Universal Stainless & Alloy Products, Inc.
(Nasdaq:USAP) today reported results for the first quarter of 2017,
showing broad-based improvement sequentially, and year-over-year,
including increases in total sales, premium alloy sales, order
entry, backlog, and EBITDA. At the start of 2017, the market
has shown signs of sustained improvement, although continued
competitive challenges remain. We anticipate continued
topline growth, supported by our increased backlog. In
addition, we expect meaningful improvement to gross margin in the
near term.
Net sales for the first quarter of 2017 were $48.9 million, up
43.1% sequentially, and up 23.4% compared with the first quarter of
2016. While all end markets made positive contributions to sales,
aerospace and oil & gas, most notably, delivered sequential
growth of 59.9% and 55.4%, respectively. In the first quarter
of 2017, aerospace was 54.6% of total sales.
Sales of premium alloys in the first quarter of 2017 totaled a
record $5.8 million, or 11.9% of sales, compared with $3.1 million,
or 9.1% of sales, in the fourth quarter of 2016, and $4.1 million,
or 10.3% of sales, in the first quarter of 2016.
Backlog (before surcharges) at March 31, 2017 was $57.1 million,
up 30.3% from December 31, 2016, and up 43.5% from the end of the
2016 first quarter. Backlog at March 31, 2017 specific to
premium alloys was up 106.5% compared with December 31, 2016, and
up 245.1% compared with the end of the 2016 first quarter.
The Company’s gross margin for the first quarter of 2017 was
$4.2 million, or 8.7% of sales, compared with $3.1 million, or 9.1%
of sales, in the fourth quarter of 2016, and significantly improved
from $1.3 million, or 3.4% of sales, in the first quarter of
2016. Gross margin was negatively impacted in the first
quarter of 2017 by the sell-through of high cost product
manufactured in the lower activity months of 2016, as well as less
favorable product mix.
For the first quarter of 2017, the Company’s SG&A was $4.7
million, or 9.7% of sales, and included $0.3 million of costs
associated with a customer bankruptcy as well as increased legal
expenses related to an ongoing claim with a supplier for the
recovery of a previously recorded loss. SG&A was $4.5
million, or 13.3% of sales, in the fourth quarter of 2016, and $3.8
million, or 9.7% of sales, in the first quarter of 2016.
The Company's net loss for the first quarter of 2017 was $1.2
million, or $0.17 per diluted share, and included $0.03 after tax
loss per diluted share for the SG&A items noted above, and
$0.03 loss per diluted share associated with an adverse income tax
rate. The adverse income tax rate is relative to the standard
35.0% corporate tax rate, and includes the discrete impact of
adopting new accounting guidance related to stock-based
compensation, resulting in additional tax expense that would have
previously been booked to stockholders equity.
The Company’s EBITDA for the first quarter of 2017 was $4.2
million, up $1.0 million, or 31.9%, sequentially, and up $3.0
million, or 269.8%, compared with the first quarter of
2016.
The Company’s first quarter 2017 debt, net of cash, of $74.3
million increased by $1.8 million, compared with December 31, 2016,
driven by additional working capital in support of increased
business activity. Capital expenditures for the first quarter
of 2017 were $1.4 million, compared with $1.3 million in the fourth
quarter of 2016 and $0.8 million in the first quarter of 2016.
Chairman, President and CEO Dennis Oates commented: “After two
years of very challenging business conditions we are encouraged by
the strong start to 2017 in sales, order entry, and backlog. We
expect the general increase in business activity to continue as we
move through 2017. Bookings in the first quarter of
2017 were the highest in five years at $57.2 million and 24.4
million pounds – they were broad-based by all end user markets
including a substantial increase in premium alloys.
“In addition, we remain confident that the increased sales
volume, coupled with improving mix, growing benefits from
productivity gains, and recently announced price increases should
improve gross margin, returning Universal to sustained
profitability.”
Webcast
The Company has scheduled a conference call for today, April 26,
2017, at 10:00 a.m. (Eastern) to discuss first quarter 2017
results. 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
2017.
About Universal Stainless & Alloy Products,
Inc.
Universal Stainless & Alloy Products, Inc., 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.
