Universal Stainless Reports Second Quarter 2012 Results
Jul 19, 2012
- Sales are $67.9 Million; EPS is $0.62
- North Jackson Facility is Operationally Accretive to Results
- Quarter-End Backlog Totals $89.0 Million
- Conference Call and Webcast Scheduled for Tomorrow, July 20, at 9:00 a.m. (ET)
BRIDGEVILLE, Pa., July 19, 2012 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) reported today that sales for the second quarter of 2012 were $67.9 million, an increase of 7% from the second quarter of 2011 but 9% below the record 2012 first quarter.
Operating income for the second quarter of 2012 was $7.3 million, a decline of 14% from the second quarter of 2011 and 25% below the 2012 first quarter. Operating income was 10.8% of sales in the second quarter of 2012 compared with 13.4% in the second quarter of 2011 and 13.0% of sales in the 2012 first quarter.
Net income for the second quarter of 2012 was $4.5 million, or $0.62 per diluted share, which includes a benefit of $0.02 per diluted share due to research and development tax credits. This compares with net income of $5.5 million, or $0.79 per diluted share, in the second quarter of 2011, which included $0.04 per diluted share of expense for the acquisition of the Company's North Jackson facility. In the first quarter of 2012, net income was $6.3 million, or $0.86 per diluted share, including a benefit of $0.07 per diluted share due to state income tax adjustments as well as an after-tax loss of $0.2 million, or $0.03 per diluted share, attributable to the ramp-up of North Jackson. The operating income of the Company's North Jackson facility was accretive to second quarter 2012 results.
For the second quarter of 2012, the Company narrowed its negative cash flow from operations to $0.5 million despite investment in working capital and in the ramp-up of North Jackson. Capital expenditures were $10.3 million in the second quarter, including $7.2 million for the North Jackson operation. At June 30, 2012, the Company had total debt of $114.7 million, or 37.3% of total capitalization.
Shipment volume for the second quarter of 2012 increased 6% from the second quarter of 2011 but was 5% lower than the 2012 first quarter. Compared to the first quarter of 2012, tons shipped to the aerospace, petrochemical and power generation markets declined by 10%, 11% and 25%, respectively, while service center plate volume increased 48%.
Chairman, President and CEO Dennis Oates commented: "Despite continued end market strength, we experienced changes in our customers' buying patterns as the second quarter progressed. Falling raw material prices and the prospect of lower future surcharges combined with growing economic caution influenced customers to reduce their order quantities, negatively impacting our shipment volume, order entry and backlog.
"The lower shipment volume and the gap between surcharges and our raw material costs reduced margins in the second quarter, although our operating margin as a percentage of sales remained above 10%. As anticipated we reached an important milestone in the quarter with our North Jackson facility becoming operationally accretive for the first time.
"Soft demand due to channel inventory adjustments is expected to continue through the normal summer slowdown. However, the fundamental drivers of our end markets remain in place and our long-term growth strategy and prospects remain intact."
Segment Review
For the second quarter of 2012, the Universal Stainless & Alloy Products segment, including the North Jackson operation, had sales of $61.8 million and operating income of $4.5 million, yielding an operating margin of 7.2% of sales. In the second quarter of 2011, sales were $60.4 million and operating income was $6.4 million, or 10.7% of sales. For the first quarter of 2012, sales were $60.3 million and operating income was $5.8 million, or 9.6% of sales.
Segment sales increased 2% from the second quarter of 2011 on 2% higher tons shipped mainly due to increased shipments to service centers and of conversion pounds with the addition of North Jackson, offset by lower shipments to forgers of quick-turn ingot. Segment sales increased 3% from the 2012 first quarter on a 2% increase in volume, including higher shipments of tool steel to service centers, offset by lower shipments to forgers.
Sales for the Dunkirk Specialty Steel segment were $25.3 million for the second quarter of 2012 and operating income was $2.7 million, yielding an operating margin of 10.7% of sales. This compares with sales in the second quarter of 2011 of $25.6 million and operating income of $3.0 million, or 11.6% of sales. In the first quarter of 2012, sales were $30.5 million and operating income was $3.4 million, or 11.0% of sales
Dunkirk's sales decreased 1% from the second quarter of 2011 on a 5% decrease in tons shipped. Dunkirk's sales decreased 17% from the 2012 first quarter on 18% lower tons shipped, due to lower shipments to all major customer categories.
