-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KJ6YG3mgwD6UM3UgrKc6Hda6SXvZv/5wpD7zUXZ/Rnohu3uuR7y/xKiEDAL3pLjg Df5b06RxwMwAESk0QTLgUg== 0000903112-96-000941.txt : 19961115 0000903112-96-000941.hdr.sgml : 19961115 ACCESSION NUMBER: 0000903112-96-000941 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL STAINLESS & ALLOY PRODUCTS INC CENTRAL INDEX KEY: 0000931584 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 251724540 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25032 FILM NUMBER: 96661797 BUSINESS ADDRESS: STREET 1: 600 MAYER ST CITY: BRIDGEVILLE STATE: PA ZIP: 15017 BUSINESS PHONE: 4122577600 MAIL ADDRESS: STREET 1: 600 MAYER ST CITY: BRIDGEVILLE STATE: PA ZIP: 15017 10-Q 1 09/30/96 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------------------------ FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ______ to ______ Commission File Number 0-25032 ------------------------------ UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. (Exact name of Registrant as specified in its charter) DELAWARE 25-1724540 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 600 Mayer Street Bridgeville, PA 15017 (Address of principal executive offices, including zip code) (412) 257-7600 (Telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of Class Common Stock Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No As of September 30, 1996, there were 6,270,000 shares of the Registrant's Common Stock issued and outstanding. 424412.1 UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. This Quarterly Report on Form 10-Q contains historical information and forward-looking statements. Statements looking forward in time are included in this Form 10-Q pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. They involve known and unknown risks and uncertainties that may use the Company's actual results in future periods to be materially different from any future performance suggested herein. In the context of forward-looking information provided in this Form 10-Q and in other reports, please refer to the discussion of risk factors detailed in, as well as the other information contained in, the Company's filings with the Securities and Exchange Commission during the past 12 months. INDEX PAGE NO. PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Statements of Operations 1 Condensed Consolidated Balance Sheets 2 Condensed Consolidated Statements of Cash Flows 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5-7 PART II OTHER INFORMATION Item 1. Legal Proceedings 7 Item 2. Changes in Securities 7 Item 3. Defaults Upon Senior Securities 7 Item 4. Submission of Matters to a Vote of Securityholders 7 Item 5. Other Information 7 Item 6. Exhibits and Reports on Form 8-K 7 SIGNATURES -ii- 424412.1 Part I. Financial Information Item 1. Financial Statements UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, except per share information) (Unaudited)
For the Three Months Ended For the Nine Months Ended September 30 September 30 ----------------------------- ----------------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Net Sales $16,708 $9,961 $43,882 $34,482 Cost of products sold 13,005 8,719 35,336 30,106 ----------- ----------- ----------- ---------- Gross profit 3,703 1,242 8,546 4,376 Selling and administrative expenses 1,184 1,019 3,558 2,529 ----------- ----------- ----------- ---------- Operating income 2,519 223 4,988 1,847 Interest and other income 21 29 186 101 ----------- ----------- ----------- ---------- Interest and other financing costs (36) (108) (97) (310) ----------- ----------- ----------- ----------- Income before taxes 2,504 144 5,077 1,638 Income taxes 952 (238) 1,929 164 ------------ ----------- ----------- ---------- Net income $1,552 $382 $3,148 $1,474 =========== ============ =========== ========== Net income per share of Common Stock $0.25 $0.08 $0.50 $0.32 ============ ============ ============ =========== Weighted average number of shares of Common Stock outstanding 6,270,000 4,570,000 6,270,000 4,563,628 =========== =========== =========== ==========
The accompanying notes are an integral part of these financial statements -1- UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
