Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Jul. 21, 2017 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | usap | |
Entity Registrant Name | UNIVERSAL STAINLESS & ALLOY PRODUCTS INC | |
Entity Central Index Key | 931,584 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 7,228,277 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Income Statement [Abstract] | ||||
Net sales | $ 52,607 | $ 41,030 | $ 101,482 | $ 80,624 |
Cost of products sold | 45,441 | 36,691 | 90,071 | 74,944 |
Gross margin | 7,166 | 4,339 | 11,411 | 5,680 |
Selling, general and administrative expenses | 4,499 | 4,591 | 9,228 | 8,429 |
Operating income (loss) | 2,667 | (252) | 2,183 | (2,749) |
Interest expense and other financing costs | 1,084 | 948 | 2,087 | 2,758 |
Other (income) expense | (14) | 39 | (20) | 92 |
Income (loss) before income taxes | 1,597 | (1,239) | 116 | (5,599) |
Provision (benefit) for income taxes | 369 | (437) | 107 | (2,357) |
Net income (loss) | $ 1,228 | $ (802) | $ 9 | $ (3,242) |
Net income (loss) per common share - Basic | $ 0.17 | $ (0.11) | $ 0 | $ (0.45) |
Net income (loss) per common share - Diluted | $ 0.17 | $ (0.11) | $ 0 | $ (0.45) |
Weighted average shares of common stock outstanding | ||||
Basic | 7,219,423 | 7,196,891 | 7,217,943 | 7,179,746 |
Diluted | 7,360,137 | 7,196,891 | 7,333,106 | 7,179,746 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Statement Of Income And Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 1,228 | $ (802) | $ 9 | $ (3,242) |
Other comprehensive loss, net of tax | ||||
Reclassification of losses on foreign currency contracts to net income | 18 | 18 | ||
Unrealized loss on foreign currency contracts | (40) | (71) | ||
Other comprehensive loss | (22) | (53) | ||
Comprehensive income (loss) | $ 1,206 | $ (802) | $ (44) | $ (3,242) |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash | $ 97 | $ 75 |
Accounts receivable (less allowance for doubtful accounts of $468 and $309, respectively) | 29,030 | 19,437 |
Inventory, net | 100,140 | 91,342 |
Other current assets | 4,237 | 2,729 |
Total current assets | 133,504 | 113,583 |
Property, plant and equipment, net | 177,408 | 182,398 |
Other long-term assets | 64 | 64 |
Total assets | 310,976 | 296,045 |
Current liabilities: | ||
Accounts payable | 29,129 | 19,906 |
Accrued employment costs | 3,253 | 3,803 |
Current portion of long-term debt | 4,675 | 4,579 |
Other current liabilities | 1,051 | 898 |
Total current liabilities | 38,108 | 29,186 |
Long-term debt | 73,013 | 67,998 |
Deferred income taxes | 16,757 | 17,629 |
Other long-term liabilities | 12 | 12 |
Total liabilities | 127,890 | 114,825 |
Commitments and contingencies (Note 6) | ||
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; 7,521,132 and 7,508,154 shares issued, respectively | 8 | 8 |
Additional paid-in capital | 57,470 | 56,397 |
Other comprehensive (loss) income | (32) | 21 |
Retained earnings | 127,930 | 127,084 |
Treasury stock, at cost; 292,855 common shares held | (2,290) | (2,290) |
Total stockholders’ equity | 183,086 | 181,220 |
Total liabilities and stockholders’ equity | $ 310,976 | $ 296,045 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Statement Of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 468 | $ 309 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 1,980,000 | 1,980,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 7,521,132 | 7,508,154 |
Treasury stock at cost, common shares held | 292,855 | 292,855 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flow - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Operating Activities: | ||
Net income (loss) | $ 9 | $ (3,242) |
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||
Depreciation and amortization | 9,365 | 9,147 |
Deferred income tax | (16) | (2,365) |
Write-off of deferred financing costs | 768 | |
Share-based compensation expense | 971 | 684 |
Net gain on asset disposals | (349) | |
Changes in assets and liabilities: | ||
Accounts receivable, net | (9,614) | (2,350) |
Inventory, net | (9,798) | (2,141) |
Accounts payable | 8,655 | 6,140 |
Accrued employment costs | (550) | 186 |
Income taxes | 117 | 265 |
Other, net | (752) | 19 |
Net cash (used in) provided by operating activities | (1,613) | 6,762 |
Investing Activities: | ||
Capital expenditures | (3,068) | (1,736) |
Proceeds from sale of property, plant and equipment | 1,571 | |
Net cash used in investing activities | (3,068) | (165) |
Financing Activities: | ||
Borrowings under revolving credit facility | 158,180 | 131,030 |
Payments on revolving credit facility | (150,830) | (152,298) |
Borrowings under term loan facility | 30,000 | |
Payments on term loan facility, capital leases, and convertible notes | (2,751) | (15,171) |
Payments of deferred financing costs | (702) | |
Proceeds from the issuance of common stock | 104 | 500 |
Net cash provided by (used in) financing activities | 4,703 | (6,641) |
Net increase (decrease) in cash | 22 | (44) |
Cash at beginning of period | 75 | 112 |
Cash at end of period | $ 97 | $ 68 |
Nature of Business and Basis of