Webcast
The Company has scheduled a conference call for tomorrow, July 20, at 9:00 a.m. (Eastern) to discuss second quarter 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 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 | For the Six-Months Ended | |||||
| June 30, | June 30, | |||||
| 2012* | 2011 | 2012* | 2011 | |||
| Net Sales | ||||||
| Stainless steel | $ 52,286 | $ 48,253 | $ 112,412 | $ 95,051 | ||
| Tool steel | 6,565 | 7,478 | 10,870 | 12,969 | ||
| High-strength low alloy steel | 5,841 | 4,771 | 12,079 | 9,485 | ||
| High-temperature alloy steel | 1,728 | 1,778 | 4,169 | 3,458 | ||
| Conversion services | 1,397 | 996 | 2,864 | 2,010 | ||
| Scrap sales and other | 49 | 42 | 86 | 156 | ||
| Total net sales | 67,866 | 63,318 | 142,480 | 123,129 | ||
| Cost of products sold | 56,296 | 51,146 | 116,635 | 100,159 | ||
| Selling and administrative expenses | 4,263 | 3,697 | 8,846 | 7,527 | ||
| Operating income | 7,307 | 8,475 | 16,999 | 15,443 | ||
| Interest expense | (618) | (118) | (1,322) | (243) | ||
| Other income | 38 | 143 | 61 | 143 | ||
| Income before income taxes | 6,727 | 8,500 | 15,738 | 15,343 | ||
| Income tax provision | 2,222 | 2,975 | 4,947 | 5,370 | ||
| Net income | $ 4,505 | $ 5,525 | $ 10,791 | $ 9,973 | ||
| Earnings per common share — Basic | $ 0.66 | $ 0.81 | $ 1.57 | $ 1.46 | ||
| Earnings per common share — Diluted ** | $ 0.62 | $ 0.79 | $ 1.48 | $ 1.43 | ||
| Weighted average shares of Common | ||||||
| Stock outstanding | ||||||
| Basic | 6,863,904 | 6,821,567 | 6,856,310 | 6,817,317 | ||
| Diluted | 7,465,260 | 6,995,361 | 7,445,391 | 6,973,785 | ||
| MARKET SEGMENT INFORMATION | ||||||
| For the Quarter Ended | For the Six-Months Ended | |||||
| June 30, | June 30, | |||||
| 2012* | 2011 | 2012* | 2011 | |||
| Net Sales | ||||||
| Service centers | $ 41,804 | $ 34,305 | $ 83,460 | $ 62,933 | ||
| Forgers | 9,149 | 11,925 | 22,868 | 23,795 | ||
| Rerollers | 10,426 | 10,672 | 21,422 | 23,477 | ||
| Original equipment manufacturers | 3,548 | 4,205 | 8,545 | 8,326 | ||
| Wire redrawers | 1,493 | 1,173 | 3,235 | 2,432 | ||
| Conversion services | 1,397 | 996 | 2,864 | 2,010 | ||
| Scrap sales and other | 49 | 42 | 86 | 156 | ||
| Total net sales | $ 67,866 | $ 63,318 | $ 142,480 | $ 123,129 | ||
| Tons Shipped | 13,277 | 12,591 | 27,311 | 25,604 | ||
| * Includes the results of the North Jackson operation, which was acquired on August 18, 2011. | ||||||
| ** 2012 diluted earnings per common share have been adjusted for interest expense on convertible notes. | ||||||
| BUSINESS SEGMENT RESULTS | ||||||
| Universal Stainless & Alloy Products Segment | ||||||
| For the Quarter Ended | For the Six-Months Ended | |||||
| June 30, | June 30, | |||||
| 2012* | 2011 | 2012* | 2011 | |||
| Net Sales | ||||||
| Stainless steel | $ 32,675 | $ 28,657 | $ 68,788 | $ 59,234 | ||
| Tool steel | 6,088 | 7,092 | 9,857 | 12,137 | ||
| High-strength low alloy steel | 1,931 | 688 | 3,987 | 1,154 | ||
| High-temperature alloy steel | 528 | 569 | 1,488 | 1,427 | ||
| Conversion services | 1,337 | 772 | 2,610 | 1,562 | ||
| Scrap sales and other | 37 | 21 | 98 | 129 | ||
| 42,596 | 37,799 | 86,828 | 75,643 | |||
| Intersegment | 19,215 | 22,652 | 35,247 | 39,958 | ||
| Total net sales | 61,811 | 60,451 | 122,075 | 115,601 | ||
| Material cost of sales | 31,113 | 31,987 | 59,979 | 61,073 | ||
| Operation cost of sales | 23,555 | 19,709 | 46,196 | 38,300 | ||
| Selling and administrative expenses | 2,671 | 2,309 | 5,652 | 4,868 | ||
| Operating income | $ 4,472 | $ 6,446 | $ 10,248 | $ 11,360 | ||
| * 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 | For the Six-Months Ended | |||||
| June 30, | June 30, | |||||
| 2012 | 2011 | 2012 | 2011 | |||
| Net Sales | ||||||
| Stainless steel | $ 19,611 | $ 19,596 | $ 43,624 | $ 35,817 | ||
