SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 24, 2008
Universal Stainless & Alloy Products, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 000-25032 25-1724540
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
600 Mayer Street, Bridgeville, Pennsylvania 15017
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (412) 257-7600
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On July 24, 2008, Universal Stainless and Alloy Products, Inc. issued a
press release regarding its earnings for the second quarter ended June 30, 2008.
A copy of the press release is attached hereto.
The information in this Current Report on Form 8-K, including the attached
press release, shall not be deemed "filed" for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that section, nor shall it be deemed incorporated by reference in
any filing under the Securities Act of 1933, as amended, except as shall be
expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release dated July 24, 2008
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
By: /s/ Richard M. Ubinger
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Vice President of Finance,
Chief Financial Officer and Treasurer
Dated: July 24, 2008
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
CONTACTS: Richard M. Ubinger June Filingeri
Vice President of Finance, President
Chief Financial Officer and Treasurer Comm-Partners LLC
(412) 257-7606 (203) 972-0186
FOR IMMEDIATE RELEASE
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UNIVERSAL STAINLESS REPORTS 2008 SECOND QUARTER
RESULTS - Record Sales of $63.5 Million and Diluted EPS of
$0.77 Exceed Forecast -
- Backlog Rises to 10% to $97 Million -
BRIDGEVILLE, PA, July 24, 2008 - Universal Stainless & Alloy Products, Inc.
(Nasdaq: USAP) reported today that sales for the second quarter of 2008 were
$63.5 million compared with $62.1 million reported in the second quarter of
2007. Net income for the second quarter of 2008 was $5.3 million, or $0.77 per
diluted share, compared with $5.9 million, or $0.87 per diluted share, in the
second quarter of 2007.
The results for the second quarter of 2008 exceeded the Company's forecast
of sales in the range of $55 to $60 million and diluted EPS in the range of
$0.70 to $0.75.
Net income for the second quarters of both 2008 and 2007 included net
inventory charges before tax of $1.5 million ($0.15 per diluted share) and $1.0
million ($0.10 per diluted share), respectively, for increased reserves related
to declines in nickel prices at the end of each quarter. Net income for the
second quarter of 2007 also included the effect of a pre-tax charge of $800,000,
equivalent to $0.08 per diluted share, related to a legal settlement.
The Company's tax rate for the second quarter of 2008 was 33% compared to
35% in second quarter of 2007. The benefit of this rate change was equivalent to
$0.02 per diluted share in the 2008 second quarter.
For the first six months of 2008, sales rose 2% to $120.3 million while net
income was $10.0 million, or $1.47 per diluted share, compared with $12.6
million, or $1.87 per diluted share, in the same period of 2007.
Cash flow from operations was $4.7 million for the second quarter of 2008
and capital expenditures were $2.3 million. Inventories were $72.4 million, an
increase of $6.9 million from the 2008 first quarter, as a result of increased
order entry activity. This increase was substantially offset by an increase in
accounts payable. Accounts receivable remained level sequentially due to
improved collections.
President and CEO Dennis Oates commented: "The record sales we achieved in
the second quarter led to better than forecasted EPS. Driving our results were
higher sales to the power generation market combined with record sales to the
petrochemical market and tool steel to service centers. In fact, our sales of
tool steel rose 28% from the strong first quarter, mainly due to high demand for
heavy equipment to support global infrastructure investments and major metal
fabrication markets. While aerospace demand remains strong, our sales to the
aerospace market were 6% below the first quarter of 2008 as service centers and
their customers moved to the sidelines in anticipation of a further reduction in
the cost of nickel. Based on their current inventory levels, we continue to
expect service center order entry will begin to pick up in the second half of
the year."
Mr. Oates continued: "We remained focused on improving customer service
levels and our operational efficiency in the second quarter. The relocation of
our bar finishing equipment to Dunkirk is underway, the new high temperature
annealing equipment in Dunkirk is up and running with increased utilization
expected, and the capital improvements to our melt shop are moving forward on
schedule. We are also continuing to energize and strengthen our sales effort,
which has contributed to the solid increase in our backlog."
Mr. Oates concluded: "We plan to continue our progress in the third quarter
as we work towards further accelerating our growth."
Segment Review
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For the second quarter of 2008, the Universal Stainless & Alloy Products
segment had sales of $53.1 million and operating income of $5.6 million,
yielding an operating margin of 11%. This compares with sales of $55.1 million
and operating income of $5.8 million, or 11% of sales, in the second quarter of
2007. The 2008 second quarter included a $1.2 million increase to its lower of
cost or market reserve primarily related to the decline in nickel prices at the
end of the quarter. The second quarter of 2007 also included an inventory
adjustment as well as the pre-tax effect of a legal settlement aggregating $1.3
million. In the first quarter of 2008, sales were $48.2 million and operating
income was $4.9 million, or 10% of sales.