Nature of Business and Basis of Presentation | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Nature of Business and Basis of Presentation | Note 1: Nature of Business and Basis of Presentation Universal Stainless & Alloy Products, Inc., and its wholly-owned subsidiaries (“Universal”, “we”, “our” or the “Company”), manufacture and market semi-finished and finished specialty steel products, including stainless steel, nickel alloys, tool steel and certain other alloyed steels. Our manufacturing process involves melting, remelting, heat treating, hot and cold rolling, forging, machining and cold drawing of semi-finished and finished specialty steels. Our products are sold to service centers, forgers, rerollers, original equipment manufacturers and wire redrawers. Our customers further process our products for use in a variety of industries, including the aerospace, power generation, oil and gas, heavy equipment, and general industrial manufacturing industries. We also perform conversion services on materials supplied by customers. The accompanying unaudited consolidated statements include the accounts of Universal Stainless & Alloy Products, Inc. and its subsidiaries and are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reports and the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under U.S. GAAP have been condensed or omitted pursuant to such regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our most recently audited financial statements and the notes thereto included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission. In the opinion of management, the accompanying financial statements include all adjustments necessary to present a fair presentation of the consolidated financial statements for the periods shown. Interim results are not necessarily indicative of the operating results for the full fiscal year or any future period. The preparation of these financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Actual results may differ from our estimates. The consolidated financial statements include our accounts and the accounts of our wholly–owned subsidiaries. All intercompany transactions and balances have been eliminated. Recently Adopted Accounting Pronouncements Effective January 1, 2017, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) 2016-09 “Improvements to Employee Share-Based Payment Accounting”. This ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. Excess tax benefits for share-based payments will be recorded as a reduction of income taxes and reflected in operating cash flows upon the adoption of this ASU, eliminating additional paid in capital (“APIC”) pools. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. This ASU also eliminates the requirement that excess tax benefits be realized before companies can recognize them. As a result of the implementation of this guidance, we recorded an adjustment to retained earnings of $0.8 million and a corresponding deferred tax asset for the cumulative effect of excess tax benefits that were not previously recognized. We recorded $0.1 million of tax expense as discrete items in the six months ended June 30, 2017 for the expiration of stock options. This amount would have been recorded to APIC under the previous guidance. We have elected to account for forfeitures as they occur. This election has not had a material impact on our financial statements. Effective January 1, 2017, we adopted the FASB ASU 2015-11, “Simplifying the Measurement of Inventory”. This ASU simplifies the guidance on the subsequent measurement of inventory, excluding inventory measured using last-in, first out or the retail inventory method. Under the new standard, inventory should be valued at the lower of cost and net realizable value. The implementation of this guidance did not have a material impact on our financial statements. Recently Issued Accounting Pronouncements The Company considers the applicability and impact of all ASUs. Recently issued ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-2 “Leases (Topic 842)”. The ASU requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. The criteria for evaluating are similar to those applied in current leases accounting. This guidance is effective for annual and interim reporting periods beginning after December 15, 2018 with early adoption permitted. We are currently evaluating the impact of this guidance on our financial statements and the timing of adoption. In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)”. This topic converges the guidance within U.S. GAAP and International Financial Reporting Standards and supersedes Accounting Standards Codification 605, Revenue Recognition. The new standard requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. We have completed a preliminary evaluation of this guidance and we do not expect it to have a material impact on our financial statements. We will continue our evaluation of this ASU through the date of adoption. |
Net (Loss) Income Per Common Sh
Net (Loss) Income Per Common Share | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share [Abstract] | |
