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Universal Stainless Reports Third Quarter 2012 Results

Stocks in this article: USAP

For the third quarter of 2012, the Company had positive cash flow from operations of $12.4 million despite continued investment in the ramp-up of North Jackson, including $3.5 million of increased inventory to support VIM product and equipment development. Capital expenditures were $10.7 million in the third quarter of 2012, including $6.8 million for the North Jackson operation. At September 30, 2012, the Company had total debt of $113.4 million, or 36.6% of total capitalization.

Shipment volume for the third quarter of 2012 decreased 9% from the third quarter of 2011. This reflected a 13% increase in tons shipped to the aerospace market, offset by decreases of 16%, 30% and 7% in shipments to the petrochemical, power generation and service center plate markets, respectively.

Chairman, President and CEO Dennis Oates commented: "Our third quarter results were in line with continued inventory adjustment by service centers, our largest customer category. While we are encouraged by the continued expansion of our aerospace-related business fueled by the North Jackson investment, other industries have been moving cautiously through the second half of the year because of global economic conditions and uncertainty. This is evidenced in our sales as well as in our lower order entry and backlog. Declining nickel prices and shorter lead times also had a depressing effect on customer purchasing patterns. 

"The reduction in our shipment volume in the third quarter continued to restrain our consolidated operating margin. So did our ongoing investment in the ramp-up of our North Jackson facility, where we are only in the early stages of realizing its full benefits. Most recently, the two newly installed vacuum-arc remelt furnaces were commissioned. As a result, we have increased our internal VAR capacity to 11 furnaces and by 60% this year in support of our aerospace customers.  

"Both the current usage or 'chew-up' rate of specialty metals and the growth prospects for our end markets remain strong. Therefore, channel demand is expected to return to more normal levels as we move through 2013. During the course of 2013, we also expect to complete the ramp-up of North Jackson as well as achieve many of the product certifications and approvals from customers that we have been working towards. The certifications and approvals will position us to capture more market opportunity in new higher-margin product categories while improving our operating profitability – in line with our strategic plan."

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