Established in 1994, the Company, with its experience, technical
expertise, and dedicated workforce, stands committed to providing
the best quality, delivery, and service possible. 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 concentrated nature of the Company’s customer base to
date and the Company’s dependence on its significant customers; the
receipt, pricing and timing of future customer orders; changes in
product mix; the limited number of raw material and energy
suppliers and significant fluctuations that may occur in raw
material and energy prices; risks related to property, plant and
equipment, including the Company’s reliance on the continuing
operation of critical manufacturing equipment; risks associated
with labor matters; 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 and matters; risks related
to acquisitions that the Company may make; 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. 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, |
|
|
|
|
|
2017 |
|
|
2016 |
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
Stainless steel |
|
|
|
$ |
|
35,033 |
|
|
$ |
|
29,277 |
|
High-strength low alloy
steel |
|
|
|
|
|
4,172 |
|
|
|
|
3,779 |
|
Tool steel |
|
|
|
|
|
7,057 |
|
|
|
|
3,902 |
|
High-temperature alloy
steel |
|
|
|
|
|
1,976 |
|
|
|
|
1,640 |
|
Conversion services and
other sales |
|
|
|
|
|
637 |
|
|
|
|
996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net
sales |
|
|
|
|
|
48,875 |
|
|
|
|
39,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products
sold |
|
|
|
|
|
44,630 |
|
|
|
|
38,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin |
|
|
|
|
|
4,245 |
|
|
|
|
1,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
|
|
|
|
4,729 |
|
|
|
|
3,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss |
|
|
|
|
|
(484 |
) |
|
|
|
(2,497 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
939 |
|
|
|
|
983 |
|
Deferred financing
costs |
|
|
|
|
|
64 |
|
|
|
|
827 |
|
Other expense, net |
|
|
|
|
|
(6 |
) |
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes |
|
|
|
|
|
(1,481 |
) |
|
|
|
(4,360 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit for income
taxes |
|
|
|
|
|
(262 |
) |
|
|
|
(1,920 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
|
$ |
|
(1,219 |
) |
|
$ |
|
(2,440 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common
share -Basic |
|
|
|
$ |
|
(0.17 |
) |
|
$ |
|
(0.34 |
) |
Net loss per common
share -Diluted |
|
|
|
$ |
|
(0.17 |
) |
|
$ |
|
(0.34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
of common |
|
|
|
|
|
|
|
|
|
|
|
|
stock
outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
7,216,447 |
|
|
|
|
7,162,601 |
|
Diluted |
|
|
|
|
|
7,216,447 |
|
|
|
|
7,162,601 |
|
MARKET SEGMENT INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
|
2017 |
|
2016 |
|
Net Sales |
|
|
|
|
|
|
|
|
Service centers |
$ |
|
32,729 |
|
$ |
|
27,514 |
|
Original equipment
manufacturers |
|
|
4,122 |
|
|
|
4,295 |
|
Rerollers |
|
|
6,553 |
|
|
|
3,215 |
|
Forgers |
|
|
4,834 |
|
|
|
3,574 |
|
Conversion services and
other sales |
|
|
637 |
|
|
|
996 |
|
|
|
|
|
|
|
|
|
|
Total net
sales |
$ |
|
48,875 |
|
$ |
|
39,594 |
|
|
|
|
|
|
|
|
|
|
Tons shipped |
|
|
10,332 |
|
|
|
7,571 |
|
|
|
|
|
|
|
|
|
|
MELT TYPE INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
|
2017 |
|
2016 |
|
Net Sales |
|
|
|
|
|
|
|
|
Specialty alloys |
$ |
|
42,405 |
|
$ |
|
34,536 |
|
Premium alloys * |
|
|
5,833 |
|
|
|
4,062 |
|
Conversion services and
other sales |
|
|
637 |
|
|
|
996 |
|
|
|
|
|
|
|
|
|
|
Total net
sales |
$ |
|
48,875 |
|
$ |
|
39,594 |
|
|
|
|
|
|
|
|
|
|
END MARKET INFORMATION ** |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
|
2017 |
|
2016 |
|
Net Sales |
|
|
|
|
|
|
|
|
Aerospace |
$ |
|
26,692 |
|
$ |
|
25,366 |
|
Power generation |
|
|
4,234 |
|
|
|
3,497 |
|
Oil & gas |
|
|
4,889 |
|
|
|
3,345 |
|
Heavy equipment |
|
|
7,685 |
|
|
|
4,033 |
|
General industrial,
conversion services and other sales |
|
|
5,375 |
|
|
|
3,353 |
|
|
|
|
|
|
|
|
|
|
Total net
sales |
$ |
|
48,875 |
|
$ |
|
39,594 |
|
|
|
|
|
|
|
|
|
|
* 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, |
|
|
|
|
|
2017 |
|
2016 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
|
$ |
|
214 |
|
$ |
|
75 |
|
Accounts receivable,
