Universal Stainless Posts Solid Fourth Quarter 2014 Results
01/28/2015 - Universal Stainless & Alloy Products, Inc. reported that net sales for the fourth quarter of 2014 were US$53.0 million, which is 31% higher than the fourth quarter of 2013, and is in line with third quarter 2014 net sales of US$53.6 million.
For the full year of 2014, net sales increased 14% to US$205.6 million compared with US$180.8 million in 2013. Sales of premium alloys also increased 8% sequentially, 26% from the fourth quarter of 2013, and 30% for the full year as compared to 2013.
Net sales increased significantly in all of the company's targeted end markets, with aerospace sales up 40%, power generation sales up 16%, oil & gas sales up 53%, and heavy equipment sales up 27% compared with the fourth quarter of 2013. Fourth quarter 2014 net sales also increased sequentially from the third quarter of 2014 in all the company's targeted end markets, with the exception of oil and gas. The company's backlog (before surcharges) at year-end 2014 was US$61.1 million, remaining level with US$60.8 million at the end of the 2014 third quarter, and 31% higher than US$46.8 million at the end of 2013.
The company's gross margin for the fourth quarter of 2014 was US$8.9 million, or 16.8% of net sales, the highest level in 2014. The company's gross margin was US$1.5 million, or 3.7% of sales, in the fourth quarter of 2013. For the full year, the company's gross margin was US$32.0 million, or 15.6% of net sales, more than double its gross margin for full year 2013 of US$13.9 million, or 7.7% of net sales.
Operating income for the fourth quarter of 2014 was US$3.1 million, matching US$3.1 million in third quarter of 2014. In the fourth quarter of 2013, the company reported an operating loss of US$2.6 million. On a full year basis, the company posted operating income of US$10.9 million compared to an operating loss of US$4.0 million for 2013.
Net income for the fourth quarter of 2014 was US$1.7 million, or US$0.24 per diluted share, and included US$0.03 per diluted share of favorable year-end tax adjustments, which were primarily related to the recently extended R&D tax credits. For the third quarter of 2014, net income was US$1.4 million, or US$0.20 per diluted share. In the fourth quarter of 2013, the company recorded a net loss of US$2.9 million, or US$0.41 per diluted share.
For full year 2014, the company's net income increased to US$4.1 million, or US$0.57 per diluted share, which included two discrete tax charges in the first quarter of 2014 totaling US$0.12 per diluted share. For full year 2013, the company reported a net loss of US$4.1 million, or US$0.58 per diluted share.
For the fourth quarter of 2014, the company generated cash from operations of US$8.5 million. At December 31, 2014, total debt was US$86.9 million, compared with US$89.8 million at the end of 2013. Debt to total capitalization was 29.9% at the end of 2014.
Chairman, President and CEO Dennis Oates commented: "Our solid fourth quarter results capped a year of strong recovery for our company as we grew our top-line, improved our margins and returned to full profitability. Our management team, which we have deepened over the past year, focused on execution in every quarter, including the seasonally slow fourth quarter, with positive results. Among the highlights of the fourth quarter, we realized the highest sales dollar per pound in our history as we made further progress in moving to higher value added products. Our sales mix combined with improved cost performance and yields contributed to our fourth quarter gross margin of 16.8%, the highest in over two years, despite lower surcharges, which were primarily impacted by the decline in nickel prices at the end of the year.
"As we enter 2015, we see encouraging levels of business in all of our end markets, with the exception of oil & gas. We intend to pursue all market opportunities as part of our broader and ongoing effort to move our company to higher value products."
* The three months ended December 31, 2014 diluted earnings per common share has been adjusted for $128 related to interest expense on convertible notes.
* Premium alloys represent all vacuum induction melted (VIM) products.
** The majority of our products are sold to service centers/processors rather than the ultimate end market customers. The end market information in this press release is our estimate based upon our knowledge of our customers and the grade of material sold to them, that they will in-turn sell to the ultimate end market customer.
Net sales increased significantly in all of the company's targeted end markets, with aerospace sales up 40%, power generation sales up 16%, oil & gas sales up 53%, and heavy equipment sales up 27% compared with the fourth quarter of 2013. Fourth quarter 2014 net sales also increased sequentially from the third quarter of 2014 in all the company's targeted end markets, with the exception of oil and gas. The company's backlog (before surcharges) at year-end 2014 was US$61.1 million, remaining level with US$60.8 million at the end of the 2014 third quarter, and 31% higher than US$46.8 million at the end of 2013.
The company's gross margin for the fourth quarter of 2014 was US$8.9 million, or 16.8% of net sales, the highest level in 2014. The company's gross margin was US$1.5 million, or 3.7% of sales, in the fourth quarter of 2013. For the full year, the company's gross margin was US$32.0 million, or 15.6% of net sales, more than double its gross margin for full year 2013 of US$13.9 million, or 7.7% of net sales.
Operating income for the fourth quarter of 2014 was US$3.1 million, matching US$3.1 million in third quarter of 2014. In the fourth quarter of 2013, the company reported an operating loss of US$2.6 million. On a full year basis, the company posted operating income of US$10.9 million compared to an operating loss of US$4.0 million for 2013.
Net income for the fourth quarter of 2014 was US$1.7 million, or US$0.24 per diluted share, and included US$0.03 per diluted share of favorable year-end tax adjustments, which were primarily related to the recently extended R&D tax credits. For the third quarter of 2014, net income was US$1.4 million, or US$0.20 per diluted share. In the fourth quarter of 2013, the company recorded a net loss of US$2.9 million, or US$0.41 per diluted share.
