Universal Stainless Reports 2nd Quarter 2009 Results
07/30/2009 - Universal Stainless & Alloy Products reports a net loss of $400,000 on sales of $30.8 million for the second quarter, and a net loss of $4.2 million on sales of $72.9 million for the first six months of 2009.
Universal Stainless & Alloy Products, Inc. reported a net loss of $400,000 on sales of $30.8 million for the second quarter, and a net loss of $4.2 million on sales of $72.9 million for the first six months of 2009.
Second Quarter Results—The $400,000 net loss ($0.06 per share) which compares with net income of $5.3 million ($0.77 per diluted share) in the year-ago second quarter. Results included a $742,000 tax adjustment (equivalent to $0.11 per share);without this adjustment, net income would have been $342,000 ($0.05 per diluted share).
Sales of $30.8 million reflect a 52% decline from the record $63.5 million reported in the year-ago second quarter. Tons shipped declined 40% from the prior-year period.
Cash flow from operations totaled $12.7 million, a 168% increase from the year-ago second quarter. Capital expenditures were $3.9 million including expenditures of $3.2 million for the meltshop upgrade project. At June 30, 2009, cash was $34.4 million, working capital was $97.4 million, and long-term debt was $12.2 million.
Six Month Results—The $4.2 million net loss ($0.63 per share) compares to net income of $10.0 million ($1.47 per diluted share) in the first half of 2008. Results included a tax adjustment in the second quarter and $3.6 million ($0.53 per share, after-tax) of unusual charges recognized in the previous quarter.
Sales of $72.9 million compare to sales of $120.3 million in the first half of 2008.
Management Comments—"During the first quarter, we implemented an aggressive plan to reduce costs, generate cash and adjust our operating levels in the face of difficult economic and credit conditions and significant de-stocking in the specialty steel supply channel,” commented President and CEO Dennis Oates. “As a result, we were able to report operating income in the second quarter despite 27% lower sales and 29% fewer tons shipped than in the first quarter.
Our cost control and working capital management, which included a 19% sequential reduction in WIP inventory, also yielded a nearly four-fold increase in operating cash flow compared to the first quarter and enabled us to increase our net cash position by $8.7 million to $21.1 million,” added Oates.
Oates noted that the company’s meltshop upgrade project remains on time and on budget. He said that upgrades that have been placed in service had already produced better product quality and improved material yields. The improvements have also helped the company to shorten lead times and improve on-time delivery, which ultimately resulted in additional orders.
Oates also mentioned the company’s recent achievement of AS9100 certification for its Bridgeville and Dunkirk facilities, which will help to better positions the company to serve the international aerospace market.
"In a sign that business is starting to return, total order entry has improved each month since April,” continued Oates. “However, bookings are well below normal levels and our backlog has dropped to $38 million at June 30 as our end markets remain challenged and inventory restocking has not resumed in the supply channel.
“Our lean operations, low fixed costs and continued aggressive working capital management should allow us to generate positive cash flow and maintain our strong financial position in the third quarter in spite of the current low volume environment," added Oates.
Second Quarter Segment Review—The company’s Universal Stainless & Alloy Products segment reported sales of $26.9 million and operating income of $949,000, yielding an operating margin of 4% of sales. This compares with sales of $53.1 million and operating income of $5.6 million (11% of sales) in the year-ago second quarter. In the previous quarter, sales were $36.7 million and there was an operating loss of $3.9 million, including $5.0 million of unusual charges.
Segment sales declined 49% (vs. the year-ago quarter) primarily due to a 33% decrease in tons shipped and lower surcharges. Increased shipments to forgers and OEMs, mainly of power generation products, were offset by substantially lower shipments to rerollers and to service centers, mainly of tool steel plate. Segment sales decreased 27% from the previous quarter on 24% fewer tons shipped.
The company’s Dunkirk Specialty Steel segment recorded sales of $10.2 million and an operating loss of $384,000, which compares with sales of $21.2 million and operating income of $2.1 million (10% of sales) in the year-ago second quarter. In the previous quarter, sales were $11.4 million and the operating loss was $2.5 million, including unusual charges of $1.0 million.
Dunkirk's sales declined 52% (vs. the year-ago quarter) while tons shipped decreased 31% due to lower shipments to all customer categories and lower surcharges. Dunkirk's sales were 10% lower than in the previous quarter on a 2% decrease in tons shipped.
Headquartered in Bridgeville, Pa., Universal Stainless & Alloy Products 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.
