USAP
$12.96
Universal Stainles
$.38
3.02%
Earnings Details
1st Quarter March 2019
Wednesday, April 24, 2019 6:45:00 AM
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Summary

Universal Stainles (USAP) Recent Earnings

Universal Stainles (USAP) reported 1st Quarter March 2019 earnings of $0.14 per share on revenue of $60.3 million. The consensus earnings estimate was $0.24 per share on revenue of $65.4 million. Revenue fell 5.4% compared to the same quarter a year ago.

Universal Stainless & Alloy Products, Inc. and its wholly owned subsidiaries, manufactures and markets semi-finished and finished specialty steel products. It offers stainless steel, nickel alloys, tool steel and certain other premium alloyed steels.

Results
Reported Earnings
$0.14
Earnings Whisper
-
Consensus Estimate
$0.24
Reported Revenue
$60.3 Mil
Revenue Estimate
$65.4 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Universal Stainless Reports First Quarter 2019 Results

  • Q1 2019 Sales of $60.3 million, up 5.6% from Q4 2018
  • Q1 2019 Net Income of $1.2 million, or $0.14 per diluted share, versus $0.6 million, or $0.07 per diluted share, in Q4 2018
  • EBITDA totals $7.0 million in Q1 2019 versus $5.4 million in Q4 2018
  • Quarter-End Backlog of $130.1 million, up 3.1% from Q4 2018

BRIDGEVILLE, Pa., April 24, 2019 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported that net sales for the first quarter of 2019 were $60.3 million, an increase of 5.6% from $57.1 million in the fourth quarter of 2018, although 5.4% below 2018 first quarter revenues of $63.7 million. Sales to the aerospace and power generation end markets increased sequentially and year-over-year in the first quarter of 2019, while sales to the oil & gas, heavy equipment and general industrial markets were lower than in both prior periods.  Aerospace remained the Company's largest end market in the first quarter of 2019, with sales of $42.6 million, or 70.7% of total net sales, compared with 61.5% in the fourth quarter of 2018 and 56.9% in the first quarter of 2018.

Sales of premium alloys in the first quarter of 2019 totaled $9.4 million, or 15.5% of sales, compared with $8.1 million, or 14.2% of sales in the fourth quarter of 2018, and $11.8 million, or 18.6% of sales, in the first quarter of 2018. 

The Company's gross margin for the first quarter of 2019 was 12.2% of sales, compared with 11.3% of sales in the fourth quarter of 2018 and 14.5% of sales in the first quarter of 2018. Margins were impacted by lower than forecasted shipment volume, product mix and slower recovery in surcharges.

Selling, general and administrative expenses were $5.0 million, or 8.2% of sales for the first quarter of 2019, compared with $5.6 million, or 9.7% of sales, for the fourth quarter of 2018, and $5.2 million, or 8.2% of sales, for the first quarter of 2018.

Net income for the first quarter of 2019 totaled $1.2 million, or $0.14 per diluted share, compared with $0.6 million, or $0.07 per diluted share, in the fourth quarter of 2018, and $2.1 million, or $0.28 per diluted share in the first quarter of 2018.  The first quarter of 2019 and the fourth quarter of 2018 include an additional 1.4 million weighted average shares outstanding due to the second quarter 2018 equity issuance.

The Company’s EBITDA for the first quarter of 2019 was $7.0 million compared with $5.4 million in the fourth quarter of 2018, and $8.8 million in the first quarter of 2018. 

Managed working capital at March 31, 2019 totaled $140.0 million, compared with $123.0 million at December 31, 2018, and $125.2 million at the end of the first quarter of 2018. The increase in managed working capital was primarily driven by a $12.4 million increase in inventory compared to the fourth quarter of 2018. The Company’s inventory build supported the continued increase in Company backlog.

Backlog (before surcharges) at March 31, 2019 was a record $130.1 million, an increase of 3.1% from December 31, 2018, and 43.6% higher than at the end of the 2018 first quarter.

