Universal Stainless Reports First Quarter 2015 Results in Line With Preliminary Forecast
05/01/2015 - • Net Sales are $56.0 Million - Highest in 10 Quarters • Premium Alloy Sales Reach Record 9% of Total Sales • Gross Margin and Operating Income Reduced by Effect of Commodity Price Drop on Surcharges • Net Income Totals $0.1 Million, or $0.02 per Diluted Share • Quarter-End Backlog Is $58.5 Million
Universal Stainless & Alloy Products, Inc. reported results for the first quarter of 2015 in line with its announcement of preliminary results on April 21.
Net sales for the first quarter of 2015 were $56.0 million, an increase of 20% from the first quarter of 2014 and 6% higher than the fourth quarter of 2014. Sales of premium alloys also increased, rising 87% from the first quarter of 2014 and 42% sequentially, and reached a record $5.0 million, or 9% of net sales.
Net sales increased in all of the Company's targeted end markets compared with the first quarter of 2014, with aerospace sales up 26%, power generation sales up 35%, oil & gas sales up 44%, and heavy equipment sales up 1%. Compared with the fourth quarter of 2014, aerospace sales were up 5%, power generation sales were up 26%, oil & gas sales were up 30%, while heavy equipment sales were 31% lower sequentially. The Company's backlog (before surcharges) at March 31, 2015 was $58.5 million compared with $61.1 million at the end of 2014.
The Company's gross margin for the first quarter of 2015 was $5.7 million, or 10.2% of net sales, compared with $6.1 million, or 13.0% of sales, in the first quarter of 2014, and $8.9 million, or 16.8% of net sales, in the fourth quarter of 2014. The lower gross margin in the 2015 first quarter was impacted by a continued decline in nickel prices, which were down 14% in the first quarter and down 24% over the past six months, and a sudden 31% drop in iron scrap pricing in February, both of which caused a misalignment between Company surcharges and material costs of products shipped, especially those with longer lead times. Material costs are calculated at the time of production, while surcharges are calculated at the time of shipment.
Operating income was $1.0 million for the first quarter of 2015, compared with $1.4 million for the first quarter of 2014, and $3.1 million for the fourth quarter of 2014.
Net income for the first quarter of 2015 was $0.1 million, or $0.02 per diluted share. In the first quarter of 2014, the Company recorded a net loss of $0.5 million, or $0.07 per diluted share. Net income for the fourth quarter of 2014 was $1.7 million, or $0.24 per diluted share.
For the first quarter of 2015, the Company used cash for operating activities of $2.1 million. Total debt at March 31, 2015 was $91.8 million, compared with $86.9 million at the end of 2014. The increase was mainly to support higher receivables due to increased sales in the quarter, with March being especially strong. Debt to total capitalization at the end of the first quarter 2015 was 31.0%.
Chairman, President and CEO Dennis Oates commented: "We achieved continued sales growth in the first quarter of 2015. Even with lower surcharges and mounting concerns about the oil & gas market, we realized increased sales to all our end markets over the first quarter of 2014. Further, we made progress in our sales of premium products, which reached a record 9% of sales.
"Despite our top-line growth, the substantial drop in commodity prices and resulting misalignment of surcharges with material cost of products shipped in the quarter, took a sharp toll on our gross margin. While soft commodity prices may persist for a few more months, our surcharges and material costs are expected to become better aligned by the second half of the year. Additionally, we are taking pro-active measures to reduce operating costs, inventory and certain capital expenditures. Finally, we continue to execute our strategy to move to higher value products.
"Looking forward, our end markets of aerospace, power generation and heavy equipment remain positive. At the same time, there is increasing industry-wide concern about the effect of the drop in the price of oil on demand, which will pose challenges as we move through 2015. Nonetheless, we are fully focused on capturing opportunities in each of our markets and pushing forward with our growth strategy."
