Ended
December 31,
 
     2016     2015     2016     2015  

Net loss

   $ (1,585   $ (3,396   $ (5,347   $ (20,672

Interest expense

     928        511        3,659        2,324   

Benefit for income taxes

     (877     (2,497     (3,526     (12,144

Depreciation and amortization

     4,699        4,499        18,533        18,608   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     3,165        (883     13,319        (11,884

Share-based compensation expense

     433        378        1,405        1,865   

Write-off of deferred financing costs

     —          —          768        —     

Goodwill Impairment

     —          —          —          20,268   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 3,598      $ (505   $ 15,492      $ 10,249   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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