EX-99 2 release_072408.txt EXHIBIT 99 - PRESS RELEASE [GRAPHIC OMITTED] [GRAPHIC OMITTED] CONTACTS: Richard M. Ubinger June Filingeri Vice President of Finance, President Chief Financial Officer and Treasurer Comm-Partners LLC (412) 257-7606 (203) 972-0186 FOR IMMEDIATE RELEASE --------------------- UNIVERSAL STAINLESS REPORTS 2008 SECOND QUARTER RESULTS - Record Sales of $63.5 Million and Diluted EPS of $0.77 Exceed Forecast - - Backlog Rises to 10% to $97 Million - BRIDGEVILLE, PA, July 24, 2008 - Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) reported today that sales for the second quarter of 2008 were $63.5 million compared with $62.1 million reported in the second quarter of 2007. Net income for the second quarter of 2008 was $5.3 million, or $0.77 per diluted share, compared with $5.9 million, or $0.87 per diluted share, in the second quarter of 2007. The results for the second quarter of 2008 exceeded the Company's forecast of sales in the range of $55 to $60 million and diluted EPS in the range of $0.70 to $0.75. Net income for the second quarters of both 2008 and 2007 included net inventory charges before tax of $1.5 million ($0.15 per diluted share) and $1.0 million ($0.10 per diluted share), respectively, for increased reserves related to declines in nickel prices at the end of each quarter. Net income for the second quarter of 2007 also included the effect of a pre-tax charge of $800,000, equivalent to $0.08 per diluted share, related to a legal settlement. The Company's tax rate for the second quarter of 2008 was 33% compared to 35% in second quarter of 2007. The benefit of this rate change was equivalent to $0.02 per diluted share in the 2008 second quarter. For the first six months of 2008, sales rose 2% to $120.3 million while net income was $10.0 million, or $1.47 per diluted share, compared with $12.6 million, or $1.87 per diluted share, in the same period of 2007. Cash flow from operations was $4.7 million for the second quarter of 2008 and capital expenditures were $2.3 million. Inventories were $72.4 million, an increase of $6.9 million from the 2008 first quarter, as a result of increased order entry activity. This increase was substantially offset by an increase in accounts payable. Accounts receivable remained level sequentially due to improved collections. President and CEO Dennis Oates commented: "The record sales we achieved in the second quarter led to better than forecasted EPS. Driving our results were higher sales to the power generation market combined with record sales to the petrochemical market and tool steel to service centers. In fact, our sales of tool steel rose 28% from the strong first quarter, mainly due to high demand for heavy equipment to support global infrastructure investments and major metal fabrication markets. While aerospace demand remains strong, our sales to the aerospace market were 6% below the first quarter of 2008 as service centers and their customers moved to the sidelines in anticipation of a further reduction in the cost of nickel. Based on their current inventory levels, we continue to expect service center order entry will begin to pick up in the second half of the year." Mr. Oates continued: "We remained focused on improving customer service levels and our operational efficiency in the second quarter. The relocation of our bar finishing equipment to Dunkirk is underway, the new high temperature annealing equipment in Dunkirk is up and running with increased utilization expected, and the capital improvements to our melt shop are moving forward on schedule. We are also continuing to energize and strengthen our sales effort, which has contributed to the solid increase in our backlog." Mr. Oates concluded: "We plan to continue our progress in the third quarter as we work towards further accelerating our growth." Segment Review -------------- For the second quarter of 2008, the Universal Stainless & Alloy Products segment had sales of $53.1 million and operating income of $5.6 million, yielding an operating margin of 11%. This compares with sales of $55.1 million and operating income of $5.8 million, or 11% of sales, in the second quarter of 2007. The 2008 second quarter included a $1.2 million increase to its lower of cost or market reserve primarily related to the decline in nickel prices at the end of the quarter. The second quarter of 2007 also included an inventory adjustment as well as the pre-tax effect of a legal settlement aggregating $1.3 million. In the first quarter of 2008, sales were $48.2 million and operating income was $4.9 million, or 10% of sales. Segment sales were down 4% from the second quarter of 2007 primarily due to an 8% decline in tons shipped partially offset by favorable shifts in the product mix. Specifically, higher shipments of tool steel plate to service centers partially offset lower shipments of semi-finished products to forgers and rerollers, including Dunkirk, and of bar products to service centers. The shift in product mix increased the second quarter 2008 operating margin, before the effect of the