SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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): January 24, 2018
Universal Stainless & Alloy Products, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 000-25032 | 25-1724540 | ||
| (State or other jurisdiction of incorporation ) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 600 Mayer Street, Bridgeville, Pennsylvania | 15017 | |
| (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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
On January 24, 2018, Universal Stainless and Alloy Products, Inc. issued a press release regarding its earnings for the quarter and year ended December 31, 2017. A copy of the press release is attached hereto as Exhibit 99.1.
The information in this Current Report on Form 8-K, including the attached press release regarding the Company’s earnings for the quarter and year ended December 31, 2017, 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 January 24, 2018 | |
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/ Paul A. McGrath | |
| Paul A. McGrath | ||
| Vice President of Administration, | ||
| General Counsel and Secretary | ||
Dated: January 24, 2018
Exhibit 99.1
| CONTACTS: Dennis M. Oates | June Filingeri | |||
| Chairman, |
President | |||
| President and CEO |
Comm-Partners LLC | |||
| (412) 257-7609 |
(203) 972-0186 |
FOR IMMEDIATE RELEASE
UNIVERSAL STAINLESS REPORTS CONTINUED OPERATIONAL AND FINANCIAL
IMPROVEMENTS IN FOURTH QUARTER 2017 RESULTS
| • | Q4 2017 Sales of $50.3 Million, Up 47.2% vs. Q4 2016 |
| • | Q4 Net Income of $7.9 million, or $1.06 per diluted share, including a net tax benefit of $1.06 per diluted share primarily attributable to the new federal tax legislation |
| • | EBITDA in Q4 of $5.8 Million, Up 82.4% from Q4 2016 |
| • | Quarter-End Backlog of $77.7 Million, Up 17.3% sequentially, and Up 77.3% vs. Q4 2016 |
BRIDGEVILLE, PA, January 24, 2018 – Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported net sales for the fourth quarter of 2017 of $50.3 million, an increase of 47.2% from $34.2 million in the fourth quarter of 2016, and slightly below $50.9 million in the 2017 third quarter. All end markets made substantial contributions to the year-over-year quarterly sales growth, including aerospace, the Company’s largest end market, where sales grew 70.1% from the fourth quarter of 2016.
Sales of premium alloys remained at record levels in the fourth quarter of 2017 at $7.3 million, or 14.6% of sales, compared with $7.4 million, or 14.5% of sales reached in the third quarter of 2017, and versus $3.1 million, or 9.1% of sales, in the fourth quarter of 2016.
For full year 2017, sales increased to $202.6 million, up 31.2% from $154.4 million in 2016. Sales of premium alloys in 2017 increased 90.1% to $27.3 million, or 13.5% of sales, from $14.4 million, or 9.3% of sales, in 2016.
The Company’s gross margin for the fourth quarter of 2017 was $6.2 million, or 12.3% of sales, compared with $5.5 million, or 10.7% of sales, in the third quarter of 2017, and $3.1 million, or 9.1% of sales, in the fourth quarter of 2016.
For the fourth quarter of 2017, selling, general and administrative expenses were $5.1 million, or 10.2% of sales, compared with $4.4 million, or 8.7% of sales, in the 2017 third quarter, and $4.5 million, or 13.3% of sales, in the fourth quarter of 2016. The fourth quarter increase is primarily due to increased legal expenses and adjustments to the bonus program accruals.
Net income for the fourth quarter of 2017 was $7.9 million, or $1.06 per diluted share, including a net tax benefit of $1.06 per diluted share primarily attributable to the new federal tax legislation. In the third quarter of 2017, the Company incurred a net loss of $0.3 million, or $0.04 per diluted share, including unusual charges related to the facility fires totaling $0.03 per diluted share, and $0.03 per diluted share of discrete tax expense items mainly related to the new stock compensation accounting guidance in 2017. In the fourth quarter of 2016, the Company’s net loss was $1.6 million, or $0.22 per diluted share.
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For full year 2017, net income was $7.6 million, or $1.03 per diluted share, (including $1.03 per diluted share of net tax benefit) compared with a net loss of $5.3 million, or $0.74 per diluted share, in full year 2016.
The Company’s EBITDA for the fourth quarter of 2017 was $5.8 million, an increase of 2.3% from the 2017 third quarter and an increase of 82.4% from the prior year fourth quarter.
