EX-99 2 exh99-1_102308.txt EXHIBIT 99.1 [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 THIRD QUARTER RESULTS IN LINE WITH REVISED FORECAST BRIDGEVILLE, PA, OCTOBER 23, 2008 - UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. (NASDAQ: USAP) reported today that sales for the third quarter of 2008 were $57.6 million compared with $62.0 million in the third quarter of 2007. Net income for the third quarter of 2008 was $2.7 million, or $0.40 per diluted share, and included a charge of $586,000, equivalent to $0.06 per diluted share, for the relocation of the Company's round bar finishing line from its Bridgeville facility to its Dunkirk facility. In the third quarter of 2007, net income was $5.5 million, or $0.81 per diluted share. The results for the third quarter of 2008 were in line with the Company's revised forecast of sales in the range of $57 to $58 million and diluted EPS in the range of $0.35 to $0.40. The Company's estimated annual effective income tax rate for 2008 was adjusted to 32% at September 30 from 33% at June 30 as a result of current income expectations for the year. The benefit of this rate change was equivalent to $0.03 per diluted share in the 2008 third quarter. For the first nine months of 2008, sales were $178.0 million while net income was $12.7 million, or $1.87 per diluted share, compared with sales of $180.3 million and net income of $18.1 million, or $2.67 per diluted share, in the same period of 2007. Cash flow from operations was $6.9 million for the third quarter of 2008, a $2.2 million increase from the 2008 second quarter, as the Company continues to manage working capital aggressively. Capital expenditures for the third quarter of 2008 were $4.2 million, and included completion of a new high temperature annealing facility as well as certain planned infrastructure investments and equipment upgrades related to the round bar finishing line in Dunkirk. President and CEO Dennis Oates commented: "As we previously reported, our third quarter performance was impeded by reduced demand for aerospace grades of steel due to the Boeing labor situation, by conservative service center purchasing in anticipation of lower surcharges due to falling commodity prices, and by production inefficiencies at our Bridgeville facility during labor negotiations. The resulting lower shipment volume combined with a 20% decline in raw material prices that decreased margins on finished products shipped reduced our third quarter earnings. With our success in reaching a five-year collective bargaining agreement with our Bridgeville hourly employees on October 8th, we are ready to face the challenges that continue in the specialty steel supply chain as well as new ones created by the recent shocks to our economy." 1 Mr. Oates continued: "The diversity of our end markets is an important asset that will help us offset the issues in aerospace demand that are expected to continue at least through the end of the year. Our backlog confirms that our most immediate opportunities are in power generation and in tool steel where we have a strong market position. We also plan to build upon the inroads we have made into the oil and gas markets and on the international relationships we have begun to establish." Mr. Oates concluded: "In this time of heightened uncertainty, we will remain fully focused on executing our plan, with our highest priority on improving customer service levels and our operating efficiency." SEGMENT REVIEW -------------- For the third quarter of 2008, the UNIVERSAL STAINLESS & ALLOY PRODUCTS SEGMENT had sales of $52.2 million and operating income of $3.3 million, yielding an operating margin of 6%. Favorable product mix shifts in inventory at September 30 more than offset further declines in nickel and other commodity prices in the quarter and resulted in a net decrease in the lower of cost or market (LCM) reserve of $300,000. In the third quarter of 2007, sales were $55.9 million and operating income was $4.3 million, or 8% of sales. This included an increase to the LCM reserve of $772,000. In the second quarter of 2008, sales were $53.1 million and operating income was $5.6 million, or 11% of sales, and included a $1.2 million charge to the LCM reserve primarily related to the decline in nickel prices at the end of the quarter. Segment sales were down 7% from the third quarter of 2007 primarily due to a 6% decline in tons shipped and lower surcharges. Higher shipments of tool steel plate to service centers were offset by lower shipments of aerospace-related vacuum-arc remelted (VAR) products to service centers and to Dunkirk. This mix shift, as well as an increase in material costs as a percentage of sales, reduced the operating margin compared with the 2007 third quarter. Segment sales decreased 2% over the second quarter of 2008 even though tons shipped were level. This was due to lower shipments of aerospace-related VAR products and of tool steel plate to service centers offset by higher shipments to forgers. The