Universal Stainless Reports Record Sales and Earnings for 2007 First Quarter
Apr 24, 2007
Universal Stainless Reports Record Sales and Earnings for 2007 First Quarter
Universal Stainless Reports Record Sales and Earnings for 2007 First Quarter
First Quarter EPS Reaches $1.00 On $56 Million in Sales
BRIDGEVILLE, Pa., April 24, 2007 -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) reported today that sales for the first quarter of 2007 rose 25% to a record $56.2 million compared with $44.9 million in the same period of 2006. First quarter 2007 net income rose 70% to a record $6.8 million, or $1.00 per diluted share. This compares with net income of $4.0 million, or $0.61 per diluted share, for the first quarter of 2006.The 2007 first quarter results reflect a reduction in the annual income tax rate to 35.0% from 36.0% recorded in the 2006 first quarter, equivalent to $0.02 per diluted share. Net income for the 2006 first quarter has been adjusted for the retrospective application of an accounting pronouncement as detailed in the financial tables.
The first quarter 2007 sales were in line with the Company's forecast of $52-$57 million while diluted EPS substantially exceeded the forecasted range of $0.82 to $0.87, mainly due to higher than expected nickel pricing.
Chairman and CEO Mac McAninch commented: "Our record first quarter shows the ongoing benefit of our investments in equipment and personnel over the past two years, which have enabled us to respond to strong end markets and continue our shift to higher value-added products while also improving our on-time delivery performance. Our strong year-over-year growth to all our end markets in the first quarter was led, once again, by aerospace. In fact, our sales of high strength low alloy and high temperature alloy steels, which are used primarily for aerospace applications, represented 16% of our total sales in the 2007 first quarter compared with 11% in the same quarter last year. With the peak in commercial aircraft delivery not expected until 2010 and the potential for replacement aircraft orders from domestic airlines, we expect aerospace demand to drive our growth for the foreseeable future, supported by the strong prospects for all our niche markets."
Segment Review
In the first quarter of 2007, the Universal Stainless & Alloy Products segment had record sales of $48.2 million and record operating income of $7.2 million, yielding an operating margin of 15%. This compares with first quarter 2006 sales of $39.1 million and operating income of $5.1 million, or 13% of sales. In the fourth quarter of 2006, sales were $47.1 million and operating income was $4.6 million, or 10% of sales.
The 23% increase in sales and 41% increase in operating income from the 2006 first quarter reflect the contribution of new vacuum-arc remelt (VAR) furnaces installed in December 2005 and August 2006, which supported a continued shift to higher value added products. Favorable product mix also accounted for the 55% increase in the first quarter 2007 operating margin on a 2% increase in sales compared with the 2006 fourth quarter, while higher sales of bar and tool steel plate products to service centers offset lower sales of semi-finished products to rerollers and forgers.
The Dunkirk Specialty Steel segment reported record sales for the 2007 first quarter of $20.4 million and operating income of $3.8 million, resulting in an operating margin of 19%. This compares with sales of $14.0 million and operating income of $1.5 million, or 10% of sales, in the first quarter of 2006. In the fourth quarter of 2006, sales were $20.3 million and operating income was $3.9 million, or 19% of sales.
Dunkirk's 46% increase in sales and 162% rise in operating income over the 2006 first quarter were due to the improved VAR remelted feedstock supply from Bridgeville, workforce additions, and rising nickel prices that affected the surcharge mechanism. The growth in sales over the 2006 first quarter reflected increases in every customer category, including a 102% increase in OEM sales and a 77% increase in sales to redrawers. Sales and operating income were in line with those of the 2006 fourth quarter, with growth in sales of bar products to service centers and OEMs. These gains more than offset lower rod and wire sales, mainly reflecting the delay of orders for high nickel-bearing grades of steel because of record nickel prices.
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 second quarter 2007 sales will range from $52 to $57 million and that diluted EPS will range from $0.85 to $0.90. This compares with sales of $48.0 million and diluted EPS of $0.70, as adjusted, in the second quarter of 2006.
