July 31, 2014

Universal Stainless Posts Strong Second Quarter 2014 Results

  • Net Sales of $52.3 Million Increase 12% Sequentially and 22% from 2013 Second Quarter
  • Gross Margin Improves to 16% of Sales; Operating Income is $3.2 Million
  • Net Income Totals $1.4 Million or $0.20 per Diluted Share
  • Second Quarter Backlog Rises to $61.0 Million

BRIDGEVILLE, Pa., July 31, 2014 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) today reported that net sales for the second quarter of 2014 were $52.3 million, an increase of 12% from the first quarter of 2014 and 22% higher than the second quarter of 2013. Sales of premium alloy products rose to $4.3 million, an increase of 58% sequentially and more than double their level in the second quarter of 2013. Premium alloy products represented 8% of total net sales in the 2014 second quarter.

Compared with the first quarter of 2014, sales to the aerospace market increased 13%, power generation sales were up 21%, oil and gas market sales increased 27%, while heavy equipment market sales were lower by 7%. On a tons shipped basis, aerospace shipments increased 3% from the first quarter of 2014, power generation shipments were up 25%, shipments to the oil and gas market were level, and heavy equipment market shipments were lower by 9%. The Company's backlog (before surcharges) has increased 30% from the start of this year to $61.0 million at the end of the second quarter.

The Company's gross margin for the second quarter of 2014 continued to show strong improvement, reaching $8.4 million, or 16.1% of sales, compared with $6.1 million, or 13.0% of sales, in the first quarter of 2014, and $5.3 million, or 12.4% of sales, in the second quarter of 2013.

Operating income for the second quarter of 2014 was $3.2 million, which is more than double operating income of $1.4 million in the first quarter of 2014, and up more than seven-fold from operating income of $0.4 million in the second quarter of 2013.

The Company reported net income of $1.4 million, or $0.20 per diluted share, for the second quarter of 2014. That compares with a net loss of $0.5 million, or $0.07 per diluted share, in the first quarter of 2014, which included $0.12 of state tax charges, and net income of $0.5 million, or $0.06 per diluted share, in the second quarter of 2013, including $0.11 of tax benefits.

For the first six months of 2014, net sales increased 8% to $99.0 million compared with net sales of $92.0 million in the same period of 2013. Net income for the first six months of 2014 increased to $1.0 million, or $0.13 per diluted share, compared to net income of $0.5 million, or $0.06 per diluted share, in the first six months of 2013.

For the second quarter of 2014, the Company used $1.8 million in cash from operations for investment in working capital to support increased sales activity and operating levels. At June 30, 2014, total debt was $91.8 million, an increase of 4% from the end of the first quarter of 2014, largely as a result of the higher activity levels; however, total debt was lower by 11% from the second quarter of 2013. Debt to total capitalization was 31.5% at the end of the 2014 second quarter.   

Chairman, President and CEO Dennis Oates commented: "Increasing demand in the aerospace market, which represents nearly 60% of our sales, was the main driver of the continued improvement in our second quarter performance, which also benefited from increased sales to the power generation and oil and gas markets. Premium product sales reached 8% of total sales, as we continued to execute our plan to move toward more advanced alloys. The favorable shift in our product mix combined with solid manufacturing activity levels, improved yields, lower scrap rates, and better matching of surcharges to material costs, all contributed to the strong step-up in our gross margin for the quarter.

"With the recent approvals received from GE Aviation, which completed our certification by three of the world's largest aircraft engine manufacturers, we have entered the third quarter on a positive footing." 

Webcast

The Company has scheduled a conference call for today, July 31, at 10:00 a.m. (Eastern) to discuss second quarter 2014 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 third quarter of 2014.  

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 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 share and per share information)
(Unaudited)
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three months endedSix months ended
 June 30,June 30,
 2014201320142013
Net Sales        
Stainless steel  $ 42,045  $ 32,193  $ 78,672  $ 67,670 
High-strength low alloy steel  3,451   3,865   7,246   10,458 
Tool steel  3,389   5,118   7,061   10,102 
High-temperature alloy steel  1,795   805   3,015   2,075 
Conversion services and other sales  1,629   906   2,982   1,717 
         
Total net sales  52,309   42,887   98,976   92,022 
         
Cost of products sold  43,899   37,579   84,506   82,068 
         
Gross margin  8,410   5,308   14,470   9,954 
         
Selling, general and administrative expenses  5,169   4,869   9,797   9,348 
         
Operating income  3,241   439   4,673   606 
         
Interest expense  (882)  (756)  (1,580)  (1,330)
Deferred financing amortization  (160)  (81)  (325)  (196)
Other (expense) income, net  (1)  35   3   63 
         
Income (loss) before income taxes  2,198   (363)  2,771   (857)
         
Provision (benefit) for income taxes  749   (841)  1,821   (1,375)
         
