Universal Stainless Reports Record Quarter and Annual Sales
Jan 20, 2005
Universal Stainless Reports Record Quarter and Annual Sales
Universal Stainless Reports Record Quarter and Annual Sales
- Full year sales reach record $121 million, backlog continues to grow -
BRIDGEVILLE, Pa., Jan. 20, 2005 -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) today reported fourth quarter 2004 record sales of $37.0 million and net income of $2.6 million, or $0.40 per diluted share. For the full year 2004, sales were a record $120.6 million. Net income was $7.1 million, or $1.12 per diluted share, and included a total of $1.1 million, or $0.11 per diluted share, of other income from import duties received in 2004. Of that amount, $507,000, or $0.05 per diluted share, was received in the fourth quarter, as previously announced.The 2004 fourth quarter results were in line with the Company's forecast of sales of $32 to $37 million and EPS of $0.32 to $0.37 before including the other income from import duties. In addition, fourth quarter earnings were reduced by a bad debt charge of $282,000, equivalent to $0.03 per diluted share, due to a financially distressed customer's inability to pay its outstanding receivable balance.
In 2003, sales for the fourth quarter and full year were $18.8 million and $69.0 million, respectively. The Company incurred a net loss of $273,000, or $0.04 per diluted share, in the 2003 fourth quarter and a net loss of $1.4 million, or $0.23 per diluted share, for the full year.
Commenting on the results, President and CEO Mac McAninch stated: "Our solid sales momentum allowed us to reach new company sales milestones in 2004. In the fourth quarter, sales to the power generation market climbed 22% and tool steel sales rose 38% compared with the prior quarter. Demand from all of our markets remained strong."
Mr. McAninch continued: "Our cost recovery pricing initiatives in the fourth quarter helped to offset a 17% sequential increase in material costs and substantially higher electricity prices. Our recently announced base price increases are intended to offset higher energy and manufacturing costs, as well as support our capital investment program aimed at increasing throughput and efficiency."
Mr. McAninch added: "Our immediate priority is to increase our shipment levels in response to the growth in customer demand that has raised our backlog to a record $72 million. Our capital investments in 2004, which are in place, have rectified production bottlenecks at Bridgeville. We are now turning our attention to improved scheduling and have added a production planning manager to take us to the next step."
Segment Review
In the fourth quarter of 2004, the Universal Stainless & Alloy Products segment had sales of $32.7 million and operating income of $2.3 million. This compares with sales of $16.5 million and operating income of $226,000 in the fourth quarter of 2003 and sales of $31.2 million and operating income of $2.9 million in the third quarter of 2004.
The 98% increase in sales compared with the 2003 fourth quarter reflected substantial growth in all customer categories. Fourth quarter 2004 sales increased 5% over the prior quarter, but higher electricity costs and increased S&A expenses caused by the bad debt charge resulted in a lower operating income compared with the prior quarter.
The Dunkirk Specialty Steel segment reported record sales of $10.5 million and operating income of $1.2 million. This compares with sales of $4.5 million and an operating loss of $428,000 in the fourth quarter of 2003 and sales of $9.5 million and operating income of $1.2 million in the prior quarter.
Dunkirk's sales rose 134% over the fourth quarter of 2003, as it continued its ramp-up in 2004. The 10% increase in fourth quarter sales over the prior quarter is primarily due to increased selling prices and surcharges to offset higher material costs. The operating income only improved slightly over the prior quarter due to a 22% increase in raw material costs.
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 first quarter 2005 sales will range from $35 to $40 million and that diluted EPS will range from $0.35 to $0.40. This compares with sales of $21.3 million and diluted EPS of $0.04 in the first quarter of 2004.
The following factors were considered in developing these estimates:
-- The Company's total backlog at December 31, 2004 approximated $72
million compared to $60 million at September 30, 2004 reflecting
continued strength in all of the Company's markets.
-- The implementation of recent price increases will allow the
Company to offset continuing manufacturing cost increases as well
as support future capital improvements designed to increase
production levels and efficiency.
-- Sales from the Dunkirk Specialty Steel segment are expected to
approximate $12 million as service center demand remains very
strong.