For full year 2014, the company's net income increased to US$4.1 million, or US$0.57 per diluted share, which included two discrete tax charges in the first quarter of 2014 totaling US$0.12 per diluted share. For full year 2013, the company reported a net loss of US$4.1 million, or US$0.58 per diluted share.
For the fourth quarter of 2014, the company generated cash from operations of US$8.5 million. At December 31, 2014, total debt was US$86.9 million, compared with US$89.8 million at the end of 2013. Debt to total capitalization was 29.9% at the end of 2014.
Chairman, President and CEO Dennis Oates commented: "Our solid fourth quarter results capped a year of strong recovery for our company as we grew our top-line, improved our margins and returned to full profitability. Our management team, which we have deepened over the past year, focused on execution in every quarter, including the seasonally slow fourth quarter, with positive results. Among the highlights of the fourth quarter, we realized the highest sales dollar per pound in our history as we made further progress in moving to higher value added products. Our sales mix combined with improved cost performance and yields contributed to our fourth quarter gross margin of 16.8%, the highest in over two years, despite lower surcharges, which were primarily impacted by the decline in nickel prices at the end of the year.
"As we enter 2015, we see encouraging levels of business in all of our end markets, with the exception of oil & gas. We intend to pursue all market opportunities as part of our broader and ongoing effort to move our company to higher value products."
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Net Sales | ||||
| Stainless steel | $ 39,566 | $ 31,580 | $ 159,799 | $ 137,383 |
| High-strength low alloy steel | 5,066 | 3,063 | 16,853 | 17,894 |
| Tool steel | 5,365 | 4,161 | 16,680 | 18,112 |
| High-temperature alloy steel | 1,725 | 1,034 | 6,295 | 4,277 |
| Conversion services and other sales | 1,236 | 448 | 5,933 | 3,102 |
| Total net sales | 52,958 | 40,286 | 205,560 | 180,768 |
| Cost of products sold | 44,049 | 38,798 | 173,538 | 166,888 |
| Gross margin | 8,909 | 1,488 | 32,022 | 13,880 |
| Selling, general and administrative expenses | 5,805 | 4,070 | 21,122 | 17,885 |
| Operating income (loss) | 3,104 | (2,582) | 10,900 | (4,005) |
| Interest expense | (665) | (631) | (3,035) | (2,598) |
| Deferred financing amortization | (160) | (133) | (644) | (444) |
| Other (expense) income | (21) | -- | (22) | 481 |
| Income (loss) before income taxes | 2,258 | (3,346) | 7,199 | (6,566) |
| Provision (benefit) for income taxes | 553 | (477) | 3,149 | (2,504) |
| Net income (loss) | $ 1,705 | $ (2,869) | $ 4,050 | $ (4,062) |
| Net income (loss) per common share - Basic | $ 0.24 | $ (0.41) | $ 0.58 | $ (0.58) |
| Net income (loss) per common share - Diluted* | $ 0.24 | $ (0.41) | $ 0.57 | $ (0.58) |
| Weighted average shares of common stock outstanding | ||||
| Basic | 7,040,086 | 6,973,382 | 7,031,539 | 6,950,976 |
| Diluted | 7,522,554 | 6,973,382 | 7,116,431 | 6,950,976 |
| MARKET SEGMENT INFORMATION | ||||
| Three Months Ended | Year ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Net Sales | ||||
| Service centers | $ 36,639 | $ 23,499 | $ 137,298 | $ 115,859 |
| Forgers | 5,199 | 5,504 | 24,918 | 21,254 |
| Rerollers | 4,872 | 7,364 | 21,129 | 27,021 |
| Original equipment manufacturers | 5,012 | 3,471 | 16,282 | 13,532 |
| Conversion services and other sales | 1,236 | 448 | 5,933 | 3,102 |
| Total net sales | $ 52,958 | $ 40,286 | $ 205,560 | $ 180,768 |
| Tons shipped | 9,408 | 8,449 | 38,869 | 36,477 |
| MELT TYPE INFORMATION | ||||
| Three Months Ended | Year ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Net Sales | ||||
| Specialty alloys | $ 48,163 | $ 37,013 | $ 185,811 | $ 167,040 |
| Premium alloys* | 3,559 | 2,825 | 13,816 | 10,626 |
| Conversion services and other sales | 1,236 | 448 | 5,933 | 3,102 |
| Total net sales | $ 52,958 | $ 40,286 | $ 205,560 | $ 180,768 |
| END MARKET INFORMATION** | ||||
| Three Months Ended | Year ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Net Sales | ||||
| Aerospace | $ 32,078 | $ 22,893 | $ 120,947 | $ 102,341 |
| Power generation | 5,821 | 5,003 | 23,498 | 21,671 |
| Oil & gas | 4,694 | 3,059 | 19,470 | 18,880 |
| Heavy equipment | 5,819 | 4,587 | 18,147 | 19,788 |
| General industrial, conversion services and other sales | 4,546 | 4,744 | 23,498 | 18,088 |
| Total net sales | $ 52,958 | $ 40,286 | $ 205,560 | $ 180,768 |
** The majority of our products are sold to service centers/processors rather than the ultimate end market customers. The end market information in this press release is our estimate based upon our knowledge of our customers and the grade of material sold to them, that they will in-turn sell to the ultimate end market customer.