inventory adjustments, compared with the prior year second quarter. Segment sales increased 10% over the first quarter of 2008 even though tons shipped declined 7%. This was due to increased shipments to forgers and of bar products and tool steel plate to service centers, offset by lower shipments to rerollers, including Dunkirk. The improved product mix led to the sequential improvement in the operating margin. The Company noted that it is negotiating a new collective bargaining agreement that covers the hourly employees at its Bridgeville facility. The current agreement expires on August 31, 2008. The Dunkirk Specialty Steel segment reported sales of $21.2 million and operating income of $2.1 million for the second quarter of 2008, resulting in an operating margin of 10%, which included a $259,000 increase to its lower of cost or market reserve and no FIFO benefit. That compares with sales of $21.3 million and operating income of $3.7 million, or 17% of sales, in the second quarter of 2007, which included an estimated FIFO benefit of $1.2 million offset by $492,000 of costs related to the inventory adjustment attributable to the segment. In the first quarter of 2008, sales were $20.1 million and operating income was $2.8 million, or 14% of sales, and included a FIFO charge of $157,000. Dunkirk's sales declined 1% while tons shipped increased 4% compared with the second quarter of 2007. Higher shipments of rod and wire products to service centers and OEMs, and of finished bar products to OEMs, offset lower shipments of vacuum-arc remelted finished bar products to service centers. Selling prices and operating margins declined from the second quarter of 2007 due to product mix and the effect of lower nickel prices on surcharges assessed. Dunkirk's sales rose 6% and tons shipped increased 4% over the first quarter of 2008 due to increased shipments in all categories, except rod and wire products to service centers. The operating margin was lower than in the 2008 first quarter mainly due to the effect of the inventory adjustment on the most recent period. 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 sales for the third quarter of 2008 will range from $60 to $65 million and that diluted EPS will range from $0.78 to $0.83. This does not include any expense related to the relocation of the round bar finishing facility from Bridgeville to Dunkirk discussed below. In the third quarter of 2007, sales were $62.0 million and diluted EPS was $0.81. Results in the prior year third quarter included a charge of $1.4 million, equivalent to $0.14 per diluted share, for an increase to the Company's inventory reserve, mainly due to a continued decline in nickel prices in the quarter. This was offset by an estimated FIFO benefit of $1.5 million, equivalent to $0.15 per diluted share, at the Dunkirk segment. The following factors were considered in developing the estimates for the third quarter of 2008: o The Company's total backlog at June 30, 2008 rose to $97 million from $88 million at March 31, 2008. The increased backlog is primarily attributable to demand for the company's tool steel plate and electro-slag remelted products. o Sales from the Dunkirk Specialty Steel segment are expected to approximate $19 million in the third quarter of 2008, while pounds shipped are expected to match the prior year period. It is assumed that there will be no FIFO benefit or charge at the Dunkirk operation. o The cost to relocate the round bar finishing facility from Bridgeville to Dunkirk is $800,000, equivalent to $0.08 per share. No costs were expensed during the 2008 second quarter. Management expects the relocation project to be complete and all costs recognized by September 30. Webcast ------- A simultaneous Webcast of the Company's conference call discussing the second quarter of 2008 and the third quarter 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 July 31st. It can be accessed by dialing 706-645-9291, passcode 54242860. 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. 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, 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, labor 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. - FINANCIAL TABLES FOLLOW - 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 Six-Months Ended June 30, June 30, 2008 2007 2008 2007 ---- ---- ---- ---- Net Sales Stainless steel $ 43,760 $ 45,128 $ 85,788 $ 84,698 Tool steel 11,659 6,444 20,766 13,541 High-strength low alloy steel 2,934 7,572 6,945 13,806 High-temperature alloy steel 3,344 2,355 4,490 5,100 Conversion services 448 492 973 981 Other 1,337 65 1,365 169 ------- ------- --------- --------- Total net sales 63,482 62,056 120,327 118,295 Cost of products sold 53,018 49,442 99,797 92,462 Selling and administrative expenses 2,634 3,407 5,709 5,961 ------- -------- --------- --------- Operating income 7,830 9,207 14,821 19,872 Interest expense (27) (195) (55) (422) Other income 62 6 149 10 ------- -------- -------- --------- Income before taxes 7,865 9,018 14,915 19,460 Income tax provision 2,595 3,156 4,922 6,811 ------- -------- ---------- --------- Net income $ 5,270 $ 5,862 9,993 12,649 ======= ======== ========== ========= Earnings per share - Basic $ 0.79 $ 0.88 $ 1.49 $ 1.91 ======= ======== ========== ========= Earnings per share - Diluted $ 0.77 $ 0.87 $ 1.47 1.87 ======= ======== ========== ========= Weighted average shares of Common Stock outstanding Basic 6,707,523 6,642,655 6,685,368 6,631,981 Diluted 6,819,546 6,774,586 6,795,514 6,767,871 MARKET SEGMENT INFORMATION For the Quarter Ended For the Six-Months Ended June 30, June 30, 2008 2007 2008 2007 ---- ---- ---- ---- Net Sales Service centers $ 33,850 $ 32,598 $ 63,084 $ 61,703 Forgers 11,142 13,744 20,160 26,318 Rerollers 9,240 8,658 20,479 15,850 Original equipment manufacturers 5,795 4,540 11,236 9,417 Wire redrawers 1,692 2,015 3,061 3,913 Conversion services 448 492 973 981 Other 1,315 9 1,334 113 ------- -------- --------- -------- Total net sales $ 63,482 $ 62,056 $ 120,327 $ 118,295 ======= ======== ========= ======== Tons shipped 11,423 11,327 23,190 22,484 ======= ======== ========= ========
BUSINESS SEGMENT RESULTS Universal Stainless & Alloy Products Segment For the Quarter Ended For the Six-Months Ended June 30, June 30, 2008 2007 2008 2007 ---- ---- ---- ---- Net Sales Stainless steel $ 28,901 $ 30,804 $ 56,211 $ 55,800 Tool steel 11,278 6,111 19,702 12,270 High-strength low alloy steel 1,114 3,822 2,227 7,822 High-temperature alloy steel 929 916 1,498 2,146 Conversion services 296 325 653 652 Other 1,262 36 1,272 122 ------- ------- --------- -------- 43,780 42,014 81,563 78,812 Intersegment 9,312 13,080 19,727 24,447 ------- ------- --------- -------- Total net sales 53,092 55,094 101,290 03,259 Material cost of sales 28,654 29,684 51,993 50,915 Operation cost of sales 16,936 17,033 34,726 35,050 Selling and administrative expenses 1,869 2,571 4,007 4,289 ------- ------- --------- -------- Operating income $ 5,633 $ 5,806 $ 10,564 $ 13,005 ======= ======= ========= ======== Dunkirk Specialty Steel Segment For the Quarter Ended For the Six-Months Ended June 30, June 30, 2008 2007 2008 2007 ---- ---- ---- ---- Net Sales Stainless steel $ 14,859 $ 14,324 $ 29,577 $ 28,898 Tool steel 381 333 1,064 1,271 High-strength low alloy steel 1,820 3,750 4,718 5,984 High-temperature alloy steel 2,415 1,439 2,992 2,954 Conversion services 152 167 320 329 Other 75 29 93 47 ------- ------- --------- -------- 19,702 20,042 8,764 39,483 Intersegment 1,474 1,279 2,462 2,278 ------- ------- --------- -------- Total net sales 21,176 21,321 41,226 41,761 Material cost of sales 13,126 12,048 24,965 23,244 Operation cost of sales 5,159 4,719 9,648 9,306 Selling and administrative expenses 765 836 1,702 1,672 ------- ------- --------- -------- Operating income $ 2,126 $ 3,718 $ 4,911 $ 7,539 ======= ======= ========= =========
CONSOLIDATED BALANCE SHEET June 30, December 31, 2008 2007 ---- ---- Assets Cash $ 13,067 $ 10,648 Accounts receivable, net 34,634 27,501 Inventory 72,399 65,572 Other current assets 5,581 5,537 ---------- ----------- Total current assets 125,681 109,258 Property, plant & equipment, net 57,357 54,271 Other assets 920 767 ---------- ----------- Total assets $ 183,958 $ 164,296 ========== ============ Liabilities and Stockholders' Equity Trade accounts payable $ 20,819 $ 13,983 Outstanding checks in excess of bank balance 3,912 2,064 Accrued employment costs 4,941 5,307 Current portion of long-term debt 395 383 Other current liabilities 1,004 1,600 ---------- ------------ Total current liabilities 31,071 23,337 Long-term debt 1,247 1,453 Deferred taxes 10,399 9,904 ---------- ------------ Total liabilities 42,717 34,694 Stockholders' equity 141,241 129,602 ---------- ------------ Total liabilities and stockholders' equity $ 183,958 $ 164,296 ========== ============
CONSOLIDATED STATEMENT OF CASH FLOW DATA For the Six-month Period Ended June 30, 2008 2007 ---- ---- Cash flows provided by operating activities: Net income $ 9,993 $ 12,649 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 2,008 1,822 Deferred tax increase (decrease) 304 (31) Stock based compensation expense 413 208 Tax benefits from share-based payment arrangements (51) (98) Changes in assets and liabilities: Accounts receivable, net (7,133) (5,849) Inventory (6,827) (9,558) Trade accounts payable 6,836 5,182 Accrued employment costs (366) 806 Other, net 216 166 --------- --------- Cash flow provided by operating activities 4,933 4,126 --------- --------- Cash flow used in investing activities: Capital expenditures (5,401) (2,906) --------- --------- Cash flow used in investing activities (5,401) (2,906) --------- -------- Cash flows used in financing activities: Revolving credit net repayments - (8,174) Long-term debt repayments (194) (1,180) Net change in outstanding checks in excess of bank balance 1,848 4,129 Proceeds from issuance of common stock 722 975 Tax benefits from share-based payment arrangements 511 982 ---------- -------- Cash flow provided by (used in) financing activities 2,887 (3,268) ---------- ------- Net cash flow $ 2,419 $ (2,048) ========== =========