Universal Stainless Reports Strong 2005 Second Quarter Results
Jul 20, 2005
Universal Stainless Reports Strong 2005 Second Quarter Results
Universal Stainless Reports Strong 2005 Second Quarter Results
Quarterly earnings per share reach $0.50 on sales of $42 million
BRIDGEVILLE, Pa., July 20, 2005 -- Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) reported today that sales for the second quarter of 2005 rose 44% to $41.9 million compared with the same period of 2004. Second quarter 2005 net income more than doubled to $3.3 million, or $0.50 per diluted share, versus $1.6 million, or $0.25 per diluted share, in the year-ago period.The Company's second quarter 2005 sales were in line with its forecasted range of $40 to $45 million and diluted EPS exceeded the projected range of $0.40 to $0.45.
President and CEO Mac McAninch commented: "Our second quarter results demonstrate the benefit of improved pricing and a favorable product mix due to very strong demand in our aerospace, power generation and petrochemical markets. In fact, sales to all end markets and customer categories increased substantially over the 2004 second quarter. Capacity limitations on remelted products prevented us from achieving even higher levels of sales. The scheduled addition of a sixth vacuum arc remelt furnace later this year should enable us to respond to the increased requirements of the aerospace and power generation markets."
Mr. McAninch continued: "In contrast to the strength in our main markets, the automotive market has weakened. While not a niche market that we focus on, it reduced demand for our tool steel in the second quarter compared to the first quarter of this year. However, heavy truck and industrial equipment production remains high and our tool steel backlog is at more normal levels."
Mr. McAninch added: "We are very pleased with the improvement in the operating margin at both our Universal Stainless and Dunkirk segments, which led to an overall company operating margin of 13% in the second quarter. We are continuing to realize the payback from our 2004 capital investments, on-going process improvement efforts and cost recovery pricing initiatives."
Mr. McAninch concluded: "We are entering the second half of 2005 with a high level of confidence based on the outlook for our niche markets, and on the size and quality of our backlog that extends into 2007. We remain committed to reinvest in our company to meet the needs of our customers and realize further value for our shareholders."
Segment Review
In the second quarter of 2005, the Universal Stainless & Alloy Products segment had sales of $37.2 million and operating income of $3.6 million, yielding an operating margin of 10%, a level not achieved since the first quarter of 2002. In the second quarter of 2004, sales were $25.5 million and operating income was $1.9 million, or 7% of sales. In the first quarter of 2005, sales were $38.4 million and operating income was $2.7 million, including a write-off of $342,000 of fixed assets in Bridgeville. This resulted in an operating margin of 7%.
The 46% increase in sales compared with the 2004 second quarter reflected substantial growth in sales to all customer categories. Second quarter 2005 sales were slightly lower than the prior quarter, reflecting the lower shipments of tool steel products to service centers, partially offset by increased bar shipments to them. The increase in operating income compared to both prior periods reflects stronger pricing and product mix.
The Dunkirk Specialty Steel segment reported sales of $12.4 million and operating income of $1.8 million, resulting in a record operating margin of 15%. These results compare with sales of $8.0 million and operating income of $651,000, or 8% of sales, in the second quarter of 2004. In the first quarter of 2005, sales were $13.7 million and operating income was $1.9 million, or 14% of sales, and included a $184,000 asset write-off.
Dunkirk's sales increased 54% over the 2004 second quarter due to substantial growth in shipments to all customer categories. Operating income increased 182% over the second quarter of 2004 on improvements in pricing, efficiency from higher volume and product mix. Dunkirk's sales were 9% lower than the 2005 first quarter mainly because of management's decision to allocate shipments of remelted feedstock from Bridgeville. Operating income was 2% lower than the prior quarter of 2005 due to the lower volume.
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 third quarter 2005 sales will range from $40 to $45 million and that diluted EPS will range from $0.45 to $0.50. This compares with sales of $33.3 million and diluted EPS of $0.43 in the third quarter of 2004.
The following factors were considered in developing these estimates:
-- The Company's total backlog at June 30, 2005 approximated
$105 million compared to $88 million at March 31, 2005,
reflecting strong aerospace, power generation and petrochemical
markets. The Company noted that a portion of the backlog is for
shipments scheduled in 2006 and 2007, as customers take into
account future needs and current remelt capacity constraints
industry-wide.
-- Tool steel sales are expected to remain at 2005 second
quarter levels for the balance of the year as continued strength
in the industrial manufacturing sector is offset by lower
automotive requirements.
-- Sales from the Dunkirk Specialty Steel segment are expected to
approximate $13 million.