net |
|
|
|
|
|
25,960 |
|
|
|
19,437 |
|
Inventory, net |
|
|
|
|
|
95,348 |
|
|
|
91,342 |
|
Other current
assets |
|
|
|
|
|
3,709 |
|
|
|
2,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets |
|
|
|
|
|
125,231 |
|
|
|
113,583 |
|
Property, plant and
equipment, net |
|
|
|
|
|
179,754 |
|
|
|
182,398 |
|
Other long-term
assets |
|
|
|
|
|
64 |
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets |
|
|
|
$ |
|
305,049 |
|
$ |
|
296,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
$ |
|
29,118 |
|
$ |
|
19,906 |
|
Accrued employment
costs |
|
|
|
|
|
2,432 |
|
|
|
3,803 |
|
Current portion of
long-term debt |
|
|
|
|
|
4,654 |
|
|
|
4,579 |
|
Other current
liabilities |
|
|
|
|
|
1,151 |
|
|
|
898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities |
|
|
|
|
|
37,355 |
|
|
|
29,186 |
|
Long-term debt |
|
|
|
|
|
69,845 |
|
|
|
67,998 |
|
Deferred income
taxes |
|
|
|
|
|
16,495 |
|
|
|
17,629 |
|
Other long-term
liabilities |
|
|
|
|
|
12 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities |
|
|
|
|
|
123,707 |
|
|
|
114,825 |
|
Stockholders’
equity |
|
|
|
|
|
181,342 |
|
|
|
181,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity |
|
|
|
$ |
|
305,049 |
|
$ |
|
296,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH
FLOW |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
Operating
activities: |
|
|
|
|
|
|
|
|
|
Net
loss |
$ |
|
(1,219 |
) |
|
$ |
|
(2,440 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
4,717 |
|
|
|
|
4,506 |
|
Deferred
income tax |
|
|
(296 |
) |
|
|
|
(1,928 |
) |
Write off
of deferred financing fees |
|
|
- |
|
|
|
|
768 |
|
Share-based compensation expense |
|
|
534 |
|
|
|
|
405 |
|
Net gain
on asset disposals |
|
|
- |
|
|
|
|
(389 |
) |
Changes
in assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts
receivable, net |
|
|
(6,523 |
) |
|
|
|
(4,238 |
) |
Inventory, net |
|
|
(4,499 |
) |
|
|
|
652 |
|
Accounts
payable |
|
|
9,423 |
|
|
|
|
5,438 |
|
Accrued
employment costs |
|
|
(1,371 |
) |
|
|
|
(1,005 |
) |
Income
taxes |
|
|
32 |
|
|
|
|
269 |
|
Other,
net |
|
|
(790 |
) |
|
|
|
(495 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities |
|
|
8 |
|
|
|
|
1,543 |
|
Investing
activities: |
|
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(1,413 |
) |
|
|
|
(818 |
) |
Proceeds
from sale of property, plant and equipment |
|
|
- |
|
|
|
|
1,571 |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in)
provided by investing activities |
|
|
(1,413 |
) |
|
|
|
753 |
|
Financing
activities: |
|
|
|
|
|
|
|
|
|
Borrowings under revolving credit facility |
|
|
71,863 |
|
|
|
|
71,323 |
|
Payments
on revolving credit facility |
|
|
(68,721 |
) |
|
|
|
(88,585 |
) |
Borrowings under term loan facility |
|
|
- |
|
|
|
|
30,000 |
|
Payments
on term loan facility, capital leases, and convertible notes |
|
|
(1,598 |
) |
|
|
|
(14,033 |
) |
Payment
of deferred financing costs |
|
|
- |
|
|
|
|
(702 |
) |
Proceeds
from the issuance of common stock |
|
|
- |
|
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) financing activities |
|
|
1,544 |
|
|
|
|
(1,497 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase in
cash |
|
|
139 |
|
|
|
|
799 |
|
Cash at beginning of
period |
|
|
75 |
|
|
|
|
112 |
|
Cash at end of
period |
$ |
|
214 |
|
|
$ |
|
911 |
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NET LOSS TO EBITDA AND
ADJUSTED EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended |
|
|
|
|
|
March 31, |
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
$ |
|
(1,219 |
) |
|
$ |
|
(2,440 |
) |
Interest
expense |
|
|
|
|
|
939 |
|
|
|
|
983 |
|
Benefit
for income taxes |
|
|
|
|
|
(262 |
) |
|
|
|
(1,920 |
) |
Depreciation and amortization |
|
|
|
|
|
4,717 |
|
|
|
|
4,506 |
|
EBITDA |
|
|
|
|
|
4,175 |
|
|
|
|
1,129 |
|
Share-based compensation expense |
|
|
|
|
|
534 |
|
|
|
|
405 |
|
Write-off
of deferred financing costs |
|
|
|
|
|
- |
|
|
|
|
768 |
|
Adjusted EBITDA |
|
|
|
$ |
|
4,709 |
|
|
$ |
|
2,302 |
|
CONTACTS:
Dennis M. Oates
Chairman,
President and CEO
(412) 257-7609
Ross C. Wilkin
VP Finance, CFO
and Treasurer
(412) 257-7662
Brian M. Rayle
Managing Director
Libertatis Consulting
(440) 827-2019
Unversal Stainless and A... (NASDAQ:USAP)
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