U.S. Markets closed
  • S&P 500

    3,821.35
    -20.59 (-0.54%)
     
  • Dow 30

    31,802.44
    +306.14 (+0.97%)
     
  • Nasdaq

    12,609.16
    -310.99 (-2.41%)
     
  • Russell 2000

    2,202.98
    +10.77 (+0.49%)
     
  • Crude Oil

    65.00
    -0.05 (-0.08%)
     
  • Gold

    1,681.50
    +3.50 (+0.21%)
     
  • Silver

    25.25
    -0.02 (-0.08%)
     
  • EUR/USD

    1.1854
    -0.0071 (-0.5927%)
     
  • 10-Yr Bond

    1.5960
    +0.0420 (+2.70%)
     
  • Vix

    25.47
    +0.81 (+3.28%)
     
  • GBP/USD

    1.3824
    -0.0004 (-0.0263%)
     
  • USD/JPY

    108.9380
    +0.5560 (+0.5130%)
     
  • BTC-USD

    51,689.92
    +1,359.74 (+2.70%)
     
  • CMC Crypto 200

    1,045.17
    +20.96 (+2.05%)
     
  • FTSE 100

    6,719.13
    +88.61 (+1.34%)
     
  • Nikkei 225

    28,743.25
    -121.07 (-0.42%)
     

Universal Stainless Reports Fourth Quarter 2018 Results

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Q4 2018 Sales of $57.1 million, up 13.5% from Q4 2017

  • Q4 2018 Net Income is $0.6 million, or $0.07 per diluted share, versus $7.6 million in Q4 2017, which was comprised entirely of the 2017 tax law change benefits

  • EBITDA totals $5.4 million in Q4 2018 versus $5.8 million in Q4 2017

  • Quarter-End Backlog of $126.2 million, up 62.5% from Q4 2017 and up 13.3% sequentially

BRIDGEVILLE, Pa., Jan. 23, 2019 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (USAP) today reported that net sales for the fourth quarter of 2018 were $57.1 million, an increase of 13.5% from $50.3 million in the fourth quarter of 2017, although below 2018 third quarter revenues of $69.1 million. All end markets contributed to the year-over-year growth, with the exception of power generation and general industrial. Aerospace remained the Company's largest end market, at 61.5% of total Company sales. Fourth quarter 2018 aerospace sales totaled $35.1 million, up 23.7% from the fourth quarter of 2017.

Sales of premium alloys in the fourth quarter of 2018 totaled $8.1 million, or 14.2% of sales, compared with $7.3 million, or 14.6% of sales, in the fourth quarter of 2017, and $9.2 million, or 13.3% of sales, in the third quarter of 2018.

Full year 2018 sales increased 26.3% to a record $255.9 million from $202.6 million in 2017. Sales of premium alloys were also at a record level for full year 2018 increasing 50.7% to $41.1 million, or 16.1% of sales. 2017 premium alloy sales were $27.3 million or 13.5% of sales.

The Company's gross margin for the fourth quarter was 11.3% of sales, compared with 12.3% of sales in the fourth quarter of 2017, and 15.1% of sales in the third quarter of 2018. Margins were negatively impacted by continued cost increases in supply items, especially electrodes, coupled with misalignment of customer surcharges. In addition, lower productivity associated with labor contract negotiations, unplanned Bridgeville melt shop maintenance issues, as well as physical inventory adjustments further reduced fourth quarter gross margin.

Selling, general and administrative expenses were $5.6 million, or 9.7% of sales, for the fourth quarter of 2018, compared with $5.1 million, or 10.2% of sales, in the fourth quarter of 2017, and $5.1 million, or 7.4% of sales, for the third quarter of 2018.

Net income for the fourth quarter of 2018 totaled $0.6 million, or $0.07 per diluted share, (which includes an additional 1.4 million weighted average shares outstanding due to the second quarter 2018 equity issuance), compared with net income of $7.9 million, or $1.06 per diluted share, in the fourth quarter of 2017, which included a net tax benefit of $1.06 per diluted share primarily attributable to the new federal tax legislation. Before the tax benefit, net income in the fourth quarter of 2017 was breakeven. Net income in the 2018 third quarter totaled $3.9 million, or $0.44 per diluted share.

