Universal Stainless Reports Third Quarter 2021 Results
Universal Stainless & Alloy Products (Nasdaq: USAP) reported Q3 2021 sales of $37.2 million, a 3.5% decrease from Q2 2021. However, backlog increased significantly by 26.5% to $125.1 million, the highest since Q1 2019, boosted by $58 million in new orders. Gross margin improved to 6.2%, while net income reached $7.9 million, or $0.87 per diluted share, mainly due to a $10 million PPP loan forgiveness. Adjusted EBITDA stood at $3.8 million. Aerospace sales rose by 4.4%, constituting 60% of total sales. Inventory increased to $135.6 million, reflecting higher raw material costs.
- Quarter-end backlog increased 26.5% to $125.1 million, highest since Q1 2019.
- Q3 2021 gross margin improved to 6.2% from 5.6% in Q2 2021.
- Net income of $7.9 million includes $10 million gain on PPP loan forgiveness.
- Aerospace sales increased 4.4% sequentially, representing 60% of total sales.
- Total debt reduced to $51.5 million from $53.0 million in Q2 2021.
- Q3 2021 sales decreased 3.5% from Q2 2021.
- Net loss before PPP gain was $2.1 million, compared to a loss of $2.5 million in Q2 2021.
- Sales of premium alloys decreased to 16% of total sales from 24.5% in Q3 2020.
- Heavy equipment market sales dropped 18% sequentially.
- Quarter-end Backlog increases
26.5% to$125.1 million versus$98.9 million at end of Q2 2021 - Q3 2021 Sales are
$37.2 million ; Premium alloy sales are16.0% of sales - Q3 2021 Gross margin improves to
6.2% of sales from5.6% in Q2 2021 - Q3 2021 Net income of
$7.9 million , or$0.87 per diluted share, includes$10 million gain on PPP loan forgiveness. Net loss is$2.1 million , or$0.23 per diluted share, before PPP gain, versus loss of$2.5 million , or$0.28 per diluted share, in Q2 2021 - Q3 2021 EBITDA is
$12.1 million including PPP gain; Adjusted EBITDA is$3.8 million
BRIDGEVILLE, Pa., Oct. 20, 2021 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported net sales for the third quarter of 2021 of
Sales of premium alloys in the third quarter of 2021 were
The Company's gross margin increased in the third quarter to
Chairman, President and CEO Dennis Oates commented: “Our backlog of
“Despite those headwinds, recovery in the aerospace market, our largest end market, continued on pace and was driven by further improvement in commercial air travel and ongoing defense spending. Our third quarter aerospace sales increased
“Our sales to the oil & gas market also increased from the second quarter, rising
“The growth in aerospace and oil and gas sales was offset by lower sales in the balance of our end markets versus the second quarter. Heavy equipment market sales were off
“We continue to benefit from positive operating leverage as activity levels rise. Substantial increases in raw material costs and general inflationary trends in key inputs are being offset by our surcharges and base price increases.
“We are focused on restoring our profitability and controlling working capital as operations ramp up to meet our rapidly growing backlog. Third quarter results are further evidence of progress in this effort. We are also commissioning a new vacuum arc re-melting furnace and installing expanded vacuum induction melting capability designed to support the growth of premium products and continuously improve the efficiency of our melt operations. Our balance sheet remains strong to support our strategic initiatives.”
Mr. Oates concluded: “While current supply chain challenges will likely persist, we remain determined to make further progress in the fourth quarter and take full advantage of our recovering markets, especially aerospace, as we move into 2022. We will continue to rely on the commitment of our team, the support of our customers and our focus on providing critical products to our markets to do so.”