Mr. McAninch concluded: "We are entering 2005 with a high level of optimism. Recovery in the aerospace market continues, demand for our power generation products is increasing rapidly, and the petrochemical market remains firm. At the same time, tool steel demand continues to be strong, which should bode well for the economy in the coming year." Webcast
A simultaneous Webcast of the Company's conference call discussing the 2004 fourth quarter and the first quarter 2005 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 January 27th. It can be accessed by dialing 706-645-9291, passcode 3197137. 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 Quarter Ended For the Year Ended
December 31, December 31,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net Sales
Stainless steel $ 28,944 $ 14,482 $ 94,530 $ 52,546
Tool steel 5,890 2,345 17,075 9,673
High-strength low
alloy steel 597 911 3,682 2,869
High-temperature
alloy steel 673 732 2,468 2,482
Conversion services 751 234 2,386 1,079
Other 157 123 501 340
---------- ---------- ---------- ----------
Total net sales 37,012 18,827 120,642 68,989
Cost of products
sold 31,396 17,617 102,972 65,534
Selling and
administrative
expenses 2,053 1,412 7,401 5,837
---------- ---------- ---------- ----------
Operating income
(loss) 3,563 (202) 10,269 (2,382)
Interest expense (120) (94) (422) (383)
Other income 542 54 1,119 128
---------- ---------- ---------- ----------
Income (loss)
before taxes 3,985 (242) 10,966 (2,637)
Income tax
provision (benefit) 1,392 31 3,835 (1,220)
---------- ---------- ---------- ----------
Net income (loss) $ 2,593 $ (273) $ 7,131 $ (1,417)
========== ========== ========== ==========
Earnings (loss) per
share - Basic $ 0.41 $ (0.04) $ 1.13 $ (0.23)
========== ========== ========== ==========
Earnings (loss) per
share - Diluted $ 0.40 $ (0.04) $ 1.12 $ (0.23)
========== ========== ========== ==========
Weighted average
shares of Common
Stock outstanding
Basic 6,318,951 6,289,538 6,304,909 6,287,088
Diluted 6,427,348 6,289,538 6,379,579 6,287,088
MARKET SEGMENT INFORMATION
For the Quarter Ended For the Year Ended
December 31, December 31,
2004 2003 2004 2003
-------- -------- -------- --------
Net Sales
Service centers $ 16,645 $ 6,817 $ 52,261 $ 29,150
Rerollers 8,735 6,955 30,200 20,240
Forgers 6,827 2,719 22,008 9,773
Original equipment
manufacturers 2,248 1,280 8,349 5,124
Wire redrawers 1,662 713 5,008 3,328
Conversion services 751 234 2,386 1,079
Other 144 109 430 295
-------- -------- -------- --------
Total net sales $ 37,012 $ 18,827 $120,642 $ 68,989
======== ======== ======== ========
Tons shipped 13,662 9,468 48,350 35,126
======== ======== ======== ========
BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the Quarter Ended For the Year Ended
December 31, December 31,
2004 2003 2004 2003
------- ------- -------- --------
Net Sales
Stainless steel $19,739 $11,081 $ 65,208 $ 35,946
Tool steel 5,770 2,173 16,672 9,097
High-strength low
alloy steel 189 488 1,576 1,672
High-temperature
alloy steel 656 502 2,182 1,965
Conversion services 605 210 1,961 926
Other 129 100 427 302
------- ------- -------- --------
27,088 14,554 88,026 49,908
Intersegment 5,620 1,963 20,208 9,677
------- ------- -------- --------
Total net sales 32,708 16,517 108,234 59,585
Material cost of sales 16,044 7,095 49,967 22,982
Operation cost of sales 12,788 8,201 45,521 32,934
Selling and administrative
expenses 1,581 995 5,253 3,918
------- ------- -------- --------
Operating income (loss) $ 2,295 $ 226 $ 7,493 $ (249)
======= ======= ======== ========
Dunkirk Specialty Steel Segment
For the Quarter Ended For the Year Ended
December 31, December 31,
2004 2003 2004 2003
------- ------- ------- -------
Net Sales
Stainless steel $ 9,205 $ 3,401 $29,322 $16,600
Tool steel 120 172 403 576
High-strength low
alloy steel 408 423 2,106 1,197
High-temperature
alloy steel 17 230 286 517
Conversion services 146 24 425 153
Other 28 23 74 38
------- ------- ------- -------
9,924 4,273 32,616 19,081
Intersegment 535 198 2,107 794
------- ------- ------- -------
Total net sales 10,459 4,471 34,723 19,875
Material cost of sales 5,739 2,357 17,834 11,080
Operation cost of sales 3,008 2,125 11,653 9,009
Selling and administrative
expenses 472 417 2,148 1,919
------- ------- ------- -------
Operating income (loss) $ 1,240 $ (428) $ 3,088 $(2,133)
======= ======= ======= =======
CONSOLIDATED BALANCE SHEET
December 31,
2004 2003
-------- --------
Assets
Cash $ 241 $ 4,735
Accounts receivable, net 24,562 12,690
Inventory 38,318 22,281
Other current assets 3,417 4,285
-------- --------
Total current assets 66,538 43,991
Property, plant & equipment, net 40,716 40,176
Other assets 586 758
-------- --------
Total assets $107,840 $ 84,925
======== ========
Liabilities and Stockholders' Equity
Accounts payable $ 11,666 $ 6,685
Bank overdrafts 2,638 813
Accrued employment costs 1,830 833
Current portion of long-term debt 2,044 1,944
Other current liabilities 442 302
-------- --------
Total current liabilities 18,620 10,577
Bank revolver 8,635 --
Long-term debt 3,555 5,599
Deferred taxes 10,093 9,313
-------- --------
Total liabilities 40,903 25,489
Stockholders' equity 66,937 59,436
-------- --------
Total liabilities and stockholders' equity $107,840 $ 84,925
======== ========
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Year Ended December 31,
2004 2003
-------- --------
Cash flows from operating activities:
Net income (loss) $ 7,131 $ (1,417)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 3,061 3,093
Deferred taxes 724 996
Tax benefit from exercise of stock options 51 --
Changes in assets and liabilities:
Accounts receivable, net (11,872) (1,140)
Inventory (16,037) 436
Trade accounts payable 4,981 2,561
Accrued employment costs 997 (186)
Refundable taxes 1,443 (729)
Other, net (196) 164
-------- --------
Cash flow from (due to) operating activities (9,717) 3,778
-------- --------
Cash flow from investing activities:
Capital expenditures (3,586) (1,193)
-------- --------
Cash flow due to investing activities (3,586) (1,193)
-------- --------
Cash flows from financing activities:
Net borrowings under revolving line of credit 8,635 --
Deferred financing costs (26) --
Proceeds from deferred loan agreement -- 200
Repayments of long-term debt (1,944) (1,948)
Net change in bank overdrafts 1,825 538
Proceeds from issuance of common stock 319 52
-------- --------
Cash flow from (due to) financing activities 8,809 (1,158)
-------- --------
Net cash flow $ (4,494) $ 1,427
======== ========
