Universal Stainless Reports First Quarter 2020 Results
Apr 22, 2020
- Q1 2020 Sales total
$58.5 million ; Aerospace sales rise 12.7% sequentially - Q1 2020 Net Loss of
$1.4 million , or$0.16 per diluted share - EBITDA totals
$4.0 million in Q1 2020 - Quarter-end Backlog of
$110.7 million versus$119.1 million at end of Q4 2019
Chairman, President and CEO
“We have been able to keep our plants operational while we work through our backlog, however the coronavirus has presented substantial challenges which negatively impacted the efficiency of our operations and our gross margin. The Company expects the significance of the pandemic to be dictated by its duration and the impact of actions taken by governmental entities and others in response.
“We have initiated cost-cutting actions and operating plans to strengthen liquidity and results of operations. Above all, we are committed to the health and well-being of our employees - without their continued dedication our progress would not be possible.”
COVID-19 Response Summary
- Each of the Company’s facilities is considered to be an essential operation and remains operational in accordance with the laws of the states in which the facilities are located.
- The Company continues to monitor the pandemic’s impact on the markets the Company serves, such as the aerospace and oil & gas markets.
- While the Company expects the effects of the pandemic and the related responses to negatively impact its results of operations, cash flows and financial position, the uncertainty over the duration and severity of the economic and operational impacts of COVID-19 means the Company cannot reasonably estimate the related impacts at this time.
Paycheck Protection Program Funding
The Company has entered into a term note in a principal amount of
Quarterly Results of Operations
Sales of premium alloys totaled
The Company's gross margin for the first quarter of 2020 was 8.4% of sales, compared with 10.6% of sales in the fourth quarter of 2019, and 12.2% of sales in the first quarter of 2019.
Selling, general and administrative expenses were
The net loss for the first quarter of 2020 was
The Company’s EBITDA for the first quarter of 2020 was
Managed working capital at
Backlog (before surcharges) at
The Company’s total debt at
Chairman, President and CEO
Conference Call and Webcast
The Company has scheduled a conference call for today,
About
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 Company’s ability to maintain its relationships with its significant customers and market segments; the Company’s response to competitive factors in its industry that may adversely affect the market for finished products manufactured by the Company or its customers; uncertainty regarding the return to service of the Boeing 737 MAX aircraft; the Company’s ability to compete successfully with domestic and foreign producers of specialty steel products and products fashioned from alternative materials; changes in overall demand for the Company’s products and the prices at which the Company is able to sell its products in the aerospace industry, from which a substantial amount of our sales is derived; the Company’s ability to develop, commercialize, market and sell new applications and new products; the receipt, pricing and timing of future customer orders; the impact of changes in the Company’s product mix on the Company’s profitability; the Company’s ability to maintain the availability of raw materials and operating supplies with acceptable pricing; the availability and pricing of electricity, natural gas and other sources of energy that the Company needs for the manufacturing of its products; risks related to property, plant and equipment, including the Company’s reliance on the continuing operation of critical manufacturing equipment; the Company’s success in timely concluding collective bargaining agreements and avoiding strikes or work stoppages; the Company’s ability to attract and retain key personnel; 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 matters; the Company’s ability to meet its debt service requirements and to comply with applicable financial covenants; risks associated with conducting business with suppliers and customers in foreign countries; public health issues, including the outbreak of COVID-19 and its uncertain impact on our facilities and operations and our customers and suppliers and the effectiveness of the Company’s actions taken in response to these risks; risks related to acquisitions that the Company may make; the Company’s ability to protect its information technology infrastructure against service interruptions, data corruption, cyber-based attacks or network security breaches; the impact on the Company’s effective tax rates from changes in tax rules, regulations and interpretations in
Non-GAAP Financial Measures
This press release includes discussions of financial measures that have not been determined in accordance with
[TABLES FOLLOW]
FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except Per Share Information)
(Unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
Three months ended | |||||||
2020 | 2019 | ||||||
Net sales | 58,494 | 60,271 | |||||