The following factors were considered in developing these estimates:
* The Company's total backlog at March 31, 2007 was approximately $114 million compared to $120 million at December 31, 2006. * End market demand led by aerospace is expected to remain strong in the 2007 second quarter. * Nickel prices are expected to remain at the high levels experienced in the 2007 first quarter. * Sales from the Dunkirk Specialty Steel segment are expected to approximate $20 million in the second quarter of 2007 based on its backlog of $44 million at March 31, 2007.Webcast
A simultaneous Webcast of the Company's conference call discussing the first quarter of 2007 and the second quarter outlook, 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. A telephone replay of the conference call will be available beginning at 12:00 noon (Eastern) today and continuing through May 1st. It can be accessed by dialing 706-645-9291, passcode 4463625. 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 rerollers, forgers, service centers, original equipment manufacturers 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
March 31,
2007 2006
----------- -----------
Net Sales
Stainless steel $ 39,570 $ 33,418
Tool steel 7,097 5,827
High-strength low alloy steel 6,234 2,552
High-temperature alloy steel 2,745 2,369
Conversion services 489 729
Other 104 42
----------- -----------
Total net sales 56,239 44,937
Cost of products sold 43,020 36,170
Selling and administrative expenses 2,554 2,256
----------- -----------
Operating income 10,665 6,511
Interest expense (227) (266)
Other income 4 2
----------- -----------
Income before taxes 10,442 6,247
Income tax provision 3,655 2,249
----------- -----------
Net income $ 6,787 $ 3,998
=========== ===========
Earnings per share - Basic $ 1.03 $ 0.62
=========== ===========
Earnings per share - Diluted $ 1.00 $ 0.61
=========== ===========
Weighted average shares of
Common Stock outstanding
Basic 6,621,307 6,417,323
Diluted 6,761,157 6,559,491
Note: 2006 results have been adjusted to reflect the retrospective
application of the January 1, 2007 change in accounting for major
maintenance expenses from the accrue-in-advance method to the
deferral method in accordance with the FASB Staff Position entitled
"Accounting for Planned Major Maintenance Activities," issued in
September 2006. The effect of the change in accounting is summarized
below:
For the Quarter Ended
March 31, 2006
As Reported As Adjusted
----------- -----------
Operating income:
Universal Stainless & Alloy
Products Segment $ 4,949 $ 5,106
Dunkirk Specialty Steel Segment 1,467 1,460
Intersegment elimination (55) (55)
----------- -----------
6,361 6,511
=========== ===========
Net income $ 3,902 $ 3,998
=========== ===========
Diluted earnings per share $ 0.59 $ 0.61
=========== ===========
BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the Quarter Ended
March 31,
2007 2006
------- -------
Net Sales
Stainless steel $24,996 $23,567
Tool steel 6,159 5,360
High-strength low alloy steel 4,000 1,239
High-temperature alloy steel 1,230 1,041
Conversion services 327 538
Other 86 40
------- -------
36,798 31,785
Intersegment 11,367 7,352
------- -------
Total net sales 48,165 39,137
Material cost of sales 21,231 17,408
Operation cost of sales 18,017 15,094
Selling and administrative expenses 1,718 1,529
------- -------
Operating income $ 7,199 $ 5,106
======= =======
Dunkirk Specialty Steel Segment
For the Quarter Ended
March 31,
2007 2006
------- -------
Net Sales
Stainless steel $14,574 $ 9,851
Tool steel 938 467
High-strength low alloy steel 2,234 1,313
High-temperature alloy steel 1,515 1,328
Conversion services 162 191
Other 18 2
------- -------
19,441 13,152
Intersegment 999 835
------- -------
Total net sales 20,440 13,987
Material cost of sales 11,196 7,971
Operation cost of sales 4,587 3,829
Selling and administrative expenses 836 727
------- -------
Operating income $ 3,821 $ 1,460
======= =======
MARKET SEGMENT INFORMATION
For the Quarter Ended
March 31,
2007 2006
-------- --------
Net Sales
Service centers $ 29,105 $ 23,038
Forgers 12,574 7,564
Rerollers 7,192 7,847
Original equipment manufacturers 4,877 4,599
Wire redrawers 1,898 1,144
Conversion services 489 729
Other 104 16
-------- --------
Total net sales $ 56,239 $ 44,937
======== ========
Tons shipped 11,157 12,045
======== ========
CONSOLIDATED BALANCE SHEET
March 31, December 31,
2007 2006
-------- --------
Assets
Cash $ 882 $ 2,909
Accounts receivable, net 36,917 33,308
Inventory 71,640 66,019
Deferred taxes 1,285 1,544
Other current assets 1,373 1,606
-------- --------
Total current assets 112,097 105,386
Property, plant & equipment, net 49,608 49,251
Other assets 718 584
-------- --------
Total assets $162,423 $155,221
======== ========
Liabilities and Stockholders' Equity
Trade accounts payable $ 15,194 $ 13,123
Outstanding checks in excess of bank balance 4,326 3,427
Current portion of long-term debt 2,370 2,364
Accrued employment costs 3,599 4,121
Accrued income tax 2,358 544
Other current liabilities 1,619 1,358
-------- --------
Total current liabilities 29,466 24,937
Bank revolver 3,243 8,392
Long-term debt 8,241 8,836
Deferred taxes 8,402 8,402
-------- --------
Total liabilities 49,352 50,567
Stockholders' equity 113,071 104,654
-------- --------
Total liabilities and
stockholders' equity $162,423 $155,221
======== ========
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Three-month Period Ended March 31,
2007 2006
------- -------
Cash flows provided by operating activities:
Net income $ 6,787 $ 3,998
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 899 795
Deferred tax increase (decrease) 113 (184)
Stock based compensation expense 100 41
Excess tax benefits from share-based
payment arrangements (799) (6)
Changes in assets and liabilities:
Accounts receivable, net (3,609) (1,881)
Inventory (5,621) (4,295)
Trade accounts payable 2,071 1,496
Deferred revenue 277 3,487
Accrued income tax payable 1,814 2,370
Accrued employment costs (522) (611)
Other, net 1,025 506
------- -------
Cash flow provided by operating activities 2,535 5,716
------- -------
Cash flow used in investing activities:
Capital expenditures (1,253) (2,216)
------- -------
Cash flow used in investing activities (1,253) (2,216)
------- -------
Cash flows used in financing activities:
Revolving credit net repayments (5,149) (3,296)
Long-term debt repayments (589) (141)
Net change in outstanding checks in excess
of bank balance 899 (205)
Proceeds from issuance of common stock 731 3
Excess tax benefits from share-based
payment arrangements 799 6
------- -------
Cash flow used in financing activities (3,309) (3,633)
------- -------
Net cash flow $(2,027) $ (133)
======= =======
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
