Universal Stainless Reports Second Quarter 2020 Results
Universal Stainless & Alloy Products (USAP) reported Q2 2020 sales of $52.5 million, down 10.3% from Q1 and 26.1% year-over-year. Premium alloy sales surged 62.3% sequentially, reaching $12.4 million. The net loss was $3.3 million, or $0.38 per diluted share. EBITDA was $1.4 million, a decrease from $4.0 million in Q1 2020. Backlog declined to $71.8 million from $110.7 million in Q1 due to weak end-market demand, particularly in aerospace and oil & gas. The pandemic's effects continue to impact operations, with the company adapting its cost structure to align with lower activity levels.
- Premium alloy sales increased 62.3% sequentially to $12.4 million.
- Strong demand in defense market sales.
- Net loss of $3.3 million, widening from previous quarter's $1.4 million loss.
- Sales down 10.3% from Q1 2020 and 26.1% year-over-year.
- Backlog decreased to $71.8 million from $110.7 million in Q1 2020.
- Q2 2020 Sales total
$52.5 million ; Premium alloy sales rise62.3% sequentially - Q2 2020 Net Loss of
$3.3 million , or$0.38 per diluted share; Net loss of$2.4 million , or$0.27 per diluted share, excluding charges in response to the COVID-19 pandemic - EBITDA totals
$1.4 million in Q2 2020 - Quarter-end Backlog of
$71.8 million versus$110.7 million at end of Q1 2020 - Q2 2020 cash flow from operations totaled
$7.4 million
BRIDGEVILLE, Pa., July 29, 2020 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported that net sales for the second quarter of 2020 were
Sales of premium alloys in the second quarter of 2020 increased
Chairman, President and CEO Dennis Oates commented: “The COVID-19 pandemic continues to cause dislocation in the metals supply chain, as it takes a further sharp toll on end market demand, especially in aerospace and oil & gas.
“In aerospace, the decrease in aircraft production rates has been further impacted by reduced air travel causing airlines to cancel and delay orders for new airplanes. Aftermarket demand declined in the quarter due to the significant reduction in air traffic which began in March. While defense market sales remained strong, demand and related sales levels from the aerospace and oil and gas markets remain under extreme pressure.
“Our premium alloy sales increased
“Even with the areas of strength in the second quarter, our current order entry and backlog point to a sequential step-down in quarterly sales and operating activity for the balance of the year.
“We are adapting our operations to lower activity levels, aggressively reducing costs, and generating cash. As a result, our current cost structure is in-line with our forecasted revenues and operating levels. We will continue to review demand and operating levels as the markets we serve continue to evolve.”
COVID-19 Response Summary
- Each of the Company’s facilities is considered to be an essential operation and remains 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, primarily due to the cancellation or delay in orders for new airplanes caused by the fall-off 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 term note in a principal amount of
$10.0 million pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act. The related eight-week forgiveness period expired June 11, 2020, and the Company will apply for full forgiveness of the term note. - 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 has taken measures to align its current cost structure with reduced forecasted revenue and operating levels.
Quarterly and Year-to-Date Results of Operations
For the first six months of 2020, sales totaled
The Company's gross margin for the second quarter of 2020 was
Selling, general and administrative (SG&A) expenses were
The net loss for the second quarter of 2020 was
For the first six months of 2020, the net loss was
The Company’s EBITDA for the second quarter of 2020 was
Managed working capital at June 30, 2020 totaled
Backlog (before surcharges) at June 30, 2020 was
The Company’s total debt at June 30, 2020 was
Capital expenditures for the second quarter of 2020 totaled
Chairman, President and CEO Dennis Oates concluded: “In the face of the unprecedented challenges confronting both our Company and our industry, Universal continues to be strengthened by the critical products we produce, by the support of our customers, and by the dedication and diligence of our employees. We remain deeply committed to the safety and wellbeing of our employees and to our customers.”
Conference Call and Webcast
The Company has scheduled a conference call for today, July 29th, at 10:00 a.m. (Eastern) to discuss second quarter 2020 results. Those wishing to listen to the live conference call via telephone should dial 706-679-0668, passcode 1491355. 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 third quarter of 2020.