For full year 2017, the Company’s EBITDA was $22.9 million, an increase of $9.5 million, or 71.6%, compared with full year 2016.
Backlog (before surcharges) at December 31, 2017 was $77.7 million, an increase of 17.3% from September 30, 2017, and 77.3% higher than at the end of the 2016 fourth quarter. The December 31, 2017 backlog is the largest backlog since the second quarter of 2012.
The Company’s fourth quarter debt was $79.7 million compared with $77.1 in the third quarter of 2017, with the increase for higher working capital driven by strong bookings and backlog growth.
Capital expenditures for the fourth quarter of 2017 increased to $3.3 million from $1.6 million in the third quarter of 2017 and $1.3 million in the fourth quarter of 2016 and included down payments on capital projects scheduled for 2018 in Dunkirk and Bridgeville.
Chairman, President and CEO Dennis Oates commented: “We continue to see positive customer sentiment and increasing market momentum. Our bookings in the fourth quarter were the highest level reached since the first quarter of 2012. Our top line continued to grow, including a record level of premium alloy sales, despite the normal seasonal slow-down as customers address their year-end inventory targets and extreme weather conditions.
“We made modest progress in improving our gross margin during the fourth quarter, although there was some spill-over effect from the September fire-related issues as we sold through third quarter production and worked to keep orders flowing according to schedule. These challenges are now largely behind us and our focus is on expanding gross margins, driving efficiencies and seizing opportunities in the current strong market.”
Webcast
The Company has scheduled a conference call for today, January 24, 2018, at 10:00 a.m. (Eastern) to discuss fourth quarter 2017 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 first quarter of 2018.
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, nickel alloys, tool steel and certain other alloyed steels. The Company’s products are used in a variety of industries, including aerospace, power generation, oil and gas, 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
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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.
Non-GAAP Financial Measures
This press release includes discussions of financial measures that have not been determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). These measures include earnings (loss) before interest, income taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA. We include these measurements to enhance the understanding of our operating performance. We believe that EBITDA, considered along with net earnings (loss), is a relevant indicator of trends relating to cash generating activity of our operations. Adjusted EBITDA excludes the effect of share-based compensation expense and other non-cash generating activity such as impairments and the write-off of deferred financing costs. We believe excluding these costs provides a consistent comparison of the cash generating activity of our operations. We believe that EBITDA and Adjusted EBITDA are useful to investors as they facilitate a comparison of our operating performance to other companies who also use EBITDA and Adjusted EBITDA as supplemental operating measures. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measures. These non-GAAP measures may not be entirely comparable to similarly titled measures used by other companies due to potential differences among calculations methodologies. A reconciliation of these non-GAAP financial measures to their most directly comparable financial measure prepared in accordance with GAAP is included in the tables that follow.
-TABLES FOLLOW -
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UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except Per Share Information)
(Unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net Sales |
||||||||||||||||
| Stainless steel |
$ | 33,307 | $ | 23,048 | $ | 139,603 | $ | 112,118 | ||||||||
| High-strength low alloy steel |
4,744 | 2,241 | 15,693 | 13,180 | ||||||||||||
| Tool steel |
7,355 | 6,469 | 32,279 | 19,179 | ||||||||||||
| High-temperature alloy steel |
4,350 | 1,415 | 12,435 | 6,057 | ||||||||||||
| Conversion services and other sales |
518 | 986 | 2,633 | 3,900 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total net sales |
50,274 | 34,159 | 202,643 | 154,434 | ||||||||||||
| Cost of products sold |
44,115 | 31,060 | 179,609 | 140,921 | ||||||||||||
|
