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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2020 

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from              to             

Commission File Number 001-39467

 

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

(Exact name of Registrant as specified in its charter)

 

 

Delaware

25-1724540

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

 

600 Mayer Street

Bridgeville, PA 15017

(Address of principal executive offices, including zip code)

(412) 257-7600

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class

Trading Symbol

Name of Each Exchange

on Which Registered

Common Stock, par value $0.001 per share

Preferred Stock Purchase Rights

USAP  

 

The Nasdaq Stock Market, LLC

The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

 

 

Non-accelerated filer

 

☐  

Smaller reporting company

 

 

 

 

 

 

 

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.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of October 14, 2020, there were 8,829,732 shares of the Registrant’s common stock outstanding.

 

 

 

i


Universal Stainless & Alloy Products, Inc.

Table of Contents

 

 

 

DESCRIPTION

 

PAGE NO.

 

 

 

 

 

PART I.

 

FINANCIAL INFORMATION

 

1

 

 

 

 

 

Item 1.

 

Financial Statements

 

1

 

 

 

 

 

 

 

Consolidated Statements of Operations

 

1

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive (Loss) Income

 

2

 

 

 

 

 

 

 

Consolidated Balance Sheets

 

3

 

 

 

 

 

 

 

Consolidated Statements of Cash Flow

 

4

 

 

 

 

 

 

 

Consolidated Statements of Shareholders' Equity

 

5

 

 

 

 

 

 

 

Notes to the Unaudited Consolidated Financial Statements

 

6

 

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

13

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

20

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

20

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

21

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

21

 

 

 

 

 

Item 1A.

 

Risk Factors

 

21

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

21

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

21

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

21

 

 

 

 

 

Item 5.

 

Other Information

 

21

 

 

 

 

 

Item 6.

 

Exhibits

 

22

 

 

 

 

 

SIGNATURES

 

23

 

 

 


 

Part I.

FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Information)

(Unaudited)

 

 

 

Three months ended

 

 

Nine months ended

 

 

September 30,

 

 

September 30,

 

 

2020

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

37,434

 

$

56,568

 

$

148,407

 

$

187,836

Cost of products sold

 

 

41,861

 

 

51,260

 

 

145,988

 

 

166,052

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

(4,427)

 

 

5,308

 

 

2,419

 

 

21,784

Selling, general and administrative expenses

 

 

4,153

 

 

4,525

 

 

15,458

 

 

15,095

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss) income

 

 

(8,580)

 

 

783

 

 

(13,039)

 

 

6,689

Interest expense and other financing costs

 

 

642

 

 

1,045

 

 

2,401

 

 

2,980

Other income, net

 

 

(288)

 

 

(452)

 

 

(302)

 

 

(421)

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income before income taxes

 

 

(8,934)

 

 

190

 

 

(15,138)

 

 

4,130

(Benefit) provision for income taxes

 

 

(1,934)

 

 

(577)

 

 

(3,396)

 

 

55

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(7,000)

 

$

767

 

$

(11,742)

 

$

4,075

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per common share - Basic

 

$

(0.79)

 

$

0.09

 

$

(1.33)

 

$

0.46

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per common share - Diluted

 

$

(0.79)

 

$

0.09

 

$

(1.33)

 

$

0.46

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

8,829,732

 

 

8,787,837

 

 

8,813,880

 

 

8,780,590

Diluted

 

 

8,829,732

 

 

8,879,441

 

 

8,813,880

 

 

8,870,240

 

The accompanying notes are an integral part of these consolidated financial statements.


1


 

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Dollars in Thousands)

(Unaudited)

 

 

 

Three months ended

 

 

 

Nine months ended

 

 

 

September 30,

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

 

2020

 

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

 

(7,000

)

 

$

 

767

 

 

$

 

(11,742

)

 

$

 

4,075

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adoption of ASU 2018-02

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(21

)

Unrealized (loss) gain on foreign currency contracts

 

 

 

(63

)

 

 

 

58

 

 

 

 

32

 

 

 

 

145

 

Comprehensive (loss) income

 

$

 

(7,063

)

 

$

 

825

 

 

$

 

(11,710

)

 

$

 

4,199

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2


 

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Per Share Information)

 

 

 

September 30,

 

December 31,

 

 

2020

 

2019

 

 

(Unaudited)

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

58

 

$

170

Accounts receivable (less allowance for doubtful accounts of $203 and $295, respectively)

 

 

26,451

 

 

35,595

Inventory, net

 

 

120,947

 

 

147,402

Other current assets

 

 

4,824

 

 

8,300

 

 

 

 

 

 

 

Total current assets

 

 

152,280

 

 

191,467

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

168,623

 

 

176,061

Other long-term assets

 

 

997

 

 

871

 

 

 

 

 

 

 

Total assets

 

$

321,900

 

$

368,399

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

12,443

 

$

40,912

Accrued employment costs

 

 

3,235

 

 

4,449

Current portion of long-term debt

 

 

16,690

 

 

3,934

Other current liabilities

 

 

1,664

 

 

830

 

 

 

 

 

 

 

Total current liabilities

 

 

34,032

 

 

50,125

 

 

 

 

 

 

 

Long-term debt, net

 

 

43,879

 

 

60,411

Deferred income taxes

 

 

7,609

 

 

10,962

Other long-term liabilities, net

 

 

3,739

 

 

3,765

 

 

 

 

 

 

 

Total liabilities

 

 

89,259

 

 

125,263

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Senior preferred stock, par value $0.001 per share; 1,980,000 shares authorized; 0 shares issued and outstanding

 

 

-

 

 

-

Common stock, par value $0.001 per share; 20,000,000 shares authorized; 9,124,011 and 9,093,715 shares issued, respectively

 

 

9

 

 

9

Additional paid-in capital

 

 

96,197

 

 

94,982

Accumulated other comprehensive income (loss)

 

 

1

 

 

(31)

Retained earnings

 

 

138,745

 

 

150,487

Treasury stock, at cost; 294,279 common shares held

 

 

(2,311)

 

 

(2,311)

 

 

 

 

 

 

 

Total stockholders’ equity

 

 

232,641

 

 

243,136

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

321,900

 

$

368,399

 

The accompanying notes are an integral part of these consolidated financial statements. 

