January 27, 2012

Universal Stainless Reports Fourth Quarter 2011 Results

- Fourth Quarter Sales are $62.2 Million; Full Year Sales are Record $252.6 Million

- Fourth Quarter EPS is $0.59, including $0.13 of Expense for Newly-Acquired North Jackson Operation

- Full Year 2011 EPS is $2.56, including $0.51 of North Jackson-Related Expense

- Backlog Reaches Record $102.6 Million at Quarter-End

BRIDGEVILLE, Pa., Jan. 27, 2012 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) reported today that sales for the fourth quarter of 2011 were $62.2 million, an increase of 21% from sales of $51.6 million in the fourth quarter of 2010, but below the record of $67.3 million reached in the 2011 third quarter.

Operating income for the 2011 fourth quarter was $7.0 million and included $0.9 million of operating expense related to the start-up of the North Jackson operation acquired by the Company in August 2011. Operating income was $5.5 million in the fourth quarter of 2010, and $7.2 million in the 2011 third quarter, which included $1.7 million of operating expense related to the acquisition and start-up of the North Jackson operation.

Net income for the fourth quarter of 2011 was $4.3 million, or $0.59 per diluted share, including an after-tax loss attributable to the North Jackson operation of $0.7 million, which reduced EPS by $0.13 per diluted share. Excluding these North Jackson-related costs, net income for the 2011 fourth quarter was $5.0 million or $0.72 per diluted share. Net income for the fourth quarter of 2010 was $3.6 million, or $0.52 per diluted share. In the third quarter of 2011, net income was $3.9 million, or $0.55 per diluted share, including North Jackson-related acquisition and start-up expenses of $1.9 million, or $0.28 per diluted share.

For full year 2011, sales increased 33% to a record $252.6 million compared with $189.4 million for 2010, while net income rose 37% to $18.1 million, or $2.56 per diluted share, including after-tax expense of $3.2 million, or $0.51 per diluted share, related to the acquisition, financing and start-up of the North Jackson operation.   

For the fourth quarter of 2011, cash flow from operations reached $9.6 million. Capital expenditures were $16.6 million for the fourth quarter, including $14.4 million for the North Jackson operation. At December 31, 2011, the Company had cash of $0.3 million and total debt of $94.7 million, or 34.4% of total capitalization.

Shipment volume for the fourth quarter of 2011 increased 4% from the fourth quarter of 2010 but was 8% lower than the 2011 third quarter. Compared with the fourth quarter of 2010, volume shipped to the aerospace and service center plate markets increased 31% and 13%, respectively, while volume shipped to the petrochemical and power generation markets was lower by 1% and 15%, respectively. Compared with the third quarter of 2011, volume shipped to the aerospace market increased 3%, while volume shipped to both the petrochemical and power generation market was down 8% and service center plate volume was down 27%.

Chairman, President and CEO Dennis Oates commented: "End market trends remained favorable and our sales were strong in the fourth quarter, although they did not match the third quarter mainly due to customer receiving schedules shifting from December into the first quarter of 2012. Record order entry in the fourth quarter contributed to a new peak in our backlog of $102.6 million at quarter-end, including $14.0 million for our new North Jackson facility.

"Driving profitable growth remained a main focus in the quarter through higher value sales mix, cost reduction and pricing actions. As a result, we achieved a consolidated operating margin on our legacy Universal business (before including North Jackson) of 12.8%, which was among the highest in the past four years, despite a continued decline in nickel prices.

"The accelerated start-up of North Jackson is on schedule. In December, our team completed first heats on our vacuum induction melting (VIM) furnace and on two newly installed vacuum arc remelting (VAR) furnaces. 

"We have entered 2012 with positive market momentum, record backlog and a full focus on accelerating the ramp-up of our North Jackson operation to achieve further profitable growth."

Segment Review

For the fourth quarter of 2011, the Universal Stainless & Alloy Products segment, including the North Jackson operation, had sales of $49.2 million and operating income of $4.0 million, yielding an operating margin of 8.2% of sales. Before including the North Jackson operation, segment sales were $48.6 million and operating income was $4.9 million, or 10.1% of sales. In the fourth quarter of 2010, sales were $46.1 million and operating income was $4.2 million, or 9.2% of sales. For the third quarter of 2011, segment sales, including the North Jackson operation, were $60.6 million and operating income was $4.8 million, or 7.9% of sales. Before including North Jackson, segment operating income was $6.5 million, or 10.7% of sales.

