Attached files

file filename
8-K - FORM 8-K - UNIVERSAL STAINLESS & ALLOY PRODUCTS INCd49574d8k.htm

Exhibit 99.1

 

LOGO

 

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 SECOND QUARTER 2015 RESULTS

 

    Second Quarter Net Sales are $49.6 Million; Year-to-Date Net Sales Total $105.6 Million

 

    Gross Margin is 10.5% of Sales; Operating Income is $0.2 Million

 

    Net Loss Totals $0.4 Million, or $0.05 per Diluted Share

 

    Quarter-End Backlog Is $48.9 Million

BRIDGEVILLE, PA, July 29, 2015 – Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported that net sales for the second quarter of 2015 were $49.6 million compared with $52.3 million in the second quarter of 2014, and $56.0 million in the first quarter of 2015. Sales of premium alloys totaled $4.2 million, or 8.6% of net sales, in the second quarter of 2015, compared with $4.3 million, or 8.1% of net sales, in the second quarter of 2014, and a record $5.0 million, or 9.0% of net sales, in the 2015 first quarter.

For the first six months of 2015, net sales increased 7% to $105.6 million from net sales of $99.0 million in the same period of 2014. Premium alloy sales were $9.3 million, an increase of 33.5% from the first half of 2014, and represented 8.8% of net sales.

Compared with the second quarter of 2014, sales to the aerospace market were up 1% and heavy equipment market sales were up 35%, while sales to the power generation and oil & gas markets were lower by 23% and 24%, respectively. Sales increased to all targeted markets in the first six months of 2015, with aerospace sales up 13%, power generation sales up 4%, oil & gas sales up 6%, and heavy equipment market sales up 17%. The Company’s backlog (before surcharges) at June 30, 2015 was $48.9 million compared with $58.5 million at the end of the first quarter of 2015.

The Company’s gross margin for the second quarter of 2015 was $5.2 million, or 10.5% of net sales, compared with $8.4 million, or 16.1% of net sales, in the second quarter of 2014, and $5.7 million, or 10.2% of net sales, in the first quarter of 2015. The gross margin, while increasing sequentially as a percentage of sales, continued to be negatively impacted by the misalignment of the material costs of products shipped with surcharges. The negative impact to the gross margin was due to the further decline in commodity prices, especially for nickel, during the second quarter.

Operating income was $0.2 million for the second quarter of 2015, compared with $3.2 million for the second quarter of 2014, and $1.0 million for the first quarter of 2015.

The Company recorded a net loss of $0.4 million, or $0.05 per diluted share, for the second quarter of 2015. That compares with net income of $1.4 million, or $0.20 per diluted share, in the second quarter of 2014, and net income of $0.1 million, or $0.02 per diluted share, in the first quarter of 2015.

The net loss for the first six months of 2015 was $0.2 million, or $0.03 per diluted share, compared with net income of $1.0 million, or $0.13 per diluted share, in the first six months of 2014.

 

1


For the second quarter of 2015, the Company generated cash from operating activities of $1.9 million, compared with cash used for operating activities of $2.1 million in the first quarter of 2015. Capital expenditures totaled $2.8 million in the second quarter of 2015. Total debt at June 30, 2015 was $92.7 million, compared with $91.8 million at the end of the first quarter of 2015. Debt to total capitalization was 31.2% at the end of the second quarter of 2015.

Chairman, President and CEO Dennis Oates commented: “Market conditions were challenging in the second quarter. Commodity prices, especially for nickel, deteriorated further. Oil and gas demand continued to plummet due to market conditions. Customers worked down inventories overall and postponed purchases with the prospect of lower surcharges in coming months. Competition for existing orders intensified.

“These conditions led to lower market demand and volume in the second quarter throughout the specialty steel sector. Despite the continued challenge of falling commodity prices and the associated cost, we were able to improve our gross margin during the quarter.

“Our current backlog points towards a challenging third quarter and we have taken steps to reduce spending in line with lower activity levels, and to improve yields and generate cash. There is an emerging view among customers of a potential improvement in demand in the fourth quarter and growing optimism about 2016. We remain committed to our transformation to more higher value products. To date this year, we have successfully launched seven new products with associated customer approvals and made significant strides in continuing to develop our organization for the future. This progress combined with our team’s relentless efforts enabled us to grow our premium alloy sales nearly 34% so far this year.”

Webcast

The Company has scheduled a conference call for today, July 29, at 10:00 a.m. (Eastern) to discuss second quarter 2015 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 third quarter of 2015.

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

 

2


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 -

 

3


UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

FINANCIAL HIGHLIGHTS

(Dollars in thousands, except share and per share information)

(Unaudited)

 

CONSOLIDATED STATEMENTS OF OPERATIONS   
     Three months ended     Six months ended  
     June 30,     June 30,  
     2015     2014     2015     2014  

Net Sales

        

Stainless steel

   $ 36,955     $ 42,045     $ 81,353     $ 78,672  

High-strength low alloy steel

     4,154       3,451       9,432       7,246  

Tool steel

     5,086       3,389       8,893       7,061  

High-temperature alloy steel

     2,051       1,795       3,469       3,015  

Conversion services and other sales

     1,364       1,629       2,446       2,982  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net sales

     49,610       52,309       105,593       98,976  

Cost of products sold

     44,424       43,899       94,697       84,506  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     5,186       8,410       10,896       14,470  

Selling, general and administrative expenses

     4,961       5,169       9,655       9,797  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     225       3,241       1,241       4,673  