For full year 2018, net income increased 40.1% to $10.7 million, or $1.28 per diluted share, (which included an additional 0.8 million weighted average shares outstanding due to the second quarter equity issuance), versus net income of $7.6 million, or $1.03 per diluted share, in 2017, which included the tax benefit.

The Company’s EBITDA for the fourth quarter of 2018 was $5.4 million, compared with $5.8 million in the fourth quarter of 2017, and $10.1 million in the third quarter of 2018. Full year 2018 EBITDA increased 55.6% to $35.6 million from $22.9 million in 2017.

Managed working capital at December 31, 2018 totaled $123.0 million compared with $136.9 million at September 30, 2018.

Backlog (before surcharges) at December 31, 2018 was a record $126.2 million, an increase of 13.3% from September 30, 2018, and 62.5% higher than at the end of the 2017 fourth quarter.

Fourth quarter operating cash flow improved from the prior quarter and resulted in a debt reduction of $15.8 million in the quarter. The Company’s total debt at December 31, 2018 declined to $46.7 million, compared with $62.5 million at the end of the third quarter of 2018 and $79.7 million at the end of the fourth quarter of 2017.

Capital expenditures for the fourth quarter of 2018 totaled $2.2 million compared to $6.6 million for the third quarter of 2018 and $3.3 million in the fourth quarter of 2017. Fourth quarter capital expenditures were driven by the Company’s mid-size bar cell project at its Dunkirk, NY facility, which began the commissioning process late in the fourth quarter. 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 twelve months ended December 31, 2018 was 15.4%. The Company’s effective tax rate is less 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: “After a strong three quarters, the 2018 fourth quarter proved to be more difficult than anticipated. Even so, 2018 was a profitable year highlighted by record levels of both premium alloy and total sales. We exited the year with a strong balance sheet and significantly improved liquidity, and enter 2019 with a record backlog and healthy order entry across most of our end markets, especially aerospace. The mid-size bar cell in our Dunkirk, NY facility is on schedule to become fully operational in the 2019 first quarter. We are encouraged by the cycle time and quality improvements that the bar cell is expected to provide.”

Conference Call and Webcast

The Company has scheduled a conference call for today, January 23, 2019, at 10:00 a.m. (Eastern) to discuss fourth quarter 2018 results. Those wishing to listen to the live conference call via telephone should dial 706-679-0668, passcode 6498743. 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 first 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)

Three Months Ended

Year Ended

December 31,

December 31,

2018

2017

2018

2017

Net Sales

Stainless steel

$

39,571

$

33,307

$

176,955

$

139,603

High-strength low alloy steel

6,082

4,744

21,617

15,693

Tool steel

8,771

7,355

40,308

32,279

High-temperature alloy steel

1,840

4,350

11,467

12,435

Conversion services and other sales

799

518

5,580

2,633

Total net sales

57,063

50,274

255,927

202,643

Cost of products sold

50,639

44,115

218,111

179,609

Gross margin

6,424

6,159

37,816

23,034

Selling, general and administrative expenses

5,559

5,121

21,746

18,797

Operating income

865

1,038

16,070

4,237

Interest expense

802

1,005

4,047

4,022

Deferred financing amortization

60

63

255

255

Other (income) expense

(139

)

(6

)

(829

)

(49

)

Income (loss) before income taxes

142

(24

)

12,597

9

Provision (benefit) for income taxes

(441

)

(7,884

)

1,935

(7,601

)