September 30, 1996 December (Unaudited) 31, 1995 ASSETS Current assets Cash and cash equivalents $1,819 $10,038 Accounts receivable (less allowance for doubtful accounts of $223 and $178) 12,769 7,832 Inventory (Note 2) 10,885 7,105 Prepaid Expenses 571 470 --------------- ------------- Total current assets 26,044 25,445 -------------- ------------ Property, plant and equipment 15,287 6,928 Accumulated depreciation (559) (264) -------------- ------------- Net property, plant and equipment 14,728 6,664 ------------- ------------ Other assets 575 328 -------------- ------------ Total assets $41,347 $32,437 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Trade accounts payable $6,929 $4,085 Bank overdrafts 1,400 992 Current portion of long-term debt 144 73 Accrued employment costs 1,480 687 Other current liabilities 1,484 547 ------------- ------------ Total current liabilities 11,437 6,384 Long-term debt 1,171 462 ------------- ------------ Total liabilities 12,608 6,846 ------------- ------------ Commitments and contingencies (Note 3) -- -- Stockholders' equity Senior Preferred Stock, par value $.001 per share; liquidation value $100 per share; 2,000,000 shares authorized; and 0 shares issued -- -- and outstanding Common Stock, par value $.001 per share; 10,000,000 shares authorized; 6,270,000 shares issued and outstanding 6 6 Additional paid-in capital 25,338 25,338 Retained earnings 3,395 247 ------------- ----------- Total stockholders' equity 28,739 25,591 ------------- ----------- Total liabilities and stockholders' equity $41,347 $32,437 ============= ===========
The accompanying notes are an integral part of these financial statements. -2- UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
For the Nine Months Ended September 30, September 30, 1996 1995 Cash flow from operating activities: Net income $3,148 $1,474 Adjustments to reconcile to net cash used by operating activities: Depreciation and amortization 351 201 Changes in assets and liabilities: Accounts receivable, net (4,937) (5,185) Inventory (3,780) (1,424) Accounts payable and bank overdrafts 3,252 1,981 Accrued employment costs 793 397 Other, net 593 (84) ---------- ----------- Net cash used by operating activities (580) (2,640) ----------- ----------- Cash flows from investing activities: Acquisition of assets through purchase agreement (Note 3) -- (859) Capital expenditures (8,124) (2,005) ----------- ----------- Net cash used by investing activities (8,124) (2,864) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of long-term debt 600 -- Proceeds from issuance of Common Stock -- 353 Net borrowing under revolving line of credit -- 4,229 Long-term debt payments (90) (7) Deferred financing costs (25) (15) ------------ ---------- Net cash provided by financing activities 485 4,560 ------------ ---------- Net decrease in cash (8,219) (944) Cash at beginning of period 10,038 1,123 ------------ ---------- Cash at end of period $1,819 $179 ============ ========== Supplemental disclosure of cash flow information: Interest paid $52 $242 Income taxes paid $938 $225
The accompanying notes are an integral part of these financial statements. -3- UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1) Universal Stainless & Alloy Products, Inc. (the "Company") was incorporated in June 1994, and is the successor by merger (the "Merger") to a corporation incorporated in January 1994, for the principal purpose of acquiring substantially all of the idled equipment and related assets (the "Assets") located at the Bridgeville, Pennsylvania, production facility of Armco, Inc. ("Armco"). On August 15, 1994, the Company entered into an Asset Purchase Agreement (the "Asset Agreement") with Armco to purchase the Assets. On June 2, 1995, the Company and Armco entered into an Asset and Real Property Purchase Agreement (the "Purchase Agreement") pursuant to which the Company agreed to buy the precision rolled products business (the "PRP Business") and the vacuum arc remelting equipment (the "VAR Assets") of Armco's Cytemp Division located in Titusville, Pennsylvania (the "PRP Division"). The accompanying unaudited, condensed consolidated financial statements of operations for the three- and nine-month periods ended September 30, 1996 and 1995, balance sheets at September 30, 1996 and December 31, 1995, and statement of cash flows for the nine-month periods ended September 30, 1996 and 1995 have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, these statements should be read in conjunction with the audited financial statements as of and for the period ended December 31, 1995. In the opinion of management, the accompanying unaudited, condensed consolidated financial statements contain all adjustments, all of which were of a normal recurring nature, necessary to present fairly, in all material respects, the consolidated results of operations and of cash flows for the periods ended