Universal Stainless 2004 Third Quarter EPS Exceeds Forecast
Oct 20, 2004
Universal Stainless 2004 Third Quarter EPS Exceeds Forecast
Universal Stainless 2004 Third Quarter EPS Exceeds Forecast
Backlog Reaches $60 million
BRIDGEVILLE, Pa., Oct. 20, 2004 -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) today reported third quarter 2004 sales of $33.3 million and net income of $2.7 million, or $0.43 per diluted share. This includes other income of $565,000, or $0.06 per diluted share, related to the delayed receipt of the remaining 2003 import duties awarded the Company under the "Continued Dumping and Subsidy Act of 2000" resulting from a favorable ruling on a lawsuit challenging the distribution method of the import duties. Sales for the 2004 third quarter were in line with the Company's forecast and EPS was ahead of the projected range of $0.30 to $0.35, before including the other income from import duties.In the third quarter of 2003, sales were $18.6 million and the Company incurred a net loss of $121,000 or $0.02 per diluted share.
Commenting on the results, President and CEO Mac McAninch stated: "I am pleased with our performance in all of our markets and by the confidence our customers have demonstrated in us. In a period of very high market demand, we have worked diligently to respond to our customers' needs by investing rapidly to increase throughput and by maintaining a fair and transparent pricing policy in the face of volatile, rising costs."
Mr. McAninch continued: "Our third quarter sales rose 79% from last year, which was a difficult period for the economy and our industry. More importantly, end market sales improved 15% over stronger 2004 second quarter levels, with sales of aerospace, power generation, petrochemical and tool steel products up 17%, 2%, 11% and 14%, respectively."
Mr. McAninch added: "We continued to improve our profitability in the third quarter by focusing on higher value-added products and by taking necessary pricing action for cost recovery. I am especially pleased with the enthusiasm and dedication of our employees at Dunkirk Specialty Steel. They have done an excellent job of penetrating attractive niche markets and improving their product mix. Their improved operating results begin to show the facility's true potential to the Company. I also want to acknowledge the efforts of our employees at Bridgeville and Titusville, who increased shipments by 17% from the prior quarter. As our backlog continues to rise, we must continue to increase our productivity and remain focused on quality improvement and cost reduction initiatives."
Segment Review
In the third quarter of 2004, the Universal Stainless & Alloy Products segment had sales of $31.2 million and operating income of $2.9 million. This compares with sales of $16.2 million and operating income of $554,000 in the third quarter of 2003 and sales of $25.1 million and operating income of $1.9 million in the second quarter of 2004.
The strong growth reflected increased sales to all customer categories, including sales of reroll product to Dunkirk, in the year-over-year period and sequentially. Higher shipments, improved mix and price recovery initiatives led to greater profitability.
The Dunkirk Specialty Steel segment reported record sales of $9.5 million and operating income of $1.2 million. This compares with sales of $5.2 million and an operating loss of $732,000 in the third quarter of 2003 and sales of $8.0 million and operating income of $651,000 in the prior quarter.
Dunkirk's top line growth mainly reflected improved product mix and increased sales to service centers, while its total sales volume allowed further reductions in the manufacturing cost of products sold, leading to the continued improvement in its profitability.
Business Outlook
The following statements are based on the Company's current expectations. These statements are forward-looking, and actual results may differ materially.
The Company estimates that fourth quarter 2004 sales will range from $32 to $37 million and that diluted EPS will range from $0.32 to $0.37. In the fourth quarter of 2003, sales were $18.8 million and the Company incurred a net loss per diluted share of $0.04. The 2004 fourth quarter EPS estimate does not include any monies that may be received by the Company related to the Continued Dumping and Subsidy Act of 2000 for the current year.
The following factors were considered in developing these estimates:
-- The Company's total backlog at September 30, 2004 approximated $60
million compared to $49 million at June 30, 2004, reflecting
continued strength in all of the Company's markets.
-- Capital improvements implemented in the second and third quarters,
including the addition of a reheat furnace to increase throughput
at the Bridgeville blooming mill, should fully benefit the fourth
quarter.
