Universal Stainless Reports Fourth Quarter 2020 Results
Universal Stainless & Alloy Products (USAP) reported a Q4 2020 net loss of $7.3 million, equating to $0.83 per diluted share, and a significant revenue decline of 16.3% quarter-over-quarter, totaling $31.3 million. The total debt was reduced by $10.4 million, and managed working capital decreased by $19.2 million. Despite challenges in aerospace and oil & gas markets due to COVID-19, sales in the General Industrial segment, particularly semiconductor demand, showed strength. The backlog fell to $48.0 million from $54.8 million in Q3 2020.
- Total debt reduced by $10.4 million quarter-over-quarter.
- Managed working capital declined by $19.2 million.
- Sales in semiconductor demand reached near-record levels.
- Fourth quarter premium alloy bookings improved, highest since Q1 2020.
- Net loss of $7.3 million in Q4 2020, an increase from Q3's $7.0 million loss.
- Sales decreased by 43.2% year-over-year compared to Q4 2019.
- Backlog decreased from $54.8 million in Q3 to $48.0 million in Q4.
- Fourth quarter gross margin was a loss of $5.1 million or (16.2%) of sales.
- Total debt reduced by
$10.4 million and managed working capital declined by$19.2 million from Q3 2020 - Q4 2020 Sales total
$31.3 million ; Premium alloy sales represent19.1% of total Q4 sales - Q4 2020 Net Loss of
$7.3 million , or$0.83 per diluted share; Net loss is$4.6 million , or$0.52 per diluted share, excluding$3.8 million (pre-tax) of fixed cost absorption charges, a$0.3 million (pre-tax) loss on the sale of excess scrap and$0.7 million (pre-tax) gain on insurance proceeds - EBITDA is a loss of
$3.9 million in Q4 2020; Adjusted EBITDA is a loss of$0.2 million - Quarter-end Backlog of
$48.0 million versus$54.8 million at end of Q3 2020
BRIDGEVILLE, Pa., Jan. 27, 2021 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported net sales for the fourth quarter of 2020 of
Sales of premium alloys in the fourth quarter of 2020 were
Chairman, President and CEO Dennis Oates commented: “The fourth quarter was a challenging quarter as expected, and we continued to operate at low activity levels, which negatively impacted profitability. Our focus on liquidity continued, with positive results, as we achieved our cash targets and reduced debt by more than
“Despite the challenging environment, we continue to see positive results within areas of our control, including increased efficiency of our operations as well as our quality programs. These favorable activities will allow for increased facility capacity and provide benefit as volumes increase. Most importantly, our safety performance, as measured by our OSHA recordable rate, marked a record low in 2020.
“The pandemic continued to limit air travel worldwide and airlines reduced new plane orders, ultimately depressing aerospace product demand. We did see a bright spot with the return to service of the Boeing 737-MAX, which should begin to benefit new aircraft production into 2022 and 2023. Within the oil and gas markets, customers remain reluctant to place orders even with the rise in oil prices and rig counts.
“Demand in the Heavy Equipment market was strong in the fourth quarter, especially for our products used in auto production and metals fabrication. Plate bookings have also remained strong. Growth in our General Industrial end market was especially strong in the quarter, led by semiconductor demand. In fact, sales to that end market for the quarter were at a near record level, and that strength is expected to continue in the coming months.
“We saw positive signs in our order entry in the fourth quarter, which has increased each quarter from its 2020 low point in the second quarter. Cancellations further slowed and were at their lowest level in 2020. Fourth quarter premium alloy bookings also improved and were at the highest levels since the 2020 first quarter, with ongoing demand for defense and specialty applications.
“Fourth quarter margins continued to be negatively impacted by lower activity levels and included fixed cost absorption direct charges. Margins were also negatively impacted by a
“Our continued focus on working capital reduction in the fourth quarter resulted in continued reductions in inventory and debt levels. Both inventory and debt further declined from the third quarter, with inventory reduced by
“Looking forward in 2021, we continue to expect measured improvement in activity levels as we move through the year, starting slowly in the first quarter. We will be focused on our strategic growth initiatives, which include strategic capital investment in our premium alloy production assets, including adding a vacuum arc remelt furnace and an 18-ton crucible to expand our capabilities and reduce costs.”