Segment sales were down 4% from the second quarter of 2007 primarily due to
an 8% decline in tons shipped partially offset by favorable shifts in the
product mix. Specifically, higher shipments of tool steel plate to service
centers partially offset lower shipments of semi-finished products to forgers
and rerollers, including Dunkirk, and of bar products to service centers. The
shift in product mix increased the second quarter 2008 operating margin, before
the effect of the inventory adjustments, compared with the prior year second
quarter.
Segment sales increased 10% over the first quarter of 2008 even though tons
shipped declined 7%. This was due to increased shipments to forgers and of bar
products and tool steel plate to service centers, offset by lower shipments to
rerollers, including Dunkirk. The improved product mix led to the sequential
improvement in the operating margin.
The Company noted that it is negotiating a new collective bargaining
agreement that covers the hourly employees at its Bridgeville facility. The
current agreement expires on August 31, 2008.
The Dunkirk Specialty Steel segment reported sales of $21.2 million and
operating income of $2.1 million for the second quarter of 2008, resulting in an
operating margin of 10%, which included a $259,000 increase to its lower of cost
or market reserve and no FIFO benefit. That compares with sales of $21.3 million
and operating income of $3.7 million, or 17% of sales, in the second quarter of
2007, which included an estimated FIFO benefit of $1.2 million offset by
$492,000 of costs related to the inventory adjustment attributable to the
segment. In the first quarter of 2008, sales were $20.1 million and operating
income was $2.8 million, or 14% of sales, and included a FIFO charge of
$157,000.
Dunkirk's sales declined 1% while tons shipped increased 4% compared with
the second quarter of 2007. Higher shipments of rod and wire products to service
centers and OEMs, and of finished bar products to OEMs, offset lower shipments
of vacuum-arc remelted finished bar products to service centers. Selling prices
and operating margins declined from the second quarter of 2007 due to product
mix and the effect of lower nickel prices on surcharges assessed.
Dunkirk's sales rose 6% and tons shipped increased 4% over the first
quarter of 2008 due to increased shipments in all categories, except rod and
wire products to service centers. The operating margin was lower than in the
2008 first quarter mainly due to the effect of the inventory adjustment on the
most recent period.
Business Outlook
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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 sales for the third quarter of 2008 will range
from $60 to $65 million and that diluted EPS will range from $0.78 to $0.83.
This does not include any expense related to the relocation of the round bar
finishing facility from Bridgeville to Dunkirk discussed below. In the third
quarter of 2007, sales were $62.0 million and diluted EPS was $0.81. Results in
the prior year third quarter included a charge of $1.4 million, equivalent to
$0.14 per diluted share, for an increase to the Company's inventory reserve,
mainly due to a continued decline in nickel prices in the quarter. This was
offset by an estimated FIFO benefit of $1.5 million, equivalent to $0.15 per
diluted share, at the Dunkirk segment.
The following factors were considered in developing the estimates for the
third quarter of 2008:
o The Company's total backlog at June 30, 2008 rose to $97 million from $88
million at March 31, 2008. The increased backlog is primarily attributable
to demand for the company's tool steel plate and electro-slag remelted
products.
o Sales from the Dunkirk Specialty Steel segment are expected to approximate
$19 million in the third quarter of 2008, while pounds shipped are expected
to match the prior year period. It is assumed that there will be no FIFO
benefit or charge at the Dunkirk operation.
o The cost to relocate the round bar finishing facility from Bridgeville to
Dunkirk is $800,000, equivalent to $0.08 per share. No costs were expensed
during the 2008 second quarter. Management expects the relocation project
to be complete and all costs recognized by September 30.
Webcast
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A simultaneous Webcast of the Company's conference call discussing the
second quarter of 2008 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 31st. It can be accessed by dialing
706-645-9291, passcode 54242860. This is a toll call.
About Universal Stainless & Alloy Products, Inc.
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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. More information
is available at www.univstainless.com.
Forward-Looking Information Safe Harbor
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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, labor 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.