-- Sales from the Dunkirk Specialty Steel segment are expected to
approximate the 2004 third quarter sales of $9.5 million.
Additional sales are dependent upon the level of inventory
management initiatives implemented by the service center industry
near the end of the year.
-- The Company expects raw material costs to remain volatile for the
balance of the year. Its electricity costs will increase by
$200,000 per month in the fourth quarter due to a recent Public
Utility Commission ruling that has reduced the number of off-peak
power hours available to conduct its melting operations at the
Bridgeville facility. The Company has retained a consultant to
recommend energy-saving initiatives and is currently negotiating
its 2005 energy contract.
Mr. McAninch concluded: "Our Company and our industry have realized substantial improvement this year. Based on our own assessment of the marketplace and what we are currently hearing from our customers, we expect continued strength in our business at least through the first half of 2005." Webcast
A simultaneous Webcast of the Company's conference call discussing the 2004 third quarter and the fourth quarter 2004 outlook, scheduled at 10:30 a.m. (Eastern) today, will be available on the Company's website at www.univstainless.com, and thereafter archived on the website. A telephone replay of the conference call will be available beginning at 1:00 p.m. (Eastern) today and continuing through October 27th. It can be accessed by dialing 706-645-9291, passcode 1371941. This is a toll call.
About Universal Stainless & Alloy Products, Inc.
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 original equipment manufacturers, service centers, forgers, rerollers and wire redrawers.
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, 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 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. 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.
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,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net Sales
Stainless steel $ 26,529 $ 14,215 $ 65,586 $ 38,064
Tool steel 4,277 2,828 11,185 7,328
High-strength low
alloy steel 1,160 619 3,085 1,958
High-temperature
alloy steel 473 608 1,795 1,750
Conversion services 707 247 1,635 845
Other 151 108 344 217
---------- ---------- ---------- ----------
Total net sales 33,297 18,625 83,630 50,162
Cost of products sold 27,701 17,296 71,576 47,917
Selling and
administrative
expenses 1,873 1,507 5,348 4,425
---------- ---------- ---------- ----------
Operating income
(loss) 3,723 (178) 6,706 (2,180)
Interest expense (108) (100) (302) (289)
Other income 566 24 577 74
---------- ---------- ---------- ----------
Income (loss) before
taxes 4,181 (254) 6,981 (2,395)
Income tax provision
(benefit) 1,436 (133) 2,443 (1,251)
---------- ---------- ---------- ----------
Net income (loss) $ 2,745 $ (121) $ 4,538 $ (1,144)
========== ========== ========== ==========
Earnings (loss) per
share - Basic $ 0.44 $ (0.02) $ 0.72 $ (0.18)
========== ========== ========== ==========
Earnings (loss) per
share - Diluted $ 0.43 $ (0.02) $ 0.71 $ (0.18)
========== ========== ========== ==========
Weighted average
shares of Common
Stock outstanding
Basic 6,305,456 6,289,485 6,300,229 6,286,271
Diluted 6,400,188 6,289,485 6,363,656 6,286,271
MARKET SEGMENT INFORMATION
For the Quarter Ended For the Nine-Months Ended
September 30, September 30,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net Sales
Service centers $ 13,443 $ 7,478 $ 35,616 $ 22,333
Rerollers 9,208 5,246 21,465 13,285
Forgers 6,232 3,052 15,181 7,054
Original equipment
manufacturers 2,263 1,423 6,101 3,844
Wire redrawers 1,307 1,095 3,346 2,615
Conversion services 707 246 1,635 844
Other 137 85 286 187
---------- ---------- ---------- ----------
Total net sales $ 33,297 $ 18,625 $ 83,630 $ 50,162
========== ========== ========== ==========
Tons shipped 13,470 9,600 34,667 25,658
========== ========== ========== ==========
BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the Quarter For the Nine-Months
Ended Ended
September 30, September 30,
2004 2003 2004 2003
------- ------- ------- -------
Net Sales
Stainless steel $18,373 $ 9,805 $45,469 $24,865
Tool steel 4,155 2,744 10,902 6,924
High-strength low alloy steel 575 313 1,387 1,184
High-temperature alloy steel 451 438 1,526 1,463
Conversion services 632 208 1,356 716
Other 146 108 298 202
------- ------- ------- -------
24,332 13,616 60,938 35,354
Intersegment 6,867 2,552 14,588 7,714
------- ------- ------- -------
Total net sales 31,199 16,168 75,526 43,068
Material cost of sales 14,999 6,247 33,923 15,887
Operation cost of sales 11,990 8,362 32,733 24,733
Selling and administrative
expenses 1,310 1,005 3,672 2,923
------- ------- ------- -------
Operating income (loss) $ 2,900 $ 554 $ 5,198 $ (475)
======= ======= ======= =======
Dunkirk Specialty Steel Segment
For the Quarter For the Nine-Months
Ended Ended
September 30, September 30,
2004 2003 2004 2003
------- ------- ------- -------
Net Sales
Stainless steel $ 8,156 $ 4,410 $20,117 $13,199
Tool steel 122 84 283 404
High-strength low alloy steel 585 306 1,698 774
High-temperature alloy steel 22 170 269 287
Conversion services 75 39 279 129
Other 5 -- 46 15
------- ------- ------- -------
8,965 5,009 22,692 14,808
Intersegment 519 216 1,572 596
------- ------- ------- -------
Total net sales 9,484 5,225 24,264 15,404
Material cost of sales 4,716 3,170 12,095 8,723
Operation cost of sales 3,042 2,285 8,645 6,884
Selling and administrative
expenses 563 502 1,676 1,502
------- ------- ------- -------
Operating income (loss) $ 1,163 $ (732) $ 1,848 $(1,705)
======= ======= ======= =======
CONSOLIDATED BALANCE SHEET
September 30, December 31,
2004 2003
-------- --------
Assets
Cash $ 549 $ 4,735
Accounts receivable, net 22,629 12,690
Inventory 33,808 22,281
Other current assets 3,098 4,285
-------- --------
Total current assets 60,084 43,991
Property, plant & equipment, net 40,225 40,176
Other assets 472 758
-------- --------
Total assets $100,781 $ 84,925
======== ========
Liabilities and Stockholders' Equity
Accounts payable $ 11,787 $ 6,792
Bank overdrafts 939 813
Accrued employment costs 2,818 833
Current portion of long-term debt 1,931 1,944
Other current liabilities 1,030 195
-------- --------
Total current liabilities 18,505 10,577
Bank revolver 4,597 --
Long-term debt 4,150 5,599
Deferred taxes 9,451 9,313
-------- --------
Total liabilities 36,703 25,489
Stockholders' equity 64,078 59,436
-------- --------
Total liabilities and stockholders' equity $100,781 $ 84,925
======== ========
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Nine-Months Ended September 30,
2004 2003
-------- --------
Cash flows from operating activities:
Net income (loss) $ 4,538 $ (1,144)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 2,336 2,319
Deferred taxes 480 670
Tax benefit from exercise of stock options 8 --
Changes in assets and liabilities:
Accounts receivable, net (9,939) (2,167)
Inventory (11,527) (188)
Trade accounts payable 4,995 2,559
Accrued employment costs 1,985 243
Refundable taxes 1,405 (930)
Other, net 553 227
-------- --------
Cash flow from (due to) operating activities (5,166) 1,589
-------- --------
Cash flow from investing activities:
Capital expenditures (2,377) (713)
-------- --------
Cash flow due to investing activities (2,377) (713)
-------- --------
Cash flows from financing activities:
Net borrowings under revolving line of credit 4,597 --
Proceeds from deferred loan agreement -- 200
Repayments of long-term debt (1,462) (1,451)
Net change in bank overdrafts 126 235
Proceeds from issuance of common stock 96 25
-------- --------
Cash flow from (due to) financing activities 3,357 (991)
-------- --------
Net cash flow $ (4,186) $ (115)
======== ========
CONTACTS: Universal Stainless & Alloy Products
Richard M. Ubinger
Vice President of Finance,
Chief Financial Officer and Treasurer
(412) 257-7606
Comm-Partners LLC
June Filingeri
(203) 972-0186