Net income

$

583

$

7,860

$

10,662

$

7,610

Net income per common share - Basic

$

0.07

$

1.09

$

1.31

$

1.05

Net income per common share - Diluted

$

0.07

$

1.06

$

1.28

$

1.03

Weighted average shares of common

stock outstanding

Basic

8,728,631

7,238,372

8,132,632

7,225,697

Diluted

8,864,592

7,417,044

8,347,692

7,374,805


MARKET SEGMENT INFORMATION

Three Months Ended

Year ended

December 31,

December 31,

2018

2017

2018

2017

Net Sales

Service centers

$

41,013

$

34,641

$

180,165

$

140,259

Original equipment manufacturers

5,350

4,395

20,582

17,634

Rerollers

6,149

6,223

29,337

23,675

Forgers

3,752

4,497

20,263

18,442

Conversion services and other sales

799

518

5,580

2,633

Total net sales

$

57,063

$

50,274

$

255,927

$

202,643

Tons shipped

9,873

8,996

44,554

39,246

MELT TYPE INFORMATION

Three Months Ended

Year ended

December 31,

December 31,

2018

2017

2018

2017

Net Sales

Specialty alloys

$

48,155

$

42,428

$

209,203

$

172,715

Premium alloys *

8,109

7,328

41,144

27,295

Conversion services and other sales

799

518

5,580

2,633

Total net sales

$

57,063

$

50,274

$

255,927

$

202,643

END MARKET INFORMATION **

Three Months Ended

Year ended

December 31,

December 31,

2018

2017

2018

2017

Net Sales

Aerospace

$

35,108

$

28,391

$

148,850

$

111,795

Power generation

1,941

4,325

9,278

16,592

Oil & gas

6,282

4,773

31,493

19,069

Heavy equipment

9,117

7,545

41,623

33,876

General industrial, conversion services and other sales

4,615

5,240

24,683

21,311

Total net sales

$

57,063

$

50,274

$

255,927

$

202,643

* 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 customer. 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

December 31,

2018

2017

Assets

Cash

$

3,696

$

207

Accounts receivable, net

32,618

24,990

Inventory, net

134,738

116,663

Other current assets

3,756

4,404

Total current assets

174,808

146,264

Property, plant and equipment, net

177,844

174,444

Other long-term assets

668

523

Total assets

$

353,320

$

321,231

Liabilities and Stockholders' Equity

Accounts payable

$

44,379

$

34,898

Accrued employment costs

7,939

4,075

Current portion of long-term debt

3,907

4,707

Other current liabilities

2,929

1,268

Total current liabilities

59,154

44,948

Long-term debt, net

42,839

75,006

Deferred income taxes

11,481

9,605

Other long-term liabilities, net

2,835

4

Total liabilities

116,309

129,563

Stockholders’ equity

237,011

191,668

Total liabilities and stockholders’ equity

$

353,320

$

321,231


CONSOLIDATED STATEMENTS OF CASH FLOW

Year Ended

December 31,

2018

2017

Operating activities:

Net income

$

10,662

$

7,610

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

18,918

18,823

Deferred income tax

1,850

(7,593

)

Share-based compensation expense

1,368

1,564

Net gain on asset disposals

(9

)

(70

)

Changes in assets and liabilities:

Accounts receivable, net

(7,628

)

(5,567

)

Inventory, net

(20,373

)

(27,378

)

Accounts payable

5,293

14,178

Accrued employment costs

3,939

272

Income taxes

(246

)

77

Other, net

2,833

(811

)

Net cash provided by operating activities

16,607

1,105

Investing activities:

Capital expenditures

(15,388

)

(7,996

)

Proceeds from sale of property, plant and equipment

10

70

Net cash used in investing activities

(15,378

)

(7,926

)

Financing activities:

Borrowings under revolving credit facility

368,910

350,314

Payments on revolving credit facility

(388,728

)

(338,836

)

Proceeds under New Markets Tax Credit financing

2,835

-

Payments on term loan facility, capital leases, and notes

(12,364

)

(5,078

)

Payments of financing costs

(1,109

)

-

Proceeds from public offering, net of cash expenses

32,246

-

Proceeds from the exercise of stock options

865

553

Net cash provided by financing activities

2,655

6,953

Net increase in cash and restricted cash

3,884

132

Cash and restricted cash at beginning of period

207

75

Cash and restricted cash at end of period

$

4,091

$

207


RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA

Three Months ended

Twelve Months Ended

December 31,

December 31,

2018

2017

2018

2017

Net income

$

583

$

7,860

$

10,662

$

7,610

Interest expense

802

1,005

4,047

4,022

Provision (benefit) for income taxes

(441

)

(7,884

)

1,935

(7,601

)

Depreciation and amortization

4,458

4,791

18,918

18,823

EBITDA

5,402

5,772

35,562

22,854

Share-based compensation expense

322

197

1,368

1,564

Adjusted EBITDA

$

5,724

$

5,969

$

36,930

$

24,418



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