BRIDGEVILLE, Pa., Jan. 19, 2006 (PRIMEZONE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) reported today that sales for the fourth quarter of 2005 rose 14% to $42.0 million compared with $37.0 million in the same period of 2004. Fourth quarter 2005 net income rose 38% to $3.6 million, or $0.55 per diluted share, and included $358,000 of other income from the receipt of 2005 import duties, equivalent to $0.04 per diluted share. This compares with net income of $2.6 million, or $0.40 per diluted share, reported in the fourth quarter of 2004, which included 2004 import duties of $507,000, equivalent to $0.05 per diluted share.
The Company's fourth quarter 2005 results exceeded its forecast of sales in the range of $33 to $38 million and diluted EPS in the range of $0.37 to $0.42, before including the benefit of import duties.
For the full year 2005, sales rose 41% to a record $170.0 million compared with $120.6 million in 2004. Net income for 2005 increased 83% to a record $13.1 million, or $2.02 per diluted share, including the import duties received in the 2005 fourth quarter. Full year 2004 net income was $7.1 million, or $1.12 per diluted share, and included a total of $1.1 million of other income from import duties, equivalent to $0.11 per diluted share, reflecting the receipt of a substantial portion of the 2003 and 2004 import duties awarded to the Company. Before including import duties in both periods, full year 2005 net income was double that of 2004.
President and CEO Mac McAninch commented: "Our very strong fourth quarter capped a record year for our Company. Our niche markets of aerospace, power generation, petrochemical and tool steel were robust all year and current indications are they will remain strong in 2006. Our cost recovery pricing strategy continued to be both effective for us and fair to our customers given the ongoing volatility of raw material costs and high energy prices."
Mr. McAninch continued: "We also committed to further reinvest in our operations to increase throughput and efficiency at a time of acute customer need for our products, and to expand our capabilities to produce higher value-added products. We delivered on that promise with more than $8 million in capital improvements in 2005, including the addition of a vacuum-arc remelt furnace that became operational in December. In addition, we focused on process improvements throughout the year, especially at our Bridgeville and Titusville facilities which comprise the Universal Stainless and Alloy Products segment of our business. As a result, that segment achieved sales of $153 million in 2005, surpassing the company-wide record we achieved in 2004."
Segment Review
In the fourth quarter of 2005, the Universal Stainless & Alloy Products segment had sales of $37.7 million and operating income of $4.7 million, yielding an operating margin of 12%. This compares with sales of $32.7 million and operating income of $2.3 million, or 7% of sales, in the fourth quarter of 2004, which included a bad debt charge of $282,000. In the 2005 third quarter, sales in this segment were $40.0 million and operating income was $4.0 million, or 10% of sales, including a write-off of $363,000 mainly for the retirement of fixed assets replaced.
The 15% increase in sales compared with the 2004 fourth quarter reflects higher product prices and a favorable product mix, including strong growth in shipments of bar and special shape products. This more than offset the Company's continued reduction in shipments to rerollers. Fourth quarter 2005 sales were 6% lower than the prior quarter mainly due to lower sales to rerollers and forgers. Operating income was more than double that of the 2004 fourth quarter and up 17% from the 2005 third quarter due to the improved pricing, production processes and mix of products shipped.
The Dunkirk Specialty Steel segment reported fourth quarter 2005 sales of $13.0 million and operating income of $1.3 million, resulting in an operating margin of 10%. This compares with sales of $10.5 million and operating income of $1.2 million, or 12% of sales, in the fourth quarter of 2004. In the third quarter of 2005, sales were $14.0 million and operating income was $1.8 million, or 13% of sales.
Dunkirk's sales increased 24% over the 2004 fourth quarter due to higher selling prices and increased shipments of bar products to service centers and OEMs and of rod and wire products to redrawers and OEMs. They were 7% lower than the 2005 third quarter due to lower sales to redrawers and normal seasonal factors. Operating income rose just 2% over the fourth quarter of 2004 and was 28% lower than the prior quarter due to the high cost of raw materials at the time of feedstock procurement and manufacturing delays resulting from the mix of products in production.
