Universal Stainless Reports Continued Improvement in 4th Quarter
01/28/2010 - Universal Stainless & Alloy Products reported that sales for the fourth quarter of 2009 were $26.7 million, compared with $57.1 million in the fourth quarter of 2008 and $25.3 million in the third quarter of 2009.
Universal Stainless & Alloy Products, Inc. reported that sales for the fourth quarter of 2009 were $26.7 million, compared with $57.1 million in the fourth quarter of 2008 and $25.3 million in the third quarter of 2009.
Net income for the fourth quarter was $956,000 ($0.14 per diluted share), compared with $1.2 million ($0.18 per diluted share) a year ago and $312,000 ($0.05 per diluted share) the previous quarter. Import duties received in the 2009 and 2008 fourth quarters were $551,000 and $599,000, respectively, both amounts equivalent to $0.06 per diluted share.
Cash flow from operations for the fourth quarter of 2009 totaled $2.5 million, compared with $5.8 million in the fourth quarter of 2008 and $10.0 million in the third quarter of 2009. The company notes that cash flow decreased in the quarter due to the slowing rate of reduction in managed working capital because of improving shipment volume and order entry.
Capital expenditures were $2.1 million, including $1.8 million for a melt shop upgrade project, which remains on budget.
Full-Year Results — For the full year of 2009, sales were $124.9 million and the company incurred a net loss of $3.0 million ($0.44 per share). The net loss included a negative tax adjustment in the second quarter of $742,000, equivalent to $0.11 per diluted share, and unusual charges related to economic conditions in the first quarter of $3.6 million, equivalent to $0.53 per diluted share after-tax.
Before the tax adjustment and unusual charges, the company's net income for 2009 was $1.4 million ($0.20 per diluted share). In 2008, the company had record sales of $235.1 million and net income was $14.0 million ($2.05 per diluted share).
Executive Comments — "The fourth quarter of 2009 was marked by early-stage recovery in demand. Our order entry improved each month in the quarter, and resulted in the first sequential increase in our backlog since the third quarter of 2008. In total, our year-end backlog was $36 million, an increase of 8% from September 30,” said President and CEO Dennis Oates.
"The sequential growth in fourth quarter 2009 sales and tons shipped resulted from a 50% increase in our shipments to service centers, consistent with indications that service centers have generally finished inventory destocking. Sales of tool steel plate tripled and aerospace sales improved modestly,” Oates said.
"Our profitability improved over the third quarter of 2009 due to higher shipment volumes, cost savings being realized from recent capital projects and process improvements, and improved cycle times.
"There is widespread belief among our customers that 2010 will be better than 2009, but the level of caution accompanying their optimism is high. Therefore, we currently expect further recovery in market demand to be gradual," Oates concluded.
Segment Review — For the fourth quarter of 2009, the Universal Stainless & Alloy Products segment had sales of $23.1 million and operating income of $509,000, yielding an operating margin of 2.2% of sales. This compares with sales of $53.1 million and operating income of $1.9 million, or 3.5% of sales, in the fourth quarter of 2008. In the third quarter of 2009, sales were $21.7 million and operating income was $60,000, or 0.3% of sales.
Segment sales declined 57% from the fourth quarter of 2008 primarily due to a 48% decrease in tons shipped, according to the company. Shipments to rerollers, forgers, and service centers declined substantially from the 2008 fourth quarter, offsetting a strong increase in shipments to OEMs. Segment sales increased 7% from the third quarter of 2009 on 11% more tons shipped, reflecting higher shipments to service centers, especially of tool steel plate, and to forgers.
The Dunkirk Specialty Steel segment recorded sales of $8.5 million and operating income of $227,000 for the fourth quarter of 2009, yielding an operating margin of 2.7% of sales. This compares with sales in the fourth quarter of 2008 of $11.4 million and an operating loss of $1.3 million, which included a $248,000 charge for the relocation of the round bar finishing line to Dunkirk from Bridgeville and a $385,000 increase to the segment's LCM reserve. In the third quarter of 2009, sales were $8.5 million and operating income was $397,000, or 4.7% of sales.
Dunkirk's sales declined 25% from the fourth quarter of 2008 on 3% fewer tons shipped due to product mix and lower surcharges. Dunkirk's sales were level with the third quarter of 2009 on a 3% increase in tons shipped.
Universal Stainless & Alloy Products, Inc., headquartered in Bridgeville, Pa., 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.
