Fourth Quarter Diluted EPS is $0.18 On Sales of $57.1 Million
Full Year Sales are Record $235.1 Million With Diluted EPS
of $2.05
Operating Cash Flow Was $5.8 Million for Fourth Quarter and
$17.7 Million for 2008
BRIDGEVILLE, Pa., Jan. 29, 2009 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) reported today that sales for the fourth quarter of 2008 rose 15% to $57.1 million compared with $49.6 million in the fourth quarter of 2007. Net income for the fourth quarter of 2008 was $1.2 million, or $0.18 per diluted share, compared with $4.4 million, or $0.65 per diluted share in the fourth quarter of 2007.
Sales for the 2008 fourth quarter exceeded the Company's forecast of $45 to $55 million while EPS was in line with recent Company guidance of breakeven to $0.15, excluding import duties. For full year 2008, sales were a record $235.1 million while net income was $13.9 million, or $2.05 per diluted share, compared with sales of $229.9 million and net income of $22.5 million, or $3.32 per diluted share, in 2007. Import duties received in the 2008 and 2007 fourth quarters were $599,000 and $586,000, respectively.
Nickel and other commodity prices declined substantially in the fourth quarter of 2008 resulting in a charge related to an increase in inventory reserves of $807,000 (equivalent to $0.08 per dilute share) with $422,000 attributable to the Universal Stainless segment and $385,000 to the Dunkirk segment. The Company's tax rate for 2008 was 29.9% compared to 32.7% in 2007 due to the impact of lower income levels on the Company's permanent tax deductions and favorable adjustments to state income tax provisions. The benefit of this rate change in comparison to the 2007 fourth quarter and full year was equivalent to $0.05 and $0.08 per diluted share, respectively.
Cash flow from operations was $5.8 million for the 2008 fourth quarter and $17.7 million for the full year. Capital expenditures were $3.3 million and $12.9 million for those periods, respectively. The 2008 capital expenditures included the completion of a new high temperature annealing facility in Dunkirk, the addition of annealing and finishing equipment in Bridgeville and the relocation of the Company's round bar facility to Dunkirk, for which the remaining expense of $248,000 was recognized in the 2008 fourth quarter. At December 31, 2008, the Company had cash of $14.8 million, working capital of $94.8 million and long-term debt of $1.0 million. Accounts receivable at the end of the 2008 fourth quarter remained in line with the 2008 third quarter while inventories were down $7.2 million from the previous quarter.
President and CEO Dennis Oates commented: "Our 15% increase in sales over the fourth quarter of 2007 on a 19% increase in tons shipped was fueled by a 136% increase in shipments to forgers destined for the global power generation markets. With the exception of aerospace, our sales increased to all end markets compared to the 2007 fourth quarter. Our aerospace sales declined 5% as service centers sharply reduced buying activity amid falling commodity prices, the lingering effect of the Boeing work stoppage, and deteriorating economic and credit conditions. In total, our sales to service centers declined 21% from the 2007 fourth quarter, with the greatest impact on our Dunkirk segment, where service centers are the main customer group."
Mr. Oates continued: "Sales and gross profit margins were adversely affected by the rapid, unprecedented decline in raw material prices and the resulting timing imbalance between surcharges and raw material costs incurred."
Mr. Oates concluded: "There is no doubt that current business conditions are very challenging. We are focused on moving forward despite current conditions. Providing unparalleled customer service levels is crucial in this environment and we are increasing the intensity of our efforts to do so by making significant investments in our facilities, including the $13 million melt shop upgrade we announced separately today. We are optimistic about our long-term potential, while prudently planning for the contingencies and opportunities that may present themselves in the shorter term."
Segment Review
For the fourth quarter of 2008, the Universal Stainless & Alloy Products segment had sales of $53.1 million and operating income of $1.9 million, yielding an operating margin of 3%. In the fourth quarter of 2007, sales were $43.4 million and operating income was $3.2 million, or 7% of sales. In the third quarter of 2008, sales were $52.2 million and operating income was $3.3 million, or 6% of sales.
Segment sales rose 22% from the fourth quarter of 2007 primarily due to a 17% increase in tons shipped and the effect of base sales price increases announced earlier in 2008. Increased shipments to forgers, which more than doubled over the fourth quarter of 2007 due to strong demand for semi-finished power generation products, were partially offset by declines in all other customer categories.
Segment sales increased 2% over the third quarter of 2008 while tons shipped increased 8%. Higher shipments to forgers, rerollers and of bar products to service centers offset lower shipments of tool steel plate to service centers.
The Dunkirk Specialty Steel segment reported sales of $11.4 million and an operating loss of $1.3 million for the fourth quarter of 2008. This included a $248,000 charge related to the relocation of the round bar finishing line to Dunkirk from Bridgeville. In the fourth quarter of 2007, sales were $18.7 million and operating income was $2.2 million, or 12% of sales. In the third quarter of 2008, sales were $16.9 million while Dunkirk incurred an operating loss of $172,000, which included a $586,000 charge for the round bar finishing line relocation project. Before giving effect to the relocation charge, Dunkirk's operating income was $414,000 for the third quarter of 2008, resulting in an operating margin of 2%.