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|
|
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|
|
|
|||||||||
| Gross margin |
6,159 | 3,099 | 23,034 | 13,513 | ||||||||||||
| Selling, general and administrative expenses |
5,121 | 4,549 | 18,797 | 17,482 | ||||||||||||
|
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|
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|
|||||||||
| Operating income (loss) |
1,038 | (1,450 | ) | 4,237 | (3,969 | ) | ||||||||||
| Interest expense |
1,005 | 928 | 4,022 | 3,659 | ||||||||||||
| Deferred financing amortization |
63 | 64 | 255 | 1,015 | ||||||||||||
| Other (income) expense |
(6 | ) | 20 | (49 | ) | 230 | ||||||||||
|
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|
|
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|
|
|
|
|||||||||
| Income (loss) before income taxes |
(24 | ) | (2,462 | ) | 9 | (8,873 | ) | |||||||||
| Benefit for income taxes |
(7,884 | ) | (877 | ) | (7,601 | ) | (3,526 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
$ | 7,860 | $ | (1,585 | ) | $ | 7,610 | $ | (5,347 | ) | ||||||
|
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|
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|
|
|||||||||
| Net income (loss) per common share - Basic |
$ | 1.09 | $ | (0.22 | ) | $ | 1.05 | $ | (0.74 | ) | ||||||
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|
|
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| Net income (loss) per common share - Diluted |
$ | 1.06 | $ | (0.22 | ) | $ | 1.03 | $ | (0.74 | ) | ||||||
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|
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|
|||||||||
| Weighted average shares of common stock outstanding | ||||||||||||||||
| Basic |
7,238,372 | 7,206,753 | 7,225,697 | 7,193,300 | ||||||||||||
| Diluted |
7,417,044 | 7,206,753 | 7,374,805 | 7,193,300 | ||||||||||||
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| MARKET SEGMENT INFORMATION | ||||||||||||||||
| Three Months Ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net Sales |
||||||||||||||||
| Service centers |
$ | 34,641 | $ | 23,744 | $ | 140,259 | $ | 108,582 | ||||||||
| Forgers |
4,497 | 2,557 | 18,442 | 13,441 | ||||||||||||
| Rerollers |
6,223 | 3,125 | 23,675 | 12,481 | ||||||||||||
| Original equipment manufacturers |
4,395 | 3,747 | 17,634 | 16,030 | ||||||||||||
| Conversion services and other sales |
518 | 986 | 2,633 | 3,900 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total net sales |
$ | 50,274 | $ | 34,159 | $ | 202,643 | $ | 154,434 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Tons shipped |
8,996 | 7,582 | 39,246 | 31,372 | ||||||||||||
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|
|||||||||
| MELT TYPE INFORMATION | ||||||||||||||||
| Three Months Ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net Sales |
||||||||||||||||
| Specialty alloys |
$ | 42,428 | $ | 30,074 | $ | 172,715 | $ | 136,178 | ||||||||
| Premium alloys * |
7,328 | 3,099 | 27,295 | 14,356 | ||||||||||||
| Conversion services and other sales |
518 | 986 | 2,633 | 3,900 | ||||||||||||
|
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|
|
|
|
|
|
|
|||||||||
| Total net sales |
$ | 50,274 | $ | 34,159 | $ | 202,643 | $ | 154,434 | ||||||||
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|
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|||||||||
| END MARKET INFORMATION ** | ||||||||||||||||
| Three Months Ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net Sales |
||||||||||||||||
| Aerospace |
$ | 28,391 | $ | 16,692 | $ | 111,795 | $ | 91,979 | ||||||||
| Power generation |
4,325 | 3,242 | 16,592 | 14,175 | ||||||||||||
| Oil & gas |
4,773 | 3,147 | 19,069 | 12,392 | ||||||||||||
| Heavy equipment |
7,545 | 6,833 | 33,876 | 20,109 | ||||||||||||
| General industrial, conversion services and other sales |
5,240 | 4,245 | 21,311 | 15,779 | ||||||||||||
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|
|||||||||
| Total net sales |
$ | 50,274 | $ | 34,159 | $ | 202,643 | $ | 154,434 | ||||||||
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| * | Premium alloys represent all vacuum induction melted (VIM) products. |
| ** | The majority of our products are sold to service centers rather than the ultimate end market customer. The end market information in this press release is our estimate based upon our knowledge of our customers and the grade of material sold to them, which they will in-turn sell to the ultimate end market customer. |
5
| CONDENSED CONSOLIDATED BALANCE SHEETS
|
||||||||
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Assets |