Net (Loss) Income Per Common Share | Note 2: Net (loss) income per Common Share The following table sets forth the computation of basic and diluted net (loss) income per common share: Three months ended Six months ended June 30, June 30, (dollars in thousands, except per share amounts) 2017 2016 2017 2016 Numerator: Net income (loss) $ 1,228 $ (802) $ 9 $ (3,242) Adjustment for interest expense on convertible notes (A) - - - - Net income (loss), as adjusted $ 1,228 $ (802) $ 9 $ (3,242) Denominator: Weighted average number of shares of common stock outstanding 7,219,423 7,196,891 7,217,943 7,179,746 Weighted average effect of dilutive stock options and other stock compensation 140,714 - 115,163 - Weighted average number of shares of common stock outstanding, as adjusted 7,360,137 7,196,891 7,333,106 7,179,746 Net income (loss) per common share: Net income (loss) per common share - Basic $ 0.17 $ (0.11) $ 0.00 $ (0.45) Net income (loss) per common share - Diluted $ 0.17 $ (0.11) $ 0.00 $ (0.45) (A) An adjustment for interest expense on convertible notes was excluded from the loss per share calculation for the three and six months ended June 30, 2017 and 2016 as a result of the convertible notes being antidilutive. We had options to purchase 591,700 and 696,300 shares of common stock outstanding at an average price of $30.26 and $28.44, respectively, which were excluded in the computation of diluted net income (loss) per common share for the three months ended June 30, 2017 and 2016, respectively. We had options to purchase 616,200 and 818,250 shares of common stock outstanding at an average price of $29.90 and $27.01, respectively, which were excluded in the computation of diluted net income (loss) per common share for the six months ended June 30, 2017 and 2016, respectively. These outstanding options were not included in the computation of diluted net income (loss) per common share because their respective exercise prices were greater than the average market price of our common stock. The calculation of diluted net income (loss) per common share for the three months ended June 30, 2017 and 2016 excluded 410,204 and 407,466 shares, respectively, for the assumed conversion of convertible notes as a result of being anti-dilutive. The calculation of diluted net income (loss) per common share for the six months ended June 30, 2017 and 2016 excluded 408,526 and 409,078 shares, respectively, for the assumed conversion of convertible notes as a result of being anti-dilutive. The calculation of diluted net loss per common share for the three and six months ended June 30, 2016 excluded 5,313 and 1,539 shares, respectively, for the assumed exercise of stock options as a result of being in a net loss position. |
Inventory
Inventory | 6 Months Ended |
Jun. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Inventory | Note 3: Inventory Our raw material and starting stock inventory is primarily comprised of ferrous and non-ferrous scrap metal and alloys such as nickel, chrome, molybdenum, cobalt and copper. Our semi-finished and finished steel products are work-in-process in various stages of production or are finished products waiting to be shipped to our customers. Operating materials are primarily comprised of forge dies and production molds and rolls that are consumed over their useful lives. During the six months ended June 30, 2017 and 2016, we amortized these operating materials in the amount of $1.0 million and $0.8 million, respectively. This expense is recorded as a component of cost of products sold on the consolidated statements of operations and included as a part of our total depreciation and amortization on the consolidated statements of cash flows. Inventory is stated at the lower of cost or market with cost principally determined on a weighted average cost method. Such costs include the acquisition cost for raw materials and supplies, direct labor and applied manufacturing overhead. We assess market based upon actual and estimated transactions at or around the balance sheet date. Typically, we reserve for slow-moving inventory and inventory that is being evaluated under our quality control process. The reserves are based upon management’s expected method of disposition. Inventories consisted of the following: June 30, December 31, (in thousands) 2017 2016 Raw materials and starting stock $ 8,247 $ 5,769 Semi-finished and finished steel products 83,815 77,510 Operating materials 10,329 9,893 Gross inventory 102,391 93,172 Inventory reserves (2,251 ) (1,830 ) Total inventory, net $ 100,140 $ 91,342 |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Note 4: Long-Term Debt Long-term debt consisted of the following: June 30, December 31, (in thousands) 2017 2016 Revolving credit facility $ 33,896 $ 26,546 Convertible notes 19,000 19,000 Term loan 23,685 26,273 Capital leases 1,984 1,763 Total debt 78,565 73,582 Less: current portion of long-term debt (4,675) (4,579) Less: deferred financing costs (877) (1,005) Long-term debt $ 73,013 $ 67,998 Credit Facility We have a Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as administrative agent and co-collateral agent, Bank of America, N.A., as co-collateral agent, and PNC Capital Markets LLC, as sole lead arranger and sole bookrunner. The Credit Agreement provides for a senior