[GRAPHIC OMITTED][GRAPHIC OMITTED]
CONTACTS: Richard M. Ubinger June Filingeri
Vice President of Finance, President
Chief Financial Officer and Treasurer Comm-Partners LLC
(412) 257-7606 (203) 972-0186
FOR IMMEDIATE RELEASE
UNIVERSAL STAINLESS REPORTS RECORD SALES AND EARNINGS
FOR FOURTH QUARTER AND FULL YEAR 2006
- Fourth Quarter EPS Reaches $0.97 on $56 Million in Sales -
- Full-Year Sales Top $200 Million and EPS Climbs to $3.12 -
BRIDGEVILLE, PA, January 18, 2007 - Universal Stainless & Alloy Products,
Inc. (Nasdaq: USAP) reported today that sales for the fourth quarter of 2006
rose 33% to a record $55.8 million compared with $42.0 million in the same
period of 2005. Fourth quarter 2006 net income rose 80% to a record $6.4
million, or $0.97 per diluted share. This compares with net income of $3.6
million, or $0.55 per diluted share, reported in the fourth quarter of 2005. For
the full year 2006, sales rose 20% to a record $203.9 million compared with
$170.0 million in 2005. Net income for 2006 increased 58% to a record $20.6
million, or $3.12 per diluted share compared with $13.1 million, or $2.02 per
diluted share reported for 2005.
The 2006 fourth quarter and full year results included $465,000 of other
income from the receipt of 2006 import duties, equivalent to $0.05 per diluted
share, and a reduction in the annual income tax rate to 35.2% from 36.0%,
equivalent to $0.04 per diluted share. The 2005 fourth quarter and full year
results included import duties of $358,000, equivalent to $0.04 per diluted
share, and a reduction in the annual income tax rate to 35.4% from 36.0%,
equivalent to $0.02 per diluted share.
The Company's fourth quarter 2006 results exceeded its forecast of sales in
the range of $45 to $50 million and diluted EPS in the range of $0.70 to $0.75.
Chairman and CEO Mac McAninch commented: "We achieved record results in the
fourth quarter of 2006 as we have each quarter this year due to the strength of
our niche markets coupled with our targeted investments in capital equipment and
personnel, which have enabled us to take advantage of market opportunities.
Substantial aerospace demand continued to be the major force driving our growth
in the fourth quarter accompanied by increased year-over-year sales to the
petrochemical and power generation markets. In fact, the sizeable increase in
our fourth quarter forger sales was for billet product to be used for power
generation applications. While our sales of tool steel slowed in the second half
of 2006, we view this as temporary because of the favorable outlook for
heavy equipment manufacturers later in 2007."
USAP REPORTS RECORD 2006 FOURTH QUARTER RESULTS - Page 2 -
Mr. McAninch continued: "Both of our operating segments reached important
milestones for the full year. Sales at our Universal Stainless segment reached
$179 million, while Dunkirk's sales crossed the $70 million threshold for the
first time. These record results mainly reflect our successful shift to higher
value-added products as well as higher nickel prices which increased the
surcharge passed on to our customers."
Mr. McAninch concluded: "We are entering 2007 with a great deal of optimism
for further growth due to the continued strength of our markets. We continue to
focus on initiatives to build the Company. We have expanded our executive team
with the addition of Ken Matz as our new president, which we announced earlier
this week. We also will continue to re-invest in our Company to meet the needs
of our customers, to further increase our value-added sales and to build
additional value for our shareholders."
Segment Review
- --------------
In the fourth quarter of 2006, the Universal Stainless & Alloy Products
segment had sales of $47.1 million and operating income of $4.9 million,
yielding an operating margin of 10%. This compares with fourth quarter 2005
sales of $37.7 million and operating income of $4.7 million, or 12% of sales. In
the third quarter of 2006, sales were $47.2 million and operating income was
$4.0 million, or 9% of sales. The reduction in operating margin in the 2006
fourth quarter in comparison to the prior year quarter is due to higher material
costs incurred, as the price of nickel continued to rise throughout the quarter.
The 25% increase in sales from the 2005 fourth quarter reflects the
contribution of the new vacuum-arc remelt furnaces installed in 2005 and 2006,
the addition of two milling machines and a plate flattener, and efficiency
improvements in Bridgeville. It also was due to higher product prices and a
favorable product mix including increased shipments to forgers and of bar
products to service centers. Fourth quarter 2006 sales were level with the 2006
third quarter as lower sales of semi-finished product to rerollers and of tool
steel plate to service centers were offset by increased sales to forgers.
The Dunkirk Specialty Steel segment reported record sales for the 2006
fourth quarter of $20.3 million and record operating income of $4.0 million,
resulting in an operating margin of 20%. This compares with sales of $13.0
million and operating income of $1.3 million, or 10% of sales, in the fourth
quarter of 2005. In the third quarter of 2006 sales were $19.8 million and
operating income was $3.8 million, or 19% of sales.