The Company’s total debt at March 31, 2019 was $65.4 million, compared with $46.7 million at December 31, 2018, and $99.9 million at the end of the first quarter of 2018.  Capital expenditures for the first quarter of 2019 totaled $5.6 million, compared with $2.2 million in the fourth quarter of 2018 and $2.5 million in the first quarter of 2018.  First quarter 2019 capital expenditures reflect the commissioning of the Company’s new mid-size bar cell project at its Dunkirk, NY facility.  Benefits related to this project are expected to include both cost and inventory reductions, as well as quality and cycle time improvements.

The Company’s effective tax rate for the first quarter ended March 31, 2019 was 16.9%. The rate is lower than the federal statutory rate of 21.0%, primarily due to the favorable impact of federal research and development tax credits.

Chairman, President and CEO Dennis Oates commented: “We continued to make progress in the first quarter of 2019, although more slowly than originally planned.  Sales increased 5.6% from the fourth quarter of 2018 and included record aerospace sales, which reached more than 70% of total sales, while premium alloy sales grew 15.6% sequentially.  First quarter 2019 gross margin of 12.2% also improved from the 2018 fourth quarter but was impacted by lower shipment volume as well as less favorable product mix, with demand for tool steel down substantially as our tool steel customers adjusted their inventories after strong buying in 2018.  The combined output of our facilities set a new Company record despite the significant production challenges posed by a tight labor market.

“Even with the slower than anticipated start, we expect 2019 to be another positive year for Universal Stainless with strong top-line growth and margin improvement forecasted as soon as the second quarter.  We believe that our record backlog and the increasing benefits of our new bar cell in our Dunkirk facility support our positive outlook.”

Conference Call and Webcast

The Company has scheduled a conference call for today, April 24, 2019, at 10:00 a.m. (Eastern) to discuss first quarter 2019 results. Those wishing to listen to the live conference call via telephone should dial 706-679-0668, passcode 2274525. A simultaneous webcast will be available on the Company’s website at www.univstainless.com, and thereafter archived on the website through the end of the second quarter of 2019.  

About Universal Stainless & Alloy Products, Inc.

Universal Stainless & Alloy Products, Inc., established in 1994 and headquartered in Bridgeville, PA, manufactures and markets semi-finished and finished specialty steels, including stainless steel, nickel alloys, tool steel and certain other alloyed steels. The Company's products are used in a variety of industries, including aerospace, power generation, oil and gas, and heavy equipment manufacturing. More information is available at www.univstainless.com.

Forward-Looking Information Safe Harbor

Except for historical information contained herein, the statements in this release are forward-looking statements that are made pursuant to the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, among others, the Company’s ability to maintain its relationships with its significant customers and market segments; the Company’s response to competitive factors in its industry that may adversely affect the market for finished products manufactured by the Company or its customers; the Company’s ability to compete successfully with domestic and foreign producers of specialty steel products and products fashioned from alternative materials; the demand for the Company’s products and the prices at which the Company is able to sell its products in the aerospace industry, from which a substantial amount of our sales is derived; the Company’s ability to develop, commercialize, market and sell new applications and new products; the receipt, pricing and timing of future customer orders; the impact of changes in the Company’ product mix on the Company’s profitability; the Company’s ability to maintain the availability of raw materials and operating supplies with acceptable pricing; the availability and pricing of electricity, natural gas and other sources of energy that the Company needs for the manufacturing of its products; risks related to property, plant and equipment, including the Company’s reliance on the continuing operation of critical manufacturing equipment; the Company’s success in timely concluding collective bargaining agreements and avoiding strikes or work stoppages; the Company’s ability to attract and retain key personnel; the Company’s ongoing requirement for continued compliance with laws and regulations, including applicable safety and environmental regulations; the ultimate outcome of the Company’s current and future litigation matters; the Company’s ability to meet its debt service requirements and to comply with applicable financial covenants; risks associated with conducting business with suppliers and customers in foreign countries; risks related to acquisitions that the Company may make; the Company’s ability to protect its information technology infrastructure against service interruptions, data corruption, cyber-based attacks or network security breaches; the impact on the Company’s effective tax rates of changes in tax rules, regulations and interpretations in the United States and other countries where it does business; and the impact of various economic, credit and market risk uncertainties. Many of these factors are not within the Company’s control and involve known and unknown risks and uncertainties that may cause the Company’s actual results in future periods to be materially different from any future performance suggested herein.  Any unfavorable change in the foregoing or other factors could have a material adverse effect on the Company’s business, financial condition and results of operations.  Further, the Company operates in an industry sector where securities values may be volatile and may be influenced by economic and other factors beyond the Company’s control.  Certain of these risks and other risks are described in the Company's filings with the Securities and Exchange Commission (SEC) over the last 12 months, copies of which are available from the SEC or may be obtained upon request from the Company