Interest expense

     (605     (882     (1,227     (1,580

Deferred financing amortization

     (160     (160     (320     (325

Other income (expense), net

     11       (1     (33     3  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (529     2,198       (339     2,771  

(Benefit) provision for income taxes

     (173     749       (108     1,821  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (356   $ 1,449     $ (231   $ 950  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income per common share - Basic

   $ (0.05   $ 0.21     $ (0.03   $ 0.14  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income per common share - Diluted

   $ (0.05   $ 0.20     $ (0.03   $ 0.13  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares of common stock outstanding

        

Basic

     7,061,545       7,031,041       7,058,026       7,022,983  

Diluted

     7,061,545       7,110,761       7,058,026       7,112,093  

 

4


MARKET SEGMENT INFORMATION   
     Three months ended      Six months ended  
     June 30,      June 30,  
     2015      2014      2015      2014  

Net Sales

           

Service centers

   $ 34,393      $ 34,971      $ 71,804      $ 63,762  

Original equipment manufacturers

     5,790        4,002        12,736        7,918  

Rerollers

     4,162        4,627        10,819        10,852  

Forgers

     3,901        7,080        7,788        13,462  

Conversion services and other sales

     1,364        1,629        2,446        2,982  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 49,610      $ 52,309      $ 105,593      $ 98,976  
  

 

 

    

 

 

    

 

 

    

 

 

 

Tons shipped

     8,909        9,921        18,801        19,246  
  

 

 

    

 

 

    

 

 

    

 

 

 
MELT TYPE INFORMATION   
     Three months ended      Six months ended  
     June 30,      June 30,  
     2015      2014      2015      2014  

Net Sales

           

Specialty alloys

   $ 44,001      $ 46,424      $ 93,863      $ 89,040  

Premium alloys *

     4,245        4,256        9,284        6,954  

Conversion services and other sales

     1,364        1,629        2,446        2,982  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 49,610      $ 52,309      $ 105,593      $ 98,976  
  

 

 

    

 

 

    

 

 

    

 

 

 
END MARKET INFORMATION **   
     Three months ended      Six months ended  
     June 30,      June 30,  
     2015      2014      2015      2014  

Net Sales

           

Aerospace

   $ 30,379      $ 30,190      $ 64,140      $ 56,897  

Power generation

     5,074        6,552        12,398        11,967  

Oil & gas

     4,113        5,406        10,214        9,655  

Heavy equipment

     4,975        3,697        8,967        7,656  

General industrial, conversion services and other sales

     5,069        6,464        9,874        12,801  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 49,610      $ 52,309      $ 105,593      $ 98,976  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

* Premium alloys represent all vacuum induction melted (VIM) products.
** The majority of our products are sold to service centers/processors rather than the ultimate end market customers. 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, that they will in-turn sell to the ultimate end market customer.

 

5


CONDENSED CONSOLIDATED BALANCE SHEETS   
     June 30,      December 31,  
     2015      2014  

Assets

     

Cash

   $ 420      $ 142  

Accounts receivable, net

     30,180        29,057  

Inventory, net

     99,021        101,070  

Deferred income taxes

     7,227        9,683  

Other current assets

     3,719        2,681  
  

 

 

    

 

 

 

Total current assets

     140,567        142,633  

Property, plant and equipment, net

     197,923        199,795  

Goodwill

     20,268        20,268  

Other long-term assets

     1,409        1,861  
  

 

 

    

 

 

 

Total assets

   $ 360,167      $ 364,557  
  

 

 

    

 

 

 

Liabilities and Stockholders’ Equity

     

Accounts payable

   $ 19,178      $ 25,009  

Accrued employment costs

     3,229        6,011  

Current portion of long-term debt

     3,000        3,000  

Other current liabilities

     593        861  
  

 

 

    

 

 

 

Total current liabilities

     26,000        34,881  

Long-term debt

     89,711        83,875  

Deferred income taxes

     39,650        42,108  

Other long-term liabilities

     58        63  
  

 

 

    

 

 

 

Total liabilities

     155,419        160,927  

Stockholders’ equity

     204,748        203,630  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 360,167      $ 364,557  
  

 

 

    

 

 

 

 

6


CONSOLIDATED STATEMENTS OF CASH FLOW   
     Six months ended  
     June 30,  
     2015     2014  

Operating activities:

    

Net (loss) income

   $ (231   $ 950  

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

    

Depreciation and amortization

     9,181       8,723  

Deferred income tax

     (2     1,347  

Share-based compensation expense

     961       1,032  

Changes in assets and liabilities:

    

Accounts receivable, net

     (1,123     (10,477

Inventory, net

     (1,011 )     (14,495

Accounts payable

     (5,831     12,497  

Accrued employment costs

     (2,782     822  

Income taxes

     (272     433  

Other, net

     (1,039     (402
  

 

 

   

 

 

 

Net cash (used in) provided by operating activities

     (127     430  

Investing activity:

    

Capital expenditures

     (5,819     (3,472
  

 

 

   

 

 

 

Net cash used in investing activity

     (5,819     (3,472

Financing activities:

    

Borrowings under revolving credit facility

     63,848       45,207  

Payments on revolving credit facility

     (56,512     (41,698

Payments on term loan facility

     (1,500     (1,500

Proceeds from the issuance of common stock

     388       891  
  

 

 

   

 

 

 

Net cash provided by financing activities

     6,224       2,900  
  

 

 

   

 

 

 

Net increase (decrease) in cash

     278       (142

Cash at beginning of period

     142       307  
  

 

 

   

 

 

 

Cash at end of period

   $ 420     $ 165  
  

 

 

   

 

 

 

 

7