Dunkirk's 56% increase in sales and 212% rise in operating income over the
2005 fourth quarter were due to the improved VAR remelted feedstock supply from
Bridgeville, workforce additions, the timing of feedstock procurement and rising
nickel prices that affected the surcharge mechanism. The year-over-year growth
in sales reflected increases in nearly every customer category, with sales to
redrawers up 40%, to service centers up 60% and to OEMs up 70%. Sales rose 2%
over the 2006 third quarter and operating income increased 4% from the 2006
third quarter due to the effect of higher nickel prices.
USAP REPORTS RECORD 2006 FOURTH QUARTER RESULTS - Page 3 -
Business Outlook
- ----------------
The following statements are based on the Company's current expectations.
These statements are forward-looking, and actual results may differ materially.
The Company estimates that first quarter 2007 sales will range from $52 to
$57 million and that diluted EPS will range from $0.82 to $0.87. This compares
with sales of $44.9 million and diluted EPS of $0.59 in the first quarter of
2006.
The following factors were considered in developing these estimates:
o The Company's total backlog at December 31, 2006 remained at high levels,
approximating $120 million compared to $124 million at September 30, 2006.
o The Company expects to continue to work down its backlog and improve its
on-time delivery performance in the 2007 first quarter because it is
shipping more remelted products from its seventh VAR furnace installed in
August and is continuing to improve manufacturing processes and efficiency
company-wide.
o End market demand is expected to remain strong in the 2007 first quarter.
Nickel prices are expected to remain level with the 2006 fourth quarter.
o Sales from the Dunkirk Specialty Steel segment are expected to approximate
$20 million in the first quarter of 2007 based on its backlog of $51
million at December 31, 2006. Its operating income as a percentage of sales
is expected to approximate the average for 2006 of 16%, as the majority of
its feedstock to support these sales reflect the higher nickel prices
reached in the second half of 2006.
Webcast
- -------
A simultaneous Webcast of the Company's conference call discussing the
fourth quarter of 2006 and the first quarter 2007 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. A telephone
replay of the conference call will be available beginning at 12:00 noon
(Eastern) today and continuing through January 25th. It can be accessed by
dialing 706-645-9291, passcode 5578498. This is a toll call.
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.
USAP REPORTS RECORD 2006 FOURTH QUARTER RESULTS - Page 4 -
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 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. 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.
- FINANCIAL TABLES FOLLOW -
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,
2006 2005 2006 2005
---- ---- ---- ----
Net Sales
- ---------
Stainless steel $ 41,474 $ 32,191 $ 151,633 $ 135,588
Tool steel 4,744 5,556 23,389 20,737
High-strength low alloy steel 6,145 2,336 16,467 6,606
High-temperature alloy steel 2,792 1,371 9,837 3,694
Conversion services 443 497 2,137 3,030
Other 209 92 410 367
------- -------- ---------- ---------
Total net sales 55,807 42,043 203,873 170,022
Cost of products sold 43,758 34,653 160,682 140,952
Selling and administrative expenses 2,619 2,106 10,792 8,441
------ -------- ---------- ---------
Operating income 9,430 5,284 32,399 20,629
Interest expense (296) (256) (1,106) (851)
Other income 516 374 522 437
------- -------- ---------- ---------
Income before taxes 9,650 5,402 31,815 20,215
Income tax provision 3,222 1,826 11,201 7,159
------- -------- ---------- ---------
Net income 6,428 $ 3,576 $ 20,614 $ 13,056
======= ======== ========== =========
Earnings per share - Basic $ 0.99 $ 0.56 $ 3.20 $ 2.05
======= ======== ========== =========
Earnings per share - Diluted $ 0.97 $ 0.55 $ 3.12 $ 2.02
======= ======== ========== =========
Weighted average shares of
Common Stock outstanding
Basic 6,516,880 6,403,185 6,451,037 6,375,257
Diluted 6,658,566 6,507,520 6,612,530 6,479,114
- -------------------------------------------------------------------------------
MARKET SEGMENT INFORMATION
For the Quarter Ended For the Year Ended
December 31, December 31,
2006 2005 2006 2005
---- ---- ---- ----
Net Sales
- ---------
Service centers $ 25,760 $ 19,817 $ 101,510 $ 73,213
Forgers 13,504 7,172 38,539 29,914
Rerollers 8,193 6,214 33,273 39,254
Original equipment manufacturers 4,392 5,922 18,368 13,992
Wire redrawers 3,330 2,329 9,660 10,263
