Universal Stainless & Alloy Products, Inc. reported net income of $1.6 million on near-record sales of $29.0 million for the second quarter of 2004.

Second Quarter Results—Net income, $1.6 million ($0.25 per diluted share) represented a strong turnaround from the net loss of $440,000 ($0.07 per diluted share) in the year-ago period and was greatly improved from the net income of $227,000 ($0.04 per diluted share) reported in the 2004 first quarter. EPS was solidly ahead of the projected range of $0.15 to $0.20. Sales, $29 million, represent a 72% increase over the second quarter of 2003 and 36% over the first quarter of 2004.

Comments—Commenting on the results, President and CEO Mac McAninch stated: "Business is good across all the markets we serve. Our sales to service centers, rerollers and forgers in the 2004 second quarter demonstrated substantial growth over the prior quarter and year over year. Our strong financial performance resulted from greater demand for our higher value-added niche products. This was reflected in higher shipments of aerospace, power generation, petrochemical and tool steel products, which were up 42%, 56%, 63% and 18%, respectively, over the first quarter of 2004 and even more substantially over the prior year."

Mr. McAninch added: "The improvement in our profitability company-wide in the second quarter was also due to the price increases we have implemented to offset unprecedented raw material cost increases, as well as higher energy and manufacturing supply costs. In addition, the improvement in the second quarter was due to the efforts of our employees at each operating location to respond to customer needs in a time of high demand."

Segment Review—In the second quarter of 2004, the Universal Stainless & Alloy Products segment had an operating income of $1.9 million on sales of $25.1 million. This compares with an operating loss of $255,000 on sales of $14.5 million in the second quarter of 2003 and an operating income of $401,000 on sales of $18.8 million in the first quarter of 2004. The strong growth reflected increased sales to all customer categories, including sales of reroll product to Dunkirk, both year-over-year and sequentially. Increased shipments, combined with improved pricing, led to greater profitability.

The Dunkirk Specialty Steel segment reported an operating income of $651,000 on record sales of $8.0 million. This compares with an operating loss of $374,000 on sales of $5.4 million in the second quarter of 2003 and operating income of $34,000 on sales of $6.7 million in the prior quarter. Dunkirk's top line growth mainly reflected increased sales to service centers while its total sales volume allowed further reductions in the manufacturing cost of products sold, leading to the substantial improvement in its profitability.

Outlook—The company estimates that third quarter 2004 sales will range from $30 to $35 million and that diluted EPS will range from $0.30 to $0.35. In the third quarter of 2003, sales were $18.6 million and the Company incurred a net loss per diluted share of $0.02.

The company’s outlook is based inpart on its total backlog of approximated $49 million at June 30, 2004 compared to $37 million at March 31, 2004, reflecting strength in all of the company's niche markets. The company also expects that third quarter results will benefit from capital improvements implemented in the second quarter, including the addition of annealing furnaces for ingot, billet and bar products. The addition of a reheat furnace is scheduled to be completed in August and is expected to increase throughput of the Bridgeville blooming mill, with full benefit expected in the 2004 fourth quarter. Additionally, sales from the Dunkirk Specialty Steel segment are expected to approximate $9 million due to strong customer demand. Further sales growth is expected when additional reroll product is available from the Bridgeville operation.

Mr. McAninch concluded: "The recent capital investments we have made will enable us to respond more quickly to customer needs which we expect will remain strong through the balance of the year."

Headquartered in Bridgeville, Pa., Universal Stainless & Alloy Products, Inc. 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 original equipment manufacturers, service centers, forgers, rerollers and wire redrawers.