USAP
$15.06
Universal Stainles
($.80)
(5.04%)
Earnings Details
3rd Quarter September 2018
Wednesday, October 24, 2018 7:00:00 AM
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Summary

Universal Stainles (USAP) Recent Earnings

Universal Stainles (USAP) reported 3rd Quarter September 2018 earnings of $0.44 per share on revenue of $69.1 million. The consensus earnings estimate was $0.45 per share on revenue of $72.1 million. Revenue grew 102.5% on a year-over-year basis.

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
$0.44
Earnings Whisper
-
Consensus Estimate
$0.45
Reported Revenue
$69.1 Mil
Revenue Estimate
$72.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Universal Stainless Reports Strong Results on Continued Sales Growth in Third Quarter of 2018

  • Q3 2018 Sales of $69.1 million, up 35.7% from Q3 2017
  • Q3 2018 Net Income increases to $3.9 million, or $0.44 per diluted share, versus loss of $0.3 million, or $0.04 per diluted share, in Q3 2017
  • EBITDA totals $10.1 million in Q3 2018, up 79.5% from Q3 2017
  • Quarter-End Backlog of $111.4 million, up 68.3% from Q3 2017 and up 6.9% sequentially     

BRIDGEVILLE, Pa., Oct. 24, 2018 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported net sales of $69.1 million for the third quarter of 2018, an increase of 35.7% from $50.9 million in the third quarter of 2017, and up 4.5% from $66.1 million in the 2018 second quarter.  All end markets contributed to the year-over-year growth, with the exception of power generation.  Aerospace remained the Company's largest end market, at 54.0% of total Company sales.  Third quarter 2018 aerospace sales totaled $37.3 million, up 34.6% from the third quarter of 2017.

Sales of premium alloys in the third quarter of 2018 totaled $9.2 million, or 13.3% of sales, compared with $7.4 million, or 14.5% of sales, in the third quarter of 2017, and $12.0 million, or 18.2% of sales, in the second quarter of 2018. 

For the first nine months of 2018, sales increased 30.5% to $198.9 million from $152.4 million in the same period of 2017.  Sales of premium alloys increased 65.4% to $33.0 million, or 16.6% of sales, in the first nine months of 2018, from $20.0 million, or 13.1% of sales, in same period of 2017.

The Company’s gross margin for the third quarter of 2018 totaled $10.4 million, or 15.1% of sales, compared with $5.5 million, or 10.7% of sales, in the third quarter of 2017, and $11.7 million, or 17.7% of sales, in the 2018 second quarter.

Selling, general and administrative expenses were $5.1 million, or 7.4% of sales, for the third quarter of 2018, compared with $4.4 million, or 8.7% of sales, in the third quarter of 2017, and $5.8 million, or 8.9% of sales, for the second quarter of 2018.

Net income for the third quarter of 2018 totaled $3.9 million, or $0.44 per diluted share, (which includes an additional 1.4 million weighted average shares outstanding due to the second quarter 2018 equity issuance), compared with a loss of $0.3 million, or $0.04 per diluted share, in the third quarter of 2017, and net income of $4.0 million, or $0.50 per diluted share, in the second quarter of 2018, (which included an additional 0.6 million weighted average shares outstanding due to the second quarter equity issuance).  Additionally, the net loss in third quarter in 2017 included unusual charges of $0.06 per diluted share related to facility fires as well as discrete tax items.  Net income in the 2018 second quarter included other income of $0.06 per diluted share as a result of a favorable legal settlement.

For the first nine months of 2018, net income increased to $10.1 million, or $1.23 per diluted share, versus a net loss of $0.3 million, or $0.03 per diluted share, in the first nine months of 2017.

The Company’s EBITDA for the third quarter of 2018 was $10.1 million, compared with $5.6 million in the third quarter of 2017, and $11.2 million in the second quarter of 2018. 

Managed working capital at September 30, 2018 totaled $136.9 million compared with $125.5 million at June 30, 2018 and included accounts receivable of $44.2 million and inventory of $122.8 million, continuing to reflect strong markets and increased business activity.

Backlog (before surcharges) at September 30, 2018 was $111.4 million, an increase of 6.9% from June 30, 2018, and 68.3% higher than at the end of the 2017 third quarter.

The Company’s total debt at September 30, 2018 was $62.5 million, compared with $57.1 million at the end of the second quarter of 2018 and $77.1 million at the end of the third quarter of 2017.  

