Universal Stainless Has Positive Outlook for Its End Markets
10/31/2014 - Universal Stainless & Alloy Products Inc. provided a short term outlook as it posted solid third quarter results.
Universal Stainless & Alloy Products Inc. reported that net sales for the third quarter of 2014 were US$53.6 million, an increase of 3% from the second quarter of 2014, and 11% higher than the third quarter of 2013. For the first nine months of 2014, net sales increased 9% to US$152.6 million compared with net sales of US$140.5 million in the same period of 2013, with premium alloy products accounting for 7% of total net sales.
Third quarter 2014 net sales were led by the aerospace market which grew by 6% sequentially over the second quarter of 2014 and by 11% over the third quarter of 2013. Aerospace represented 60% of total net sales. Compared to the third quarter of 2013, the company's sales increased to all of its end markets with the exception of power generation. With a strong pick-up in order entry in September, the company's backlog (before surcharges) was US$61 million at the end of the third quarter of 2014, remaining level with the end of the 2014 second quarter, but 52% higher than at the end of the third quarter of 2013.
The company's gross margin for the third quarter of 2014 was US$8.6 million, or 16.1% of sales, which is essentially the same as the second quarter of 2014, but substantially higher than the third quarter of 2013 when the gross margin was US$2.4 million, or 5.0% of net sales. The improvement in the company's third quarter 2014 gross margin compared to the same prior year period is primarily attributable to an improved product mix, management's initiatives to improve yields and lower scrap rates, and higher manufacturing activity.
Operating income for the third quarter of 2014 was US$3.1 million, or almost equal with the second quarter of 2014. In the third quarter of 2013, the company posted an operating loss of US$2.0 million. Third quarter 2014 operating income included approximately US$0.2 million in selling, general and administrative expenses related to placement fees as management continues to strengthen the organization for future growth.
The company reported net income of US$1.4 million, or US$0.20 per diluted share, for the third quarter of 2014, which matches the US$1.4 million, or US$0.20 per diluted share, reported in the second quarter of 2014. In the third quarter of 2013, the company recorded a net loss of US$1.7 million, or US$0.25 per diluted share.
Net income for the first nine months of 2014 increased to US$2.3 million, or US$0.33 per diluted share, compared to a net loss of US$1.2 million, or US$0.17 per diluted share, in the first nine months of 2013. Included in the results for the first nine months of 2014 were state tax charges, which were primarily non-cash, of approximately US$0.9 million that negatively impacted earnings per share by US$0.12.
For the third quarter of 2014, the company generated cash from operations of US$3.8 million. At September 30, 2014, total debt was US$91.1 million, or approximately the same level as the end of the second quarter of 2014. Debt to total capitalization was 31.2% at the end of the 2014 third quarter.
Chairman, president and CEO Dennis Oates commented: "Third quarter sales increased 3% sequentially reaching their highest level in two years and overcoming normal seasonal slowness. Our initiatives to manage product mix and improve yields were major positive contributors in maintaining a two-year-high gross profit margin of 16.1%. Overall order entry remains solid with September marking the second highest monthly level since early 2012.
"Overall, market conditions have been stronger this year than in 2013 and we are well positioned to participate in future growth. We are monitoring any short-term impacts from recent volatile global issues and the decline in commodity prices, although the outlook for the end markets we target, especially aerospace, continues to be positive. Additionally, our latest discussions with customers indicate that their optimism for further improvement in 2015 remains unchanged."
Third quarter 2014 net sales were led by the aerospace market which grew by 6% sequentially over the second quarter of 2014 and by 11% over the third quarter of 2013. Aerospace represented 60% of total net sales. Compared to the third quarter of 2013, the company's sales increased to all of its end markets with the exception of power generation. With a strong pick-up in order entry in September, the company's backlog (before surcharges) was US$61 million at the end of the third quarter of 2014, remaining level with the end of the 2014 second quarter, but 52% higher than at the end of the third quarter of 2013.
The company's gross margin for the third quarter of 2014 was US$8.6 million, or 16.1% of sales, which is essentially the same as the second quarter of 2014, but substantially higher than the third quarter of 2013 when the gross margin was US$2.4 million, or 5.0% of net sales. The improvement in the company's third quarter 2014 gross margin compared to the same prior year period is primarily attributable to an improved product mix, management's initiatives to improve yields and lower scrap rates, and higher manufacturing activity.
Operating income for the third quarter of 2014 was US$3.1 million, or almost equal with the second quarter of 2014. In the third quarter of 2013, the company posted an operating loss of US$2.0 million. Third quarter 2014 operating income included approximately US$0.2 million in selling, general and administrative expenses related to placement fees as management continues to strengthen the organization for future growth.
The company reported net income of US$1.4 million, or US$0.20 per diluted share, for the third quarter of 2014, which matches the US$1.4 million, or US$0.20 per diluted share, reported in the second quarter of 2014. In the third quarter of 2013, the company recorded a net loss of US$1.7 million, or US$0.25 per diluted share.
Net income for the first nine months of 2014 increased to US$2.3 million, or US$0.33 per diluted share, compared to a net loss of US$1.2 million, or US$0.17 per diluted share, in the first nine months of 2013. Included in the results for the first nine months of 2014 were state tax charges, which were primarily non-cash, of approximately US$0.9 million that negatively impacted earnings per share by US$0.12.
For the third quarter of 2014, the company generated cash from operations of US$3.8 million. At September 30, 2014, total debt was US$91.1 million, or approximately the same level as the end of the second quarter of 2014. Debt to total capitalization was 31.2% at the end of the 2014 third quarter.
Chairman, president and CEO Dennis Oates commented: "Third quarter sales increased 3% sequentially reaching their highest level in two years and overcoming normal seasonal slowness. Our initiatives to manage product mix and improve yields were major positive contributors in maintaining a two-year-high gross profit margin of 16.1%. Overall order entry remains solid with September marking the second highest monthly level since early 2012.
"Overall, market conditions have been stronger this year than in 2013 and we are well positioned to participate in future growth. We are monitoring any short-term impacts from recent volatile global issues and the decline in commodity prices, although the outlook for the end markets we target, especially aerospace, continues to be positive. Additionally, our latest discussions with customers indicate that their optimism for further improvement in 2015 remains unchanged."