Cost of products sold | 53,585 | 52,901 | |||||
Gross margin | 4,909 | 7,370 | |||||
Selling, general and administrative expenses | 5,908 | 4,966 | |||||
Operating (loss) income | (999 | ) | 2,404 | ||||
Interest expense | 896 | 854 | |||||
Deferred financing amortization | 56 | 59 | |||||
Other (income) expense, net | (17 | ) | 21 | ||||
(Loss) income before income taxes | (1,934 | ) | 1,470 | ||||
(Benefit) provision for income taxes | (523 | ) | 248 | ||||
Net (loss) income | $ | (1,411 | ) | $ | 1,222 | ||
Net (loss) income per common share - Basic | $ | (0.16 | ) | $ | 0.14 | ||
Net (loss) income per common share - Diluted | $ | (0.16 | ) | $ | 0.14 | ||
Weighted average shares of common stock outstanding: | |||||||
Basic | 8,801,337 | 8,761,538 | |||||
Diluted | 8,801,337 | 8,860,525 |
MARKET SEGMENT INFORMATION | |||||||
Three months ended | |||||||
2020 | 2019 | ||||||
Service centers | $ | 42,884 | $ | 43,056 | |||
Original equipment manufacturers | 5,695 | 5,226 | |||||
Rerollers | 5,105 | 6,031 | |||||
Forgers | 3,900 | 4,821 | |||||
Conversion services and other sales | 910 | 1,137 | |||||
Total net sales | $ | 58,494 | $ | 60,271 | |||
Tons shipped | 10,120 | 10,160 | |||||
MELT TYPE INFORMATION | |||||||
Three months ended | |||||||
2020 | 2019 | ||||||
Specialty alloys | $ | 49,920 | $ | 49,764 | |||
Premium alloys * | 7,664 | 9,370 | |||||
Conversion services and other sales | 910 | 1,137 | |||||
Total net sales | $ | 58,494 | $ | 60,271 | |||
END MARKET INFORMATION ** | |||||||
Three months ended | |||||||
2020 | 2019 | ||||||
Aerospace | $ | 42,398 | $ | 42,607 | |||
Power generation | 2,217 | 2,503 | |||||
Oil & gas | 4,404 | 5,376 | |||||
Heavy equipment | 6,141 | 6,444 | |||||
General industrial, conversion services and other sales | 3,334 | 3,341 | |||||
Total net sales | $ | 58,494 | $ | 60,271 | |||
* 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. |
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
2020 | 2019 | ||||||
Assets | |||||||
Cash | $ | 233 | $ | 170 | |||
Accounts receivable, net | 36,614 | 35,595 | |||||
Inventory, net | 146,779 | 147,402 | |||||
Other current assets | 8,877 | 8,300 | |||||
Total current assets | 192,503 | 191,467 | |||||
Property, plant and equipment, net | 173,994 | 176,061 | |||||
Other long-term assets | 758 | 871 | |||||
Total assets | $ | 367,255 | $ | 368,399 | |||
Liabilities and Stockholders' Equity | |||||||
Accounts payable | $ | 29,907 | $ | 40,912 | |||
Accrued employment costs | 3,762 | 4,449 | |||||
Current portion of long-term debt | 17,203 | 3,934 | |||||
Other current liabilities | 799 | 830 | |||||
Total current liabilities | 51,671 | 50,125 | |||||
Long-term debt, net | 59,075 | 60,411 | |||||
Deferred income taxes | 10,472 | 10,962 | |||||
Other long-term liabilities, net | 3,681 | 3,765 | |||||
Total liabilities | 124,899 | 125,263 | |||||
Stockholders’ equity | 242,356 | 243,136 | |||||
Total liabilities and stockholders’ equity | $ | 367,255 | $ | 368,399 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | |||||||
Three months ended | |||||||
2020 | 2019 | ||||||
Operating activities: | |||||||
Net (loss) income | $ | (1,411 | ) | $ | 1,222 | ||
Adjustments for non-cash items: | |||||||
Depreciation and amortization | 5,025 | 4,646 | |||||
Deferred income tax | (525 | ) | 235 | ||||
Share-based compensation expense | 511 | 432 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable, net | (1,019 | ) | (2,003 | ) | |||
Inventory, net | 12 | (12,962 | ) | ||||
Accounts payable | (9,161 | ) | (1,314 | ) | |||
Accrued employment costs | (687 | ) | (4,390 | ) | |||
Income taxes | 7 | 12 | |||||
Other, net | (524 | ) | (3,719 | ) | |||
Net cash used in operating activities | (7,772 | ) | (17,841 | ) | |||
Investing activity: | |||||||
Capital expenditures | (4,042 | ) | (5,557 | ) | |||
Net cash used in investing activity | (4,042 | ) | (5,557 | ) | |||
Financing activities: | |||||||
Borrowings under revolving credit facility | 49,232 | 50,450 | |||||
Payments on revolving credit facility | (34,872 | ) | (29,339 | ) | |||
Payments on term loan facility, finance leases, and notes | (2,483 | ) | (2,472 | ) | |||
Bank overdrafts | - | 1,276 | |||||
Proceeds from the exercise of stock options | - | 41 | |||||
Net cash provided by financing activities | 11,877 | 19,956 | |||||
Net increase (decrease) in cash and restricted cash | 63 | (3,442 | ) | ||||
Cash and restricted cash at beginning of period | 170 | 4,091 | |||||
Cash and restricted cash at end of period | $ | 233 | $ | 649 |
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA | |||||||
Three months ended | |||||||
2020 | 2019 | ||||||
Net (loss) income | $ | (1,411 | ) | $ | 1,222 | ||
Interest expense | 896 | 854 | |||||
(Benefit) provision for income taxes | (523 | ) | 248 | ||||
Depreciation and amortization | 5,025 | 4,646 | |||||
EBITDA | 3,987 | 6,970 | |||||
Share-based compensation expense | 511 | 432 | |||||
Adjusted EBITDA | $ | 4,498 | $ | 7,402 |
CONTACTS: | |||
Chairman, | VP Finance, CFO | President | |
President and CEO | and Treasurer | ||
(412) 257-7609 | (412) 257-7662 | (203) 972-0186 |
Source: Universal Stainless & Alloy Products, Inc.