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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 2008 FIRST QUARTER RESULTS
- DILUTED EPS OF $0.70 ON SALES OF $56.8 MILLION EXCEEDS FORECAST-
- BACKLOG INCREASES TO $88 MILLION -
BRIDGEVILLE, PA, APRIL 24, 2008 - UNIVERSAL STAINLESS & ALLOY PRODUCTS,
INC. (NASDAQ: USAP) reported today that sales for the first quarter of 2008 were
$56.8 million, which is in line with $56.2 million reported in the first quarter
of 2007. Net income for the 2008 first quarter was $4.7 million, or $0.70 per
diluted share, compared with $6.8 million, or $1.00 per diluted share, in the
first quarter of 2007.
These results exceeded the Company's forecast for the first quarter of
2008 of sales in the range of $50 to $55 million and diluted EPS in the range of
$0.60 to $0.65.
Nickel costs were more stable in the 2008 first quarter compared to
their high volatility in 2007 and were substantially lower than their level at
March 31, 2007. The change in nickel costs reduced gross margins for the
Company's Dunkirk segment for the first quarter of 2008 by an estimated $157,000
(FIFO charge), equivalent to $0.02 per diluted share, compared with an increase
(FIFO benefit) of $1.2 million, equivalent to $0.12 per diluted share, in the
first quarter of 2007. The swing in the FIFO effect combined with a change in
product mix reduced company-wide gross margins in the first quarter of 2008
compared with the same period of 2007.
The Company's tax rate for the first quarter of 2008 was 33% compared
to 35% in first quarter of 2007. The benefit of this rate change was equivalent
to $0.02 per diluted share.
Cash flow from operations was $208,000 for the first quarter of 2008
and capital expenditures were $3.1 million. Inventories remained level with the
2007 fourth quarter, while receivables increased due to the sequential increase
in revenues.
President and CEO Dennis Oates commented: "Solid demand in our key
markets combined with better than expected sales of power generation and tool
steel products enabled us to exceed our forecast for the first quarter of 2008.
In total, our sales to the power generation market rose an estimated 34%
sequentially and 15% over the first quarter of 2007, while tool steel sales
increased 25% over the fourth quarter of 2007 and 28% year-over-year. Our sales
to the petrochemical market also improved sequentially, rising an estimated 30%
from the 2007 fourth quarter, and matched the first quarter of 2007. Our sales
to the aerospace market increased an estimated 5% from the fourth quarter of
2007, but were 15% lower than the first quarter a year ago. While aerospace
demand remains very strong, our aerospace sales go through service centers and
forgers, which continue to demonstrate conservative buying patterns and report
pockets of excess inventory. We have not changed our view that service centers
and forgers will, by necessity, return to more normal buying levels in the
second half of the year."
Mr. Oates continued: "We made progress on several priorities in the
first quarter. One of the highest was to add a Vice President of Sales and
Marketing, and we were pleased to announce earlier this week that Chris Zimmer
has joined our team. Our focus is to accelerate sales growth by further
penetrating our domestic markets as well as expanding into international sales.
We are now in conversations with potential partners and new customers in North
America, South America, Europe, Russia and India. This is a long-term process,
but we are pleased by the initial response and have several trial orders
underway, including some for new products.
"Operational improvement is another area of high priority for us. We
are progressing with the start-up of our new state-of-the-art high temperature
annealing system in Dunkirk and remain on track to have it fully operational by
the end of the current second quarter.
"In a further move to realize Dunkirk's potential and improve
efficiency company-wide, we will relocate the round bar finishing operation in
Bridgeville to Dunkirk, where it will replace inefficient multi-step equipment
with advanced continuous-process capability. We expect to reduce the round bar
production cycle in Dunkirk by as much as two weeks resulting in a payback that
is less than one year. It also will enable Bridgeville to focus on its core
competency, the manufacture of semi-finished products including tool steel
plate."
Mr. Oates concluded: "We expect continued incremental improvement in
our financial performance as reflected in our forecast for the second quarter of
2008. We expect our operational improvement to be more substantial as we
continue to enhance our productivity and improve customer service levels. Our
overall goal is to further accelerate our growth."