Dunkirk's sales declined 39% while tons shipped decreased 35% compared with the fourth quarter of 2007 reflecting lower shipments to service centers and OEMs and lower surcharges on products shipped. The lower shipment volume and lower surcharges combined with high raw material costs due to the timing of procurement as well as the effect of the inventory charge led to the operating loss in the fourth quarter of 2008.
Dunkirk's sales decreased 33% and tons shipped decreased 28% compared with the third quarter of 2008 mainly due to lower shipments of service centers and lower surcharges.
Business Outlook
The Company currently estimates that sales for the first quarter of 2009 will range from $32 to $42 million and that diluted EPS will range from breakeven to $0.10. In the first quarter of 2008, sales were $56.8 million and diluted EPS was $0.70. Approximately $6-8 million of the decline in sales from the 2008 first quarter is a result of lower surcharges anticipated in the first quarter of 2009.
The following factors were considered in developing the estimates for the first quarter of 2009:
* The Company's total backlog at December 31, 2008 was $75 million
compared with $101 million at September 30, 2008. The Company's
current backlog mainly consists of semi-finished products for
rerollers and forgers and tool steel plate for service centers.
* The Company's forecast is based on average December raw
material costs.
* A two-week melt shop outage planned for March 2009 to install
certain equipment is not expected to have a material impact on
first quarter shipments. The Company's outlook includes
approximately $300,000 of expenses related to the outage.
Webcast
A simultaneous Webcast of the Company's conference call discussing the fourth quarter of 2008 and the first quarter 2009 outlook, scheduled at 10:00 a.m. (Eastern) today, will be available on the Company's website at www.univstainless.com, and thereafter archived on the website.
About Universal Stainless & Alloy Products, Inc.
Universal Stainless & Alloy Products, Inc., headquartered in Bridgeville, Pa., manufactures and markets a broad line of semi-finished and finished specialty steels, including stainless steel, tool steel and certain other alloyed steels. The Company's products are sold to rerollers, forgers, service centers, original equipment manufacturers and wire redrawers. 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, risks associated with the receipt, pricing and timing of future customer orders, risks associated with significant fluctuations that may occur in raw material and energy prices, risks associated with the manufacturing process, labor and production yields, risks related to property, plant and equipment, and risks related to the ultimate outcome of the Company's current and future litigation and regulatory matters. The Company's actual results in future periods also may be impacted by various economic and market risk and uncertainties, many of which are 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.
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share information)
(Unaudited)
CONSOLIDATED STATEMENT OF OPERATIONS
For the Quarter Ended For the Year Ended
December 31, December 31,
2008 2007 2008 2007
--------- --------- --------- ---------
Net Sales
Stainless steel $ 44,339 $ 34,020 $ 172,222 $ 164,228
Tool steel 7,887 7,297 39,046 28,119
High-strength
low alloy steel 2,427 6,080 11,936 25,892
High-temperature
alloy steel 1,678 1,580 7,931 9,317
Conversion
services 427 584 1,941 2,011
Other 382 72 2,030 369
--------- --------- --------- ---------
Total net sales 57,140 49,633 235,106 229,936
Cost of products
sold 54,092 41,154 204,929 184,491
Selling and
administrative
expenses 2,524 3,087 11,085 12,038
--------- --------- --------- ---------
Operating income 524 5,392 19,092 33,407
Interest expense (24) (128) (105) (731)
Other income 694 740 911 776
--------- --------- --------- ---------
Income before
taxes 1,194 6,004 19,898 33,452
Income tax
(benefit)
provision (37) 1,616 5,948 10,948
--------- --------- --------- ---------
Net income $ 1,231 $ 4,388 $ 13,950 $ 22,504
========= ========= ========= =========
Earnings per share
- Basic $ 0.18 $ 0.66 $ 2.08 $ 3.39
========= ========= ========= =========
Earnings per share
- Diluted $ 0.18 $ 0.65 $ 2.05 $ 3.32
========= ========= ========= =========
Weighted average
shares of Common
Stock outstanding
Basic 6,727,727 6,656,783 6,706,535 6,644,374
Diluted 6,781,712 6,780,808 6,801,203 6,774,924
MARKET SEGMENT INFORMATION
For the Quarter Ended For the Year Ended
December 31, December 31,
2008 2007 2008 2007
--------- --------- --------- ---------
Net Sales
