Universal Stainless & Alloy Products, Inc. (Nasdaq:
USAP) today reported net sales for the first quarter
of 2023 of $65.9 million, an increase of 17.2% from $56.2 million
in the fourth quarter of 2022, and an increase of 38.5% from net
sales of $47.6 million in the first quarter of 2022.
Sales of premium alloys in the first quarter of 2023 reached a
record $17.7 million, or 26.8% of sales, an increase of 30.6% from
$13.5 million, or 24.1% of sales, in the fourth quarter of 2022,
and an increase of 97.6% from $8.9 million, or 18.8% of sales, in
the first quarter of 2022.
The Company’s premium alloy sales are mainly driven by aerospace
demand. First quarter 2023 aerospace sales increased 22.2%
sequentially to $49.0 million, or 74.3% of sales, and were up 62.6%
from first quarter 2022 sales of $30.1 million.
The Company reported improvement in its gross margin, which
totaled $7.7 million, or 11.7% of sales, in the first quarter of
2023, compared with $2.4 million, or 4.3% of sales in the fourth
quarter of 2022, and $4.1 million, or 8.5% of sales, in the 2022
first quarter. The gross margin in the most recent quarter
benefited from higher shipment volume both sequentially and
year-over-year, increased production activity and higher selling
prices.
As a result, the Company reported operating income of $1.4
million versus an operating loss of $3.2 million in the fourth
quarter of 2022 and an operating loss of $1.0 million in the first
quarter of 2022.
The net loss was reduced to $0.5 million, or $0.06 per diluted
share, in the first quarter of 2023, from a net loss of $3.7
million, or $0.41 per diluted share, in the fourth quarter of 2022,
and a net loss of $1.6 million, or $0.18 per diluted share, in the
first quarter of 2022.
The Company’s EBITDA for the first quarter of 2023 increased to
$6.5 million from $1.7 million in the fourth quarter of 2022 and
$3.8 million in the year-ago first quarter. First quarter 2023
adjusted EBITDA totaled $6.8 million versus $2.1 million in the
2022 fourth quarter and $3.2 million in the 2022 first quarter.
Dennis Oates, Chairman, President and CEO, commented: “I am
pleased to report that our First Quarter results exceeded our
expectations. Net sales were the highest since the second quarter
of 2019. Premium alloy product sales were at record levels. Both
were driven by continued robust demand in the aerospace market. In
fact, premium product sales nearly doubled year-over-year as we
pushed forward with our growth strategy.
“Importantly, we achieved a gross profit margin of 11.7% of
sales, breaking through the double-digit level also for the first
time since 2019. Increased shipment volume and plant activity
levels, the higher premium sales mix, higher base selling prices,
and positive surcharges were the main contributors to our improved
profitability. Increased hiring along with training and better
retention also aided the quarter and bodes well for the rest of the
year. While supply chain issues persisted, they improved from last
year.
“We have entered 2023 on a very strong footing. Backlog at the
end of the first quarter reached a record $366 million, and
bookings of $117 million were also a quarter record. Business
conditions remain positive, even with current economic uncertainty,
with strong aerospace market demand continuing unabated. These
factors point to continued sales growth and profitability
improvement over the balance of the year.
“We are intent on making further progress in 2023 as we execute
our strategic plan. Our ability to do so rests, as always, on the
talents, commitment and hard work of all our employees.”
Financial Position
Managed working capital was $149.8 million at March 31, 2023,
compared with $145.9 million at December 31, 2022, and $142.7
million at March 31, 2022. Inventory at the end of the first
quarter of 2023 was $149.4 million, compared with $154.2 million at
the end of the fourth quarter of 2022, and $147.6 million at the
end of the 2022 first quarter. The sequential decrease in inventory
reflects higher sales and improved inventory turnover while
maintaining increased plant activity levels.
Backlog (before surcharges) increased 27.1% to a record $366.0
million at March 31, 2023 from $287.9 million at December 31, 2022,
and increased 81.4% from $201.8 million at the end of the first
quarter of 2022.
The Company’s total debt at March 31, 2023 was $99.4 million
compared with $98.4 million at December 31, 2022, and $76.0 million
at March 31, 2022. Interest expense increased to $2.0 million
compared with $1.6 million in the 2022 fourth quarter and $0.7
million in the 2022 first quarter. The increase compared to the
first quarter of 2021 was primarily driven by higher rates on the
Company’s variable debt, as the underlying interest rate on its
revolver and term loan borrowings increased from approximately 3%
in the prior year quarter to more than 7% in the 2023 first
quarter. The average total debt balance outstanding during the
quarter also increased approximately 30% compared to the same
quarter in the prior year.