September 30, 1996 and 1995, and are not necessarily indicative of the results to be expected for the full year. 2) The major classes of inventory are as follows (dollars in thousands): September 30, 1996 December 31, 1995 ------------------ ----------------- Raw materials and supplies $1,922 $1,473 Semi-finished steel products 7,155 4,278 Operating materials 1,808 1,354 ----------- ---------- Total inventory $10,885 $7,105 =========== ========== 3) The Company has reviewed the status of its environmental contingencies and believes there are no material changes from that disclosed in Form 10-K for the year ended December 31, 1995. -4- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net sales by product line and cost of products sold for the three- and nine-month periods ended September 30, 1996 and 1995 were as follows (dollars in thousands):
Three-month period ended September Nine-month period ended September 30, 30, 1996 1995 1996 1995 Net sales Stainless steel $13,562 $8,876 $34,071 $27,904 Tool steel 1,617 403 5,977 3,359 Conversion services 966 525 2,696 2,414 Other 563 157 1,138 805 ------------ ----------- ------------ ------------ Total net sales $16,708 $9,961 $43,882 $34,482 ----------- ----------- ------------ ----------- Cost of products sold Raw materials 6,747 4,853 17,727 18,006 Other 6,258 3,866 17,609 12,100 ----------- ----------- ----------- ----------- Total cost of products sold 13,005 8,719 35,336 30,106 ----------- ----------- ----------- ----------- Gross profit $3,703 $1,242 $8,546 $4,376 =========== =========== =========== ===========
THREE- AND NINE- MONTH PERIODS ENDED SEPTEMBER 30, 1996 VS. THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 The increase in net sales for the three- and nine-month periods ended September 30, 1996 as compared to the similar periods in 1995 reflects the June 1995 acquisition of the PRP Business and VAR Assets, and an increase in shipments of stainless steel within the reroller and original equipment manufacturer market segments. The 1995 third quarter and nine-month periods sales and earnings were unfavorably impacted by the approximately six-week production halt of the universal rolling mill at the Bridgeville facility in July and August of last year. Cost of products sold, as a percent of net sales, was 77.8% and 87.5% for the three-month periods ended September 30, 1996 and 1995, respectively, and was 80.5% and 87.3% for the nine-month periods ended September 30, 1996 and 1995, respectively. This improvement is primarily due to lower acquisition costs for the Company's primary raw materials, improved manufacturing yields, and the absence of the production halt described above, which were partially offset by the level of manufacturing required by the mix of products sold in 1996. Selling and administrative expenses increased from $1,019,000 and $2,529,000 in the three- and nine-month periods ended September 30, 1995 to $1,184,000 and $3,558,000 in the three- and nine-month periods ended September 30, 1996. The increase primarily relates to insurance costs and the addition of personnel as a result of the continued growth of the business, including the June 1995 acquisition of the PRP Business and VAR Assets. Interest and other income decreased in the three-month period ended September 30, 1996 in comparison to the same period in 1995. Interest and other income increased in the nine-month period ended September 30, 1996 in comparison to the same period in 1995. These changes are primarily due to cash available for investing purposes during the respective periods. The increased cash availability in 1996 is directly related to the sale of 1,700,000 -5- shares of Common Stock in a public offering completed in November 1995. The public offering proceeds have been utilized to fund the Company's capital expenditure program. In addition, the Company was not required to borrow funds under its $6.5 million revolving line of credit which resulted in a decrease in interest and other financing costs from $108,000 and $310,000 in the three- and nine-month periods ended September 30, 1995 to $36,000 and $97,000 in the three- and nine-month periods ended September 30, 1996. The effective income tax rate utilized in the three- and nine-month periods ended September 30, 1996 was 38.0%. The effective income tax rate utilized for the nine-month period ended September 30, 1995 was reduced from 27.0% to 10.0%, reflecting the impact of the production halt at the Bridgeville facility during the 1995 third quarter. The lower effective income tax rate in 