secured revolving credit facility not to exceed $65.0 million (the “Revolving Credit Facility”) and a senior secured term loan facility (the “Term Loan”) in the amount of $30.0 million (together with the Revolving Credit Facility, the “Facilities”). The Credit Agreement also provides for a letter of credit sub-facility not to exceed $10.0 million and a swing loan sub-facility not to exceed $6.5 million. The Company may request to increase the maximum aggregate principal amount of borrowings under the Revolving Credit Facility by $25.0 million prior to January 21, 2020. The Facilities, which expire upon the earlier of (i) January 21, 2021 or (ii) the date that is 90 days prior to the scheduled maturity date of the Convertible Notes (as defined below) (in either case, the “Expiration Date”), are collateralized by a first lien in substantially all of the assets of the Company and its subsidiaries, except that no real property is collateral under the Facilities other than the Company’s real property in North Jackson, Ohio. Availability under the Revolving Credit Facility is based on eligible accounts receivable and inventory. The Company is required to pay a commitment fee of 0.25% based on the daily unused portion of the Revolving Credit Facility. With respect to the Term Loan, the Company makes quarterly installment payments of principal of approximately $1.1 million, plus accrued and unpaid interest, on the first day of each fiscal quarter. To the extent not previously paid, the Term Loan will become due and payable in full on the Expiration Date. Amounts outstanding under the Facilities, at the Company’s option, will bear interest at either a base rate plus a margin or a rate based on LIBOR plus a margin, in either case calculated in accordance with the terms of the Credit Agreement. Interest under the Credit Agreement is payable monthly. We elected to use the LIBOR based rate for the majority of the debt outstanding under the Facilities for the six months ended June 30, 2017, which was 4.06% on our Revolving Credit Facility and 4.56% for the Term Loan at June 30, 2017. The Credit Agreement contains customary affirmative and negative covenants. The Company must maintain a fixed charge coverage ratio of not less than 1.10 to 1.0, in each case measured on a rolling four-quarter basis calculated in accordance with the terms of the Credit Agreement. We were in compliance with our covenants under the Credit Agreement at June 30, 2017 and December 31, 2016. At June 30, 2017, we had deferred financing costs of approximately $0.9 million. For the six months ended June 30, 2017, we amortized $0.1 million of deferred financing costs. Convertible Notes In connection with the acquisition of the North Jackson facility, in August 2011, we issued $20.0 million in convertible notes (collectively, the “Notes”) to the sellers of the North Jackson facility as partial consideration of the acquisition. On January 21, 2016, the Company entered into Amended and Restated Convertible Notes (collectively, the “Convertible Notes”) in the aggregate principal amount of $20.0 million, each in favor of Gorbert Inc. (the “Holder”). The Convertible Notes amended and restated the Notes. The Company’s obligations under the Convertible Notes are collateralized by a second lien on the same assets of the Company that collateralize the obligations of the Company under the Facilities. The Convertible Notes mature on March 17, 2019 and the maturity date may be extended, at the Company’s option, to March 17, 2020 and further to March 17, 2021. If the Company elects to extend the maturity date of the Convertible Notes to March 17, 2020, principal payments in the aggregate of $2.0 million will be required on March 17, 2019. If the Company elects to extend the maturity date of the Convertible Notes further to March 17, 2021, principal payments in the aggregate of $2.0 million will be required on March 17, 2020. The Convertible Notes bear interest at a rate of 5.0% per year through and including August 17, 2017 and a rate of 6.0% per year from and after August 18, 2017. Through and including June 18, 2017, all accrued and unpaid interest is payable semi-annually in arrears on each June 18 and December 18. After June 18, 2017, all accrued and unpaid interest is payable quarterly in arrears on each September 18, December 18, March 18 and June 18. The Holder may elect at any time on or prior to August 17, 2017 to convert all or any portion of the outstanding principal amount of the Convertible Notes which is an integral multiple of $100,000. The Convertible Notes are convertible into shares of common stock and, in certain circumstances, cash, securities and/or other assets. The Convertible Notes are convertible based on an initial conversion rate of 21.2 shares of Common Stock per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of $47.1675 per share). The conversion rate and the conversion price associated with the Convertible Notes may be adjusted in certain circumstances. The Holder’s conversion rights will be void and no longer subject to exercise by the Holder beginning on August 17, 2017. Capital Leases The Company enters