||||||||
| Cash |
$ | 207 | $ | 75 | ||||
| Accounts receivable, net |
24,990 | 19,437 | ||||||
| Inventory, net |
116,663 | 91,342 | ||||||
| Other current assets |
4,404 | 2,729 | ||||||
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|
|||||
| Total current assets |
146,264 | 113,583 | ||||||
| Property, plant and equipment, net |
174,444 | 182,398 | ||||||
| Other long-term assets |
523 | 64 | ||||||
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|
|||||
| Total assets |
$ | 321,231 | $ | 296,045 | ||||
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|||||
| Liabilities and Stockholders’ Equity |
||||||||
| Accounts payable |
$ | 34,898 | $ | 19,906 | ||||
| Accrued employment costs |
4,075 | 3,803 | ||||||
| Current portion of long-term debt |
4,707 | 4,579 | ||||||
| Other current liabilities |
1,268 | 898 | ||||||
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|
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|
|||||
| Total current liabilities |
44,948 | 29,186 | ||||||
| Long-term debt |
75,006 | 67,998 | ||||||
| Deferred income taxes |
9,605 | 17,629 | ||||||
| Other long-term liabilities |
4 | 12 | ||||||
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|
|
|
|||||
| Total liabilities |
129,563 | 114,825 | ||||||
| Stockholders’ equity |
191,668 | 181,220 | ||||||
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|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 321,231 | $ | 296,045 | ||||
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|
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|
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6
CONSOLIDATED STATEMENTS OF CASH FLOW
| Year Ended December 31, |
||||||||
| 2017 | 2016 | |||||||
| Operating activities: |
||||||||
| Net income (loss) |
$ | 7,610 | $ | (5,347 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
18,823 | 18,533 | ||||||
| Deferred income tax |
(7,593 | ) | (3,525 | ) | ||||
| Write-off of deferred financing costs |
— | 768 | ||||||
| Share-based compensation expense, net |
1,564 | 1,405 | ||||||
| Net gain on asset disposals |
(70 | ) | (340 | ) | ||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable, net |
(5,567 | ) | (1,754 | ) | ||||
| Inventory, net |
(27,378 | ) | (9,155 | ) | ||||
| Accounts payable |
14,178 | 7,096 | ||||||
| Accrued employment costs |
272 | 547 | ||||||
| Income taxes |
77 | 200 | ||||||
| Other, net |
(811 | ) | (22 | ) | ||||
|
|
|
|
|
|||||
| Net cash provided by operating activities |
1,105 | 8,406 | ||||||
| Investing activities: |
||||||||
| Capital expenditures |
(7,996 | ) | (4,376 | ) | ||||
| Proceeds from sale of property, plant and equipment |
70 | 1,571 | ||||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(7,926 | ) | (2,805 | ) | ||||
| Financing activities: |
||||||||
| Borrowings under revolving credit facility |
350,314 | 241,152 | ||||||
| Payments on revolving credit facility |
(338,836 | ) | (259,243 | ) | ||||
| Borrowings under term loan facility |
— | 30,000 | ||||||
| Payments on term loan facility, capital leases, and convertible notes |
(5,078 | ) | (17,448 | ) | ||||
| Proceeds from the issuance of common stock |
553 | 651 | ||||||
| Payment of deferred financing costs |
— | (750 | ) | |||||
|
|
|
|
|
|||||
| Net cash provided by (used in) financing activities |
6,953 | (5,638 | ) | |||||
|
|
|
|
|
|||||
| Net increase (decrease) in cash |
132 | (37 | ) | |||||
| Cash at beginning of period |
75 | 112 | ||||||
|
|
|
|
|
|||||
| Cash at end of period |
$ | 207 | $ | 75 | ||||
|
|
|
|
|
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7
| RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA
|
||||||||||||||||
| Three Months ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net income (loss) |
$ | 7,860 | $ | (1,585 | ) | $ | 7,610 | $ | (5,347 | ) | ||||||
| Interest expense |
1,005 | 928 | 4,022 | 3,659 | ||||||||||||
| Benefit for income taxes |
(7,884 | ) | (877 | ) | (7,601 | ) | (3,526 | ) | ||||||||
| Depreciation and amortization |
4,791 | 4,699 | 18,823 | 18,533 | ||||||||||||
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|
|
|
|
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|
|||||||||
| EBITDA |
5,772 | 3,165 | 22,854 | 13,319 | ||||||||||||
| Share-based compensation expense |
197 | 433 | 1,564 | 1,405 | ||||||||||||
| Write-off of deferred financing costs |
— | — | — | 768 | ||||||||||||
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|||||||||
| Adjusted EBITDA |
$ | 5,969 | $ | 3,598 | $ | 24,418 | $ | 15,492 | ||||||||
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