Universal Stainless Reports First Quarter 2009 Results
05/01/2009 - Universal Stainless & Alloy Products reports a net loss of $3.8 million on sales of $42.2 million for the first quarter of 2009.
Universal Stainless & Alloy Products, Inc. reported a net loss of $3.8 million on sales of $42.2 million for the first quarter of 2009.
The $3.8 million net loss ($0.57 per diluted share) compares to net income of $4.7 million ($0.70 per diluted share) in the year-ago first quarter. Results included $3.6 million ($0.53 per share) after tax / $6.0 million pre-tax of unusual charges, including:
· $1.9 million increase to the bad debt reserve related to a privately held service center customer’s inability to pay amounts owed on 2008 business plus a related $0.5 million increase to the inventory reserve.
· $1.5 million related to falling raw material values and the consumption of higher-cost materials during the quarter.
· $1.0 million for inventory write-downs.
· $0.9 million attributed to operating at reduced production levels.
· $0.2 million related to a 20% reduction in salaried employees.
Sales of $42.2 million (at the high end of the company’s forecast) compares with sales of $56.8 million in the first quarter of 2008.
Cash flow from operations remained positive, totaling $2.6 million. Capital expenditures, a near-record $3.7 million, included $2.5 million in initial expenditures for the $13-million meltshop upgrade project. At March 31, 2009, cash was $25.8 million, working capital was $100.6 million, and long-term debt was $12.9 million.
"The persistence of very difficult economic and credit conditions in the first quarter of 2009 resulted in reduced market demand, significant de-stocking in the specialty steel supply channel, and liquidity problems for several of our privately-held customers,” commented President and CEO Dennis Oates. “We have executed plans to aggressively reduce costs, generate cash and adjust our operating levels to market realities.
"These actions are designed to improve our performance under current conditions and position us to seize opportunities when the markets recover,” continued Oates. “We continue to strengthen our organization with industry veterans through the addition of Bill Beible as Senior Vice President of Operations and the naming of Chris Ayers to our Board of Directors. Lastly, our strategic investment program is progressing on time and on budget. These investments are focused on reducing production cycle times, increasing customer service levels, improving material yields, reducing operating costs and enhancing working capital management."
"Given the unprecedented uncertainty in our industry, we are not providing specific earnings guidance for the second quarter of 2009,” said Oates, commenting on the company’s outlook. “We anticipate that second quarter sales will be below those of the first quarter of 2009 based on current low order entry and a decline in our backlog to $58 million at March 31 from $75 million at year-end.
“Our performance in the second quarter of 2009 is expected to be aided by our cost-saving initiatives and better alignment of material costs to surcharges,” added Oates. “We also expect to generate positive cash flow and maintain our strong balance sheet."
Segment Review—The company’s Universal Stainless & Alloy Products segment reported sales of $36.7 million for the first quarter, vs. sales of $48.2 million in the year-ago first quarter and sales of $53.1 million in the previous quarter. The 24% decline in segment sales (vs. the year-ago first quarter) is attributed primarily to a 19% decrease in tons shipped. Increased shipments to forgers and OEMs were offset by lower shipments to rerollers and to service centers, mainly of tool steel plate. Segment sales decreased 31% from the previous quarter on 19% fewer tons shipped.
The segment reported an operating loss of $3.9 million, including $5.0 million of unusual charges, which compares to $4.9 million of operating income (10% of sales) in the year-ago first quarter, and $1.9 million of operating income (3% of sales) in the previous quarter.
The company’s Dunkirk Specialty Steel segment recorded sales of $11.4 million for the first quarter, which compares to sales of $20.1 million in the year-ago first quarter and sales of $11.4 million in the previous quarter. The 43% decline in sales vs. the year-ago first quarter, which was accompanies by a 28% drop in tons shipped, is attributed to lower shipments to all customer categories and lower surcharges. Dunkirk's sales were level with the previous quarter while tons shipped increased 23%, with the benefit of a strong increase in shipments to service centers offset by lower surcharges.
The segment reported a $2.5 million first quarter operating loss that included $1.0 million of unusual charges. This compares to $2.8 million of operating income (14% of sales) in the year-ago first quarter, and a $1.3 million operating loss in the previous quarter, which included a $248,000 charge related to the relocation of the round bar finishing line to Dunkirk from Bridgeville.
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.