Conversion services 443 497 2,137 3,030
Other 185 92 386 356
------- -------- -------- --------
Total net sales $ 55,807 $ 42,043 $ 203,873 $170,022
======= ======== ========= ========
Tons shipped 12,064 10,668 50, 51,233
====== ======= ======== ========
BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the Quarter Ended For the Year Ended
December 31, December 31,
2006 2005 2006 2005
---- ---- ---- ----
Net Sales
- ---------
Stainless steel $ 28,019 $ 21,666 $ 102,372 $ 90,530
Tool steel 4,281 5,324 21,747 20,047
High-strength low alloy steel 3,141 1,312 8,177 3,199
High-temperature alloy steel 1,097 1,019 3,787 3,254
Conversion services 287 412 1,530 2,534
Other 174 78 325 295
------- -------- ---------- --------
36,999 29,811 137,938 119,859
Intersegment 10,143 7,893 41,232 33,399
------- -------- ---------- --------
Total net sales 47,142 37,704 179,170 153,258
Material cost of sales 23,489 16,412 85,298 75,568
Operation cost of sales 17,090 15,151 66,790 56,885
Selling and administrative expenses 1,713 1,467 7,392 5,791
------- -------- ---------- --------
Operating income $ 4,850 $ 4,674 $ 19,690 $ 15,014
========= ======== ========== ========
Dunkirk Specialty Steel Segment
For the Quarter Ended For the Year Ended
December 31, December 31,
2006 2005 2006 2005
---- ---- ---- ----
Net Sales
- ---------
Stainless steel $ 13,455 $ 10,525 $ 49,261 $ 45,058
Tool steel 463 232 1,642 690
High-strength low alloy steel 3,004 1,024 8,290 3,407
High-temperature alloy steel 1,695 352 6,050 440
Conversion services 156 85 607 496
Other 35 14 85 72
------- ------- ---------- -------
18,808 12,232 65,935 50,163
Intersegment 1,446 750 4,320 2,848
------- ------- ---------- --------
Total net sales 20,254 12,982 70,255 53,011
Material cost of sales 10,949 7,750 38,705 29,496
Operation cost of sales 4,438 3,324 16,654 14,141
Selling and administrative expenses 906 639 3,400 2,650
------- ------- ---------- --------
Operating income $ 3,961 $ 1,269 $ 11,496 $ 6,724
======= ======== ========== ========
CONSOLIDATED BALANCE SHEET
December 31, December 31,
2006 2005
---- ----
Assets
- ------
Cash $ 2,909 $ 620
Accounts receivable, net 33,308 27,963
Inventory 66,019 51,398
Other current assets 3,044 2,790
------------ --------------
Total current assets 105,280 82,771
Property, plant & equipment, net 49,251 45,761
Other assets 584 495
------------ --------------
Total assets $ 155,115 $ 129,027
============ ==============
Liabilities and Stockholders' Equity
- ------------------------------------
Trade accounts payable $ 13,123 $ 12,579
Accrued employment costs 4,121 2,958
Outstanding checks in excess of bank 3,427 3,101
balance
Current portion of long-term debt 2,364 1,555
Other current liabilities 1,902 914
------------ --------------
Total current liabilities 24,937 21,107
Bank revolver 8,392 6,117
Long-term debt 8,836 11,200
Deferred taxes 8,402 9,600
------------ --------------
Total liabilities 50,567 48,024
Stockholders' equity 104,548 81,003
------------ --------------
Total liabilities and stockholders' $ 155,115 $ 129,027
equity ============ ==============
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Year Ended December 31,
2006 2005
---- ----
Cash flows provided by operating activities:
Net income $ 20,614 $ 13,056
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 3,337 3,085
Loss on retirement of fixed assets 911 705
Deferred tax decrease (1,836) (90)
Stock based compensation expense 27 -
Tax benefit from exercise of stock options - 207
Excess tax benefits from share-based
payment arrangements (1,073) -
Changes in assets and liabilities:
Accounts receivable, net (5,345) (3,401)
Inventory (14,621) (13,080)
Trade accounts payable 54 913
Accrued employment costs 1,163 1,128
Other, net 2,334 808
------------ ----------
Cash flow provided by operating activities 6,301 3,331
------------ ----------
Cash flow used in investing activities:
Acquisition of assets and real property
through purchase agreements - (344 )
Capital expenditures (7,716) (8,464)
------------ ----------
Cash flow used in investing activities (7,716) (8,808)
------------ ----------
Cash flows provided by financing activities:
Revolving credit net borrowings 2,275 (2,518)
Proceeds from long-term debt - 8,050
Deferred financing costs - (48)
Long-term debt repayments (1,555) (89)
Net change in outstanding checks in excess
of bank balance 326 463
Proceeds from issuance of common stock 1,585 803
Excess tax benefits from share-based payment
arrangements 1,073 -
----------- ----------
Cash flow provided by financing activities 3,704 5,856
----------- ----------
Net cash flow $ 2,289 $ 379
=========== ==========