into capital lease arrangements from time to time. The capital assets and obligations are recorded at the present value of minimum lease payments. The assets are included in Property, plant and equipment, net on the Consolidated Balance Sheet and are depreciated over the respective lease terms which range from three to five years. The long-term component of the capital lease obligations is included in Long-term debt and the current component is included in Current portion of long-term debt. During the six months ended June 30, 2017, the Company entered into capital lease agreements for which the net present value of the minimum lease payments, at inception, was $0.4 million. These amounts have been excluded from the Consolidated Statement of Cash Flows as they are non-cash. As of June 30, 2017, future minimum lease payments applicable to capital leases were as follows: 2017 $ 286 2018 571 2019 571 2020 549 2021 447 2022 23 Total minimum capital lease payments $ 2,447 Less amounts representing interest (463) Present value of net minimum capital lease payments $ 1,984 Less current obligation (389) Total long-term capital lease obligation $ 1,595 For the three and six months ended June 30, 2017 the amortization of capital lease assets was $0.1 and $0.2 million, respectively, which is included in cost of products sold in the Consolidated Statement of Operations. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note 5: Fair Value Measurement The fair value hierarchy has three levels based on the inputs used to determine fair value, which are as follows: Level 1 — Unadjusted quoted prices available in active markets for the identical assets or liabilities at the measurement date. Level 2 — Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The carrying amounts of our cash, accounts receivable and accounts payable approximated fair value at June 30, 2017 and December 31, 2016 due to their short-term maturities (Level 1). The fair value of the Term Loan, Revolving Credit facility and swing loans at June 30, 2017 and December 31, 2016 approximated the carrying amount as the interest rate is based upon floating short-term interest rates (Level 2). At June 30, 2017 and December 31, 2016, the fair value of our Convertible Notes was approximately $18.5 and $18.4 million, respectively (Level 2). |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 6: Commitments and Contingencies From time to time, various lawsuits and claims have been or may be asserted against us relating to the conduct of our business, including routine litigation relating to commercial and employment matters. The ultimate cost and outcome of any litigation or claim cannot be predicted with certainty. Management believes, based on information presently available, that the likelihood that the ultimate outcome of any such pending matter will have a material adverse effect on our financial condition, or liquidity or a material impact on our results of operations is remote, although the resolution of one or more of these matters may have a material adverse effect on our results of operations for the period in which the resolution occurs. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 7: Income Taxes Management estimates the annual effective income tax rate quarterly, based on current annual forecasted results. Items unrelated to current year ordinary income are recognized entirely in the period identified as a discrete item of tax. The quarterly income tax provision (benefit) is comprised of tax on ordinary income provided at the most recent estimated annual effective tax rate (“ETR”), increased or decreased for the tax effect of discrete items. For the six months ended June 30, 2017 and 2016, our estimated annual effective tax rates applied to ordinary income (losses) were 22.4% and 42.1%, respectively. The difference between the statutory rate and the projected annual ETR of 22.4%, for 2017, is primarily due to the research and development credit. Including the effect of discrete items, our effective tax rates for the six months ended June 30, 2017 and 2016 were 92.2% and 42.1%, respectively. The difference between the annual ETR of 22.4% and the rate of 92.2% for the six months ended June 30, 2017 is primarily the result of the adoption of ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which now requires tax expense to be recognized as discrete items in the quarter that stock options expire, or are forfeited. |
Derivatives and Hedging
Derivatives and Hedging | 6 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Derivatives and Hedging | Note 8: Derivatives and Hedging The Company invoices certain customers in foreign currencies. In order to mitigate the risks associated with fluctuations in exchange rates with the US Dollar, during 2016, the Company entered into foreign exchange forward contracts for a portion of these sales and has designated these contracts as cash flow hedges. The notional value of these contracts at June 30, 2017 and December 31, 2016 was $1.2 million and $2.4 million, respectively. An accumulated unrealized loss of $32,000 was recorded in other comprehensive income at June 30, 2017 and an accumulated unrealized gain of $21,000 was recorded in other comprehensive income at December 31, 2016. |