Mr. Oates concluded: “Once again I want to commend our team for their efforts and the results they achieved during a prolonged period of difficult challenges. With the support of our customers and our commitment to producing the critical products required by our markets, we are fully focused on making tangible progress in 2021.”
COVID-19 Response Summary
- Each of the Company’s facilities is an essential operation and continues to remain operational in accordance with the laws of the states in which the facilities are located.
- The Company continues to monitor the pandemic’s impact on the markets the Company serves, including the aerospace and oil & gas markets. The Company’s sales to the aerospace market have declined due to the reduction in air travel caused by the COVID-19 pandemic, as well as a sharp decline in aftermarket sales due to the significant reduction in air travel. The Company also has experienced extreme pressure in demand from the oil & gas market.
- On April 15, 2020, the Company entered into a
$10.0 million term note pursuant to the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security Act. The Company applied for full forgiveness of the PPP term note in the 2020 third quarter, and the PPP loan forgiveness process is currently underway. - While the Company expects the effects of the pandemic and the related responses to continue to negatively impact its results of operations, cash flows and financial position, the uncertainty over the duration and severity of the economic and operational impacts of COVID-19 means the Company cannot reasonably estimate the related future impacts at this time.
- The Company continues to adapt its operations due to lower activity levels. As a result, the Company’s measures to align its cost structure with current forecasted revenue and operating levels are ongoing.
Quarterly and Full Year Results of Operations
For full year 2020, net sales totaled
The Company's gross margin for the fourth quarter of 2020 was a loss of
Selling, general and administrative expenses were
The net loss for the fourth quarter of 2020 was
For full year 2020, the net loss was
The Company’s EBITDA for the fourth quarter of 2020 was a loss of
Managed working capital was
Backlog (before surcharges) at December 31, 2020 was
The Company’s total debt at December 31, 2020 was
Capital expenditures for the fourth quarter of 2020 totaled
Conference Call and Webcast
The Company has scheduled a conference call for today, January 27th, at 10:00 a.m. (Eastern) to discuss fourth quarter 2020 results. Those wishing to listen to the live conference call via telephone should dial 706-679-0668, passcode 9091458. 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 2021.
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; uncertainty regarding the progress of the return to service of the Boeing 737 MAX aircraft; 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 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’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; the ultimate outcome of the Company’s PPP loan forgiveness application; risks associated with conducting business with suppliers and customers in foreign countries; public health issues, including COVID-19 and its uncertain impact on our facilities and operations and our customers and suppliers and the effectiveness of the Company’s actions taken in response to these risks; 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, 2019 and the subsequent Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020, 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 | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Total net sales | 31,324 | 55,171 | 179,731 | 243,007 | ||||||||||||