Segment sales rose 7% from the fourth quarter of 2010 on 2% lower tons shipped mainly due to increased shipments to service centers. Segment sales were 19% lower than the 2011 third quarter on 14% lower volume mainly due to lower shipments to service centers and forgers.

Sales for the Dunkirk Specialty Steel segment were $24.5 million for the fourth quarter of 2011 and operating income was $2.5 million, yielding an operating margin of 10.1% of sales. This compares with sales in the fourth quarter of 2010 of $17.1 million and operating income of $1.3 million, or 7.8% of sales. In the third quarter of 2011, sales were $25.3 million and operating income was $2.5 million, or 9.9% of sales. 

Dunkirk's sales increased 43% from the fourth quarter of 2010 on a 34% increase in tons shipped, mainly due to increased shipments to service centers. Dunkirk's sales decreased 3% from the third quarter of 2011 on 5% lower tons shipped, mainly due to lower shipments to service centers and lower conversion pounds.   

Webcast

A simultaneous webcast of the Company's conference call discussing the fourth quarter of 2011, scheduled at 9:00 a.m. (Eastern) today, 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 2012. 

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, tool steel and certain other alloyed steels. The Company's products are used in a variety of industries, including aerospace, power generation, petrochemical 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)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
         
 For the Quarter Ended
December 31,
For the Year Ended
December 31,
 2011201020112010
Net Sales        
Stainless steel   $ 52,203  $ 42,009  $ 202,000  $ 142,302
Tool steel   3,587  3,733  21,963  26,196
High-strength low alloy steel   3,607  2,734  17,532  10,310
High-temperature alloy steel   1,772  1,415  6,809  5,853
Conversion services   960  890  3,905  2,719
Scrap sales and other  39  802  387  2,043
Total net sales   62,168  51,583  252,596  189,423
Cost of products sold   50,264  42,742  205,148  155,651
Selling and administrative expenses   4,891  3,388  17,761  13,349
Operating income   7,013  5,453  29,687  20,423
Interest expense   (569)  (118)  (1,421)  (452)
Other income   24  72  212  92
Income before income taxes   6,468  5,407  28,478  20,063
Income tax provision   2,212  1,838  10,356  6,821
Net income   $ 4,256  $ 3,569  $ 18,122  $ 13,242
         
Earnings per common share — Basic   $ 0.62  $ 0.53  $ 2.65  $ 1.95
Earnings per common share — Diluted *  $ 0.59  $ 0.52  $ 2.56  $ 1.93
         
Weighted average shares of Common Stock outstanding        
Basic   6,839,979  6,796,561  6,826,490  6,782,576
Diluted   7,418,002  6,921,963  7,138,824  6,868,255
         
* 2011 diluted earnings per share have been adjusted for interest expense on convertible notes.
         
         
MARKET SEGMENT INFORMATION
         
 For the Quarter Ended
December 31,
For the Year Ended
December 31,
 2011201020112010
Net Sales        
Service centers   $ 33,624  $ 22,351  $ 131,624  $ 88,421
Forgers   11,640  10,149  48,432  41,793
Rerollers   11,131  12,403  47,114  36,515
Original equipment manufacturers   3,583  4,014  16,427  13,800
Wire redrawers   1,191  1,320  4,707  4,132
Conversion services  960  890  3,905  2,719
Scrap sales and other  39  456  387  2,043
Total net sales   $ 62,168  $ 51,583  $ 252,596  $ 189,423
         
Tons Shipped   11,820  11,365  50,164  43,373
 
 
BUSINESS SEGMENT RESULTS
 
Universal Stainless & Alloy Products Segment 
         
 For the Quarter Ended
December 31,
For the Year Ended
December 31,
 2011*20102011*2010
Net Sales        
Stainless steel   $ 31,899  $ 28,504  $ 125,936  $ 99,092
Tool steel   3,064  3,522  20,248  25,325
High-strength low alloy steel   1,210  336  3,026  2,091
High-temperature alloy steel   741  700  2,791  2,427
Conversion services  782  725  2,985  2,110
Scrap sales and other  42  720  401  1,928
   37,738  34,507  155,387  132,973
Intersegment   11,434  11,628  69,946  40,321
         
Total net sales   49,172  46,135  225,333  173,294
Material cost of sales   24,621  24,838  116,959  85,507
Operation cost of sales   17,203  14,751  76,014  61,428
Selling and administrative expenses   3,312  2,310  12,184  9,048
         
Operating income   $ 4,036  $ 4,236  $ 20,176  $ 17,311
         
* The Universal Stainless & Alloy Products segment includes the results of the North Jackson operation from the August 18, 2011 acquisition date.
         