Capital expenditures for the third quarter of 2018 totaled $6.6 million compared to $4.2 million for the second quarter of 2018 and $1.6 million in the third quarter of 2017.  The increase in capital expenditures was driven by the Company’s mid-size bar cell project at its Dunkirk, NY facility, which is proceeding and should begin production in the fourth quarter.  Once completed, 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 tax rate for the nine months ended September 30, 2018 was 19.1% and included approximately $0.1 million of discrete tax expense.  Excluding discrete items, the underlying annual effective tax rate was 18.5%.  The Company’s third quarter income tax expense totaled $0.5 million and was favorably impacted by discrete tax items totaling $0.3 million.  Favorable discrete items included research and development credits and stock option exercise benefits.

Additionally, during the quarter, the Company entered into new labor agreements with the hourly employees of its North Jackson and Bridgeville facilities.  A six-year collective bargaining agreement with the hourly employees at its North Jackson Specialty Steel facility was effective on July 1st and a new five-year agreement with the hourly employees at its Bridgeville facility was agreed to effective September 1st.  One-time costs incurred in the quarter in the negotiation and management of the new Bridgeville labor agreement totaled $0.1 million, or $0.01 per diluted share.

Chairman, President and CEO Dennis Oates commented: “Third quarter 2018 sales exceeded $69 million, driven by continued strength in nearly all of our end markets.  Premium alloy sales and bookings remain strong, with sales growth of 24% from the third quarter of 2017.  We continue to maintain a very favorable outlook for our premium products, as we exited the third quarter with record premium product bookings and backlog.”

Mr. Oates continued, “Business conditions remain strong, with robust demand in the aerospace market continuing.  We are encouraged by our record backlog and order entry levels, which we believe will position us well into 2019 as well as in the fourth quarter.  We look forward to closing out 2018 with continued strong year over year growth.”

Conference Call and Webcast

The Company has scheduled a conference call for today, October 24, 2018, at 10:00 a.m. (Eastern) to discuss third quarter 2018 results. Those wishing to listen to the live conference call via telephone should dial 706-679-0668, passcode 6082079. 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 fourth quarter of 2018.  

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  Nine months ended 
  September 30,  September 30, 
  2018  2017  2018  2017 
Net Sales                    
Stainless steel $ 46,754  $ 34,106  $ 137,384  $ 106,296 
High-strength low alloy steel   5,444    3,359    15,535    10,949 
Tool steel   13,130    9,202    31,537    24,924 
High-temperature alloy steel   2,149    3,208    9,627    8,085 
Conversion services and other sales   1,579    1,012    4,781    2,115 
                     
Total net sales   69,056    50,887    198,864    152,369 
                     
Cost of products sold   58,631    45,423    167,472    135,494 
                     
Gross margin   10,425    5,464    31,392    16,875 
                     
Selling, general and administrative expenses   5,131    4,448    16,187    13,676 
                     
Operating income (loss)   5,294    1,016    15,205    3,199 
                     
Interest expense   906    1,059    3,245    3,018 
Deferred financing amortization   60    63    195    191 
Other (income) expense, net   (48)   (23)   (690)   (43)
                     
Income (loss) before income taxes   4,376    (83)   12,455    33 
                     
Provision (benefit) for income taxes   460    176    2,376    283 
                     
Net income (loss) $ 3,916  $ (259) $ 10,079  $ (250)
                     
Net income (loss) per common share - Basic $ 0.45  $ (0.04) $ 1.27  $ (0.03)
Net income (loss) per common share - Diluted $ 0.44  $ (0.04) $ 1.23  $ (0.03)
                     
Weighted average shares of common                    
stock outstanding                    
Basic   8,699,953    7,228,277    7,931,783    7,221,426 
Diluted   8,952,749    7,228,277    8,166,759    7,221,426 


MARKET SEGMENT INFORMATION 
                     
  Three months ended  Nine months ended 
  September 30,   September 30, 
  2018  2017   2018   2017 
Net Sales                    
Service centers $ 49,889  $ 35,507  $ 139,152  $ 105,618 
Original equipment manufacturers   4,981    4,361    15,232    13,239 
Rerollers   6,530    5,640    23,188    17,452 
Forgers   6,077    4,367    16,511    13,945 
Conversion services and other sales   1,579    1,012    4,781    2,115 
                     
