- Fourth Quarter Net Sales Are $31.7 Million; Premium Alloy Sales Increase 9.6%
- Fourth Quarter Net Loss Totals $0.48 per Diluted Share, including $0.22 of Charges in Response to Industry Downturn; Net Loss is $0.26 per Diluted Share Excluding Charges
- Quarter-End Backlog is $38.2 Million
- Total Debt Reduced by $5.5 Million in the Quarter; $15.6 Million Reduction in the Second Half
BRIDGEVILLE, Pa., Jan. 27, 2016 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) today reported that net sales for the fourth quarter of 2015 were $31.7 million, compared with $53.0 million in the fourth quarter of 2014. Sales of premium alloys totaled $3.9 million, or 12.3% of net sales, in the fourth quarter of 2015, an increase of 9.6% from the fourth quarter of 2014.
For full year 2015, net sales were $180.7 million compared with $205.6 million in 2014. Premium alloy sales for 2015 rose 27.4% to $17.6 million, or 9.7% of sales, compared with $13.8 million, or 6.7% of sales, for 2014. The Company’s backlog (before surcharges) at December 31, 2015 was $38.2 million, in line with $39.0 million at the end of the third quarter of 2015.
The Company’s gross margin for the fourth quarter of 2015 was a negative $0.9 million, or a negative 2.8% of net sales, and included pre-tax charges totaling $2.1 million related to the Company's response to the sharp industry downturn in 2015, including temporarily idling plant capacity and non-cash inventory write-downs.
Excluding the pre-tax charges, the Company’s gross margin was $1.2 million, or 3.9% of sales, for the fourth quarter of 2015, compared with a gross margin of $8.9 million, or 16.8% of sales in the fourth quarter of 2014. The Company’s gross margin in 2015 has been negatively impacted by the continued misalignment of surcharges and declining commodity prices. Gross margins have also been negatively impacted by lower activity levels.
Additionally, the Company incurred a $0.2 million charge to SG&A in the fourth quarter of 2015 for further reductions in the salary workforce. Excluding the charges incurred, underlying fourth quarter SG&A of $4.3 million decreased by $1.5 million from the fourth quarter of 2014.
The Company's net loss for the fourth quarter of 2015 was $3.4 million, or $0.48 per diluted share, including all the aforementioned charges, which totaled $1.5 million, or $0.22 per diluted share on an after-tax basis. Excluding all the above charges, the net loss was $1.9 million, or $0.26 per diluted share, in the fourth quarter of 2015. In the fourth quarter of 2014, net income was $1.7 million, or $0.24 per diluted share.
For full year 2015, the net loss was $20.7 million, or $2.92 per diluted share, including all charges in the fourth quarter of 2015 as well as after-tax charges in the third quarter of 2015 totaling $15.5 million, or $2.19 per diluted share, for actions taken due to the industry downturn as well as impairment of goodwill. Excluding all charges in the third and fourth quarters of 2015, the net loss for 2015 was $3.7 million, or $0.52 per diluted share, compared with net income of $4.1 million, or $0.57 per diluted share, in 2014.
The Company’s total debt at year end was $77.1 million, reflecting a reduction of $5.5 million in the fourth quarter of 2015 and a reduction of $15.6 million in the second half of 2015. In addition, the Company generated cash from operating activities of $6.6 million in the fourth quarter of 2015. Fourth quarter capital expenditures were $1.2 million. Subsequent to the end of the year, the Company completed a new 5-year $95 million credit agreement, and extended the maturity of its $20 million convertible notes to as late as March 2021.
Chairman, President and CEO Dennis Oates commented: “The fourth quarter was as challenging as expected and capped a difficult year for the specialty metals industry. The further decline in commodity prices and heightening economic uncertainty, fed by the downturn in China, kept customer orders to a minimum. Their destocking continued as they focused on reducing inventories by year end. All of our end markets were affected.
“Given the weak conditions, we continued to move aggressively in the quarter to cut costs and maintain positive cash flow. We also stayed focused on our ongoing objective of moving to higher value alloys. Our team made hard-earned progress in that effort and our premium alloy sales grew by 27% in 2015.
“While market recovery is expected to be slow in 2016, customers are expressing increasing comfort with their current inventory levels and there are some preliminary indications of stabilization in metal commodity prices. Fuller recovery in 2016 should occur as orders increasingly match material usage by customers, given the continued positive trends in most end markets. We are intensely focused on capturing market opportunities as they arise and fully aim to move forward in our strategy over the coming year.
“As we begin 2016, we are pleased to have completed our debt refinancing, and appreciate the support we have received from both PNC Bank and Bank of America.”