Nature of Business and Basis 15
Nature of Business and Basis of Presentation (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying unaudited consolidated statements include the accounts of Universal Stainless & Alloy Products, Inc. and its subsidiaries and are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reports and the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under U.S. GAAP have been condensed or omitted pursuant to such regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our most recently audited financial statements and the notes thereto included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission. In the opinion of management, the accompanying financial statements include all adjustments necessary to present a fair presentation of the consolidated financial statements for the periods shown. Interim results are not necessarily indicative of the operating results for the full fiscal year or any future period. The preparation of these financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Actual results may differ from our estimates. The consolidated financial statements include our accounts and the accounts of our wholly–owned subsidiaries. All intercompany transactions and balances have been eliminated. |
New Accounting Pronouncement | Recently Adopted Accounting Pronouncements Effective January 1, 2017, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) 2016-09 “Improvements to Employee Share-Based Payment Accounting”. This ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. Excess tax benefits for share-based payments will be recorded as a reduction of income taxes and reflected in operating cash flows upon the adoption of this ASU, eliminating additional paid in capital (“APIC”) pools. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. This ASU also eliminates the requirement that excess tax benefits be realized before companies can recognize them. As a result of the implementation of this guidance, we recorded an adjustment to retained earnings of $0.8 million and a corresponding deferred tax asset for the cumulative effect of excess tax benefits that were not previously recognized. We recorded $0.1 million of tax expense as discrete items in the six months ended June 30, 2017 for the expiration of stock options. This amount would have been recorded to APIC under the previous guidance. We have elected to account for forfeitures as they occur. This election has not had a material impact on our financial statements. Effective January 1, 2017, we adopted the FASB ASU 2015-11, “Simplifying the Measurement of Inventory”. This ASU simplifies the guidance on the subsequent measurement of inventory, excluding inventory measured using last-in, first out or the retail inventory method. Under the new standard, inventory should be valued at the lower of cost and net realizable value. The implementation of this guidance did not have a material impact on our financial statements. Recently Issued Accounting Pronouncements The Company considers the applicability and impact of all ASUs. Recently issued ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-2 “Leases (Topic 842)”. The ASU requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. The criteria for evaluating are similar to those applied in current leases accounting. This guidance is effective for annual and interim reporting periods beginning after December 15, 2018 with early adoption permitted. We are currently evaluating the impact of this guidance on our financial statements and the timing of adoption. In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)”. This topic converges the guidance within U.S. GAAP and International Financial Reporting Standards and supersedes Accounting Standards Codification 605, Revenue Recognition. The new standard requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. We have completed a preliminary evaluation of this guidance and we do not expect it to have a material impact on our financial statements. We will continue our evaluation of this ASU through the date of adoption. |
Net (Loss) Income Per Common 16
Net (Loss) Income Per Common Share (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share [Abstract] | |
Computation of Net (Loss) Income Per Common Share | The following table sets forth the computation of basic and diluted net (loss) income per common share: Three months ended Six months ended June 30, June 30, (dollars in thousands, except per share amounts) 2017 2016 2017 2016 Numerator: Net income (loss) $ 1,228 $ (802) $ 9 $ (3,242) Adjustment for interest expense on convertible notes (A) - - - - Net income (loss), as adjusted $ 1,228 $ (802) $ 9 $ (3,242) Denominator: Weighted average number of shares of common stock outstanding 7,219,423 7,196,891 7,217,943 7,179,746 Weighted average effect of dilutive stock options and other stock compensation 140,714 - 115,163 - Weighted average number of shares of common stock outstanding, as adjusted 7,360,137 7,196,891 7,333,106 7,179,746 Net income (loss) per common share: Net income (loss) per common share - Basic $ 0.17 $ (0.11) $ 0.00 $ (0.45) Net income (loss) per common share - Diluted $ 0.17 $ (0.11) $ 0.00 $ (0.45) (A) An adjustment for interest expense on convertible notes was excluded from the loss per share calculation for the three and six months ended June 30, 2017 and 2016 as a result of the convertible notes being antidilutive. |