| Tool steel | 477 | 386 | 1,013 | 832 | ||
| High-strength low alloy steel | 3,910 | 4,083 | 8,092 | 8,331 | ||
| High-temperature alloy steel | 1,200 | 1,209 | 2,681 | 2,031 | ||
| Conversion services | 60 | 224 | 254 | 448 | ||
| Scrap sales and other | 12 | 21 | (12) | 27 | ||
| 25,270 | 25,519 | 55,652 | 47,486 | |||
| Intersegment | 68 | 78 | 179 | 92 | ||
| Total net sales | 25,338 | 25,597 | 55,831 | 47,578 | ||
| Material cost of sales | 14,687 | 15,673 | 32,861 | 29,017 | ||
| Operation cost of sales | 6,346 | 5,561 | 13,696 | 10,602 | ||
| Selling and administrative expenses | 1,592 | 1,388 | 3,194 | 2,659 | ||
| Operating income | $ 2,713 | $ 2,975 | $ 6,080 | $ 5,300 | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| June 30, | December 31, | |
| Assets | 2012 | 2011 |
| Cash | $ 180 | $ 274 |
| Accounts receivable, net | 40,847 | 34,554 |
| Inventory, net | 103,086 | 85,088 |
| Deferred income taxes | 21,845 | 28,438 |
| Refundable income taxes | 5,090 | 4,844 |
| Other current assets | 2,349 | 2,198 |
| Total current assets | 173,397 | 155,396 |
| Property, plant and equipment, net | 197,398 | 183,148 |
| Goodwill | 20,479 | 20,479 |
| Long-term refundable income taxes | 1,305 | -- |
| Other long-term assets | 2,709 | 2,649 |
| Total assets | $ 395,288 | $ 361,672 |
| Liabilities and Stockholders' Equity | ||
| Accounts payable | $ 28,952 | $ 29,912 |
| Accrued employment costs | 4,972 | 7,547 |
| Current portion of long-term debt | -- | 3,000 |
| Other current liabilities | 1,788 | 966 |
| Total current liabilities | 35,712 | 41,425 |
| Long-term debt | 114,731 | 91,650 |
| Deferred income taxes | 52,038 | 48,291 |
| Other long-term liabilities | 172 | -- |
| Total liabilities | 202,653 | 181,366 |
| Stockholders' equity | 192,635 | 180,306 |
| Total liabilities and stockholders' equity | $ 395,288 | $ 361,672 |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | |||
| For the Six-Months Ended | |||
| June 30, | |||
| 2012* | 2011 | ||
| Operating activities: | |||
| Net income | $ 10,791 | $ 9,973 | |
| Adjustments to reconcile net income to net cash used in operating activities: | |||
| Depreciation and amortization | 6,096 | 2,931 | |
| Deferred income tax | 10,341 | (211) | |
| Share-based compensation expense, net | 672 | 745 | |
| Changes in assets and liabilities: | |||
| Accounts receivable, net | (6,293) | (3,693) | |
| Inventory, net | (17,998) | (13,408) | |
| Accounts payable | (4,825) | 2,048 | |
| Accrued employment costs | (2,575) | (618) | |
| Income taxes | (1,222) | 743 | |
| Other, net | 680 | (252) | |
| Net cash used in operating activities | (4,333) | (1,742) | |
| Investing activities: | |||
| Capital expenditures, net of amount included in accounts payable | (16,196) | (3,672) | |
| Net cash used in investing activities | (16,196) | (3,672) | |
| Financing activities: | |||
| Payment on term loan facility | (20,000) | -- | |
| Borrowings under revolving credit facility | 78,664 | -- | |
| Payments on revolving credit facility | (38,583) | -- | |
| Debt repayments | -- | (1,416) | |
| Proceeds from the issuance of Common Stock | 770 | 404 | |
| Payment of deferred financing costs | (348) | -- | |
| Purchase of Treasury Stock | (233) | -- | |
| Tax benefit from share-based payment arrangements | 165 | 60 | |
| Net cash provided by (used in) financing activities | 20,435 | (952) | |
| Net decrease in cash | (94) | (6,366) | |
| Cash at beginning of period | 274 | 34,400 | |
| Cash at end of period | $ 180 | $ 28,034 | |
| Supplemental Non-Cash Investing Activity: | |||
| Capital expenditures included in accounts payable | $ 3,865 | $ 944 | |
| * Includes the results of the North Jackson operation, which was acquired on August 18, 2011. | |||
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