Webcast
The Company has scheduled a conference call for today, January 27, at 10:00 a.m. (Eastern) to discuss fourth quarter 2015 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 first quarter of 2016.
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.
-TABLES FOLLOW -
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except Per Share Information)
(Unaudited)
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
| Net Sales | ||||||||||||||||||||
| Stainless steel | $ | 21,965 | $ | 39,566 | $ | 135,945 | $ | 159,799 | ||||||||||||
| High-strength low alloy steel | 2,775 | 5,066 | 16,045 | 16,853 | ||||||||||||||||
| Tool steel | 3,064 | 5,365 | 16,197 | 16,680 | ||||||||||||||||
| High-temperature alloy steel | 2,576 | 1,725 | 7,557 | 6,295 | ||||||||||||||||
| Conversion services and other sales | 1,316 | 1,236 | 4,916 | 5,933 | ||||||||||||||||
| Total net sales | 31,696 | 52,958 | 180,660 | 205,560 | ||||||||||||||||
| Cost of products sold | 32,587 | 44,049 | 171,065 | 173,538 | ||||||||||||||||
| Gross margin | (891 | ) | 8,909 | 9,595 | 32,022 | |||||||||||||||
| Selling, general and administrative expenses | 4,533 | 5,805 | 19,406 | 21,122 | ||||||||||||||||
| Goodwill impairment | - | - | 20,268 | - | ||||||||||||||||
| Operating (loss) income | (5,424 | ) | 3,104 | (30,079 | ) | 10,900 | ||||||||||||||
| Interest expense | (511 | ) | (665 | ) | (2,324 | ) | (3,035 | ) | ||||||||||||
| Deferred financing amortization | (199 | ) | (160 | ) | (566 | ) | (644 | ) | ||||||||||||
| Other income (expense) | 241 | (21 | ) | 153 | (22 | ) | ||||||||||||||
| (Loss) income before income taxes | (5,893 | ) | 2,258 | (32,816 | ) | 7,199 | ||||||||||||||
| (Benefit) provision for income taxes | (2,497 | ) | 553 | (12,144 | ) | 3,149 | ||||||||||||||
| Net (loss) income | $ | (3,396 | ) | $ | 1,705 | $ | (20,672 | ) | $ | 4,050 | ||||||||||
| Net (loss) income per common share - Basic | $ | (0.48 | ) | $ | 0.24 | $ | (2.92 | ) | $ | 0.58 | ||||||||||
| Net (loss) income per common share - Diluted | $ | (0.48 | ) | $ | 0.24 | $ | (2.92 | ) | $ | 0.57 | ||||||||||
| Weighted average shares of common | ||||||||||||||||||||
| stock outstanding | ||||||||||||||||||||
| Basic | 7,092,233 | 7,040,086 | 7,069,954 | 7,031,539 | ||||||||||||||||
| Diluted | 7,092,233 | 7,522,554 | 7,069,954 | 7,116,431 | ||||||||||||||||
| MARKET SEGMENT INFORMATION | ||||||||||||
| Three Months Ended | Year ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||
| Net Sales | ||||||||||||
| Service centers | $ | 19,133 | $ | 36,639 | $ | 121,090 | $ | 137,298 | ||||
| Forgers | 2,691 | 5,199 | 15,143 | 24,918 | ||||||||
| Rerollers | 4,161 | 4,872 | 17,848 | 21,129 | ||||||||
| Original equipment manufacturers | 4,395 | 5,012 | 21,663 | 16,282 | ||||||||
| Conversion services and other sales | 1,316 | 1,236 | 4,916 | 5,933 | ||||||||
| Total net sales | $ | 31,696 | $ | 52,958 | $ | 180,660 | $ | 205,560 | ||||
| Tons shipped | 5,966 | 9,408 | 32,388 | 38,869 | ||||||||
| MELT TYPE INFORMATION | ||||||||||||
| Three Months Ended | Year ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||
| Net Sales | ||||||||||||
| Specialty alloys | $ | 26,481 | $ | 48,163 | $ | 158,145 | $ | 185,811 | ||||
| Premium alloys * | 3,899 | 3,559 | 17,599 | 13,816 | ||||||||
| Conversion services and other sales | 1,316 | 1,236 | 4,916 | 5,933 | ||||||||
| Total net sales | $ | 31,696 | $ | 52,958 | $ | 180,660 | $ | 205,560 | ||||
| END MARKET INFORMATION ** | ||||||||||||
| Three Months Ended | Year ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||
| Net Sales | ||||||||||||
| Aerospace | $ | 16,615 | $ | 32,078 | $ | 108,791 | $ | 120,947 | ||||
| Power generation | 2,997 | 5,821 | 19,212 | 23,498 | ||||||||
| Oil & gas | 4,098 | 4,694 | 17,094 | 19,470 | ||||||||
| Heavy equipment | 2,937 | 5,819 | 15,961 | 18,147 | ||||||||
| General industrial, conversion services and other sales | 5,049 | 4,546 | 19,602 | 23,498 | ||||||||
| Total net sales | $ | 31,696 | $ | 52,958 | $ | 180,660 | $ | 205,560 | ||||
* Premium alloys represent all vacuum induction melted (VIM) products.