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 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, comply with applicable financial covenants, and the timing and total amount of forgiveness of PPP funds received; 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 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 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 | Six months ended | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||
| Net sales | $ | 52,479 | $ | 70,997 | $ | 110,973 | $ | 131,268 | ||||||||||||
| Cost of products sold | 50,542 | 61,891 | 104,127 | 114,792 | ||||||||||||||||
| Gross margin | 1,937 | 9,106 | 6,846 | 16,476 | ||||||||||||||||
| Selling, general and administrative expenses | 5,397 | 5,604 | 11,305 | 10,570 | ||||||||||||||||
| Operating (loss) income | (3,460 | ) | 3,502 | (4,459 | ) | 5,906 | ||||||||||||||
| Interest expense | 750 | 966 | 1,646 | 1,820 | ||||||||||||||||
| Deferred financing amortization | 57 | 56 | 113 | 115 | ||||||||||||||||
| Other expense (income), net | 3 | 10 | (14 | ) | 31 | |||||||||||||||
| (Loss) income before income taxes | (4,270 | ) | 2,470 | (6,204 | ) | 3,940 | ||||||||||||||
| (Benefit) provision for income taxes | (939 | ) | 384 | (1,462 | ) | 632 | ||||||||||||||
| Net (loss) income | $ | (3,331 | ) | $ | 2,086 | $ | (4,742 | ) | $ | 3,308 | ||||||||||
| Net (loss) income per common share - Basic | $ | (0.38 | ) | $ | 0.24 | $ | (0.54 | ) | $ | 0.38 | ||||||||||
| Net (loss) income per common share - Diluted | $ | (0.38 | ) | $ | 0.24 | $ | (0.54 | ) | $ | 0.37 | ||||||||||
| Weighted average shares of common stock outstanding: | ||||||||||||||||||||
| Basic | 8,810,396 | 8,773,263 | 8,805,866 | 8,769,242 | ||||||||||||||||
| Diluted | 8,810,396 | 8,847,827 | 8,805,866 | 8,860,143 | ||||||||||||||||
| MARKET SEGMENT INFORMATION | ||||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| Net Sales | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
| Service centers | $ | 35,010 | $ | 48,247 | $ | 77,894 | $ | 91,303 | ||||||||||||
| Original equipment manufacturers | 6,524 | 9,230 | 12,219 | 14,456 | ||||||||||||||||
| Rerollers | 5,334 | 7,356 | 10,439 | 13,387 | ||||||||||||||||
| Forgers | 4,676 | 4,998 | 8,576 | 9,819 | ||||||||||||||||
| Conversion services and other sales | 935 | 1,166 | 1,845 | 2,303 | ||||||||||||||||
| Total net sales | $ | 52,479 | $ | 70,997 | $ | 110,973 | $ | 131,268 | ||||||||||||
| Tons shipped | 8,987 | 11,720 | 19,107 | 21,880 | ||||||||||||||||
| MELT TYPE INFORMATION | ||||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| Net Sales | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
| Specialty alloys | $ | 39,102 | $ | 57,017 | $ | 89,022 | $ | 106,781 | ||||||||||||
| Premium alloys * | 12,442 | 12,814 | 20,106 | 22,184 | ||||||||||||||||
| Conversion services and other sales | 935 | 1,166 | 1,845 | 2,303 | ||||||||||||||||
| Total net sales | $ | 52,479 | $ | 70,997 | $ | 110,973 | $ | 131,268 | ||||||||||||
| END MARKET INFORMATION ** | ||||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| Net Sales | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
| Aerospace | $ | 37,150 | $ | 49,335 | $ | 79,548 | $ | 91,942 | ||||||||||||
| Power generation | 2,116 | 3,201 | 4,333 | 5,704 | ||||||||||||||||
| Oil & gas | 3,619 | 7,738 | 8,023 | 13,114 | ||||||||||||||||
| Heavy equipment | 5,561 | 7,177 | 11,702 | 13,621 | ||||||||||||||||
| General industrial, conversion services and other sales | 4,033 | 3,546 | 7,367 | 6,887 | ||||||||||||||||
| Total net sales | $ | 52,479 | $ | 70,997 | $ | 110,973 | $ | 131,268 | ||||||||||||
| * 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 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, which they will in-turn sell to the ultimate end market customer. | ||||||||||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
| June 30, | December 31, | |||||||||
| 2020 | 2019 | |||||||||
| Assets | ||||||||||
| Cash | $ | 263 | $ | 170 | ||||||
| Accounts receivable, net | 33,189 | 35,595 | ||||||||
