News Releases
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Universal Stainless Reports Record Second Quarter 2006 Results
-- EPS reaches $0.69 on sales of $48 million --
-- Backlog rises to $128 million --
BRIDGEVILLE, Pa., July 20, 2006 -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) reported today that net income for the second quarter of 2006 rose 41% to a record $4.6 million, or $0.69 per diluted share, on a 15% increase in sales, which reached a record $48.0 million. This compares with net income of $3.3 million, or $0.50 per diluted share, and sales of $41.9 million reported in the second quarter of 2005. Net income for the six months ended June 30, 2006 was $8.5 million, or $1.29 per diluted share, on sales of $93.0 million, in comparison to net income of $6.2 million, or $0.96 per diluted share, and sales of $84.9 million in the year ago period. Second quarter 2006 diluted EPS exceeded the Company's forecasted range of $0.60 to $0.65 and sales were at the high end of the expected range of $43 to $48 million. President and CEO Mac McAninch commented: "Our growth momentum continued in the second quarter because of the strength of our markets, the benefits of our capital investment program and the effectiveness of our pricing strategy. Aerospace demand continues to be a powerful driver in our marketplace, especially in the requirement for remelted grades of steel, which is also reflected in our growing record backlog. We were better able to respond to that opportunity in the second quarter with the full benefit of our new vacuum-arc remelt (VAR) furnace, which contributed to record sales for both segments of our company. We are working to get our seventh VAR furnace operational before the end of August. Our capital investments and our workforce additions enabled us to meet our customer demand more effectively." Mr. McAninch concluded: "We expect our growth to continue in the third quarter and are optimistic about the balance of the year and beyond. Our optimism is based upon the positive outlook for all our end markets, the continuing acute needs of our customers and global opportunities for our products." Segment Review In the second quarter of 2006, the Universal Stainless & Alloy Products segment had record sales of $45.7 million and record operating income of $5.8 million, yielding an operating margin of 13%. This compares with second quarter 2005 sales of $37.2 million and operating income of $3.6 million, or 10% of sales. In the first quarter of 2006, sales were $39.1 million and operating income was $4.9 million, or 13% of sales. The 23% increase in sales from the 2005 second quarter and the 17% increase over the 2006 first quarter reflect the full-quarter contribution of a new vacuum-arc remelt furnace installed in December 2005 in the Company's Bridgeville facility as well as from two additional milling machines and a new plate flattener added in the 2006 first quarter. The increase in sales over the 2005 second quarter also was due to higher product prices and a continued favorable product mix, including strong growth in shipments of bar and plate products to service centers and OEMs and of special shape products, which offset lower shipments to rerollers. Increased shipments to service centers and OEMs also contributed to the sales growth over the prior quarter. Operating income rose 60% from the 2005 second quarter and 18% from the 2006 first quarter due to the improved pricing and mix of products shipped and enhanced operating efficiency due to the capital investments. The Dunkirk Specialty Steel segment reported second quarter 2006 record sales of $16.2 million and record operating income of $2.3 million, resulting in an operating margin of 14%. This compares with sales of $12.4 million and operating income of $1.8 million, or 15% of sales, in the second quarter of 2005. In the first quarter of 2006 sales were $14.0 million and operating income of $1.5 million, resulting in an operating margin of 10%. Dunkirk's sales increased 31% over the 2005 second quarter and 16% over the 2006 first quarter due to improved feedstock supply from the Bridgeville facility and workforce additions that helped increase throughput. The sales growth over both prior periods also reflected higher selling prices and increased shipments of bar and wire products to service centers and OEMs. Those factors also contributed to a 23% increase in operating income over the 2005 second quarter and a 54% increase over the 2006 first quarter, which had been impacted by the higher cost of raw materials at the time of feedstock procurement. Business Outlook The following statements are based on the Company's current expectations. These statements are forward-looking, and actual results may differ materially. The Company estimates that third quarter 2006 sales will range from $45 to $50 million and that diluted EPS will range from $0.65 to $0.70. This compares with sales of $43.1 million and diluted EPS of $0.51 in the third quarter of 2005. The following factors were considered in developing these estimates:
-- The Company's total backlog at June 30, 2006 approximated $128
million compared to $118 million at March 31, 2006, reflecting
robust aerospace demand and continued strong power generation,
petrochemical and tool steel markets.