- FINANCIAL TABLES FOLLOW -
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 Six-Months Ended
June 30, June 30,
2008 2007 2008 2007
---- ---- ---- ----
Net Sales
Stainless steel $ 43,760 $ 45,128 $ 85,788 $ 84,698
Tool steel 11,659 6,444 20,766 13,541
High-strength low alloy steel 2,934 7,572 6,945 13,806
High-temperature alloy steel 3,344 2,355 4,490 5,100
Conversion services 448 492 973 981
Other 1,337 65 1,365 169
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Total net sales 63,482 62,056 120,327 118,295
Cost of products sold 53,018 49,442 99,797 92,462
Selling and administrative expenses 2,634 3,407 5,709 5,961
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Operating income 7,830 9,207 14,821 19,872
Interest expense (27) (195) (55) (422)
Other income 62 6 149 10
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Income before taxes 7,865 9,018 14,915 19,460
Income tax provision 2,595 3,156 4,922 6,811
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Net income $ 5,270 $ 5,862 9,993 12,649
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Earnings per share - Basic $ 0.79 $ 0.88 $ 1.49 $ 1.91
======= ======== ========== =========
Earnings per share - Diluted $ 0.77 $ 0.87 $ 1.47 1.87
======= ======== ========== =========
Weighted average shares of
Common Stock outstanding
Basic 6,707,523 6,642,655 6,685,368 6,631,981
Diluted 6,819,546 6,774,586 6,795,514 6,767,871
MARKET SEGMENT INFORMATION
For the Quarter Ended For the Six-Months Ended
June 30, June 30,
2008 2007 2008 2007
---- ---- ---- ----
Net Sales
Service centers $ 33,850 $ 32,598 $ 63,084 $ 61,703
Forgers 11,142 13,744 20,160 26,318
Rerollers 9,240 8,658 20,479 15,850
Original equipment manufacturers 5,795 4,540 11,236 9,417
Wire redrawers 1,692 2,015 3,061 3,913
Conversion services 448 492 973 981
Other 1,315 9 1,334 113
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Total net sales $ 63,482 $ 62,056 $ 120,327 $ 118,295
======= ======== ========= ========
Tons shipped 11,423 11,327 23,190 22,484
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BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the Quarter Ended For the Six-Months Ended
June 30, June 30,
2008 2007 2008 2007
---- ---- ---- ----
Net Sales
Stainless steel $ 28,901 $ 30,804 $ 56,211 $ 55,800
Tool steel 11,278 6,111 19,702 12,270
High-strength low alloy steel 1,114 3,822 2,227 7,822
High-temperature alloy steel 929 916 1,498 2,146
Conversion services 296 325 653 652
Other 1,262 36 1,272 122
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43,780 42,014 81,563 78,812
Intersegment 9,312 13,080 19,727 24,447
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Total net sales 53,092 55,094 101,290 03,259
Material cost of sales 28,654 29,684 51,993 50,915
Operation cost of sales 16,936 17,033 34,726 35,050
Selling and administrative expenses 1,869 2,571 4,007 4,289
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Operating income $ 5,633 $ 5,806 $ 10,564 $ 13,005
======= ======= ========= ========
Dunkirk Specialty Steel Segment
For the Quarter Ended For the Six-Months Ended
June 30, June 30,
2008 2007 2008 2007
---- ---- ---- ----
Net Sales
Stainless steel $ 14,859 $ 14,324 $ 29,577 $ 28,898
Tool steel 381 333 1,064 1,271
High-strength low alloy steel 1,820 3,750 4,718 5,984
High-temperature alloy steel 2,415 1,439 2,992 2,954
Conversion services 152 167 320 329
Other 75 29 93 47
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19,702 20,042 8,764 39,483
Intersegment 1,474 1,279 2,462 2,278
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Total net sales 21,176 21,321 41,226 41,761
Material cost of sales 13,126 12,048 24,965 23,244
Operation cost of sales 5,159 4,719 9,648 9,306
Selling and administrative expenses 765 836 1,702 1,672
------- ------- --------- --------
Operating income $ 2,126 $ 3,718 $ 4,911 $ 7,539
======= ======= ========= =========
CONSOLIDATED BALANCE SHEET
June 30, December 31,
2008 2007
---- ----
Assets
Cash $ 13,067 $ 10,648
Accounts receivable, net 34,634 27,501
Inventory 72,399 65,572
Other current assets 5,581 5,537
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Total current assets 125,681 109,258
Property, plant & equipment, net 57,357 54,271
Other assets 920 767
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Total assets $ 183,958 $ 164,296
========== ============
Liabilities and Stockholders' Equity
Trade accounts payable $ 20,819 $ 13,983
Outstanding checks in excess of bank balance 3,912 2,064
Accrued employment costs 4,941 5,307
Current portion of long-term debt 395 383
Other current liabilities 1,004 1,600
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Total current liabilities 31,071 23,337
Long-term debt 1,247 1,453
Deferred taxes 10,399 9,904
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Total liabilities 42,717 34,694
Stockholders' equity 141,241 129,602
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Total liabilities and stockholders' equity $ 183,958 $ 164,296
========== ============
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Six-month Period Ended June 30,
2008 2007
---- ----
Cash flows provided by operating activities:
Net income $ 9,993 $ 12,649
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 2,008 1,822
Deferred tax increase (decrease) 304 (31)
Stock based compensation expense 413 208
Tax benefits from share-based
payment arrangements (51) (98)
Changes in assets and liabilities:
Accounts receivable, net (7,133) (5,849)
Inventory (6,827) (9,558)
Trade accounts payable 6,836 5,182
Accrued employment costs (366) 806
Other, net 216 166
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Cash flow provided by operating activities 4,933 4,126
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Cash flow used in investing activities:
Capital expenditures (5,401) (2,906)
--------- ---------
Cash flow used in investing activities (5,401) (2,906)
--------- --------
Cash flows used in financing activities:
Revolving credit net repayments - (8,174)
Long-term debt repayments (194) (1,180)
Net change in outstanding checks in excess
of bank balance 1,848 4,129
Proceeds from issuance of common stock 722 975
Tax benefits from share-based payment
arrangements 511 982
---------- --------
Cash flow provided by (used in) financing
activities 2,887 (3,268)
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Net cash flow $ 2,419 $ (2,048)
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