Universal Stainless Posts Improved First Quarter 2014 Results

  • Net Sales Increase 16% from 2013 Fourth Quarter to $46.7 Million
  • First Quarter Backlog Is Up 26%
  • Gross Margin Improves to 13% of Sales; Operating Income is $1.4 Million
  • Net Loss of $0.07 per Diluted Share Includes $0.12 of Tax Charges

BRIDGEVILLE, Pa., May 1, 2014 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) today reported net sales for the first quarter of 2014 of $46.7 million, an increase of 16% from the fourth quarter of 2013.

Compared with the fourth quarter of 2013, tons shipped to the aerospace market increased 8%, power generation shipments were up 7%, and shipments to the oil and gas market rose 11%, while heavy equipment market shipments were lower by 10%. Backlog (before surcharges) increased 26% sequentially in the first quarter of 2014 to $58.8 million, the highest level since the third quarter of 2012.

The Company's gross margin for the first quarter of 2014 was $6.1 million, or 13.0% of sales, compared with $1.5 million, or 3.7% of sales, in the fourth quarter of 2013, and $4.6 million, or 9.5% of sales, in the first quarter of 2013. The strong improvement was due to higher shipments and production levels as compared with the fourth quarter of 2013, in addition to a better matching of surcharges to raw material costs with the rise in nickel pricing compared to the second half of 2013. Included in the Company's first quarter 2014 results were expenses related to severe weather conditions that approximated $0.6 million pre-tax.

Operating income in the first quarter of 2014 rose to $1.4 million, compared with an operating loss of $2.6 million in the fourth quarter of 2013, and operating income of $0.2 million in the first quarter of 2013.

The Company reported a net loss of $0.5 million, or $0.07 per diluted share, for the first quarter of 2014, which included two state tax charges that were primarily non-cash, and which reduced EPS by approximately $0.9 million, or $0.12 per diluted share. Excluding the impact of the tax charges, net income in the first quarter of 2014 would have been $0.4 million, or $0.05 per diluted share. Net income was $0.04 million, or $0.01 per diluted share, in the first quarter of 2013. 

The Company generated positive cash from operations of $2.2 million in the first quarter of 2014, while at the same time it increased its investment in working capital to support higher operating activity levels. The Company also repaid an additional $1.7 million of its debt in the quarter. Total debt has been reduced by 16% since the first quarter of 2013 to $88.1 million.       

Chairman, President and CEO Dennis Oates commented: "Improved market demand led by the aerospace market, and progress in gaining customer approvals, drove a more than double digit increase in our bookings and backlog in the first quarter. Our production levels were higher company-wide, increasing our efficiency and contributing to the improvement of our gross margin. Our profitability was also aided by the better alignment of raw material costs and surcharges."

"Market demand is remaining strong thus far in the second quarter and we have increased our inventory levels since the end of the year, especially in aerospace products, as we believe that most aerospace destocking has been completed. We expect that the other end markets we serve will gradually recover as the year progresses."

Webcast

The Company has scheduled a conference call for today, May 1, at 10:00 a.m. (Eastern) to discuss first quarter 2014 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 second quarter of 2014.  

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 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

- TABLES FOLLOW -
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except share and per share information)
(Unaudited)
 
CONSOLIDATED STATEMENTS OF OPERATIONS
     
  Three months ended
  March 31,
  2014 2013
Net Sales    
Stainless steel  $ 36,627 $ 35,477
High-strength low alloy steel  3,795  6,593
Tool steel  3,672  4,984
High-temperature alloy steel  1,220  1,270
Conversion services and other sales  1,353  811
     
Total net sales  46,667  49,135
     
Cost of products sold  40,607  44,489
     
Gross margin  6,060  4,646
     
Selling, general and administrative expenses  4,628  4,479
     
Operating income  1,432  167
     
Interest expense  (698)  (608)
Deferred financing amortization  (165)  (81)
Other income, net  4  28
     
Income (loss) before income taxes  573  (494)
     
Provision (benefit) for income taxes  1,072  (534)
     