-- Sales from the Dunkirk Specialty Steel segment are expected to
increase to $17 million due to the increased capability of the
Bridgeville facility to supply remelted steel feedstock as well
as from the increased headcount.
Webcast A simultaneous Webcast of the Company's conference call discussing the second quarter of 2006 and the third quarter outlook, scheduled at 10:00 a.m. (Eastern) today, will be available on the Company's website at www.univstainless.com, and thereafter archived on the website. A telephone replay of the conference call will be available beginning at 12:00 noon (Eastern) today and continuing through July 27th. It can be accessed by dialing 706-645-9291, passcode 2702994. This is a toll call. About Universal Stainless & Alloy Products, Inc. Universal Stainless & Alloy Products, Inc., headquartered in Bridgeville, Pa., manufactures and markets a broad line of semi-finished and finished specialty steels, including stainless steel, tool steel and certain other alloyed steels. The Company's products are sold to rerollers, forgers, service centers, original equipment manufacturers and wire redrawers. 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, risks associated with the receipt, pricing and timing of future customer orders, risks associated with significant fluctuations that may occur in raw material and energy prices, risks associated with the manufacturing process and production yields, risks related to property, plant and equipment and risks related to the ultimate outcome of the Company's current and future litigation and regulatory matters. 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.
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share information)
(Unaudited)
CONSOLIDATED STATEMENT OF OPERATIONS
For the Quarter Ended For the Six-Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Net Sales
Stainless steel $ 35,015 $ 34,205 $ 68,433 $ 67,824
Tool steel 7,410 4,359 13,237 10,376
High-strength low
alloy steel 3,241 1,642 5,793 2,764
High-temperature
alloy steel 1,744 711 4,113 1,736
Conversion
services 504 850 1,233 1,964
Other 105 96 147 218
---------- ---------- ---------- ----------
Total net sales 48,019 41,863 92,956 84,882
Cost of products
sold 37,692 34,197 74,012 70,607
Selling and
administrative
expenses 2,879 2,385 5,135 4,292
---------- ---------- ---------- ----------
Operating income 7,448 5,281 13,809 9,983
Interest expense (269) (200) (535) (372)
Other income 2 3 4 63
---------- ---------- ---------- ----------
Income before
taxes 7,181 5,084 13,278 9,674
Income tax
provision 2,585 1,831 4,780 3,483
---------- ---------- ---------- ----------
Net income $ 4,596 $ 3,253 $ 8,498 $ 6,191
========== ========== ========== ==========
Earnings per
share -- Basic $ 0.72 $ 0.51 $ 1.32 $ 0.97
========== ========== ========== ==========
Earnings per
share -- Diluted $ 0.69 $ 0.50 $ 1.29 $ 0.96
========== ========== ========== ==========
Weighted average
shares of Common
Stock
outstanding
Basic 6,426,374 6,363,831 6,421,848 6,357,189
Diluted 6,615,204 6,451,326 6,588,813 6,459,901
MARKET SEGMENT INFORMATION
For the Quarter Ended For the Six-Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Net Sales
Service centers $ 26,318 $ 17,050 $ 49,356 $ 35,357
Rerollers 7,377 11,250 15,224 23,278
Forgers 6,857 7,907 14,421 14,170
Original
equipment
manufacturers 4,956 2,598 9,555 4,922
Wire redrawers 1,876 2,113 3,020 4,985
Conversion
services 504 850 1,233 1,964
Other 131 95 147 206
---------- ---------- ---------- ----------
Total net sales $ 48,019 $ 41,863 $ 92,956 $ 84,882
========== ========== ========== ==========
Tons shipped 12,741 13,383 24,785 28,613
========== ========== ========== ==========
BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the Quarter Ended For the Six-Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Net Sales
Stainless steel $22,444 $23,536 $46,011 $45,313
Tool steel 7,254 4,247 12,614 10,154
High-strength low
alloy steel 1,690 920 2,929 1,313
High-temperature
alloy steel 718 703 1,759 1,728