Quarterly and Year-to-Date Results of Operations
For the first nine months of 2021, net sales totaled
Net income for the third quarter of 2021 was
The Company’s EBITDA for the third quarter of 2021 was
Managed working capital was
Backlog (before surcharges) increased
The Company’s total debt at September 30, 2021 was
Capital expenditures for the third quarter of 2021 totaled
Conference Call and Webcast
The Company has scheduled a conference call for today, October 20th, at 10:00 a.m. (Eastern) to discuss third quarter 2021 results. Those wishing to listen to the live conference call via telephone should dial 706-679-0668, passcode 9394716. 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 fourth 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; 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; 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, 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 | Nine months ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||
| Net sales | $ | 37,169 | $ | 37,434 | $ | 112,709 | $ | 148,407 | ||||||||||||
| Cost of products sold | 34,862 | 41,861 | 108,486 | 145,988 | ||||||||||||||||
| Gross margin | 2,307 | (4,427 | ) | 4,223 | 2,419 | |||||||||||||||
| Selling, general and administrative expenses | 5,010 | 4,153 | 15,392 | 15,458 | ||||||||||||||||
| Operating loss | (2,703 | ) | (8,580 | ) | (11,169 | ) | (13,039 | ) | ||||||||||||
| Interest expense | 483 | 586 | 1,413 | 2,232 | ||||||||||||||||
| Deferred financing amortization | 56 | 56 | 168 | 169 | ||||||||||||||||
| Gain on extinguishment of debt | (10,000 | ) | - | (10,000 | ) | - | ||||||||||||||
| Other expense (income), net | 9 | (288 | ) | 32 | (302 | ) | ||||||||||||||
| Income (loss) before income taxes | 6,749 | (8,934 | ) | (2,782 | ) | (15,138 | ) | |||||||||||||
| Income taxes | (1,141 | ) | (1,934 | ) | (3,650 | ) | (3,396 | ) | ||||||||||||
| Net income (loss) | $ | 7,890 | $ | (7,000 | ) | $ | 868 | $ | (11,742 | ) | ||||||||||
| Net income (loss) per common share - Basic | $ | 0.88 | $ | (0.79 | ) | $ | 0.10 | $ | (1.33 | ) | ||||||||||
| Net income (loss) per common share - Diluted | $ | 0.87 | $ | (0.79 | ) | $ | 0.10 | $ | (1.33 | ) | ||||||||||
| Weighted average shares of common stock outstanding: | ||||||||||||||||||||
| Basic | 8,917,858 | 8,829,732 | 8,902,484 | 8,813,880 | ||||||||||||||||
| Diluted | 9,082,371 | 8,829,732 | 9,050,847 | 8,813,880 | ||||||||||||||||
| MARKET SEGMENT INFORMATION | ||||||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| Net Sales | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Service centers | $ | 26,333 | $ | 25,983 | $ | 80,185 | $ | 103,877 | ||||||||||||
| Original equipment manufacturers | 3,336 | 4,405 | 10,916 | 16,624 | ||||||||||||||||
| Rerollers | 4,722 | 3,173 | 13,629 | 13,612 | ||||||||||||||||
| Forgers | 2,518 | 3,451 | 7,012 | 12,027 | ||||||||||||||||
| Conversion services and other | 260 | 422 | 967 | 2,267 | ||||||||||||||||
| Total net sales | $ | 37,169 | $ | 37,434 | $ | 112,709 | $ | 148,407 | ||||||||||||
| Tons shipped | 6,144 | 6,046 | 20,460 | 25,153 | ||||||||||||||||
| MELT TYPE INFORMATION | ||||||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| Net Sales | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Specialty alloys | $ | 30,973 | $ | 27,847 | $ | 92,359 | $ | 116,869 | ||||||||||||
| Premium alloys * | 5,936 | 9,165 | 19,383 | 29,271 | ||||||||||||||||
| Conversion services and other sales | 260 | 422 | 967 | 2,267 | ||||||||||||||||
| Total net sales | $ | 37,169 | $ | 37,434 | $ | 112,709 | $ | 148,407 | ||||||||||||
| END MARKET INFORMATION ** | ||||||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| Net Sales | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| Aerospace | $ | 22,253 | $ | 25,138 | $ | 65,798 | $ | 104,686 | ||||||||||||
| Power generation | 847 | 1,590 | 3,453 | 5,923 | ||||||||||||||||
| Oil & gas | 4,041 | 2,755 | 11,045 | 10,778 | ||||||||||||||||
| Heavy equipment | 7,614 | 4,662 | 24,967 | 16,364 | ||||||||||||||||
| General industrial, conversion services and other | 2,414 | 3,289 | 7,446 | 10,656 | ||||||||||||||||
| Total net sales | $ | 37,169 | $ | 37,434 | $ | 112,709 | $ | 148,407 | ||||||||||||
| * 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 | ||||||||||
| September 30, | December 31, | |||||||||
| 2021 | 2020 | |||||||||
| Assets | ||||||||||
| Cash | $ | 79 | $ | 164 | ||||||