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 first quarter 2006 sales will range from $40 to $45 million and that diluted EPS will range from $0.50 to $0.55. This compares with sales of $43.0 million and diluted EPS of $0.45 in the first quarter of 2005.
The following factors were considered in developing these estimates:
-- The Company's total backlog at December 31, 2005 approximated $116 million compared to $106 million at September 30, 2005, reflecting continued strong aerospace, power generation, petrochemical and tool steel markets.
-- Production at the Bridgeville facility is expected to benefit from the recent addition of a milling machine, the improvements achieved in bar manufacturing and the initial contribution of the newly installed vacuum-arc remelt furnace.
-- Sales from the Dunkirk Specialty Steel segment are expected to remain at the $13 to $14 million level because of the expectation that the manufacturing delays will not be resolved until the end of the quarter.
Mr. McAninch concluded: "Our goal in 2006 is to take further advantage of our strong marketplace through additional improvements in production processes and investment in our facilities, as we continue to focus on building value for our shareholders, customers and employees."
Webcast
A simultaneous Webcast of the Company's conference call discussing the fourth quarter of 2005 and the first quarter 2006 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 January 25th. It can be accessed by dialing 706-645-9291, passcode 4039267. 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 Year Ended
December 31, December 31,
2005 2004 2005 2004
--------- --------- --------- ---------
Net Sales
Stainless steel $ 32,191 $ 28,944 $ 135,588 $ 94,530
Tool steel 5,556 5,890 20,737 17,075
High-strength low
alloy steel 2,336 597 6,606 3,682
High-temperature
alloy steel 1,371 673 3,694 2,468
Conversion services 497 751 3,030 2,386
Other 92 157 367 501
--------- --------- --------- ---------
Total net sales 42,043 37,012 170,022 120,642
Cost of products sold 34,653 31,396 140,952 102,972
Selling and
administrative
expenses 2,106 2,053 8,441 7,401
--------- --------- --------- ---------
Operating income 5,284 3,563 20,629 10,269
Interest expense (256) (120) (851) (422)
Other income 374 542 437 1,119
--------- --------- --------- ---------
Income before taxes 5,402 3,985 20,215 10,966
Income tax provision 1,826 1,392 7,159 3,835
--------- --------- --------- ---------
Net income $ 3,576 $ 2,593 $ 13,056 $ 7,131
========= ========= ========= =========
Earnings per share
- Basic $ 0.56 $ 0.41 $ 2.05 $ 1.13
========= ========= ========= =========
Earnings per share
- Diluted $ 0.55 $ 0.40 $ 2.02 $ 1.12
========= ========= ========= =========
Weighted average shares
of Common Stock
outstanding
Basic 6,403,185 6,318,951 6,375,257 6,304,909
Diluted 6,506,596 6,427,348 6,479,114 6,379,579
MARKET SEGMENT INFORMATION
For the Quarter Ended For the Year Ended
December 31, December 31,
2005 2004 2005 2004
--------- --------- --------- ---------
Net Sales
Service centers $ 19,817 $ 16,645 $ 73,213 $ 52,261
Rerollers 6,214 8,735 39,254 30,200
Forgers 7,172 6,827 29,914 22,008
Original equipment
manufacturers 5,922 2,248 13,992 8,349
Wire redrawers 2,329 1,662 10,263 5,008
Conversion services 497 751 3,030 2,386
Other 92 144 356 430
--------- --------- --------- ---------
Total net sales $ 42,043 $ 37,012 $ 170,022 $ 120,642
========= ========= ========= =========
Tons shipped 10,668 13,662 51,233 48,350
========= ========= ========= =========
BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the For the
Quarter Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
------- ------- -------- --------
Net Sales
Stainless steel $21,666 $19,739 $ 90,530 $ 65,208