Net (loss) income $ (499) $ 40
     
Net (loss) income per common share - Basic $ (0.07) $ 0.01
Net (loss) income per common share - Diluted $ (0.07) $ 0.01
     
Weighted average shares of common stock outstanding    
Basic  7,014,836  6,924,131
Diluted  7,014,836  7,063,703
 
MARKET SEGMENT INFORMATION
     
  Three months ended
  March 31,
  2014 2013
Net Sales    
Service centers $ 28,791 $ 32,509
Forgers  6,382  6,629
Rerollers  6,225  5,502
Original equipment manufacturers  3,916  3,684
Conversion services and other sales  1,353  811
     
Total net sales $ 46,667 $ 49,135
     
Tons shipped  9,325  9,626
     
MELT TYPE INFORMATION
     
  Three months ended
  March 31,
  2014 2013
Net Sales    
Specialty alloys $ 42,616 $ 46,122
Premium alloys *  2,698  2,202
Conversion services and other sales  1,353  811
     
Total net sales $ 46,667 $ 49,135
     
END MARKET INFORMATION **
     
  Three months ended
  March 31,
  2014 2013
Net Sales    
Aerospace $ 26,707 $ 25,735
Power generation  5,415  5,759
Oil & gas  4,249  6,292
Heavy equipment  3,959  5,516
General industrial, conversion services and other sales  6,337  5,833
     
Total net sales $ 46,667 $ 49,135
     
* Premium alloys represent all vacuum induction melted (VIM) products.
 
** End market information is our estimate based upon customers and grade of material sold that will in-turn sell to the ultimate end market customer.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
     
  March 31, December 31,
  2014 2013
Assets    
     
Cash $ 93 $ 307
Accounts receivable, net  28,062  21,447
Inventory, net  91,178  82,593
Deferred income taxes  12,361  13,042
Other current assets  4,566  3,906
     
Total current assets  136,260  121,295
Property, plant and equipment, net  201,340  203,590
Goodwill  20,268  20,268
Other long-term assets  2,541  2,771
     
Total assets $ 360,409 $ 347,924
     
Liabilities and Stockholders' Equity    
     
Accounts payable $ 26,737 $ 14,288
Accrued employment costs  4,195  3,430
Current portion of long-term debt  3,000  3,000
Other current liabilities  1,054  1,023
     
Total current liabilities  34,986  21,741
Long-term debt  85,057  86,796
Deferred income taxes  42,584  42,532
Other long-term liabilities  668  397
     
Total liabilities  163,295  151,466
Stockholders' equity  197,114  196,458
     
Total liabilities and stockholders' equity $ 360,409 $ 347,924
     
CONSOLIDATED STATEMENTS OF CASH FLOW
     
  Three months ended
  March 31,
  2014 2013
     
Operating activities:    
Net (loss) income $ (499) $ 40
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Depreciation and amortization  4,208  4,272
Deferred income tax   733  (642)
Share-based compensation expense  525  494
Changes in assets and liabilities:    
Accounts receivable, net  (6,615)  (4,967)
Inventory, net  (8,990)  (2,611)
Accounts payable  12,449  10,008
Accrued employment costs  765  (975)
Income taxes  520  70
Other, net  (897)  (43)
     
Net cash provided by operating activities  2,199  5,646
     
Investing activity:    
Capital expenditures  (1,322)  (3,624)
     
Cash used in investing activity  (1,322)  (3,624)
     
Financing activities:    
Payments on revolving credit facility  (16,045)  (20,381)
Borrowings under revolving credit facility  15,056   18,387
Payment on term loan facility  (750)  --
Proceeds from the issuance of common stock  648  241
Payment of deferred financing costs  --  (475)
     
Net cash used in financing activities  (1,091)  (2,228)
     
Net decrease in cash  (214)  (206)
Cash at beginning of period  307  321
     
Cash at end of period $ 93 $ 115
CONTACT: Dennis M. Oates         Chairman,         President and CEO         (412) 257-7609                  Michael D. Bornak         VP Finance, CFO         and Treasurer         (412) 257-7606                  June Filingeri         President         Comm-Partners LLC         (203) 972-0186

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