| Inventory, net | 135,072 | 147,402 | ||||||||
| Other current assets | 6,446 | 8,300 | ||||||||
| Total current assets | 174,970 | 191,467 | ||||||||
| Property, plant and equipment, net | 172,059 | 176,061 | ||||||||
| Other long-term assets | 752 | 871 | ||||||||
| Total assets | $ | 347,781 | $ | 368,399 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Accounts payable | $ | 16,504 | $ | 40,912 | ||||||
| Accrued employment costs | 5,469 | 4,449 | ||||||||
| Current portion of long-term debt | 16,689 | 3,934 | ||||||||
| Other current liabilities | 752 | 830 | ||||||||
| Total current liabilities | 39,414 | 50,125 | ||||||||
| Long-term debt, net | 55,794 | 60,411 | ||||||||
| Deferred income taxes | 9,546 | 10,962 | ||||||||
| Other long-term liabilities, net | 3,618 | 3,765 | ||||||||
| Total liabilities | 108,372 | 125,263 | ||||||||
| Stockholders’ equity | 239,409 | 243,136 | ||||||||
| Total liabilities and stockholders’ equity | $ | 347,781 | $ | 368,399 | ||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | ||||||||||
| Six months ended | ||||||||||
| June 30, | ||||||||||
| 2020 | 2019 | |||||||||
| Operating activities: | ||||||||||
| Net (loss) income | $ | (4,742 | ) | $ | 3,308 | |||||
| Adjustments for non-cash items: | ||||||||||
| Depreciation and amortization | 9,989 | 9,422 | ||||||||
| Deferred income tax | (1,443 | ) | 608 | |||||||
| Share-based compensation expense | 834 | 768 | ||||||||
| Changes in assets and liabilities: | ||||||||||
| Accounts receivable, net | 2,406 | (8,399 | ) | |||||||
| Inventory, net | 11,279 | (6,494 | ) | |||||||
| Accounts payable | (21,583 | ) | (8,115 | ) | ||||||
| Accrued employment costs | 1,020 | (3,227 | ) | |||||||
| Income taxes | 230 | (1 | ) | |||||||
| Other, net | 1,593 | (3,535 | ) | |||||||
| Net cash used in operating activities | (417 | ) | (15,665 | ) | ||||||
| Investing activity: | ||||||||||
| Capital expenditures | (7,224 | ) | (9,396 | ) | ||||||
| Net cash used in investing activity | (7,224 | ) | (9,396 | ) | ||||||
| Financing activities: | ||||||||||
| Borrowings under revolving credit facility | 82,680 | 108,777 | ||||||||
| Payments on revolving credit facility | (82,070 | ) | (84,532 | ) | ||||||
| Proceeds from Paycheck Protection Program Note | 10,000 | - | ||||||||
| Payments on term loan facility, finance leases, and notes | (2,962 | ) | (2,944 | ) | ||||||
| Issuance of common stock under share-based plans | 86 | 327 | ||||||||
| Net cash provided by financing activities | 7,734 | 21,628 | ||||||||
| Net increase (decrease) in cash and restricted cash | 93 | (3,433 | ) | |||||||
| Cash and restricted cash at beginning of period | 170 | 4,091 | ||||||||
| Cash and restricted cash at end of period | $ | 263 | $ | 658 | ||||||
| RECONCILIATION OF NET (LOSS) INCOME TO EBITDA AND ADJUSTED EBITDA | ||||||||||||||||||||
| Three months ended | Six months ended | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||
| Net (loss) income | $ | (3,331 | ) | $ | 2,086 | $ | (4,742 | ) | $ | 3,308 | ||||||||||
| Interest expense | 750 | 966 | 1,646 | 1,820 | ||||||||||||||||
| (Benefit) provision for income taxes | (939 | ) | 384 | (1,462 | ) | 632 | ||||||||||||||
| Depreciation and amortization | 4,965 | 4,776 | 9,989 | 9,422 | ||||||||||||||||
| EBITDA | 1,445 | 8,212 | 5,431 | 15,182 | ||||||||||||||||
| Share-based compensation expense | 323 | 336 | 834 | 768 | ||||||||||||||||
| Loss on sale of excess scrap | 354 | - | 354 | - | ||||||||||||||||
| Fixed cost absorption direct charge | 201 | - | 201 | - | ||||||||||||||||
| Employee severance costs | 620 | - | 620 | - | ||||||||||||||||
| Forge fire-related expense | - | 357 | - | 357 | ||||||||||||||||
| Adjusted EBITDA | $ | 2,943 | $ | 8,905 | $ | 7,440 | $ | 16,307 | ||||||||||||
| 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 Q2 2020 sales figures?
How did premium alloy sales perform in Q2 2020 for USAP?
What was the net loss for Universal Stainless in Q2 2020?
What is the status of USAP’s backlog at the end of Q2 2020?
How has COVID-19 impacted USAP's sales?