Tool steel 5,324 5,770 20,047 16,672
High-strength low alloy steel 1,312 189 3,199 1,576
High-temperature alloy steel 1,019 656 3,254 2,182
Conversion services 412 605 2,534 1,961
Other 78 129 295 427
------- ------- -------- --------
29,811 27,088 119,859 88,026
Intersegment 7,893 5,620 33,399 20,208
------- ------- -------- --------
Total net sales 37,704 32,708 153,258 108,234
Material cost of sales 16,412 16,044 75,568 49,967
Operation cost of sales 15,151 12,788 56,885 45,521
Selling and administrative
expenses 1,467 1,581 5,791 5,253
------- ------- -------- --------
Operating income $ 4,674 $ 2,295 $ 15,014 $ 7,493
======= ======= ======== ========
Dunkirk Specialty Steel Segment
For the For the
Quarter Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
------- ------- -------- --------
Net Sales
Stainless steel $10,525 $ 9,205 $ 45,058 $ 29,322
Tool steel 232 120 690 403
High-strength low alloy steel 1,024 408 3,407 2,106
High-temperature alloy steel 352 17 440 286
Conversion services 85 146 496 425
Other 14 28 72 74
------- ------- -------- --------
12,232 9,924 50,163 32,616
Intersegment 750 535 2,848 2,107
------- ------- -------- --------
Total net sales 12,982 10,459 53,011 34,723
Material cost of sales 7,750 5,739 29,496 17,834
Operation cost of sales 3,324 3,008 14,141 11,653
Selling and administrative
expenses 639 472 2,650 2,148
------- ------- -------- --------
Operating income $ 1,269 $ 1,240 $ 6,724 $ 3,088
======= ======= ======== ========
CONSOLIDATED BALANCE SHEET
December 31,
2005 2004
-------- --------
Assets
Cash $ 620 $ 241
Accounts receivable, net 27,963 24,562
Inventory 51,398 38,318
Other current assets 2,790 3,418
-------- --------
Total current assets 82,771 66,539
Property, plant & equipment, net 45,761 40,716
Other assets 495 585
-------- --------
Total assets $129,027 $107,840
======== ========
Liabilities and Stockholders' Equity
Accounts payable $ 12,579 $ 11,666
Outstanding checks in excess of bank balance 3,101 2,638
Accrued employment costs 2,958 1,830
Current portion of long-term debt 1,555 2,044
Other current liabilities 914 442
-------- --------
Total current liabilities 21,107 18,620
Bank revolver 6,117 8,635
Long-term debt 11,200 3,555
Deferred taxes 9,600 10,093
-------- --------
Total liabilities 48,024 40,903
Stockholders' equity 81,003 66,937
-------- --------
Total liabilities and stockholders' equity $129,027 $107,840
======== ========
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Year Ended December 31,
2005 2004
-------- --------
Cash flows from operating activities:
Net income $ 13,056 $ 7,131
Adjustments to reconcile to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,085 3,061
Loss on retirement of fixed assets 705 --
Deferred taxes (90) 724
Tax benefit from exercise of stock options 207 51
Changes in assets and liabilities:
Accounts receivable, net (3,401) (11,872)
Inventory (13,080) (16,037)
Trade accounts payable 913 4,981
Accrued employment costs 1,128 997
Other, net 808 1,247
-------- --------
Cash flow provided by (used in)
operating activities 3,331 (9,717)
-------- --------
Cash flow from investing activities:
Acquisition of real property through
purchase agreements (344) --
Capital expenditures (8,464) (3,586)
-------- --------
Cash flow used in investing activities (8,808) (3,586)
-------- --------
Cash flows from financing activities:
Proceeds from long-term debt 8,050 --
Repayments of long-term debt (894) (1,944)
Borrowings under revolving line of credit (2,518) 8,635
Increase in outstanding checks in excess of
bank balance 463 1,825
Deferred financing costs (48) (26)
Proceeds from issuance of common stock 803 319
-------- --------
Cash flow provided by financing activities 5,856 8,809
-------- --------
Net cash flow $ 379 $ (4,494)
======== ========