Inventory (Tables)
Inventory (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Major Classes of Inventory | June 30, December 31, (in thousands) 2017 2016 Raw materials and starting stock $ 8,247 $ 5,769 Semi-finished and finished steel products 83,815 77,510 Operating materials 10,329 9,893 Gross inventory 102,391 93,172 Inventory reserves (2,251 ) (1,830 ) Total inventory, net $ 100,140 $ 91,342 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Long-Term Debt | June 30, December 31, (in thousands) 2017 2016 Revolving credit facility $ 33,896 $ 26,546 Convertible notes 19,000 19,000 Term loan 23,685 26,273 Capital leases 1,984 1,763 Total debt 78,565 73,582 Less: current portion of long-term debt (4,675) (4,579) Less: deferred financing costs (877) (1,005) Long-term debt $ 73,013 $ 67,998 |
Future Minimum Lease Payments for Capital Leases | 2017 $ 286 2018 571 2019 571 2020 549 2021 447 2022 23 Total minimum capital lease payments $ 2,447 Less amounts representing interest (463) Present value of net minimum capital lease payments $ 1,984 Less current obligation (389) Total long-term capital lease obligation $ 1,595 |
Nature of Business and Basis 19
Nature of Business and Basis of Presentation (Narrative) (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2017USD ($) | |
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |
Discreet income tax expense | $ 0.1 |
Accounting Standards Update 2016-09 [Member] | |
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |
Retained earnings adjustment | $ 0.8 |
Net (Loss) Income Per Common 20
Net (Loss) Income Per Common Share (Computation of Net (Loss) Income Per Common Share) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Numerator: | ||||
Net income (loss) | $ 1,228 | $ (802) | $ 9 | $ (3,242) |
Net income (loss), as adjusted | $ 1,228 | $ (802) | $ 9 | $ (3,242) |
Denominator: | ||||
Weighted average number of shares of common stock outstanding | 7,219,423 | 7,196,891 | 7,217,943 | 7,179,746 |
Weighted average effect of dilutive stock options and other stock compensation | 140,714 | 115,163 | ||
Weighted average number of shares of common stock outstanding, as adjusted | 7,360,137 | 7,196,891 | 7,333,106 | 7,179,746 |
Net income (loss) per common share: | ||||
Net income (loss) per common share - Basic | $ 0.17 | $ (0.11) | $ 0 | $ (0.45) |
Net income (loss) per common share - Diluted | $ 0.17 | $ (0.11) | $ 0 | $ (0.45) |
Net (Loss) Income Per Common 21
Net (Loss) Income Per Common Share (Narrative) (Details) - $ / shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Stock Compensation Plan [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share, amount | 591,700 | 696,300 | 616,200 | 818,250 |
Average price of anti-dilutive options outstanding | $ 30.26 | $ 28.44 | $ 29.90 | $ 27.01 |
Convertible Notes [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share, amount | 410,204 | 407,466 | 408,526 | 409,078 |
Exercise of Stock Options [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share, amount | 5,313 | 1,539 |
Inventory (Narrative) (Details)
Inventory (Narrative) (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Inventory Disclosure [Abstract] | ||
Cost of goods sold, amortization of operating materials | $ 1 | $ 0.8 |
Inventory (Major Classes of Inv
Inventory (Major Classes of Inventory) (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Raw materials and starting stock | $ 8,247 | $ 5,769 |
Semi-finished and finished steel products | 83,815 | 77,510 |
Operating materials | 10,329 | 9,893 |
Gross inventory | 102,391 | 93,172 |
Inventory reserves | (2,251) | (1,830) |
Total inventory, net | $ 100,140 | $ 91,342 |
Long-Term Debt (Schedule of Lon
Long-Term Debt (Schedule of Long-Term Debt) (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Debt Instrument [Line Items] | ||
Total debt | $ 78,565 | $ 73,582 |
Less: current portion of long-term debt | (4,675) | (4,579) |
Less: deferred financing costs | (877) | (1,005) |
Long-term debt | 73,013 | 67,998 |
Revolving Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Total debt | 33,896 | 26,546 |
Convertible Notes [Member] | ||
Debt Instrument [Line Items] | ||
Total debt | 19,000 | 19,000 |
Term Loan [Member] | ||
Debt Instrument [Line Items] | ||
Total debt | 23,685 | 26,273 |
Capital Leases [Member] | ||
Debt Instrument [Line Items] | ||
Total debt | $ 1,984 | $ 1,763 |
Long-Term Debt (Credit Facility
Long-Term Debt (Credit Facility) (Narrative) (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Line of Credit Facility [Line Items] | ||
Deferred financing fees | $ 877,000 | $ 1,005,000 |
Amortization of deferred financing costs | $ 100,000 | |
PNC Bank [Member] | ||
Line of Credit Facility [Line Items] | ||
Minimum fixed charge coverage ratio | 1.10% | |
PNC Bank [Member] | New Credit Agreement [Member] | ||