| Cost of products sold | 36,399 | 49,317 | 182,387 | 215,369 | ||||||||||||
| Gross margin | (5,075 | ) | 5,854 | (2,656 | ) | 27,638 | ||||||||||
| Selling, general and administrative expenses | 4,203 | 5,252 | 19,752 | 20,347 | ||||||||||||
| Operating (loss) income | (9,278 | ) | 602 | (22,408 | ) | 7,291 | ||||||||||
| Interest expense | 552 | 956 | 2,784 | 3,765 | ||||||||||||
| Deferred financing amortization | 56 | 56 | 225 | 227 | ||||||||||||
| Other (income), net | (730 | ) | (53 | ) | (1,123 | ) | (474 | ) | ||||||||
| (Loss) income before income taxes | (9,156 | ) | (357 | ) | (24,294 | ) | 3,773 | |||||||||
| (Benefit) from income taxes | (1,851 | ) | (557 | ) | (5,247 | ) | (502 | ) | ||||||||
| Net (loss) income | $ | (7,305 | ) | $ | 200 | $ | (19,047 | ) | $ | 4,275 | ||||||
| Net (loss) income per common share - Basic | $ | (0.83 | ) | $ | 0.02 | $ | (2.16 | ) | $ | 0.49 | ||||||
| Net (loss) income per common share - Diluted | $ | (0.83 | ) | $ | 0.02 | $ | (2.16 | ) | $ | 0.48 | ||||||
| Weighted average shares of common | ||||||||||||||||
| stock outstanding | ||||||||||||||||
| Basic | 8,834,146 | 8,788,380 | 8,818,974 | 8,778,753 | ||||||||||||
| Diluted | 8,834,146 | 8,867,040 | 8,818,974 | 8,873,719 | ||||||||||||
| MARKET SEGMENT INFORMATION | ||||||||||||||||
| Three Months Ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net Sales | ||||||||||||||||
| Service centers | $ | 22,245 | $ | 36,331 | $ | 126,122 | $ | 166,327 | ||||||||
| Original equipment manufacturers | 4,159 | 5,413 | 20,783 | 24,731 | ||||||||||||
| Rerollers | 2,316 | 7,220 | 15,928 | 27,236 | ||||||||||||
| Forgers | 2,217 | 5,036 | 14,244 | 20,444 | ||||||||||||
| Conversion services and other sales | 387 | 1,171 | 2,654 | 4,269 | ||||||||||||
| Total net sales | $ | 31,324 | $ | 55,171 | $ | 179,731 | $ | 243,007 | ||||||||
| Tons shipped | 5,669 | 9,805 | 30,821 | 41,462 | ||||||||||||
| MELT TYPE INFORMATION | ||||||||||||||||
| Three Months Ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net Sales | ||||||||||||||||
| Specialty alloys | $ | 24,969 | $ | 46,609 | $ | 141,838 | $ | 201,120 | ||||||||
| Premium alloys * | 5,968 | 7,391 | 35,239 | 37,618 | ||||||||||||
| Conversion services and other sales | 387 | 1,171 | 2,654 | 4,269 | ||||||||||||
| Total net sales | $ | 31,324 | $ | 55,171 | $ | 179,731 | $ | 243,007 | ||||||||
| END MARKET INFORMATION ** | ||||||||||||||||
| Three Months Ended | Year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net Sales | ||||||||||||||||
| Aerospace | $ | 17,214 | $ | 37,627 | $ | 121,900 | $ | 170,445 | ||||||||
| Power generation | 956 | 2,942 | 6,879 | 11,530 | ||||||||||||
| Oil & gas | 2,287 | 6,256 | 13,065 | 25,023 | ||||||||||||
| Heavy equipment | 6,036 | 4,752 | 22,400 | 22,725 | ||||||||||||
| General industrial, conversion services and other sales | 4,831 | 3,594 | 15,487 | 13,284 | ||||||||||||
| Total net sales | $ | 31,324 | $ | 55,171 | $ | 179,731 | $ | 243,007 | ||||||||
| * 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, | ||||||||
| 2020 | 2019 | |||||||
| Assets | ||||||||
| Cash | $ | 164 | $ | 170 | ||||
| Accounts receivable, net | 18,101 | 35,595 | ||||||
| Inventory, net | 111,380 | 147,402 | ||||||
| Other current assets | 7,471 | 8,300 | ||||||
| Total current assets | 137,116 | 191,467 | ||||||
| Property, plant and equipment, net | 164,983 | 176,061 | ||||||
| Other long-term assets | 947 | 871 | ||||||
| Total assets | $ | 303,046 | $ | 368,399 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Accounts payable | $ | 12,632 | $ | 40,912 | ||||
| Accrued employment costs | 1,826 | 4,449 | ||||||