Capital expenditures for the first quarter of 2023 totaled $4.5
million, compared with $1.1 million in the fourth quarter of 2022,
and $2.5 million in the first quarter of 2022. Approximately half
of capital expenditures in the 2023 first quarter were for the
Company’s VAR (Vacuum Arc Remelt) expansion project at its North
Jackson, Ohio operation.
Conference Call and Webcast
The Company has scheduled a conference call for today, April
26th, at 10:00 a.m. (Eastern) to discuss first quarter 2023
results. If you wish to listen to the live conference call via
telephone, please Click Here to register for
the call and obtain your dial-in number and personal PIN number. 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 2023.
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; changes in overall
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 its 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’s
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; public health issues, including
COVID-19 and its impact on the Company and our customers and
suppliers; 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 from 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 SEC, including the Company’s Annual Report on Form 10-K
for the year ended December 31, 2022, 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 noted special items
such as impairments and costs or income related to special events
such as periods of low activity or insurance claims. We believe
that 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 calculation 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, |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
65,865 |
|
|
$ |
47,562 |
|
|
|
|
|
|
|
|
|
Cost of products sold |
|
58,141 |
|
|
|
43,509 |
|
|
|
|
|
|
|
|
|
Gross margin |
|
7,724 |
|
|
|
4,053 |
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
6,275 |
|
|
|
5,049 |
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
1,449 |
|
|
|
(996 |
) |
|
|
|
|
|
|
|
|
Interest expense |
|
1,968 |
|
|
|
653 |
|
Deferred financing
amortization |
|
64 |
|
|
|
56 |
|
Other (income) expense,
net |
|
(42 |
) |
|
|
13 |
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
(541 |
) |
|
|
(1,718 |
) |
|
|
|
|
|
|
|
|
Income taxes (benefit) |
|
(29 |
) |
|
|
(103 |
) |
|
|
|
|
|
|
|
|
Net loss |
$ |
(512 |
) |
|
$ |
(1,615 |
) |
|
|
|
|
|
|
|
|
Net loss per common share -
Basic |
$ |
(0.06 |
) |
|
$ |
(0.18 |
) |
Net loss per common share -
Diluted |
$ |
(0.06 |
) |
|
$ |
(0.18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of
common stock outstanding: |
|
|
|
|
|
|
|
Basic |
|
9,055,815 |
|
|
|
8,946,174 |
|
Diluted |
|
9,055,815 |
|
|
|
8,946,174 |
|
MARKET SEGMENT INFORMATION |
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
Net Sales |
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
Service centers |
$ |
49,323 |
|
|
$ |
33,253 |
|
Original equipment
manufacturers |
|
4,208 |
|
|
|
4,704 |
|
Rerollers |
|
6,645 |
|
|
|
4,508 |
|
Forgers |
|
5,029 |
|
|
|
4,688 |
|
Conversion services and
other |
|
660 |
|
|
|
409 |
|
|
|
|
|
|
|
|
|
Total net sales |
$ |
65,865 |
|
|
$ |
47,562 |
|
|
|
|
|
|
|
|
|
Tons shipped |
|
7,502 |
|
|
|
6,829 |
|
|
|
|
|
|
|
|
|
MELT TYPE INFORMATION |
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
Net Sales |
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
Specialty alloys |
$ |
47,549 |
|
|
$ |
38,220 |
|
Premium alloys * |
|
17,656 |
|
|
|
8,933 |
|
Conversion services and other
sales |
|
660 |
|
|
|
409 |
|
|
|
|
|
|
|
|
|
Total net sales |
$ |
65,865 |
|
|
$ |
47,562 |
|
|
|
|
|
|
|
|
|
END MARKET INFORMATION ** |
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
Net Sales |
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
Aerospace |
$ |
48,958 |
|
|
$ |
30,102 |
|
Power generation |
|
1,086 |
|
|
|