3


 

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

(Dollars in Thousands)

(Unaudited)

 

 

 

 

Nine months ended

 

 

 

 

September 30,

 

 

 

 

2020

 

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

$

 

(11,742

)

 

 

$

 

4,075

 

Adjustments for non-cash items:

 

Depreciation and amortization

 

 

 

 

14,721

 

 

 

 

 

14,235

 

Deferred income tax

 

 

 

 

(3,380

)

 

 

 

 

577

 

Share-based compensation expense

 

 

 

 

1,129

 

 

 

 

 

1,100

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

 

 

9,144

 

 

 

 

 

(3,804

)

Inventory, net

 

 

 

 

25,093

 

 

 

 

 

(7,628

)

Accounts payable

 

 

 

 

(25,399

)

 

 

 

 

(9,728

)

Accrued employment costs

 

 

 

 

(1,214

)

 

 

 

 

(4,109

)

Income taxes

 

 

 

 

207

 

 

 

 

 

(56

)

Other

 

 

 

 

4,045

 

 

 

 

 

(3,735

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

 

 

 

12,604

 

 

 

 

 

(9,073

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing Activity:

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

 

(8,480

)

 

 

 

 

(13,308

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activity

 

 

 

 

(8,480

)

 

 

 

 

(13,308

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings under revolving credit facility

 

 

 

 

101,559

 

 

 

 

 

145,688

 

Payments on revolving credit facility

 

 

 

 

(112,498

)

 

 

 

 

(123,097

)

Proceeds from Paycheck Protection Program Note

 

 

 

 

10,000

 

 

 

 

 

-

 

Payments on term loan facility, finance leases, and notes

 

 

 

 

(3,383

)

 

 

 

 

(3,424

)

Issuance of common stock under share-based plans

 

 

 

 

86

 

 

 

 

 

327

 

Net cash (used in) provided by financing activities

 

 

 

 

(4,236

)

 

 

 

 

19,494

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and restricted cash

 

 

 

 

(112

)

 

 

 

 

(2,887

)

Cash and restricted cash at beginning of period

 

 

 

 

170

 

 

 

 

 

4,091

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and restricted cash at end of period

 

 

$

 

58

 

 

 

$

 

1,204

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.


4


 

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in Thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

other

 

 

 

 

 

 

 

 

 

 

 

 

shares

 

 

Common

 

 

paid-in

 

 

Retained

 

 

comprehensive

 

 

Treasury

 

 

 

Treasury

 

 

 

outstanding

 

 

stock

 

 

capital

 

 

earnings

 

 

income (loss)

 

 

shares

 

 

 

stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

8,799,436

 

 

$

 

9

 

 

$

 

94,982

 

 

$

 

150,487

 

 

$

 

(31

)

 

 

294,279

 

 

$

 

(2,311

)

Share-based compensation

 

 

3,680

 

 

 

 

-

 

 

 

 

511

 

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Net gain on derivative instruments

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

120

 

 

 

-

 

 

 

 

-

 

Net loss

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(1,411

)

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Balance at March 31, 2020

 

 

8,803,116

 

 

$

 

9

 

 

$

 

95,493

 

 

$

 

149,076

 

 

$

 

89

 

 

 

294,279

 

 

$

 

(2,311

)

Common stock issuance under

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee Stock Purchase Plan

 

 

11,884

 

 

 

 

-

 

 

 

 

86

 

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Share-based compensation

 

 

14,732

 

 

 

 

-

 

 

 

 

323

 

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Net loss on derivative instruments

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(25

)

 

 

-

 

 

 

 

-

 

Net loss

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(3,331

)

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Balance at June 30, 2020

 

 

8,829,732

 

 

$

 

9

 

 

$

 

95,902

 

 

$

 

145,745

 

 

$

 

64

 

 

 

294,279

 

 

$

 

(2,311

)

Share-based compensation

 

 

-

 

 

 

 

-

 

 

 

 

295

 

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Net loss on derivative instruments

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(63

)

 

 

-

 

 

 

 

-

 

Net loss

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(7,000

)

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Balance at September 30, 2020

 

 

8,829,732

 

 

$

 

9

 

 

$

 

96,197

 

 

$

 

138,745

 

 

$

 

1

 

 

 

294,279

 

 

$

 

(2,311

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

 

8,752,490

 

 

$

 

9

 

 

$

 

93,100

 

 

$

 

146,191

 

 

$

 

1

 

 

 

292,855

 

 

$

 

(2,290

)

Common stock issuance under

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee Stock Purchase Plan

 

 

9,270

 

 

 

 

-

 

 

 

 

128

 

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Exercise of stock options

 

 

4,050

 

 

 

 

-

 

 

 

 

41

 

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Share-based compensation

 

 

6,401

 

 

 

 

-

 

 

 

 

432

 

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Net loss on derivative instruments

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(67

)

 

 

-