| Current portion of long-term debt | 16,713 | 3,934 | ||||||
| Other current liabilities | 2,722 | 830 | ||||||
| Total current liabilities | 33,893 | 50,125 | ||||||
| Long-term debt, net | 33,471 | 60,411 | ||||||
| Deferred income taxes | 5,725 | 10,962 | ||||||
| Other long-term liabilities, net | 4,277 | 3,765 | ||||||
| Total liabilities | 77,366 | 125,263 | ||||||
| Stockholders’ equity | 225,680 | 243,136 | ||||||
| Total liabilities and stockholders’ equity | $ | 303,046 | $ | 368,399 | ||||
| CONSOLIDATED STATEMENTS OF CASH FLOW | ||||||||
| Year Ended | ||||||||
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| Operating activities: | ||||||||
| Net (loss) income | $ | (19,047 | ) | $ | 4,275 | |||
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation and amortization | 19,449 | 19,133 | ||||||
| Deferred income tax | (5,231 | ) | (517 | ) | ||||
| Share-based compensation expense | 1,455 | 1,390 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable, net | 17,494 | (2,977 | ) | |||||
| Inventory, net | 34,326 | (14,965 | ) | |||||
| Accounts payable | (25,282 | ) | (1,412 | ) | ||||
| Accrued employment costs | (1,983 | ) | (3,490 | ) | ||||
| Income taxes | 243 | 84 | ||||||
| Other, net | 2,387 | (5,930 | ) | |||||
| Net cash provided by (used in) operating activities | 23,811 | (4,409 | ) | |||||
| Investing activity: | ||||||||
| Capital expenditures | (9,157 | ) | (17,354 | ) | ||||
| Net cash used in investing activity | (9,157 | ) | (17,354 | ) | ||||
| Financing activities: | ||||||||
| Borrowings under revolving credit facility | 115,876 | 174,907 | ||||||
| Payments on revolving credit facility | (136,877 | ) | (153,632 | ) | ||||
| Proceeds from Paycheck Protection Program Note | 10,000 | - | ||||||
| Payments on term loan facility, capital leases, and notes | (3,809 | ) | (3,904 | ) | ||||
| Issuance of common stock under share-based plans | 150 | 471 | ||||||
| Net cash (used in) provided by financing activities | (14,660 | ) | 17,842 | |||||
| Net increase in cash and restricted cash | (6 | ) | (3,921 | ) | ||||
| Cash and restricted cash at beginning of period | 170 | 4,091 | ||||||
| Cash and restricted cash at end of period | $ | 164 | $ | 170 | ||||
| RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA | ||||||||||||||||
| Three Months ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net (loss) income | $ | (7,305 | ) | $ | 200 | $ | (19,047 | ) | $ | 4,275 | ||||||
| Interest expense | 552 | 956 | 2,784 | 3,765 | ||||||||||||
| Benefit from income taxes | (1,851 | ) | (557 | ) | (5,247 | ) | (502 | ) | ||||||||
| Depreciation and amortization | 4,728 | 4,898 | 19,449 | 19,133 | ||||||||||||
| EBITDA | (3,876 | ) | 5,497 | (2,061 | ) | 26,671 | ||||||||||
| Share-based compensation expense | 326 | 290 | 1,455 | 1,390 | ||||||||||||
| Loss on sale of excess scrap | 300 | - | 654 | - | ||||||||||||
| Fixed cost absorption direct charge | 3,819 | - | 8,284 | - | ||||||||||||
| Employee severance costs | - | - | 620 | - | ||||||||||||
| Insurance-related (benefit) expense | (740 | ) | - | (1,047 | ) | - | ||||||||||
| Adjusted EBITDA | $ | (171 | ) | $ | 5,787 | $ | 7,905 | $ | 28,061 | |||||||
| CONTACTS: | Dennis M. Oates | Christopher T. Scanlon | June Filingeri |
| Chairman, | VP Finance, CFO | President | |
| President and CEO | and Treasurer | Comm-Partners LLC | |
| (412) 257-7609 | (412) 257-7662 | (203) 972-0186 |
FAQ
What were Universal Stainless's Q4 2020 financial results?
How did USAP's debt change in Q4 2020?
What sectors showed strength in sales for USAP in Q4 2020?
How did the backlog change for USAP in Q4 2020?
What was the impact of COVID-19 on USAP's sales?