Total net sales $ 69,056  $ 50,887  $ 198,864  $ 152,369 
                     
Tons shipped   12,385    9,829    34,681    30,250 
                     
MELT TYPE INFORMATION 
                     
  Three months ended  Nine months ended 
  September 30,  September 30, 
  2018  2017  2018  2017 
Net Sales                    
Specialty alloys $ 58,325  $ 42,511  $ 161,048  $ 130,287 
Premium alloys *   9,152    7,364    33,035    19,967 
Conversion services and other sales   1,579    1,012    4,781    2,115 
                     
Total net sales $ 69,056  $ 50,887  $ 198,864  $ 152,369 
                     
END MARKET INFORMATION ** 
                     
  Three months ended  Nine months ended 
  September 30,  September 30, 
  2018  2017  2018  2017 
Net Sales                    
Aerospace $ 37,302  $ 27,717  $ 113,742  $ 83,404 
Power generation   2,714    3,259    7,337    12,267 
Oil & gas   8,926    4,593    25,211    14,296 
Heavy equipment   13,423    9,698    32,506    26,331 
General industrial, conversion services and other sales   6,691    5,620    20,068    16,071 
                     
Total net sales $ 69,056  $ 50,887  $ 198,864  $ 152,369 
                     
* 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 
           
  September 30,  December 31, 
  2018  2017 
Assets          
           
Cash $ 33  $ 207 
Accounts receivable, net   44,185    24,990 
Inventory, net   122,839    116,663 
Other current assets   3,068    4,404 
           
Total current assets   170,125    146,264 
Property, plant and equipment, net   174,446    174,444 
Other long-term assets   6,681    523 
           
Total assets $ 351,252  $ 321,231 
           
Liabilities and Stockholders' Equity          
           
Accounts payable $ 30,129  $ 34,898 
Accrued employment costs   6,595    4,075 
Current portion of long-term debt   3,896    4,707 
Other current liabilities   1,171    1,268 
           
Total current liabilities   41,791    44,948 
Long-term debt, net   58,563    75,006 
Deferred income taxes   11,964    9,605 
Other long-term liabilities, net   2,840    4 
           
Total liabilities   115,158    129,563 
Stockholders’ equity   236,094    191,668 
           
Total liabilities and stockholders’ equity $ 351,252  $ 321,231 
           
  


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW 
           
  Nine months ended 
  September 30, 
  2018  2017 
           
Operating activities:          
Net income (loss) $ 10,079  $ (250)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation and amortization   14,460    14,032 
Deferred income tax   2,327    318 
Share-based compensation expense   1,046    1,367 
Changes in assets and liabilities:          
Accounts receivable, net   (19,195)   (7,122)
Inventory, net   (7,890)   (16,693)
Accounts payable   (3,964)   10,666 
Accrued employment costs   2,595    (922)
Income taxes   (36)   (131)
Other, net   1,307    (399)
           
Net cash provided by operating activities   729    866 
           
Investing activity:          
Capital expenditures   (13,211)   (4,699)
           
Net cash used in investing activity   (13,211)   (4,699)
           
Financing activities:          
Borrowings under revolving credit facility   347,395    240,750 
Payments on revolving credit facility   (351,918)   (232,909)
Proceeds under New Markets Tax Credit financing   2,835    - 
Payments on term loan facility, capital leases, and notes   (11,821)   (3,908)
Payments of financing costs   (1,105)   - 
Proceed from public offering, net of cash expenses   32,246    - 
Proceeds from exercise of stock options   834    104 
           
Net cash provided by financing activities   18,466    4,037 
           
Net increase in cash and restricted cash   5,984    204 
Cash and restricted cash at beginning of period   207    75 
Cash and restricted cash at end of period $ 6,191  $ 279 
           


RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA 
                      
   Three Months ended  Nine months ended 
   September 30,  September 30, 
   2018  2017  2018  2017 
                      
Net income (loss)  $ 3,916  $ (259) $ 10,079  $ (250)
Interest expense    906    1,059    3,245    3,018 
Provision (Benefit) for income taxes    460    176    2,376    283 
Depreciation and amortization    4,845    4,667    14,460    14,032 
EBITDA    10,127    5,643    30,160    17,083 
Share-based compensation expense    369    396    1,046    1,367 
Adjusted EBITDA  $ 10,496  $ 6,039  $ 31,206  $ 18,450 
                      

 

CONTACTS: Dennis M. OatesChristopher T. ScanlonJune Filingeri
 Chairman,VP Finance, CFOPresident
 President and CEOand TreasurerComm-Partners LLC
 (412) 257-7609(412) 257-7662(203) 972-0186

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Source: Universal Stainless & Alloy Products, Inc.