Net income $ 1,449  $ 478  $ 950  $ 518 
         
Net income per common share - Basic $ 0.21  $ 0.07  $ 0.14  $ 0.07 
Net income per common share - Diluted $ 0.20  $ 0.06  $ 0.13  $ 0.06 
         
Weighted average shares of common stock outstanding        
Basic  7,031,041   6,940,831   7,022,983   6,934,182 
Diluted  7,110,761   7,485,405   7,112,093   7,494,125 
 
 
MARKET SEGMENT INFORMATION
         
 Three months endedSix months ended
 June 30,June 30,
 2014201320142013
Net Sales        
Service centers  $ 34,971 $ 29,103 $ 63,762 $ 61,612
Forgers   7,080  4,433  13,462  11,062
Rerollers   4,627  5,578  10,852  11,080
Original equipment manufacturers   4,002  2,867  7,918  6,551
Conversion services and other sales  1,629  906  2,982  1,717
         
Total net sales  $ 52,309 $ 42,887 $ 98,976 $ 92,022
         
Tons shipped   9,921  8,559  19,246  18,185
         
         
MELT TYPE INFORMATION
         
 Three months endedSix months ended
 June 30,June 30,
 2014201320142013
Net Sales        
Specialty alloys $ 46,424 $ 40,097 $ 89,040 $ 86,219
Premium alloys *  4,256  1,884  6,954  4,086
Conversion services and other sales  1,629  906  2,982  1,717
         
Total net sales  $ 52,309 $ 42,887 $ 98,976 $ 92,022
         
END MARKET INFORMATION **
         
 Three months endedSix months ended
 June 30,June 30,
 2014201320142013
Net Sales        
Aerospace $ 30,190  $ 24,990 $ 56,897 $ 50,725
Power generation  6,552  4,531  11,967  10,290
Oil & gas  5,406  4,484  9,655  10,776
Heavy equipment  3,697  5,518  7,656  11,034
General industrial, conversion services and other sales  6,464  3,364  12,801  9,197
         
Total net sales  $ 52,309 $ 42,887 $ 98,976 $ 92,022
         
* Premium alloys represent all vacuum induction melted (VIM) products.
         
**The majority of our products are sold to service centers/processors 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.
 
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
     
 June 30,December 31,
 20142013
Assets    
     
Cash $ 165  $ 307 
Accounts receivable, net  31,924   21,447 
Inventory, net  96,250   82,593 
Deferred income taxes  8,440   13,042 
Other current assets  3,863   3,906 
     
Total current assets  140,642   121,295 
Property, plant and equipment, net  199,635   203,590 
Goodwill  20,268   20,268 
Other long-term assets  2,314   2,771 
     
Total assets $ 362,859  $ 347,924 
     
Liabilities and Stockholders' Equity    
     
Accounts payable $ 26,785  $ 14,288 
Accrued employment costs  4,252   3,430 
Current portion of long-term debt  3,000   3,000 
Other current liabilities  902   1,023 
     
Total current liabilities  34,939   21,741 
Long-term debt  88,805   86,796 
Deferred income taxes  39,277   42,532 
Other long-term liabilities  526   397 
     
Total liabilities  163,547   151,466 
Stockholders' equity  199,312   196,458 
     
Total liabilities and stockholders' equity $ 362,859  $ 347,924 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOW
 
 Six months ended
 June 30,
 20142013
   
Operating activities:    
Net income $ 950  $ 518 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  8,723   8,279 
Deferred income tax   1,347   (826)
Share-based compensation expense  1,032   922 
Changes in assets and liabilities:    
Accounts receivable, net  (10,477)  491 
Inventory, net  (14,495)  (57)
Accounts payable  12,497   3,461 
Accrued employment costs  822   (779)
Income taxes  433   (670)
Other, net  (402)  (715)
     
Net cash provided by operating activities  430   10,624 
     
Investing activity:    
Capital expenditures  (3,472)  (6,998)
     
Net cash used in investing activity  (3,472)  (6,998)
     
Financing activities:    
Borrowings under revolving credit facility  45,207   45,854 
Payments on revolving credit facility  (41,698)  (49,156)
Payments on term loan facility  (1,500)  --
Proceeds from the issuance of common stock  891   613 
Payment of deferred financing costs  --  (487)
Purchase of treasury stock  --  (38)
     
Net cash provided by (used in) financing activities  2,900   (3,214)
     
Net (decrease) increase in cash  (142)  412 
Cash at beginning of period  307   321 
     
Cash at end of period $ 165  $ 733 
CONTACT: Dennis M. Oates

         Chairman,

         President and CEO

         (412) 257-7609

         

         Michael D. Bornak

         VP Finance, CFO

         and Treasurer

         (412) 257-7606

         

         June Filingeri

         President

         Comm-Partners LLC

         (203) 972-0186


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