Service centers $ 20,979 $ 26,582 $ 110,889 $ 119,736
Forgers 18,092 7,541 52,551 47,711
Rerollers 11,649 8,957 41,660 35,006
Original
equipment
manufacturers 3,968 4,418 18,955 18,287
Wire redrawers 1,662 1,506 7,129 6,843
Conversion
services 427 584 1,941 2,011
Other 363 45 1,981 342
--------- --------- --------- ---------
Total net sales $ 57,140 $ 49,633 $ 235,106 $ 229,936
========= ========= ========= =========
Tons shipped 11,681 9,788 45,679 43,644
========= ========= ========= =========
BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the Quarter Ended For the Year Ended
December 31, December 31,
2008 2007 2008 2007
--------- --------- --------- ---------
Net Sales
Stainless steel $ 36,233 $ 21,524 $121,612 $ 108,535
Tool steel 7,768 6,620 37,631 25,638
High-strength low
alloy steel 925 2,382 3,881 12,764
High-temperature
alloy steel 661 714 2,977 4,067
Conversion services 296 448 1,278 1,405
Other 351 66 1,875 295
--------- --------- --------- ---------
46,234 31,754 169,254 152,704
Intersegment 6,880 11,614 37,384 49,858
--------- --------- --------- ---------
Total net sales 53,114 43,368 206,638 202,562
Material cost of
sales 32,215 23,386 114,930 106,456
Operation cost of
sales 17,375 14,730 68,415 67,286
Selling and
administrative
expenses 1,673 2,034 7,613 8,345
--------- --------- --------- ---------
Operating income $ 1,851 $ 3,218 $ 15,680 $ 20,475
========= ========= ========= =========
Dunkirk Specialty Steel Segment
For the Quarter Ended For the Year Ended
December 31, December 31,
2008 2007 2008 2007
--------- --------- --------- ---------
Net Sales
Stainless steel $ 8,107 $ 12,496 $ 50,610 $ 55,693
Tool steel 119 677 1,415 2,481
High-strength low
alloy steel 1,502 3,698 8,055 13,128
High-temperature
alloy steel 1,017 866 4,954 5,250
Conversion services 131 136 663 606
Other 30 6 155 74
--------- --------- --------- ---------
10,906 17,879 65,852 77,232
Intersegment 492 817 3,712 4,493
--------- --------- --------- ---------
Total net sales 11,398 18,696 69,564 81,725
Material cost of
sales 8,031 11,531 44,215 47,905
Operation cost of
sales 3,843 3,953 18,465 17,404
Selling and
administrative
expenses 851 1,053 3,472 3,693
--------- --------- --------- ---------
Operating (loss)
income $ (1,327) $ 2,159 $ 3,412 $ 12,723
========= ========= ========= =========
CONSOLIDATED BALANCE SHEET
Dec. 31, Dec. 31,
2008 2007
---------- ----------
Assets
Cash $ 14,812 $ 10,648
Accounts receivable, net 33,057 27,501
Inventory 63,222 65,572
Other current assets 8,239 5,537
---------- ----------
Total current assets 119,330 109,258
Property, plant &
equipment, net 62,626 54,271
Other assets 988 767
---------- ----------
Total assets $ 182,944 $ 164,296
========== ==========
Liabilities and
Stockholders' Equity
Trade accounts payable $ 19,350 $ 13,983
Outstanding checks in excess
of bank balance 540 2,064
Accrued employment costs 3,795 5,307
Current portion of long-term debt 403 383
Other current liabilities 421 1,600
---------- ----------
Total current liabilities 24,509 23,337
Long-term debt 1,046 1,453
Deferred taxes 11,689 9,904
---------- ----------
Total liabilities 37,244 34,694
Stockholders' equity 145,700 129,602
---------- ----------
Total liabilities
and stockholders' equity $ 182,944 $ 164,296
========== ==========
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Year Ended December 31,
2008 2007
---------- ----------
Cash flows provided by
operating activities:
Net income $ 13,950 $ 22,504
Adjustments to reconcile
to net cash provided by
operating activities:
Depreciation and
amortization 4,167 3,731
Loss on retirement of
fixed assets 402 40
Deferred tax increase 558 253
Stock based compensation
expense 838 427
Tax benefit from
share-based payment
arrangements (529) (958)
Changes in assets and
liabilities:
Accounts receivable, net (5,556) 5,807
Inventory 2,350 447
Trade accounts payable 5,367 860
Accrued employment costs (1,512) 1,186
Other, net (2,365) (674)
---------- ----------
Cash flow provided by
operating activities 17,670 33,623
---------- ----------
Cash flow used in investing
activities:
Capital expenditures (12,905) (8,782)
---------- ----------
Cash flow used in investing
activities (12,905) (8,782)
---------- ----------
Cash flows used in financing
activities:
Revolving credit net
repayments -- (8,392)
Long-term debt repayments (387) (9,364)
Net change in outstanding
checks in excess of bank
balance (1,524) (1,363)
Proceeds from issuance of
common stock 781 1,059
Tax benefit from share-based
payment arrangements 529 958
---------- ----------
Cash flow used in financing
activities (601) (17,102)
---------- ----------
Net cash flow $ 4,164 $ 7,739
========== ==========