Universal Stainless Reports First Quarter 2009 Results
Apr 29, 2009
Universal Stainless Reports First Quarter 2009 Results
Universal Stainless Reports First Quarter 2009 Results
Sales of $42.2 Million in Line With Forecast, 26% Below 1Q08 On 18%
Fewer Tons Shipped
Net Loss of $3.8 Million Includes $3.6 Million of Unusual Charges
Cash Flow From Operations Was $2.6 Million in 1Q09
Cash On Hand Increased to $25.8 Million vs. Total Debt of
$13.3 Million
First Phase of Melt Shop Project Completed On-Time and On-Budget
BRIDGEVILLE, Pa., April 29, 2009 -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) reported today that sales for the first quarter of 2009 were $42.2 million, which was at the high end of its forecast of $32 million to $42 million. This compares with sales of $56.8 million in the first quarter of 2008. The Company recorded a net loss for the first quarter of 2009 of $3.8 million, or $0.57 per diluted share, which included unusual charges of $3.6 million equivalent to $0.53 per share, after-tax, as detailed below. The Company announced on March 24 that the deepening recession and economic uncertainty would contribute to an expected loss for the quarter and include unusual charges. In the first quarter of 2008, the Company recorded net income of $4.7 million, or $0.70 per diluted share.
The first quarter of 2009 included the following unusual charges (totaling $6.0 million pre-tax):
* $1.9 million increase to the bad debt reserve due to the inability of a privately held service center customer to pay amounts owed on 2008 business and a related $0.5 million increase to the inventory reserve; * $1.5 million due to a decline in raw material values and the consumption of high cost material during the quarter; * $1.0 million write-down of stock inventory; * $0.9 million attributed to the reduction of operating levels; and * $0.2 million resulting from a 20% reduction in salaried employeesCash flow from operations remained positive in the first quarter of 2009 and totaled $2.6 million. Capital expenditures were a near-record $3.7 million including initial expenditures of $2.5 million for the $13 million melt shop upgrade project. At March 31, 2009, cash was $25.8 million, working capital was $100.6 million and long-term debt was $12.9 million.
President and CEO Dennis Oates commented: "The persistence of very difficult economic and credit conditions in the first quarter of 2009 resulted in reduced market demand, significant de-stocking in the specialty steel supply channel and liquidity problems for several of our privately-held customers. We have executed plans to aggressively reduce costs, generate cash and adjust our operating levels to market realities.
"These actions are designed to improve our performance under current conditions and position us to seize opportunities when the markets recover. We continue to strengthen our organization with industry veterans through the addition of Bill Beible as Senior Vice President of Operations and the naming of Chris Ayers to our Board of Directors. Lastly, our strategic investment program is progressing on time and on budget. These investments are focused on reducing production cycle times, increasing customer service levels, improving material yields, reducing operating costs and enhancing working capital management."
Mr. Oates concluded: "Given the unprecedented uncertainty in our industry, we are not providing specific earnings guidance for the second quarter of 2009. We anticipate that second quarter sales will be below those of the first quarter of 2009 based on current low order entry and a decline in our backlog to $58 million at March 31 from $75 million at year-end. Our performance in the second quarter of 2009 is expected to be aided by our cost saving initiatives and better alignment of material costs to surcharges. We also expect to generate positive cash flow and maintain our strong balance sheet."
Segment Review
For the first quarter of 2009, the Universal Stainless & Alloy Products segment had sales of $36.7 million and an operating loss of $3.9 million, including $5.0 million of unusual charges. In the first quarter of 2008, sales were $48.2 million and operating income was $4.9 million, or 10% of sales. In the fourth quarter of 2008, sales were $53.1 million and operating income of $1.9 million, or 3% of sales.
Segment sales declined 24% from the first quarter of 2008 primarily due to a 19% decrease in tons shipped. Increased shipments to forgers and OEMs were offset by lower shipments to rerollers and to service centers, mainly of tool steel plate. Segment sales decreased 31% from the fourth quarter of 2008 on 19% fewer tons shipped.
The Dunkirk Specialty Steel segment recorded sales of $11.4 million and an operating loss of $2.5 million for the first quarter of 2009, including unusual charges of $1.0 million. In the first quarter of 2008, sales were $20.1 million and operating income was $2.8 million, or 14% of sales. In the fourth quarter of 2008, sales were $11.4 million and the operating loss of $1.3 million, including a $248,000 charge related to the relocation of the round bar finishing line to Dunkirk from Bridgeville.
Dunkirk's sales declined 43% from the first quarter of 2008 while tons shipped decreased 28% due to lower shipments to all customer categories and lower surcharges. Dunkirk's sales were level with the fourth quarter of 2008 while tons shipped increased 23%, with the benefit of a strong increase in shipments to service centers offset by lower surcharges.
Webcast
A simultaneous Webcast of the Company's conference call discussing the first quarter of 2009, scheduled at 10:00 a.m. (Eastern) today, will be available on the Company's website at www.univstainless.com, and thereafter archived on the website.
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 rerollers, forgers, service centers, original equipment manufacturers and wire redrawers. 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, 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, labor 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. The Company's actual results in future periods also may be impacted by various economic and market risk and uncertainties, many of which are 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.