Conversion services 384 705 922 1,656
Other 72 43 112 160
------- ------- ------- -------
32,562 30,154 64,347 60,324
Intersegment 13,138 7,003 20,490 15,258
------- ------- ------- -------
Total net sales 45,700 37,157 84,837 75,582
Material cost of
sales 20,346 18,454 37,754 38,280
Operation cost of
sales 17,484 13,304 32,735 28,083
Selling and
administrative
expenses 2,026 1,755 3,555 2,896
------- ------- ------- -------
Operating income $ 5,844 $ 3,644 $10,793 $ 6,323
======= ======= ======= =======
Dunkirk Specialty Steel Segment
For the Quarter Ended For the Six-Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Net Sales
Stainless steel $12,571 $10,669 $22,422 $22,511
Tool steel 156 112 623 222
High-strength low
alloy steel 1,551 722 2,864 1,451
High-temperature
alloy steel 1,026 8 2,354 8
Conversion services 120 145 311 308
Other 33 53 35 58
------- ------- ------- -------
15,457 11,709 28,609 24,558
Intersegment 722 663 1,557 1,481
------- ------- ------- -------
Total net sales 16,179 12,372 30,166 26,039
Material cost of
sales 8,938 6,442 16,909 13,556
Operation cost of
sales 4,131 3,465 7,953 7,389
Selling and
administrative
expenses 853 630 1,580 1,396
------- ------- ------- -------
Operating income $ 2,257 $ 1,835 $ 3,724 $ 3,698
======= ======= ======= =======
CONSOLIDATED BALANCE SHEET
June 30, December 31,
2006 2005
---- ----
Assets
Cash $ 512 $ 620
Accounts receivable, net 32,843 27,963
Inventory 59,129 51,398
Deferred taxes 1,398 1,084
Other current assets 1,452 1,706
-------- --------
Total current assets 95,334 82,771
Property, plant & equipment, net 49,560 45,761
Other assets 498 495
-------- --------
Total assets $145,392 $129,027
======== ========
Liabilities and Stockholders' Equity
Trade accounts payable $ 13,660 $ 12,579
Deferred revenue 4,326 384
Accrued employment costs 3,981 2,958
Outstanding checks in excess of bank
balance 3,386 3,101
Current portion of long-term debt 2,459 1,555
Other current liabilities 1,173 530
-------- --------
Total current liabilities 28,985 21,107
Bank revolver 6,831 6,117
Long-term debt 10,018 11,200
Deferred taxes 9,609 9,600
-------- --------
Total liabilities 55,443 48,024
Stockholders' equity 89,949 81,003
-------- --------
Total liabilities and stockholders'
equity $145,392 $129,027
======== ========
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Six-month Period Ended June 30,
2006 2005
---- ----
Cash flows provided by operating activities:
Net income $ 8,498 $ 6,191
Adjustments to reconcile to net cash
provided by operating
activities:
Depreciation and amortization 1,639 1,532
Loss on retirement of fixed assets -- 342
Deferred tax (decrease) increase (343) 412
Stock based compensation expense 126 --
Tax benefit from exercise of stock options -- 115
Excess tax benefits from share-based
payment arrangements (115) --
Changes in assets and liabilities:
Accounts receivable, net (4,880) (3,107)
Inventory (7,731) (9,955)
Trade accounts payable 1,081 4,731
Deferred revenue 3,942 151
Accrued employment costs 1,023 1,045
Other, net 899 890
------- -------
Cash flow provided by operating activities 4,139 2,347
------- -------
Cash flow used in investing activities:
Capital expenditures (5,290) (2,931)
------- -------
Cash flow used in investing activities (5,290) (2,931)
------- -------
Cash flows used in financing activities:
Revolving credit net borrowings 714 (4,057)
Proceeds from long-term debt -- 8,050
Long-term debt repayments (278) (618)
Net change in outstanding checks in excess
of bank balance 285 (2,186)
Proceeds from issuance of common stock 207 312
Excess tax benefits from share-based
payment arrangements 115 --
------- -------
Cash flow used in financing activities 1,043 1,501
------- -------
Net cash flow $ (108) $ 917
======= =======
CONTACT: Universal Stainless & Alloy Products, Inc.
Richard M. Ubinger, Vice President of Finance,
Chief Financial Officer and Treasurer
(412) 257-7606
Comm-Partners LLC
June Filingeri, President
(203) 972-0186
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