1995 reflects the recognition of the benefit of net operating loss carryforwards generated in 1994. Financial Condition The Company has primarily financed its 1996 activities to date through cash flows from operations and cash on hand at the beginning of the period. The ratio of current assets to current liabilities decreased from 4.0:1 at December 31, 1995 to 2:3:1 at September 30, 1996 primarily due to the funding of capital expenditures during 1996. Accounts receivable, net increased by $4.9 million for the nine-month period ended September 30, 1996 as compared to an increase of $5.2 million for the nine-month period ended September 30, 1995. Inventory increased by $3.8 million for the nine-month period ended September 30, 1996 as compared to an increase of $1.4 million for the nine-month period ended September 30, 1995. Accounts payable and bank overdrafts increased by $3.3 million for the nine-month period ended September 30, 1996 as compared to an increase of $2.0 million for the nine-month period ended September 30, 1995. Each of these increases can be primarily attributed to the continued growth of the business since its formation in August 1994. The increase in long term debt is due to the issuance of a $400,000 loan from the Commonwealth of Pennsylvania's Business Infrastructure Development Program in March 1996 and a $200,000 loan from the Commonwealth of Pennsylvania's Economic Development Program in April 1996. The Company also entered into a $270,000, 5-year capital lease for mobile equipment in June 1996. The Company maintains a $6.5 million revolving credit facility through April 1998. In addition, the Company continues to seek low-interest government financing opportunities to supplement the liquidity available to fund its capital expenditures. In August 1996, the Company executed a commitment letter with the County of Allegheny's Department of Development to enter into a $1.5 million, 10-year loan agreement at a 6% interest rate. In November 1996, the Company executed a commitment letter with the Commonwealth of Pennsylvania Department of Community and Economic Development to enter into a $500,000, 7-year loan agreement at a 6% interest rate. The Company expects to execute final loan documents during the 1996 fourth quarter. Capital Expenditure Program The Company's capital expenditures approximated $8.1 million in the nine-month period ended September 30, 1996, bringing aggregate expenditures under its 1995-96 capital expenditures program to $10.2 million. At September 30, 1996, the Company has outstanding purchase commitments of approximately $3.8 million. The roller leveler, utilized to flatten plate products, was delivered and placed into operation in August 1996. Planned projects at the Company's Melt Shop and Universal Rolling Mill are in process and are expected to be completed early in 1997. -6- 1996 Outlook The Company is experiencing increased demand from the power generation sector, which is expected to generate sales growth within the original equipment manufacturers market segment. While the Company's volume of reroll product shipments is expected to increase, the soft pricing environment due to pressure from imports of bar, rod, wire and slab products is expected to impact the Company's operating results in the 1996 fourth quarter. In light of these factors and anticipated benefits derived from the Company's capital expenditure program, the Company continues to expect second half results to be substantially greater than those achieved in the first half of the year. Part II. Other Information Item 1. Legal Proceedings There are no legal proceedings pending or, to the Company's best knowledge, threatened against the Company. Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K The following reports on Form 8-K were filed during the third quarter of 1996: None -7- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. Date: 11/13/96 /s/ Clarence M. McAninch Clarence M. McAninch President and Chief Executive Officer Date: 11/13/96 /s/ Richard M. Ubinger Richard M. Ubinger Chief Financial Officer Principal Accounting Officer and Treasurer -8- EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AS OF SEPTEMBER 30, 1996 AND THE CONDENSED CONSOLIDATED BALANCE SHEETS FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1996 JUL-01-1996 SEP-30-1996 1,819 0 12,961 (223) 10,885 26,044 15,287 (559) 41,347 11,437 1,171 0 0 0 28,733 41,347 43,882 43,882 35,336 35,336 3,513 45 89 5,077 1,929 3,148 0 0 0 3,148 0.50 0.50
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