| Accounts receivable, net | 19,712 | 18,101 | ||||||||
| Inventory, net | 135,604 | 111,380 | ||||||||
| Other current assets | 5,261 | 7,471 | ||||||||
| Total current assets | 160,656 | 137,116 | ||||||||
| Property, plant and equipment, net | 159,348 | 164,983 | ||||||||
| Other long-term assets | 950 | 947 | ||||||||
| Total assets | $ | 320,954 | $ | 303,046 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Accounts payable | $ | 29,949 | $ | 12,632 | ||||||
| Accrued employment costs | 4,781 | 1,826 | ||||||||
| Current portion of long-term debt | 2,408 | 16,713 | ||||||||
| Other current liabilities | 974 | 2,722 | ||||||||
| Total current liabilities | 38,112 | 33,893 | ||||||||
| Long-term debt, net | 49,126 | 33,471 | ||||||||
| Deferred income taxes | 2,089 | 5,725 | ||||||||
| Other long-term liabilities, net | 4,082 | 4,277 | ||||||||
| Total liabilities | 93,409 | 77,366 | ||||||||
| Stockholders’ equity | 227,545 | 225,680 | ||||||||
| Total liabilities and stockholders’ equity | $ | 320,954 | $ | 303,046 | ||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | ||||||||||
| Nine months ended | ||||||||||
| September 30, | ||||||||||
| 2021 | 2020 | |||||||||
| Operating activities: | ||||||||||
| Net income (loss) | $ | 868 | $ | (11,742 | ) | |||||
| Adjustments for non-cash items: | ||||||||||
| Depreciation and amortization | 14,419 | 14,721 | ||||||||
| Gain on extinguishment of debt | (10,000 | ) | - | |||||||
| Deferred income tax | (3,646 | ) | (3,380 | ) | ||||||
| Share-based compensation expense | 833 | 1,129 | ||||||||
| Changes in assets and liabilities: | ||||||||||
| Accounts receivable, net | (1,611 | ) | 9,144 | |||||||
| Inventory, net | (25,500 | ) | 25,093 | |||||||
| Accounts payable | 16,525 | (25,399 | ) | |||||||
| Accrued employment costs | 2,955 | (1,214 | ) | |||||||
| Income taxes | 5 | 207 | ||||||||
| Other | 281 | 4,045 | ||||||||
| Net cash (used in) provided by operating activities | (4,871 | ) | 12,604 | |||||||
| Investing activity: | ||||||||||
| Capital expenditures | (6,514 | ) | (8,480 | ) | ||||||
| Net cash used in investing activity | (6,514 | ) | (8,480 | ) | ||||||
| Financing activities: | ||||||||||
| Borrowings under revolving credit facility | 89,070 | 101,559 | ||||||||
| Payments on revolving credit facility | (69,804 | ) | (112,498 | ) | ||||||
| Proceeds from term loan facility | 8,571 | - | ||||||||
| Proceeds from Paycheck Protection Program Note | - | 10,000 | ||||||||
| Payments on term loan facility, finance leases, and notes | (16,116 | ) | (3,383 | ) | ||||||
| Issuance of common stock under share-based plans | 118 | 86 | ||||||||
| Payments of financing costs | (539 | ) | - | |||||||
| Net cash provided by (used in) financing activities | 11,300 | (4,236 | ) | |||||||
| Net decrease in cash | (85 | ) | (112 | ) | ||||||
| Cash at beginning of period | 164 | 170 | ||||||||
| Cash at end of period | $ | 79 | $ | 58 | ||||||
| RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED EBITDA | ||||||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||
| Net income (loss) | $ | 7,890 | $ | (7,000 | ) | $ | 868 | $ | (11,742 | ) | ||||||||||
| Interest expense | 483 | 586 | 1,413 | 2,232 | ||||||||||||||||
| Income taxes | (1,141 | ) | (1,934 | ) | (3,650 | ) | (3,396 | ) | ||||||||||||
| Depreciation and amortization | 4,841 | 4,732 | 14,419 | 14,721 | ||||||||||||||||
| EBITDA | 12,073 | (3,616 | ) | 13,050 | 1,815 | |||||||||||||||
| Share-based compensation expense | 252 | 295 | 831 | 1,129 | ||||||||||||||||
| Fixed cost absorption direct charge | 1,491 | 4,264 | 6,144 | 4,465 | ||||||||||||||||
| Loss on sale of excess scrap | - | - | - | 354 | ||||||||||||||||
| Employee severance costs | - | - | - | 620 | ||||||||||||||||
| Gain on extinguishment of debt | (10,000 | ) | - | (10,000 | ) | - | ||||||||||||||
| Insurance benefit | - | (307 | ) | - | (307 | ) | ||||||||||||||
| Adjusted EBITDA | $ | 3,816 | $ | 636 | $ | 10,025 | $ | 8,076 | ||||||||||||
| CONTACTS: | Dennis M. Oates | June Filingeri |
| Chairman, | President | |
| President and CEO | Comm-Partners LLC | |
| (412) 257-7609 | (203) 972-0186 |
FAQ
What was Universal Stainless's stock performance in Q3 2021?
What is the backlog for Universal Stainless at the end of Q3 2021?
What was the net income for USAP in Q3 2021?
How did Universal Stainless's gross margin change in Q3 2021?
What sectors contributed to USAP's sales growth in Q3 2021?
