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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): April 26, 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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02. Results of Operations and Financial Condition.

On April 26, 2017, Universal Stainless and Alloy Products, Inc. issued a press release regarding its earnings for the quarter ended March 31, 2017. 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 ended March 31, 2017, 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 April 26, 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: April 26, 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 FIRST QUARTER 2017 RESULTS

 

    Sales in Q1 Total $48.9 Million, Up 43.1% Sequentially, and Up 23.4% vs. Q1 2016

 

    Net Loss in Q1 Totals $0.17 per Diluted Share and Includes $0.06 Loss for Non-Recurring Items

 

    EBITDA in Q1 Totals $4.2 Million, Up 31.9% Sequentially, and Up 269.8% vs. Q1 2016

 

    Quarter-End Backlog of $57.1 Million, Up 30.3% Sequentially

BRIDGEVILLE, PA April 26th, 2017 – Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported results for the first quarter of 2017, showing broad-based improvement sequentially, and year-over-year, including increases in total sales, premium alloy sales, order entry, backlog, and EBITDA. At the start of 2017, the market has shown signs of sustained improvement, although continued competitive challenges remain. We anticipate continued topline growth, supported by our increased backlog. In addition, we expect meaningful improvement to gross margin in the near term.

Net sales for the first quarter of 2017 were $48.9 million, up 43.1% sequentially, and up 23.4% compared with the first quarter of 2016. While all end markets made positive contributions to sales, aerospace and oil & gas, most notably, delivered sequential growth of 59.9% and 55.4%, respectively. In the first quarter of 2017, aerospace was 54.6% of total sales.

Sales of premium alloys in the first quarter of 2017 totaled a record $5.8 million, or 11.9% of sales, compared with $3.1 million, or 9.1% of sales, in the fourth quarter of 2016, and $4.1 million, or 10.3% of sales, in the first quarter of 2016.

Backlog (before surcharges) at March 31, 2017 was $57.1 million, up 30.3% from December 31, 2016, and up 43.5% from the end of the 2016 first quarter. Backlog at March 31, 2017 specific to premium alloys was up 106.5% compared with December 31, 2016, and up 245.1% compared with the end of the 2016 first quarter.

The Company’s gross margin for the first quarter of 2017 was $4.2 million, or 8.7% of sales, compared with $3.1 million, or 9.1% of sales, in the fourth quarter of 2016, and significantly improved from $1.3 million, or 3.4% of sales, in the first quarter of 2016. Gross margin was negatively impacted in the first quarter of 2017 by the sell-through of high cost product manufactured in the lower activity months of 2016, as well as less favorable product mix.

For the first quarter of 2017, the Company’s SG&A was $4.7 million, or 9.7% of sales, and included $0.3 million of costs associated with a customer bankruptcy as well as increased legal expenses related to an ongoing claim with a supplier for the recovery of a previously recorded loss. SG&A was $4.5 million, or 13.3% of sales, in the fourth quarter of 2016, and $3.8 million, or 9.7% of sales, in the first quarter of 2016.

The Company’s net loss for the first quarter of 2017 was $1.2 million, or $0.17 per diluted share, and included $0.03 after tax loss per diluted share for the SG&A items noted above, and $0.03 loss per diluted share associated

 

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with an adverse income tax rate. The adverse income tax rate is relative to the standard 35.0% corporate tax rate, and includes the discrete impact of adopting new accounting guidance related to stock-based compensation, resulting in additional tax expense that would have previously been booked to stockholders equity.

The Company’s EBITDA for the first quarter of 2017 was $4.2 million, up $1.0 million, or 31.9%, sequentially, and up $3.0 million, or 269.8%, compared with the first quarter of 2016.

The Company’s first quarter 2017 debt, net of cash, of $74.3 million increased by $1.8 million, compared with December 31, 2016, driven by additional working capital in support of increased business activity. Capital expenditures for the first quarter of 2017 were $1.4 million, compared with $1.3 million in the fourth quarter of 2016 and $0.8 million in the first quarter of 2016.

Chairman, President and CEO Dennis Oates commented: “After two years of very challenging business conditions we are encouraged by the strong start to 2017 in sales, order entry, and backlog. We expect the general increase in business activity to continue as we move through 2017. Bookings in the first quarter of 2017 were the highest in five years at $57.2 million and 24.4 million pounds – they were broad-based by all end user markets including a substantial increase in premium alloys.

“In addition, we remain confident that the increased sales volume, coupled with improving mix, growing benefits from productivity gains, and recently announced price increases should improve gross margin, returning Universal to sustained profitability.”

Webcast

The Company has scheduled a conference call for today, April 26, 2017, at 10:00 a.m. (Eastern) to discuss first quarter 2017 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 second 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 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

 

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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  
     March 31,  
     2017     2016  

Net Sales

    

Stainless steel

   $ 35,033     $ 29,277  

High-strength low alloy steel

     4,172       3,779  

Tool steel

     7,057       3,902  

High-temperature alloy steel

     1,976       1,640  

Conversion services and other sales

     637       996  
  

 

 

   

 

 

 

Total net sales

     48,875       39,594  

Cost of products sold

     44,630       38,253  
  

 

 

   

 

 

 

Gross margin

     4,245       1,341  

Selling, general and administrative expenses

     4,729       3,838  
  

 

 

   

 

 

 

Operating loss

     (484     (2,497

Interest expense

     939       983  

Deferred financing costs

     64       827  

Other expense, net

     (6     53  
  

 