Non-GAAP Financial Measures

This press release includes discussions of financial measures that have not been determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP).  These measures include earnings (loss) before interest, income taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA.  We include these measurements to enhance the understanding of our operating performance.  We believe that EBITDA, considered along with net earnings (loss), is a relevant indicator of trends relating to cash generating activity of our operations.  Adjusted EBITDA excludes the effect of share-based compensation expense and other non-cash generating activity such as impairments and the write-off of deferred financing costs. We believe excluding these costs provides a consistent comparison of the cash generating activity of our operations.  We believe that EBITDA and Adjusted EBITDA are useful to investors as they facilitate a comparison of our operating performance to other companies who also use EBITDA and Adjusted EBITDA as supplemental operating measures.  These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measures.  These non-GAAP measures may not be entirely comparable to similarly titled measures used by other companies due to potential differences among calculations methodologies.  A reconciliation of these non-GAAP financial measures to their most directly comparable financial measure prepared in accordance with GAAP is included in the tables that follow.

-TABLES FOLLOW -

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except Per Share Information)
(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS 
        
 Three months ended 
 March 31, 
 2019  2018 
Net Sales       
Stainless steel$45,995  $42,939 
High-strength low alloy steel 5,764   5,203 
Tool steel 6,567   9,641 
High-temperature alloy steel 808   4,547 
Conversion services and other sales 1,137   1,407 
        
Total net sales 60,271   63,737 
        
Cost of products sold 52,901   54,465 
        
Gross margin 7,370   9,272 
        
Selling, general and administrative expenses 4,966   5,207 
        
Operating income 2,404   4,065 
        
Interest expense 854   1,142 
Deferred financing amortization 59   64 
Other expense (income), net 21   (43)
        
Income before income taxes 1,470   2,902 
        
Provision for income taxes 248   777 
        
Net income$1,222  $2,125 
        
Net income per common share - Basic$0.14  $0.29 
Net income per common share - Diluted$0.14  $0.28 
        
Weighted average shares of common stock outstanding       
Basic 8,761,538   7,261,966 
Diluted 8,860,525   7,492,972 
        


MARKET SEGMENT INFORMATION 
        
 Three months ended 
 March 31, 
 2019  2018 
Net Sales       
Service centers$43,056  $44,521 
Original equipment manufacturers 5,226   4,482 
Rerollers 6,031   8,364 
Forgers 4,821   4,963 
Conversion services and other sales 1,137   1,407 
        
Total net sales$60,271  $63,737 
        
Tons shipped 10,160   11,156 
        
MELT TYPE INFORMATION 
        
 Three months ended 
 March 31, 
 2019  2018 
Net Sales       
Specialty alloys$49,764  $50,485 
Premium alloys * 9,370   11,845 
Conversion services and other sales 1,137   1,407 
        