1,297 |
|
Oil & gas |
|
4,752 |
|
|
|
4,352 |
|
Heavy equipment |
|
6,931 |
|
|
|
8,074 |
|
General industrial, conversion
services and other |
|
4,138 |
|
|
|
3,737 |
|
|
|
|
|
|
|
|
|
Total net sales |
$ |
65,865 |
|
|
$ |
47,562 |
|
|
|
|
|
|
|
|
|
* 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, |
|
|
2023 |
|
|
2022 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
$ |
1,510 |
|
|
$ |
2,019 |
|
Accounts receivable, net |
|
34,192 |
|
|
|
30,960 |
|
Inventory, net |
|
149,442 |
|
|
|
154,193 |
|
Other current assets |
|
10,380 |
|
|
|
10,392 |
|
|
|
|
|
|
|
|
|
Total current assets |
|
195,524 |
|
|
|
197,564 |
|
Property, plant and equipment,
net |
|
161,599 |
|
|
|
163,490 |
|
Deferred income taxes |
|
215 |
|
|
|
143 |
|
Other long-term assets |
|
1,928 |
|
|
|
2,137 |
|
|
|
|
|
|
|
|
|
Total assets |
$ |
359,266 |
|
|
$ |
363,334 |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
$ |
32,888 |
|
|
$ |
38,179 |
|
Accrued employment costs |
|
3,439 |
|
|
|
2,790 |
|
Current portion of long-term
debt |
|
3,370 |
|
|
|
3,419 |
|
Other current liabilities |
|
991 |
|
|
|
1,112 |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
40,688 |
|
|
|
45,500 |
|
Long-term debt, net |
|
96,069 |
|
|
|
95,015 |
|
Other long-term liabilities,
net |
|
3,053 |
|
|
|
3,066 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
139,810 |
|
|
|
143,581 |
|
Stockholders’ equity |
|
219,456 |
|
|
|
219,753 |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
$ |
359,266 |
|
|
$ |
363,334 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOW |
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
Operating
activities: |
|
|
|
|
|
|
|
Net loss |
$ |
(512 |
) |
|
$ |
(1,615 |
) |
Adjustments for non-cash items: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
5,032 |
|
|
|
4,871 |
|
Deferred income tax |
|
(68 |
) |
|
|
(122 |
) |
Share-based compensation expense |
|
361 |
|
|
|
409 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable, net |
|
(3,232 |
) |
|
|
(7,155 |
) |
Inventory, net |
|
4,320 |
|
|
|
(7,365 |
) |
Accounts payable |
|
(3,102 |
) |
|
|
7,872 |
|
Accrued employment costs |
|
649 |
|
|
|
(1,695 |
) |
Income taxes |
|
36 |
|
|
|
23 |
|
Other |
|
21 |
|
|
|
798 |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities |
|
3,505 |
|
|
|
(3,979 |
) |
|
|
|
|
|
|
|
|
Investing
activity: |
|
|
|
|
|
|
|
Capital expenditures |
|
(4,499 |
) |
|
|
(2,520 |
) |
|
|
|
|
|
|
|
|
Net cash used in investing
activity |
|
(4,499 |
) |
|
|
(2,520 |
) |
|
|
|
|
|
|
|
|
Financing
activities: |
|
|
|
|
|
|
|
Borrowings under revolving credit facility |
|
64,797 |
|
|
|
28,799 |
|
Payments on revolving credit facility |
|
(63,377 |
) |
|
|
(21,535 |
) |
Payments on term loan facility and finance leases |
|
(935 |
) |
|
|
(604 |
) |
|
|
|
|
|
|
|
|
Net cash provided by financing
activities |
|
485 |
|
|
|
6,660 |
|
|
|
|
|
|
|
|
|
Net (decrease) increase in
cash |
|
(509 |
) |
|
|
161 |
|
Cash at beginning of
period |
|
2,019 |
|
|
|
118 |
|
Cash at end of period |
$ |
1,510 |
|
|
$ |
279 |
|
RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED
EBITDA |
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(512 |
) |
|
$ |
(1,615 |
) |
Interest expense |
|
1,968 |
|
|
|
653 |
|
Income taxes (benefit) |
|
(29 |
) |
|
|
(103 |
) |
Depreciation and amortization |
|
5,032 |
|
|
|
4,871 |
|
EBITDA |
|
6,459 |
|
|
|
3,806 |
|
Share-based compensation expense |
|
361 |
|
|
|
409 |
|
AMJP benefit |
|
- |
|
|
|
(1,057 |
) |
Adjusted EBITDA |
$ |
6,820 |
|
|
$ |
3,158 |
|
CONTACTS: |
Dennis M. Oates |
Steven V. DiTommaso |
June Filingeri |
|
Chairman, |
Vice President and |
President |
|
President and CEO |
Chief Financial Officer |
Comm-Partners LLC |
|
(412) 257-7609 |
(412) 257-7661 |
(203) 972-0186 |
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