Oct. 20, 2006 — Universal Stainless & Alloy Products, Inc. reported record net income of $5.7 million on record sales of $55.1 million for the third quarter of 2006.

Third Quarter Results—The $5.7 million ($0.86 per diluted share) reflects a 73% increase compared with net income of $3.3 million ($0.51 per diluted share) in the third quarter of 2005. Record sales of $55.1 million reflect a 28% increase compared with sales of $43.1 million in the third quarter of 2005. Results exceeded the company's forecast of diluted EPS of $0.65 to $0.70 and sales of $45 to $50 million.

Nine-Month Results—Net income rose 50% to a record $14.2 million ($2.15 per diluted share) compared to $9.5 million, or $1.47 per diluted share in the comparable prior-year period. Sales, which reached a record $148.1 million, reflect a 16% increase compared with sales of $128.0 million in the prior-year period.

Comments—"Continued robust aerospace demand—coupled with strong petrochemical and power generation markets—enabled us to achieve record results for the third quarter of 2006,” commented President and CEO Mac McAninch. “Sales were further accelerated by the rapid increase in the cost of nickel, a major component of stainless steel, which increased the prices of our products due to the effect of the surcharge mechanism. Our Dunkirk operation also benefited from continued workforce additions, the timing of feedstock procurement and effective cost management. As a result, Dunkirk's sales reached $20 million and its operating margin rose to a record 19% of sales."

“Our investment in a sixth vacuum-arc remelt (VAR) furnace and the addition of milling machines and a plate flattener in Bridgeville enabled us to take advantage of our market opportunity and work down some of our substantial backlog,” continued Mr. McAninch. “We completed installation of a seventh VAR furnace ahead of schedule this summer and expect to see a full-quarter benefit in the first quarter of 2007.”

“We remain optimistic about the balance of the year even though we expect to see the normal seasonal patterns come into play in December and have developed our forecast accordingly. We see favorable conditions in our end markets continuing into 2007 and beyond.”

Segment Results—In the third quarter, the Universal Stainless & Alloy Products segment had record sales of $47.2 million and operating income of $4.0 million, yielding an operating margin of 9%. This compares with third quarter 2005 sales of $40.0 million and operating income of $4.0 million, or 10% of sales. In the second quarter of 2006, sales were $45.7 million and operating income was $5.8 million, or 13% of sales. The reduction in operating margin is primarily due to higher material costs incurred in comparison to prior quarters.

The 18% increase in sales from the 2005 third quarter reflects the contribution of the new vacuum-arc remelt furnace installed in December 2005 and additional milling machines and a plate flattener added in the 2006 first quarter. It also was due to higher product prices and a favorable product mix, including growth in shipments to forgers and of bar and plate products to service centers and OEMs. The 3% sales increase over the 2006 second quarter mainly reflected increased shipments of semi-finished product to rerollers and forgers and of bar products to service centers offset by lower shipments of tool steel plate to service centers.

The Dunkirk Specialty Steel segment reported record sales for the quarter of $19.8 million and record operating income of $3.8 million, resulting in an operating margin of 19%. This compares with sales of $14.0 million and operating income of $1.8 million, or 13% of sales, in the third quarter of 2005. In the second quarter of 2006 sales were $16.2 million and operating income of $2.3 million, resulting in an operating margin of 14%.

Dunkirk's sales increased 42% over the 2005 third quarter and 23% over the 2006 second quarter. Operating income increased 117% from the prior year third quarter and rose 69% from the 2006 second quarter. The growth in sales and profitability was due to the previously mentioned factors, including the effect of the surcharge mechanism, workforce additions that helped increase throughput and effective cost management. In addition to increased sales to service centers and OEMs in the 2006 third quarter, Dunkirk's sales to redrawers rose substantially from the previous quarter due to a large shipment of rod product requiring special chemistry.

Business Outlook—Based on its current expectations, the company estimates that fourth quarter 2006 sales will range from $45 to $50 million and that diluted EPS will range from $0.70 to $0.75. This compares with sales of $42.0 million and diluted EPS of $0.55 in the fourth quarter of 2005.

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 rerollers, forgers, service centers, original equipment manufacturers and wire redrawers.