SEGMENT REVIEW
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For the first quarter of 2008, the UNIVERSAL STAINLESS & ALLOY PRODUCTS
SEGMENT had sales of $48.2 million and operating income of $4.9 million,
yielding an operating margin of 10%. This compares with sales of $48.2 million
and operating income of $7.2 million, or 15% of sales, in the first quarter of
2007. In the fourth quarter of 2007, sales were $43.4 million and operating
income was $3.2 million, or 7% of sales.
While segment sales matched those of the first quarter of 2007, pounds
shipped increased 6% mainly due to higher shipments of billet product to reroll
customers and of tool steel plate to service centers. These increases were
offset by lower shipments of semi-finished products to forgers and of finished
bar products to service centers. The shift in product mix resulted in the lower
operating margin compared to the first quarter of 2007. Sales increased 11% over
the fourth quarter of 2007, while pounds shipped rose 16%, due to increased
shipments to all product and customer categories, with the exception of bar
products to service centers, which were down 9% sequentially. The sequential
improvement in operating margin was due to the higher shipment volume.
The DUNKIRK SPECIALTY STEEL SEGMENT reported sales of $20.1 million and
operating income of $2.8 million for the first quarter of 2008, resulting in an
operating margin of 14%, which included the FIFO charge of $157,000. That
compares with sales of $20.4 million and operating income of $3.8 million, or
19% of sales, in the first quarter of 2007, which included an estimated FIFO
benefit of $1.2 million. In the fourth quarter of 2007, sales were $18.7 million
and operating income was $2.2 million, or 12% of sales, and included a FIFO
charge of $53,000.
Dunkirk's sales and pounds shipped were in line with the first quarter
of 2007, with higher shipments to service centers offset by lower shipments of
rod and wire products to redrawers. The decline in the operating margin from the
first quarter of 2007 mainly reflected the change in the FIFO effect resulting
from the impact of nickel price changes in the applicable periods. Dunkirk's
sales rose 7% over the fourth quarter of 2007, while pounds shipped increased
11%. The increased shipments in all categories, except rod and wire products to
redrawers, accounted for the sequential improvement in operating margin.
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 sales for the second quarter of 2008 will
range from $55 to $60 million and that diluted EPS will range from $0.70 to
$0.75. This compares with sales of $62.1 million and diluted EPS of $0.87, in
the second quarter of 2007. Results in the prior year second quarter included a
FIFO benefit estimated at approximately $1.2 million, equivalent to $0.12 per
diluted share, offset by an $800,000 charge, equivalent to $0.08 per diluted
share, related to a legal settlement, and an inventory adjustment of $1.0
million, equivalent to $0.11 per diluted share, related to the sharp drop in
nickel prices at the end of the quarter.
The following factors were considered in developing the estimates for the second
quarter of 2008:
o The Company's total backlog at March 31, 2008 rose to approximately $88
million, from $85 million at December 31, 2007. The increased backlog is
primarily attributable to an order received for power generation
applications destined for Europe.
o Sales from the Dunkirk Specialty Steel segment are expected to approximate
$20 million in the second quarter of 2008. It is assumed that there will be
no FIFO benefit or charge at the Dunkirk operation.
o The cost to relocate the round bar finishing facility from Bridgeville to
Dunkirk is $700,000, equivalent to $0.07 per share, which will be expensed
in the current and third quarter of 2008. The earnings forecast assumes
that the relocation expense will approximate $200,000, equivalent to $0.02
per diluted share, in the second quarter of 2008.