Total net sales$60,271  $63,737 
        
END MARKET INFORMATION ** 
        
 Three months ended 
 March 31, 
 2019  2018 
Net Sales       
Aerospace$42,607  $36,235 
Power generation 2,503   2,289 
Oil & gas 5,376   8,459 
Heavy equipment 6,444   10,035 
General industrial, conversion services and other sales 3,341   6,719 
        
Total net sales$60,271  $63,737 
        
* Premium alloys represent all vacuum induction melted (VIM) products. 
**The majority of our products are sold to service centers rather than the ultimate end market customers. The end market information in this press release is our estimate based upon our knowledge of our customers and the grade of material sold to them, which they will in-turn sell to the ultimate end market customer. 
  


CONDENSED CONSOLIDATED BALANCE SHEETS 
        
 March 31,  December 31, 
 2019  2018 
Assets       
        
Cash$237  $3,696 
Accounts receivable, net 34,621   32,618 
Inventory, net 147,128   134,738 
Other current assets 5,646   3,756 
        
Total current assets 187,632   174,808 
Property, plant and equipment, net 176,768   177,844 
Other long-term assets 1,230   668 
        
Total assets$365,630  $353,320 
        
Liabilities and Stockholders' Equity       
        
Accounts payable$41,798  $44,379 
Accrued employment costs 3,549   7,939 
Current portion of long-term debt 3,916   3,907 
Other current liabilities 996   2,929 
        
Total current liabilities 50,259   59,154 
Long-term debt, net 61,527   42,839 
Deferred income taxes 11,697   11,481 
Other long-term liabilities, net 3,380   2,835 
        
Total liabilities 126,863   116,309 
Stockholders’ equity 238,767   237,011 
        
Total liabilities and stockholders’ equity$365,630  $353,320 
        


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW 
        
 Three months ended 
 March 31, 
 2019  2018 
        
Operating activities:       
Net income$1,222  $2,125 
Adjustments to reconcile net income to net cash used in operating activities:       
Depreciation and amortization 4,646   4,756 
Deferred income tax 235   772 
Share-based compensation expense 432   326 
Changes in assets and liabilities:       
Accounts receivable, net (2,003)  (8,604)
Inventory, net (12,962)  (3,832)
Accounts payable (1,314)  (7,699)
Accrued employment costs (4,390)  (499)
Income taxes 12   5 
Other, net (3,719)  296 
        
Net cash used in operating activities (17,841)  (12,354)
        
Investing activity:       
Capital expenditures (5,557)  (2,485)
        
Net cash used in investing activity (5,557)  (2,485)
        
Financing activities:       
Borrowings under revolving credit facility 50,450   128,729 
Payments on revolving credit facility (29,339)  (107,080)
Proceeds under New Markets Tax Credit financing -   3,010 
Payments on term loan facility, finance leases, and notes (2,472)  (1,172)
Bank overdrafts 1,276   - 
Payments of financing costs -   (351)
Proceeds from the exercise of stock options 41   54 
        
Net cash provided by financing activities 19,956   23,190 
        
Net (decrease) increase in cash, and restricted cash (3,442)  8,351 
Cash and restricted cash at beginning of period 4,091   207 
Cash and restricted cash at end of period$649  $8,558 
        


RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
        
 Three Months ended 
 March 31, 
 2019  2018 
        
Net income$1,222  $2,125 
Interest expense 854   1,142 
Provision for income taxes 248   777 
Depreciation and amortization 4,646   4,756 
EBITDA 6,970   8,800 
Share-based compensation expense 432   326 
Adjusted EBITDA$7,402  $9,126 
        


CONTACTS:     Dennis M. Oates
Chairman,
President and CEO
(412) 257-7609
     Christopher T. Scanlon
VP Finance, CFO
and Treasurer
(412) 257-7662
     June Filingeri
President
Comm-Partners LLC
(203) 972-0186
       

Universal Stainless logo

Source: Universal Stainless & Alloy Products, Inc.