Webcast A simultaneous Webcast of the Company's conference call discussing the second quarter of 2005 and the third 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 July 27th. It can be accessed by dialing 706-645-9291, passcode 7308195. 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 For the
Quarter Ended Six-Months Ended
June 30, June 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Net Sales
Stainless steel $ 34,205 $ 22,889 $ 67,824 $ 39,057
Tool steel 4,359 3,742 10,376 6,908
High-strength low
alloy steel 1,642 1,064 2,764 1,925
High-temperature
alloy steel 711 613 1,736 1,322
Conversion services 850 596 1,964 928
Other 96 122 218 193
--------- --------- --------- ---------
Total net sales 41,863 29,026 84,882 50,333
Cost of products
sold 34,197 24,531 70,607 43,875
Selling and
administrative
expenses 2,385 1,947 4,292 3,475
--------- --------- --------- ---------
Operating income 5,281 2,548 9,983 2,983
Interest expense (200) (106) (372) (194)
Other income 3 3 63 11
--------- --------- --------- ---------
Income before taxes 5,084 2,445 9,674 2,800
Income tax provision 1,831 879 3,483 1,007
--------- --------- --------- ---------
Net income $ 3,253 $ 1,566 $ 6,191 $ 1,793
========= ========= ========= =========
Earnings per share
- Basic $ 0.51 $ 0.25 $ 0.97 $ 0.28
========= ========= ========= =========
Earnings per share
- Diluted $ 0.50 $ 0.25 $ 0.96 $ 0.28
========= ========= ========= =========
Weighted average
shares of Common
Stock outstanding
Basic 6,363,831 6,299,579 6,357,189 6,297,816
Diluted 6,451,326 6,355,148 6,459,901 6,345,591
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MARKET SEGMENT INFORMATION
For the For the
Quarter Ended Six-Months Ended
June 30, June 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Net Sales
Service centers $ 17,050 $ 12,267 $ 35,357 $ 22,173
Rerollers 11,250 8,187 23,278 12,257
Forgers 7,907 5,133 14,170 8,949
Original equipment
manufacturers 2,597 1,904 4,921 3,838
Wire redrawers 2,113 843 4,985 2,039
Conversion services 851 596 1,965 928
Other 95 96 206 149
--------- --------- --------- ---------
Total net sales $ 41,863 $ 29,026 $ 84,882 $ 50,333
========= ========= ========= =========
Tons shipped 13,383 12,131 28,613 21,197
========= ========= ========= =========
BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the For the
Quarter Ended Six-Months Ended
June 30, June 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Net Sales
Stainless steel $ 23,536 $ 16,376 $ 45,313 $ 27,096
Tool steel 4,247 3,667 10,154 6,747
High-strength low
alloy steel 920 399 1,313 812
High-temperature
alloy steel 703 526 1,728 1,075
Conversion services 705 475 1,656 724
Other 43 106 160 152
--------- --------- --------- ---------
30,154 21,549 60,324 36,606
Intersegment 7,003 3,933 15,258 7,721
--------- --------- --------- ---------
Total net sales 37,157 25,482 75,582 44,327
Material cost
of sales 18,454 11,322 38,280 18,924
Operation cost
of sales 13,304 10,932 28,083 20,743
Selling and
administrative
expenses 1,755 1,331 2,896 2,362
--------- --------- --------- ---------
Operating income $ 3,644 $ 1,897 $ 6,323 $ 2,298
========= ========= ========= =========
Dunkirk Specialty Steel Segment
For the For the
Quarter Ended Six-Months Ended
June 30, June 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Net Sales
Stainless steel $ 10,669 $ 6,513 $ 22,511 $ 11,961
Tool steel 112 75 222 161
High-strength low
alloy steel 722 665 1,451 1,113
High-temperature
alloy steel 8 87 8 247
Conversion services 145 121 308 204
Other 53 16 58 41
--------- --------- --------- ---------
11,709 7,477 24,558 13,727
Intersegment 663 558 1,481 1,053
--------- --------- --------- ---------
Total net sales 12,372 8,035 26,039 14,780
Material cost
of sales 6,442 3,902 13,556 7,379
Operation cost
of sales 3,465 2,866 7,389 5,603
Selling and
administrative
expenses 630 616 1,396 1,113
--------- --------- --------- ---------
Operating income $ 1,835 $ 651 $ 3,698 $ 685
========= ========= ========= =========
CONSOLIDATED BALANCE SHEET
June 30, December 31,
2005 2004
-------- --------
Assets
Cash $ 1,158 $ 241
Accounts receivable, net 27,669 24,562
Inventory 48,273 38,318
Other current assets 2,589 3,418
-------- --------
Total current assets 79,689 66,539
Property, plant & equipment, net 41,786 40,716
Other assets 568 585
-------- --------
Total assets $122,043 $107,840
======== ========
Liabilities and Stockholders' Equity
Accounts payable $ 16,397 $ 11,666
Bank overdrafts 452 2,638
Accrued employment costs 2,875 1,830
Current portion of long-term debt 1,053 2,044
Other current liabilities 923 442
-------- --------
Total current liabilities 21,700 18,620
Bank revolver 4,578
8,635
Long-term debt 11,978 3,555
Deferred taxes 10,232 10,093
-------- --------
Total liabilities 48,488 40,903
Stockholders' equity 73,555 66,937
-------- --------
Total liabilities and
stockholders' equity $122,043 $107,840
======== ========
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Six-Months Ended June 30,
2005 2004
------- -------
Cash flows from operating activities:
Net income $ 6,191 $ 1,793
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 1,532 1,571
Deferred taxes 412 84
Tax benefit from exercise of stock options 115 3
Changes in assets and liabilities:
Accounts receivable, net (3,107) (6,858)
Inventory (9,955) (8,297)
Trade accounts payable 4,731 4,147
Accrued employment costs 1,045 907
Other, net 1,383 1,720
------- -------
Cash flow from (due to) operating activities 2,347 (4,930)
------- -------
Cash flow from investing activities:
Capital expenditures (2,931) (1,195)
------- -------
Cash flow due to investing activities (2,931) (1,195)
------- -------
Cash flows from financing activities:
Net borrowings under revolving line of credit (4,057) 3,167
Proceeds from long-term debt 8,050 --
Repayments of long-term debt (618) (983)
Net change in bank overdrafts (2,186) (508)
Proceeds from issuance of common stock 312 83
------- -------
Cash flow from financing activities 1,501 1,759
------- -------
Net cash flow $ 917 $(4,366)
======= =======
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
(203) 972-0186