resulting shift in product mix and higher material costs as a percentage of sales reduced the operating margin sequentially. The DUNKIRK SPECIALTY STEEL SEGMENT reported sales of $16.9 million and an operating loss of $172,000 for the third quarter of 2008, including the $586,000 charge for the relocation of the round bar finishing line. Before giving effect to the relocation charge, Dunkirk's operating income was $414,000 for the third quarter of 2008, resulting in an operating margin of 2%. The operating results for the quarter also include a $416,000 increase to the segment's LCM reserve. In the third quarter of 2007, sales were $21.3 million and operating income was $3.0 million, or 14% of sales, which included an increase to the LCM reserve of $635,000, which was more than offset by an estimated FIFO benefit of $1.5 million from the timing of surcharges and the changing price of nickel. In the second quarter of 2008, sales were $21.2 million and operating income of $2.1 million for the second quarter of 2008, or 10% of sales, and included a $259,000 charge to the LCM reserve. Dunkirk's sales declined 20% while tons shipped decreased 16% compared with the third quarter of 2007 mainly due to lower shipments of aerospace-related VAR finished bar products to service centers and lower surcharges. The lower shipment volume, shift in product mix and the effect of the inventory charge led to the operating margin decline in the third quarter of 2008. Dunkirk's sales decreased 20% and tons shipped decreased 21% compared with the second quarter of 2008 due to lower shipments of aerospace-related VAR finished bar products to both service centers and OEMs. 2 BUSINESS OUTLOOK ---------------- The Company currently estimates that sales for the fourth quarter of 2008 will range from $45 to $55 million and that diluted EPS will range from $0.20 to $0.35, which includes the remaining expense, equivalent to $0.02 per diluted share, for the relocation of the round bar finishing facility. In the fourth quarter of 2007, sales were $49.6 million and diluted EPS was $0.65, and included other income from the receipt of import duties equivalent to $0.06 per diluted share. The following factors were considered in developing the estimates for the fourth quarter of 2008: o The Company's total backlog at September 30, 2008 was $101 million compared with $97 million at June 30, 2008. The increased backlog is primarily attributable to tool steel plate and electro-slag remelted products. o The Company's forecast is based on average September raw material costs. The Company noted that raw material costs have continued to decline since the end of the third quarter. The forecast also does not include any receipts from import duties for 2008, which the Company is seeking. o Sales from the Dunkirk Specialty Steel segment are expected to approximate $10 to 12 million in the fourth quarter of 2008 on lower pounds shipped compared with the fourth quarter of 2007 due to the effect of the Boeing labor situation on demand for aerospace products and very conservative buying patterns of service centers. At the forecasted sales levels, Dunkirk is expected to be breakeven for the quarter after including the remaining expense related to the relocation of the round bar finishing line. o The Company reached a new five-year collective bargaining agreement with its hourly employees at its Bridgeville facility on October 8. The Company is fully focused on resuming production levels, which were adversely affected during labor negotiations, to meet its customer commitments. WEBCAST ------- A simultaneous Webcast of the Company's conference call discussing the third quarter of 2008 and the fourth 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. 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. THE COMPANY'S ACTUAL RESULTS IN FUTURE PERIODS ALSO MAY BE IMPACTED BY VARIOUS ECONOMIC AND MARKET RISK AND UNCERTAINTIES, MANY OF WHICH ARE 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. - FINANCIAL TABLES FOLLOW - 3 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 Nine-Months Ended September 30, September 30, 2008 2007 2008 2007 ---- ---- ---- ---- NET SALES Stainless steel $ 42,095 $ 45,510 $ 127,883 $ 130,208 Tool steel 10,393 7,281 31,159 20,822 High-strength low alloy steel 2,564 6,006 9,509 19,812 High-temperature alloy steel 1,763 2,637 6,253 7,737 Conversion services 541 446 1,514 1,427 Other 283 128 1,648 297 ------- -------- -------- -------- Total net sales 57,639 62,008 177,966 180,303 Cost of products sold 51,040 50,875 150,837 143,337 Selling and administrative expenses 2,852 2,990 8,561 8,951 ------- -------- -------- -------- Operating income 3,747 8,143 18,568 28,015 Interest expense (26) (181) (81) (603) Other income 68 26 217 36 ------- -------- -------- -------- Income before taxes 3,789 7,988 18,704 27,448 Income tax provision 1,063 2,521 5,985 9,332 ------- ------- -------- -------- Net income $ 2,726 $ 5,467 $ 12,719 $ 18,116 ======= ======= ======== ======== Earnings