** The majority of our products are sold to service centers/processors 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, that they will in-turn sell to the ultimate end market customer.
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| December 31, | ||||||
| 2015 | 2014* | |||||
| Assets | ||||||
| Cash | $ | 112 | $ | 142 | ||
| Accounts receivable, net | 17,683 | 29,057 | ||||
| Inventory, net | 83,373 | 101,070 | ||||
| Other current assets | 2,584 | 2,681 | ||||
| Total current assets | 103,752 | 132,950 | ||||
| Property, plant and equipment, net | 193,505 | 199,795 | ||||
| Goodwill | - | 20,268 | ||||
| Other long-term assets | 1,298 | 1,861 | ||||
| Total assets | $ | 298,555 | $ | 354,874 | ||
| Liabilities and Stockholders' Equity | ||||||
| Accounts payable | $ | 11,850 | $ | 25,009 | ||
| Accrued employment costs | 3,256 | 6,011 | ||||
| Current portion of long-term debt | 3,000 | 3,000 | ||||
| Other current liabilities | 641 | 861 | ||||
| Total current liabilities | 18,747 | 34,881 | ||||
| Long-term debt | 74,137 | 83,875 | ||||
| Deferred income taxes | 20,666 | 32,425 | ||||
| Other long-term liabilities | 29 | 63 | ||||
| Total liabilities | 113,579 | 151,244 | ||||
| Stockholders’ equity | 184,976 | 203,630 | ||||
| Total liabilities and stockholders’ equity | $ | 298,555 | $ | 354,874 | ||
*Due to the retrospective adoption of a new accounting standard in 2015, the December 31, 2014 balance sheet now reflects $9.7 million of deferred income tax assets reclassified to noncurrent deferred income taxes.
| CONSOLIDATED STATEMENTS OF CASH FLOW | ||||||||||
| Year Ended | ||||||||||
| December 31, | ||||||||||
| 2015 | 2014 | |||||||||
| Operating activities: | ||||||||||
| Net (loss) income | $ | (20,672 | ) | $ | 4,050 | |||||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||||
| Depreciation and amortization | 18,608 | 17,476 | ||||||||
| Deferred income tax | (12,060 | ) | 2,935 | |||||||
| Share-based compensation expense, net | 1,865 | 2,082 | ||||||||
| Goodwill impairment | 20,268 | - | ||||||||
| Changes in assets and liabilities: | ||||||||||
| Accounts receivable, net | 11,374 | (7,610 | ) | |||||||
| Inventory, net | 15,929 | (20,075 | ) | |||||||
| Accounts payable | (13,009 | ) | 10,721 | |||||||
| Accrued employment costs | (2,755 | ) | 2,581 | |||||||
| Income taxes | (248 | ) | 514 | |||||||
| Other, net | (130 | ) | 215 | |||||||
| Net cash provided by operating activities | 19,170 | 12,889 | ||||||||
| Investing activity: | ||||||||||
| Capital expenditures | (9,551 | ) | (11,173 | ) | ||||||
| Proceeds from insurance recovery | 218 | - | ||||||||
| Net cash used in investing activity | (9,333 | ) | (11,173 | ) | ||||||
| Financing activities: | ||||||||||
| Borrowings under revolving credit facility | 73,515 | 103,785 | ||||||||
| Payments on revolving credit facility | (80,253 | ) | (103,706 | ) | ||||||
| Payments on term loan facility | (3,000 | ) | (3,000 | ) | ||||||
| Proceeds from the issuance of common stock | 455 | 1,040 | ||||||||
| Payment of deferred financing costs | (584 | ) | - | |||||||
| Net cash used in financing activities | (9,867 | ) | (1,881 | ) | ||||||
| Net decrease in cash | (30 | ) | (165 | ) | ||||||
| Cash at beginning of period | 142 | 307 | ||||||||
| Cash at end of period | $ | 112 | $ | 142 | ||||||