 

   

 

 

 

Loss before income taxes

     (1,481     (4,360

Benefit for income taxes

     (262     (1,920
  

 

 

   

 

 

 

Net loss

   $ (1,219   $ (2,440
  

 

 

   

 

 

 

Net loss per common share -Basic

   $ (0.17   $ (0.34
  

 

 

   

 

 

 

Net loss per common share -Diluted

   $ (0.17   $ (0.34
  

 

 

   

 

 

 

Weighted average shares of common stock outstanding

    

Basic

     7,216,447       7,162,601  

Diluted

     7,216,447       7,162,601  

 

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MARKET SEGMENT INFORMATION

 

     Three months ended
March 31,
 
     2017      2016  

Net Sales

     

Service centers

   $ 32,729      $ 27,514  

Original equipment manufacturers

     4,122        4,295  

Rerollers

     6,553        3,215  

Forgers

     4,834        3,574  

Conversion services and other sales

     637        996  
  

 

 

    

 

 

 

Total net sales

   $ 48,875      $ 39,594  
  

 

 

    

 

 

 

Tons shipped

     10,332        7,571  
  

 

 

    

 

 

 

MELT TYPE INFORMATION

 

     Three months ended  
     March 31,  
     2017      2016  

Net Sales

     

Specialty alloys

   $ 42,405      $ 34,536  

Premium alloys *

     5,833        4,062  

Conversion services and other sales

     637        996  
  

 

 

    

 

 

 

Total net sales

   $ 48,875      $ 39,594  
  

 

 

    

 

 

 

END MARKET INFORMATION **

 

     Three months ended  
     March 31,  
     2017      2016  

Net Sales

     

Aerospace

   $ 26,692      $ 25,366  

Power generation

     4,234        3,497  

Oil & gas

     4,889        3,345  

Heavy equipment

     7,685        4,033  

General industrial, conversion services and other sales

     5,375        3,353  
  

 

 

    

 

 

 

Total net sales

   $ 48,875      $ 39,594  
  

 

 

    

 

 

 

 

* 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, which they will in-turn sell to the ultimate end market customer.

 

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CONDENSED CONSOLIDATED BALANCE SHEETS

 

     March 31,      December 31,  
     2017      2016  

Assets

     

Cash

   $ 214      $ 75  

Accounts receivable, net

     25,960        19,437  

Inventory, net

     95,348        91,342  

Other current assets

     3,709        2,729  
  

 

 

    

 

 

 

Total current assets

     125,231        113,583  

Property, plant and equipment, net

     179,754        182,398  

Other long-term assets

     64        64  
  

 

 

    

 

 

 

Total assets

   $ 305,049      $ 296,045  
  

 

 

    

 

 

 

Liabilities and Stockholders’ Equity

     

Accounts payable

   $ 29,118      $ 19,906  

Accrued employment costs

     2,432        3,803  

Current portion of long-term debt

     4,654        4,579  

Other current liabilities

     1,151        898  
  

 

 

    

 

 

 

Total current liabilities

     37,355        29,186  

Long-term debt

     69,845        67,998  

Deferred income taxes

     16,495        17,629  

Other long-term liabilities

     12        12  
  

 

 

    

 

 

 

Total liabilities

     123,707        114,825  

Stockholders’ equity

     181,342        181,220  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 305,049      $ 296,045  
  

 

 

    

 

 

 

 

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CONSOLIDATED STATEMENTS OF CASH FLOW

 

     Three months ended  
     March 31,  
     2017     2016  

Operating activities:

    

Net loss

   $ (1,219   $ (2,440

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Depreciation and amortization

     4,717       4,506  

Deferred income tax

     (296     (1,928

Write off of deferred financing fees

     —         768  

Share-based compensation expense

     534       405  

Net gain on asset disposals

     —         (389

Changes in assets and liabilities:

    

Accounts receivable, net

     (6,523     (4,238

Inventory, net

     (4,499     652  

Accounts payable

     9,423       5,438  

Accrued employment costs

     (1,371     (1,005

Income taxes

     32       269  

Other, net

     (790     (495
  

 

 

   

 

 

 

Net cash provided by operating activities

     8       1,543  

Investing activities:

    

Capital expenditures

     (1,413     (818

Proceeds from sale of property, plant and equipment

     —         1,571  
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (1,413     753  

Financing activities:

    

Borrowings under revolving credit facility

     71,863       71,323  

Payments on revolving credit facility

     (68,721     (88,585

Borrowings under term loan facility

     —         30,000  

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

     (1,598     (14,033

Payment of deferred financing costs

     —         (702

Proceeds from the issuance of common stock

     —         500  
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     1,544       (1,497
  

 

 

   

 

 

 

Net increase in cash

     139       799  

Cash at beginning of period

     75       112  
  

 

 

   

 

 

 

Cash at end of period

   $ 214     $ 911  
  

 

 

   

 

 

 

 

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RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED EBITDA

 

     Three Months ended  
     March 31,  
     2017     2016  

Net loss

   $ (1,219   $ (2,440

Interest expense

     939       983  

Benefit for income taxes

     (262     (1,920

Depreciation and amortization

     4,717       4,506  
  

 

 

   

 

 

 

EBITDA

     4,175       1,129  

Share-based compensation expense

     534       405  

Write-off of deferred financing costs

     —         768  
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 4,709     $ 2,302  
  

 

 

   

 

 

 

 

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