News Column

Universal Stainless Reports Fourth Quarter and Full Year 2013 Results

February 5, 2014

Fourth Quarter Backlog Is Up over 17% from Third Quarter on Stronger Fourth Quarter Bookings Full Year Positive Cash Flow of $28.6 Million ; Debt Reduced by $16.9 Million in 2013 BRIDGEVILLE, Pa. , Feb. 5, 2014 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) today reported net sales of $40.3 million for the fourth quarter of 2013 and a net loss of $2.9 million , or $0.41 per diluted share, including a write-down of a deferred state tax asset of approximately $1.0 million , or $0.14 per diluted share. In the fourth quarter of 2012, net sales were $47.2 million and net income was $1.1 million , or $0.16 per diluted share. Compared with the fourth quarter of 2012, tons shipped to the aerospace market increased 6% and power generation shipments were up 8%, while shipments to the oil and gas market were down 51% and heavy equipment market shipments were down 2%. However, backlog (before surcharges) in the fourth quarter increased by 17.2% to $46.8 million from the third quarter of 2013 as a result of stronger fourth quarter 2013 bookings. The Company's gross margin for the fourth quarter of 2013 was $1.5 million , or 3.7% of sales, compared with a gross margin as a percentage of sales of 12.7% in the fourth quarter of 2012. The decrease was primarily the result of lower shipments and operating activity, product mix and the misalignment of surcharges to raw material costs. As a result, the Company incurred an operating loss of $2.6 million in the fourth quarter of 2013 compared to operating income of $1.8 million in the fourth quarter of 2012. For full year 2013, the Company's net sales were $180.8 million and the net loss was $4.1 million , or $0.58 per diluted share. That compares with net sales of $251.0 million and net income of $14.6 million , or $2.02 per diluted share, for 2012. The Company continued to generate positive cash from operations, which totaled $7.5 million in the fourth quarter of 2013 and $28.6 million for the full year of 2013. In turn, the Company repaid $4.8 million of its debt during the fourth quarter and $16.9 million for all of 2013, primarily as a result of lowering inventory levels by $11.7 million . Capital expenditures in 2013 totaled $11.8 million compared to $35.1 million for 2012. Chairman, President and CEO Dennis Oates commented: "Our fourth quarter sales level was in line with our expectations, although the mix remained weighted towards lower margin semi-finished products. "In contrast to most of the past year, we saw a substantial improvement in our order entry in the fourth quarter, which increased 26% sequentially and 42% from the fourth quarter of 2012. "We also continued to achieve strong cash flow from operations in the quarter through our continued focus on managing inventories, controlling capital spending and reducing debt. "The renewed pick-up in order entry started in October 2013 and has continued thus far in the first quarter, with our North Jackson facility strongly participating in the improvement. While we expect shipments for those orders to build progressively as we go through 2014, the improvement supports a more positive view about the current year, especially the second half, based on current market expectations. "In the meantime, we will continue to execute our strategic plan to further realize the benefits of North Jackson and build upon the substantial progress in customer approvals, industry certifications achieved in 2013 and our continued new product development." Webcast The Company has scheduled a conference call for today, February 5 , at 10:00 a.m. (Eastern) to discuss fourth quarter and full year 2013 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 2014. 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 - CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Year Ended December 31 , December 31 , 2013 2012 2013 2012 Net Sales Stainless steel $ 31,580 $ 34,471 $ 137,383 $ 195,315 Tool steel 4,161 4,782 18,112 20,420 High-strength low alloy steel 3,063 4,938 17,894 21,897 High-temperature alloy steel 1,034 1,688 4,277 7,787 Conversion services and other sales 448 1,271 3,102 5,571 Total net sales 40,286 47,150 180,768 250,990 Cost of products sold 38,798 41,183 166,888 209,841 Gross margin 1,488 5,967 13,880 41,149 Selling, general and administrative expenses 4,034 4,215 17,493 17,365 Severance expenses 36 -- 392 381 Operating (loss) income (2,582) 1,752 (4,005) 23,403 Interest expense (631) (590) (2,598) (2,284) Deferred financing amortization (133) (78) (444) (308) Other income -- 51 481 140 (Loss) income before income taxes (3,346) 1,135 (6,566) 20,951 (Benefit) provision for income taxes (477) 54 (2,504) 6,334 Net (loss) income $ (2,869) $ 1,081 $ (4,062) $ 14,617 Net (loss) income per common share Basic $ (0.41) $ 0.16 $ (0.58) $ 2.13 Net (loss) income per common share Diluted * $ (0.41) $ 0.16 $ (0.58) $ 2.02 Weighted average shares of common stock outstanding Basic 6,973,382 6,907,744 6,950,976 6,874,669 Diluted 6,973,382 7,455,809 6,950,976 7,454,030 * Diluted earnings per common share have been adjusted for interest expense, net of tax on convertible notes of $126 and $458 for the three months and year ended December 31, 2012 , respectively. MARKET SEGMENT INFORMATION Three Months Ended Year ended December 31 , December 31 , 2013 2012 2013 2012 Net Sales Service centers $ 23,499 $ 30,943 $ 115,859 $ 151,034 Rerollers 7,364 5,492 27,021 37,343 Forgers 5,504 5,754 21,254 36,678 Original equipment manufacturers 3,471 3,690 13,532 20,364 Conversion services and other sales 448 1,271 3,102 5,571 Total net sales $ 40,286 $ 47,150 $ 180,768 $ 250,990 Tons shipped 8,449 8,877 36,477 47,802 MELT TYPE INFORMATION Three Months Ended Year ended December 31 , December 31 , 2013 2012 2013 2012 Net Sales Specialty alloys $ 37,013 $ 42,748 $ 167,040 $ 234,588 Premium alloys * 2,825 3,131 10,626 10,831 Conversion services and other sales 448 1,271 3,102 5,571 Total net sales $ 40,286 $ 47,150 $ 180,768 $ 250,990 END MARKET INFORMATION ** Three Months Ended Year ended December 31 , December 31 , 2013 2012 2013 2012 Net Sales Aerospace $ 22,893 $ 25,665 $ 102,341 $ 129,172 Power generation 5,003 5,854 21,671 33,532 Oil & gas 3,059 7,580 18,880 49,126 Heavy equipment 4,587 4,783 19,788 20,421 General industrial, conversion services and other sales 4,744 3,268 18,088 18,739 Total net sales $ 40,286 $ 47,150 $ 180,768 $ 250,990 * Premium alloys represent all VIM-produced products. ** End market information is our estimate based upon customers and grade of material sold that will in-turn sell to the ultimate end market customer. CONDENSED CONSOLIDATED BALANCE SHEETS December 31, 2013 2012 Assets Cash $ 307 $ 321 Accounts receivable, net 21,447 24,781 Inventory, net 82,593 95,749 Deferred income taxes 13,330 22,739 Other current assets 3,906 3,272 Total current assets 121,583 146,862 Property, plant and equipment, net 203,590 206,150 Goodwill 20,268 20,268 Other long-term assets 2,771 2,418 Total assets $ 348,212 $ 375,698 Liabilities and Stockholders' Equity Accounts payable $ 14,288 $ 10,610 Accrued employment costs 3,430 4,671 Current portion of long-term debt 3,000 1,500 Other current liabilities 1,023 735 Total current liabilities 21,741 17,516 Long-term debt 86,796 105,242 Deferred income taxes 42,820 55,227 Other long-term liabilities 397 -- Total liabilities 151,754 177,985 Stockholders' equity 196,458 197,713 Total liabilities and stockholders' equity $ 348,212 $ 375,698 CONSOLIDATED STATEMENTS OF CASH FLOW Year Ended December 31 , 2013 2012 Operating activities: Net (loss) income $ (4,062) $ 14,617 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 16,489 14,602 Loss on sale of property, plant and equipment -- (12) Deferred income tax (2,998) 12,635 Share-based compensation expense 1,827 1,649 Changes in assets and liabilities: Accounts receivable, net 3,334 10,267 Inventory, net 11,725 (12,636) Accounts payable 3,391 (20,130) Accrued employment costs (1,241) (2,876) Income taxes 494 3,208 Other, net (340) (180) Net cash provided by operating activities 28,619 21,144 Investing activities: Capital expenditures, net of amount included in current liabilities (11,502) (34,229) Proceeds from sale of property, plant and equipment -- 14 Net cash used in investing activities (11,502) (34,215) Financing activities: Payments on revolving credit facility (92,230) (87,000) Borrowings under revolving credit facility 76,784 119,092 Payments on term loan facility (1,500) (20,000) Proceeds from the issuance of common stock 1,117 1,608 Payment of deferred financing costs (1,165) (348) Purchase of treasury stock (137) (234) Net cash (used in) provided by financing activities (17,131) 13,118 Net (decrease) increase in cash (14) 47 Cash at beginning of period 321 274 Cash at end of period $ 307 $ 321 Supplemental non-cash investing activity: Capital expenditures included in current liabilities $ 287 $ 828 CONTACT: Dennis M. Oates Chairman, President and CEO (412) 257-7609 Michael D. Bornak VP Finance, CFO and Treasurer (412) 257-7606 June Filingeri President Comm-Partners LLC (203) 972-0186 Source: Universal Stainless & Alloy Products, Inc.


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