WEBCAST
A simultaneous Webcast of the Company's conference call discussing the
first quarter of 2008 and the second quarter 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 May 1st. It can be accessed by dialing
706-645-9291, passcode 41470894. 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. 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. 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
March 31,
2008 2007
---- ----
NET SALES
Stainless steel $ 42,028 $ 39,570
Tool steel 9,107 7,097
High-strength low alloy steel 4,011 6,234
High-temperature alloy steel 1,146 2,745
Conversion services 525 489
Other 28 104
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Total net sales 56,845 56,239
Cost of products sold 46,779 43,020
Selling and administrative expenses 3,075 2,554
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Operating income 6,991 10,665
Interest expense (28) (227)
Other income 87 4
---------- --------
Income before taxes 7,050 10,442
Income tax provision 2,327 3,655
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Net income $ 4,723 $ 6,787
========= ==========
Earnings per share - Basic $ 0.71 $ 1.03
========= ==========
Earnings per share - Diluted $ 0.70 $ 1.00
========= ==========
Weighted average shares of
Common Stock outstanding
Basic 6,662,972 6,621,307
Diluted 6,771,240 6,761,157
MARKET SEGMENT INFORMATION
For the Quarter Ended
March 31,
2008 2007
---- ----
NET SALES
Service centers $ 29,234 $ 29,105
Forgers 9,018 12,574
Rerollers 11,239 7,192
Original equipment manufacturers 5,441 4,877
Wire redrawers 1,369 1,898
Conversion services 525 489
Other 19 104
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Total net sales $ 56,845 $ 56,239
========== =========
Tons shipped 11,767 11,157
========== =========
BUSINESS SEGMENT RESULTS
UNIVERSAL STAINLESS & ALLOY PRODUCTS SEGMENT
For the Quarter Ended
March 31,
2008 2007
---- ----
NET SALES
Stainless steel $ 27,310 $ 24,996
Tool steel 8,424 6,159
High-strength low alloy steel 1,113 4,000
High-temperature alloy steel 569 1,230
Conversion services 357 327
Other 10 86
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37,783 36,798
Intersegment 10,415 11,367
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Total net sales 48,198 48,165
Material cost of sales 23,339 21,231
Operation cost of sales 17,790 18,017
Selling and administrative expenses 2,138 1,718
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Operating income $ 4,931 $ 7,199
========= =========
DUNKIRK SPECIALTY STEEL SEGMENT
For the Quarter Ended
March 31,
2008 2007
---- ----
NET SALES
Stainless steel $ 14,718 $ 14,574
Tool steel 683 938
High-strength low alloy steel 2,898 2,234
High-temperature alloy steel 577 1,515
Conversion services 168 162
Other 18 18
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19,062 19,441
Intersegment 988 999
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Total net sales 20,050 20,440
Material cost of sales 11,839 11,196
Operation cost of sales 4,489 4,587
Selling and administrative expenses 937 836
---------- ---------
Operating income $ 2,785 $ 3,821
========== =========
CONSOLIDATED BALANCE SHEET
March 31, December 31,
2008 2007
---- ----
ASSETS
Cash $ 10,795 $ 10,648
Accounts receivable, net 34,675 27,501
Inventory 65,535 65,572
Other current assets 4,800 5,537
--------------- --------------
Total current assets 115,805 109,258
Property, plant & equipment, net 56,069 54,271
Other assets 925 767
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Total assets $ 172,799 $ 164,296
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable $ 14,750 $ 13,983
Outstanding checks in excess of bank balance 4,804 2,064
Accrued employment costs 3,638 5,307
Accrued income tax payable 2,145 330
Current portion of long-term debt 389 383
Other current liabilities 971 1,270
--------------- --------------
Total current liabilities 26,697 23,337
Long-term debt 1,348 1,453
Deferred taxes 9,844 9,904
--------------- --------------
Total liabilities 37,889 34,694
Stockholders' equity 134,910 129,602
--------------- --------------
Total liabilities and stockholders' equity $ 172,799 $ 164,296
=============== ==============
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Three-month Period Ended March 31,
2008 2007
---- ----
Cash flows provided by operating activities:
Net income $ 4,723 $ 6,787
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 982 899
Loss on retirement of fixed assets 286 -
Deferred tax increase 91 113
Stock based compensation expense 195 100
Tax benefit from share-based payment
arrangements (183) (799)
Changes in assets and liabilities:
Accounts receivable, net (7,174) (3,609)
Inventory 37 (5,621)
Trade accounts payable 767 2,071
Accrued employment costs (1,669) (522)
Accrued income tax payable 1,815 1,814
Other, net 338 1,302
--------------- ---------------
Cash flow provided by operating activities 208 2,535
--------------- ---------------
Cash flow used in investing activities:
Capital expenditures (3,092) (1,253)
--------------- ---------------
Cash flow used in investing activities (3,092) (1,253)
--------------- ---------------
Cash flows used in financing activities:
Revolving credit net repayments - (5,149)
Long-term debt repayments (99) (589)
Net change in outstanding checks in excess
of bank balance 2,740 899
Proceeds from issuance of common stock 207 731
Tax benefit from share-based payment
arrangements 183 799
--------------- ---------------
Cash flow provided by (used in) financing 3,031 (3,309)
activities
--------------- ---------------
Net cash flow $ 147 $ (2,027)
=============== ===============