Universal Stainless & Alloy Products, Inc., headquartered in Bridgeville, PA, manufactures and markets semi-finished and finished specialty steels, including stainless steel, nickel alloys, tool steel and certain other alloyed steels. The Company's products are used in a variety of industries, including aerospace, power generation, oil and gas, and heavy equipment manufacturing. Established in 1994, the Company, with its experience, technical expertise, and dedicated workforce, stands committed to providing the best quality, delivery, and service possible. More information is available at www.univstainless.com.
Net sales for the first quarter of 2015 were $56.0 million, an increase of 20% from the first quarter of 2014 and 6% higher than the fourth quarter of 2014. Sales of premium alloys also increased, rising 87% from the first quarter of 2014 and 42% sequentially, and reached a record $5.0 million, or 9% of net sales.
Net sales increased in all of the Company's targeted end markets compared with the first quarter of 2014, with aerospace sales up 26%, power generation sales up 35%, oil & gas sales up 44%, and heavy equipment sales up 1%. Compared with the fourth quarter of 2014, aerospace sales were up 5%, power generation sales were up 26%, oil & gas sales were up 30%, while heavy equipment sales were 31% lower sequentially. The Company's backlog (before surcharges) at March 31, 2015 was $58.5 million compared with $61.1 million at the end of 2014.
The Company's gross margin for the first quarter of 2015 was $5.7 million, or 10.2% of net sales, compared with $6.1 million, or 13.0% of sales, in the first quarter of 2014, and $8.9 million, or 16.8% of net sales, in the fourth quarter of 2014. The lower gross margin in the 2015 first quarter was impacted by a continued decline in nickel prices, which were down 14% in the first quarter and down 24% over the past six months, and a sudden 31% drop in iron scrap pricing in February, both of which caused a misalignment between Company surcharges and material costs of products shipped, especially those with longer lead times. Material costs are calculated at the time of production, while surcharges are calculated at the time of shipment.
Operating income was $1.0 million for the first quarter of 2015, compared with $1.4 million for the first quarter of 2014, and $3.1 million for the fourth quarter of 2014.
Net income for the first quarter of 2015 was $0.1 million, or $0.02 per diluted share. In the first quarter of 2014, the Company recorded a net loss of $0.5 million, or $0.07 per diluted share. Net income for the fourth quarter of 2014 was $1.7 million, or $0.24 per diluted share.
For the first quarter of 2015, the Company used cash for operating activities of $2.1 million. Total debt at March 31, 2015 was $91.8 million, compared with $86.9 million at the end of 2014. The increase was mainly to support higher receivables due to increased sales in the quarter, with March being especially strong. Debt to total capitalization at the end of the first quarter 2015 was 31.0%.
Chairman, President and CEO Dennis Oates commented: "We achieved continued sales growth in the first quarter of 2015. Even with lower surcharges and mounting concerns about the oil & gas market, we realized increased sales to all our end markets over the first quarter of 2014. Further, we made progress in our sales of premium products, which reached a record 9% of sales.
"Despite our top-line growth, the substantial drop in commodity prices and resulting misalignment of surcharges with material cost of products shipped in the quarter, took a sharp toll on our gross margin. While soft commodity prices may persist for a few more months, our surcharges and material costs are expected to become better aligned by the second half of the year. Additionally, we are taking pro-active measures to reduce operating costs, inventory and certain capital expenditures. Finally, we continue to execute our strategy to move to higher value products.
"Looking forward, our end markets of aerospace, power generation and heavy equipment remain positive. At the same time, there is increasing industry-wide concern about the effect of the drop in the price of oil on demand, which will pose challenges as we move through 2015. Nonetheless, we are fully focused on capturing opportunities in each of our markets and pushing forward with our growth strategy."
Universal Stainless & Alloy Products, Inc., headquartered in Bridgeville, PA, manufactures and markets semi-finished and finished specialty steels, including stainless steel, nickel alloys, tool steel and certain other alloyed steels. The Company's products are used in a variety of industries, including aerospace, power generation, oil and gas, and heavy equipment manufacturing. Established in 1994, the Company, with its experience, technical expertise, and dedicated workforce, stands committed to providing the best quality, delivery, and service possible. More information is available at www.univstainless.com.