Dunkirk Specialty Steel Segment 
         
 For the Quarter Ended
December 31,
For the Year Ended
December 31,
 2011201020112010
Net Sales        
Stainless steel   $ 20,304  $ 13,505  $ 76,064  $ 43,211
Tool steel   523  211  1,715  871
High-strength low alloy steel   2,397  2,398  14,506  8,219
High-temperature alloy steel   1,031  715  4,018  3,426
Conversion services   178  165  920  609
Scrap sales and other  (3)  82  (14)  114
   24,430  17,076  97,209  56,450
Intersegment   43  58  169  150
         
Total net sales   24,473  17,134  97,378  56,600
Material cost of sales   14,971  10,475  59,835  33,003
Operation cost of sales   5,459  4,240  21,689  15,000
Selling and administrative expenses   1,579  1,075  5,577  4,301
         
Operating income   $ 2,464  $ 1,344  $ 10,277  $ 4,296
     
     
 CONDENSED CONSOLIDATED BALANCE SHEETS
     
 December 31,  
 20112010
Assets    
     
Cash and cash equivalents   $ 274  $ 34,400
Accounts receivable, net  34,554  29,273
Inventory, net   85,088  69,710
Deferred income taxes  28,676  4,326
Refundable income taxes  4,844  137
Other current assets   2,198  1,198
     
Total current assets   155,634  139,044
Property, plant and equipment, net   183,148  71,581
Goodwill  20,479  -- 
Other assets   7,147  1,499
     
Total assets   $ 366,408  $ 212,124
     
Liabilities and Stockholders' Equity    
     
Accounts payable   $ 29,912  $ 20,022
Accrued employment costs   7,547  5,488
Current portion of long-term debt   3,000  2,833
Other current liabilities   1,204  605
     
Total current liabilities   41,663  28,948
Long-term debt   91,650  7,990
Deferred taxes   52,789  15,276
Other long-term liabilities   --   287
     
Total liabilities   186,102  52,501
Stockholders' equity   180,306  159,623
     
Total liabilities and stockholders' equity   $ 366,408  $ 212,124
     
     
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
     
 For the Year Ended
December 31,
 20112010
     
Cash Flows from Operating Activities:    
 Net income   $ 18,122  $ 13,242
 Adjustments to reconcile net income to net cash provided by operating activities:     
 Depreciation and amortization   7,271  5,486
 Loss (gain) on sale of property, plant and equipment   (20)  17
 Deferred income tax   10,072  730
 Stock-based compensation expense, net   1,408  1,676
 Changes in assets and liabilities:     
 Accounts receivable, net   (5,281)  (12,245)
 Inventory, net   (15,378)  (28,388)
 Accounts payable   (5)  11,661
 Accrued employment costs   2,057  4,310
 Income taxes   (4,672)  4,175
 Other, net   (2,887)  243
     
 Net cash provided by operating activities   10,687  907
     
 Investing Activities:     
 Business acquisition, net of convertible notes assumed   (91,298)  -- 
 Capital expenditures, net of amount included in current liabilities   (16,790)  (6,903)
 Proceeds from sale of property, plant and equipment   20  18
     
 Net cash used in investing activities   (108,068)  (6,885)
     
 Financing Activities:     
 Borrowings under term loan facility   40,000  -- 
 Borrowings under revolving credit facility   65,925  -- 
 Payments on revolving credit facility   (31,275)  -- 
 Debt repayments   (10,823)  (2,223)
 Proceeds from the issuance of Common Stock   627  603
 Payment of deferred financing costs   (1,371)  -- 
 Tax benefit from stock-based payment arrangements   172  143
 State grant funding the purchase of new equipment   --   500
 Purchase of treasury stock   --   (260)
     
 Net cash provided by (used in) financing activities   63,255  (1,237)
     
 Net decrease in cash and cash equivalents   (34,126)  (7,215)
 Cash and cash equivalents at beginning of period   34,400  41,615
     
 Cash and cash equivalents at end of period   $ 274  $ 34,400
     
 Supplemental Non-Cash Investing and Financing Activities:     
 Convertible notes issued as acquisition consideration   $ 20,000  $ -- 
 Capital expenditures included in current liabilities   $ 7,690  $ 578
CONTACT: Dennis Oates

         Chairman,

         President and CEO

         (412) 257-7609

         

         Douglas McSorley

         VP Finance, CFO

         and Treasurer

         (412) 257-7606

         

         June Filingeri

         President

         Comm-Partners LLC

         (203) 972-0186


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