Line of Credit Facility [Line Items] | ||
Debt instrument, maturity date | Jan. 21, 2021 | |
Revolving Credit Facility [Member] | PNC Bank [Member] | ||
Line of Credit Facility [Line Items] | ||
Maximum secured borrowing capacity | $ 65,000,000 | |
Commitment fee on the daily unused portion of the Revolver | 0.25% | |
Revolving Credit Facility [Member] | PNC Bank [Member] | LIBOR [Member] | ||
Line of Credit Facility [Line Items] | ||
Debt instrument, effective interest rate | 4.06% | |
Revolving Credit Facility [Member] | PNC Bank [Member] | Request to Increase Borrowing Prior to January 21, 2020 [Member] | ||
Line of Credit Facility [Line Items] | ||
Increase in maximum aggregate principal amount of borrowings | $ 25,000,000 | |
Letter of Credit [Member] | PNC Bank [Member] | ||
Line of Credit Facility [Line Items] | ||
Maximum secured borrowing capacity | 10,000,000 | |
Term Loan [Member] | PNC Bank [Member] | ||
Line of Credit Facility [Line Items] | ||
Maximum secured borrowing capacity | 30,000,000 | |
Quarterly term loan payments | $ 1,100,000 | |
Term Loan [Member] | PNC Bank [Member] | LIBOR [Member] | ||
Line of Credit Facility [Line Items] | ||
Debt instrument, effective interest rate | 4.56% | |
Swing Loan Credit Facility [Member] | PNC Bank [Member] | ||
Line of Credit Facility [Line Items] | ||
Maximum secured borrowing capacity | $ 6,500,000 |
Long-Term Debt (Convertible Not
Long-Term Debt (Convertible Notes, Capital Leases) (Narrative) (Details) | Jan. 21, 2016USD ($) | Jun. 30, 2017USD ($)$ / shares | Jun. 30, 2017USD ($)$ / shares | Mar. 01, 2016USD ($) | Aug. 31, 2011USD ($) |
Debt Instrument [Line Items] | |||||
Net present value of the minimum lease payments, at inception | $ 1,984,000 | $ 1,984,000 | $ 400,000 | ||
Amortization of capital lease assets | $ 100,000 | $ 200,000 | |||
Minimum [Member] | |||||
Debt Instrument [Line Items] | |||||
Capital lease term applicable to depreciate capital assets and obligations | 3 years | ||||
Maximum [Member] | |||||
Debt Instrument [Line Items] | |||||
Capital lease term applicable to depreciate capital assets and obligations | 5 years | ||||
Convertible Notes [Member] | Gorbert Inc. [Member] | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, face amount | $ 20,000,000 | ||||
Debt instrument, maturity date | Mar. 17, 2019 | ||||
Aggregate principal payment required if maturity date extend to March 17, 2020 | 2,000,000 | ||||
Aggregate principal payment required if maturity date extend to March 17, 2021 | $ 2,000,000 | ||||
Convertible Notes [Member] | Gorbert Inc. [Member] | Through and Including August 17, 2017 [Member] | |||||
Debt Instrument [Line Items] | |||||
Debt instrument interest rate | 5.00% | ||||
Convertible Notes [Member] | Gorbert Inc. [Member] | From and After August 18, 2017 [Member] | |||||
Debt Instrument [Line Items] | |||||
Debt instrument interest rate | 6.00% | ||||
Convertible Notes [Member] | North Jackson Facility [Member] | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, face amount | $ 20,000,000 | ||||
Convertible Notes If Holder Elects to Convert on or Prior to August 17, 2017 [Member] | Gorbert Inc. [Member] | |||||
Debt Instrument [Line Items] | |||||
Conversion stock price | $ / shares | $ 47.1675 | $ 47.1675 | |||
Debt instrument integral multiple convertible principal amount | $ 100,000 | ||||
Debt instrument, initial conversion rate per $1000 principal amount | 21.2 | ||||
Principal amount used to convert convertible notes | $ 1,000 |
Long-Term Debt (Future Minimum
Long-Term Debt (Future Minimum Lease Payments for Capital Leases) (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Mar. 01, 2016 |
Debt Disclosure [Abstract] | ||
2,017 | $ 286 | |
2,018 | 571 | |
2,019 | 571 | |
2,020 | 549 | |
2,021 | 447 | |
2,022 | 23 | |
Total minimum capital lease payments | 2,447 | |
Less amounts representing interest | (463) | |
Present value of net minimum capital lease payments | 1,984 | $ 400 |
Less current obligation | (389) | |
Total long-term capital lease obligation | $ 1,595 |
Fair Value Measurements (Narrat
Fair Value Measurements (Narrative) (Details) - USD ($) $ in Millions | Jun. 30, 2017 | Dec. 31, 2016 |
Convertible Notes [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Notes payable, fair value disclosure | $ 18.5 | $ 18.4 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Income Taxes [Line Items] | ||
Estimated annual effective tax rate | 22.40% | 42.10% |
Research and Development [Member] | ||
Income Taxes [Line Items] | ||
Effective income tax rate continuing operations | 92.20% | 42.10% |
Derivatives and Hedging (Narrat
Derivatives and Hedging (Narrative) (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Derivative Instruments And Hedging Activities Disclosures [Line Items] | ||
Accumulated unrealized gain (loss) on foreign currency contracts , net of tax | $ (32,000) | $ 21,000 |
Foreign Exchange Forward Contracts [Member] | Designated as Hedging Instrument [Member] | Cash Flow Hedges [Member] | ||
Derivative Instruments And Hedging Activities Disclosures [Line Items] | ||
Notional value of derivative contracts | $ 1,200,000 | $ 2,400,000 |