per share - Basic $ 0.41 $ 0.82 $ 1.90 $ 2.73 ======= ======= ======== ======== Earnings per share - Diluted $ 0.40 $ 0.81 $ 1.87 $ 2.67 ======= ======= ======== ======== Weighted average shares of Common Stock outstanding Basic 6,727,677 6,656,753 6,699,471 6,640,238 Diluted 6,832,070 6,783,147 6,807,699 6,772,963 MARKET SEGMENT INFORMATION For the Quarter Ended For the Nine-Months Ended September 30, September 30, 2008 2007 2008 2007 ---- ---- ---- ---- NET SALES Service centers $ 26,826 $ 31,451 $ 89,910 $ 93,154 Forgers 14,299 13,852 34,459 40,170 Rerollers 9,532 10,199 30,011 26,049 Original equipment manufacturers 3,751 4,452 14,987 13,869 Wire redrawers 2,406 1,424 5,467 5,337 Conversion services 541 446 1,514 1,427 Other 284 184 1,618 297 ------- -------- --------- --------- Total net sales $ 57,639 $ 62,008 $ 177,966 $ 180,303 ======= ======== ========= ========= Tons shipped 10,808 11,372 33,998 33,856 ======= ======== ========== ========= 4
BUSINESS SEGMENT RESULTS
UNIVERSAL STAINLESS & ALLOY PRODUCTS SEGMENT For the Quarter Ended For the Nine-Months Ended September 30, September 30, 2008 2007 2008 2007 ---- ---- ---- ---- NET SALES Stainless steel $ 29,168 $ 31,211 $ 85,379 $ 87,011 Tool steel 10,161 6,748 29,863 19,018 High-strength low alloy steel 729 2,560 2,956 10,382 High-temperature alloy steel 818 1,207 2,316 3,353 Conversion services 329 305 982 957 Other 252 107 1,524 229 -------- -------- -------- -------- 41,457 42,138 123,020 120,950 Intersegment 10,777 13,797 30,504 38,244 -------- -------- -------- -------- Total net sales 52,234 55,935 153,524 159,194 Material cost of sales 30,722 32,170 82,715 83,085 Operation cost of sales 16,314 17,506 51,040 52,556 Selling and administrative expenses 1,933 2,022 5,940 6,311 -------- -------- -------- -------- Operating income $ 3,265 $ 4,237 $ 13,829 $ 17,242 ======== ======== ======== ======== DUNKIRK SPECIALTY STEEL SEGMENT For the Quarter Ended For the Nine-Months Ended September 30, September 30, 2008 2007 2008 2007 ---- ---- ---- ---- NET SALES Stainless steel $ 12,926 $ 14,299 $ 42,503 $ 43,197 Tool steel 232 533 1,296 1,804 High-strength low alloy steel 1,835 3,446 6,553 9,430 High-temperature alloy steel 945 1,430 3,937 4,384 Conversion services 212 141 532 470 Other 32 21 125 68 -------- -------- -------- -------- 16,182 19,870 54,946 59,353 Intersegment 758 1,398 3,220 3,676 -------- -------- -------- -------- Total net sales 16,940 21,268 58,166 63,029 Material cost of sales 11,219 13,130 36,184 36,374 Operation cost of sales 4,974 4,145 14,622 13,451 Selling and administrative expenses 919 968 2,621 2,640 -------- -------- -------- -------- Operating income (loss) $ (172) $ 3,025 $ 4,739 $ 10,564 ======== ======== ======== ======== 5
CONSOLIDATED BALANCE SHEET
September 30, December 31, 2008 2007 ---- ---- ASSETS Cash $ 13,598 $ 10,648 Accounts receivable, net 33,867 27,501 Inventory 70,424 65,572 Other current assets 6,008 5,537 --------- --------- Total current assets 123,897 109,258 Property, plant & equipment, net 60,503 54,271 Other assets 980 767 --------- --------- Total assets $ 185,380 $ 164,296 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Trade accounts payable $ 21,881 $ 13,983 Outstanding checks in excess of bank balance 1,785 2,064 Accrued employment costs 4,964 5,307 Current portion of long-term debt 400 383 Other current liabilities 423 1,600 --------- --------- Total current liabilities 29,453 23,337 Long-term debt 1,146 1,453 Deferred taxes 10,612 9,904 --------- --------- Total liabilities 41,211 34,694 Stockholders' equity 144,169 129,602 --------- --------- Total liabilities and stockholders' equity $ 185,380 $ 164,296 ========= ========= 6
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Nine-month Period Ended September 30, 2008 2007 ---- ---- Cash flows provided by operating activities: Net income $ 12,719 $ 18,116 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 3,030 2,764 Deferred tax decrease 191 (448) Stock based compensation expense 591 332 Tax benefit from share-based payment arrangements (534) (976) Changes in assets and liabilities: Accounts receivable, net (6,366) (5,977) Inventory (4,852) 3,070 Trade accounts payable 7,898 552 Accrued employment costs (343) 1,772 Other, net (487) 293 ---------- ---------- Cash flow provided by operating activities 11,847 19,498 ---------- ---------- Cash flow used in investing activities: Capital expenditures (9,585) (6,429) ---------- ---------- Cash flow used in investing activities (9,585) (6,429) ---------- ---------- Cash flows used in financing activities: Revolving credit net repayments - (8,392) Long-term debt repayments (290) (1,771) Net change in outstanding checks in excess of bank balance (279) 364 Proceeds from issuance of common stock 723 975 Tax benefit from share-based payment arrangements 534 976 ---------- ---------- Cash flow (used in) provided by financing activities 688 (7,848) ---------- ---------- Net cash flow $ 2,950 $ 5,221 ============ ========== 7