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share information)
(Unaudited)
CONSOLIDATED STATEMENT OF OPERATIONS
For the Quarter Ended
March 31,
2009 2008
---- ----
Net Sales
Stainless steel $ 33,762 $ 42,028
Tool steel 3,329 9,107
High-strength low alloy steel 2,743 4,011
High-temperature alloy steel 2,019 1,146
Conversion services 304 525
Other 29 28
---------- ----------
Total net sales 42,186 56,845
Cost of products sold 43,864 46,779
Selling and administrative expenses 4,737 3,075
---------- ----------
Operating income (loss) (6,415) 6,991
Interest expense (24) (28)
Other income 30 87
---------- ----------
Income (loss) before taxes (6,409) 7,050
Income tax (benefit) provision (2,583) 2,327
---------- ----------
Net income (loss) $ (3,826) $ 4,723
========== ==========
Earnings (loss) per share - Basic $ (0.57) $ 0.71
========== ==========
Earnings (loss) per share - Diluted $ (0.57) $ 0.70
========== ==========
Weighted average shares of Common Stock
outstanding
Basic 6,732,284 6,663,213
Diluted 6,761,436 6,771,482
MARKET SEGMENT INFORMATION
For the Quarter Ended
March 31,
2009 2008
---- ----
Net Sales
Service centers $ 17,532 $ 29,234
Forgers 12,971 9,018
Rerollers 6,004 11,239
Original equipment manufacturers 4,399 5,441
Wire redrawers 947 1,369
Conversion services 304 525
Other 29 19
---------- ----------
Total net sales $ 42,186 $ 56,845
========== ==========
Tons shipped 9,593 11,767
========== ==========
BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the Quarter Ended
March 31,
2009 2008
---- ----
Net Sales
Stainless steel $ 25,995 $ 27,310
Tool steel 3,208 8,424
High-strength low alloy steel 1,015 1,113
High-temperature alloy steel 734 569
Conversion services 188 357
Other 29 10
---------- ----------
31,169 37,783
Intersegment 5,516 10,415
---------- ----------
Total net sales 36,685 48,198
Material cost of sales 20,266 23,339
Operation cost of sales 16,460 17,790
Selling and administrative expenses 3,873 2,138
---------- ----------
Operating income (loss) $ (3,914) $ 4,931
========== ==========
Dunkirk Specialty Steel Segment
For the Quarter Ended
March 31,
2009 2008
---- ----
Net Sales
Stainless steel $ 7,767 $ 14,718
Tool steel 121 683
High-strength low alloy steel 1,728 2,898
High-temperature alloy steel 1,285 577
Conversion services 116 168
Other -- 18
---------- ----------
11,017 19,062
Intersegment 365 988
---------- ----------
Total net sales 11,382 20,050
Material cost of sales 8,794 11,839
Operation cost of sales 4,225 4,489
Selling and administrative expenses 864 937
---------- ----------
Operating income (loss) $ (2,501) $ 2,785
========== ==========
CONSOLIDATED BALANCE SHEET
March 31, December 31,
2009 2008
---- ----
Assets
Cash $ 25,781 $ 14,812
Accounts receivable, net 29,190 33,057
Inventory 51,397 63,222
Other current assets 10,973 8,239
---------- ----------
Total current assets 117,341 119,330
Property, plant & equipment, net 65,203 62,626
Other assets 1,365 988
---------- ----------
Total assets $ 183,909 $ 182,944
========== ==========
Liabilities and Stockholders' Equity
Trade accounts payable $ 11,935 $ 19,350
Outstanding checks in excess of bank balance 790 540
Accrued employment costs 3,189 3,795
Current portion of long-term debt 409 403
Other current liabilities 381 421
---------- ----------
Total current liabilities 16,704 24,509
Long-term debt 12,940 1,046
Deferred taxes 12,033 11,689
Other liabilities 290 --
---------- ----------
Total liabilities 41,967 37,244
Stockholders' equity 141,942 145,700
---------- ----------
Total liabilities and stockholders' equity $ 183,909 $ 182,944
========== ==========
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Three-Month Period Ended March 31,
2009 2008
---- ----
Cash flows provided by operating activities:
Net income (loss) $ (3,826) $ 4,723
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 1,164 982
Loss on retirement of fixed assets -- 286
Deferred tax (decrease) increase (609) 91
Stock based compensation expense 250 195
Tax benefit from share-based payment
arrangements -- (183)
Changes in assets and liabilities:
Accounts receivable, net 3,867 (7,174)
Inventory 11,825 37
Trade accounts payable (7,415) 767
Accrued employment costs (606) (1,669)
Other, net (2,013) 2,153
---------- ----------
Cash flow provided by operating activities 2,637 208
---------- ----------
Cash flow used in investing activities:
Capital expenditures (3,734) (3,092)
---------- ----------
Cash flow used in investing activities (3,734) (3,092)
---------- ----------
Cash flows used in financing activities:
Long-term debt issuance 12,000 --
Long-term debt repayments (100) (99)
Net change in outstanding checks in excess
of bank balance 250 2,740
Deferred financing costs (84)
Proceeds from issuance of common stock -- 207
Tax benefit from share-based payment
arrangements -- 183
---------- ----------
Cash flow used in financing activities 12,066 3,031
---------- ----------
Net cash flow $ 10,969 $ 147
========== ==========
CONTACT: Universal Stainless & Alloy Products, Inc.
Richard M. Ubinger, Vice President of Finance, Chief
Financial Officer and Treasurer
(412) 257-7606
Comm-Partners LLC
June Filingeri, President
(203) 972-0186
