Universal Stainless Reports Second Quarter 2012 Results
07/20/2012 - Universal Stainless & Alloy Products, Inc. reported today that sales for the second quarter of 2012 were $67.9 million, an increase of 7% from the second quarter of 2011 but 9% below the record 2012 first quarter.
Universal Stainless & Alloy Products, Inc. reported today that sales for the second quarter of 2012 were $67.9 million, an increase of 7% from the second quarter of 2011 but 9% below the record 2012 first quarter.
Operating income for the second quarter of 2012 was $7.3 million, a decline of 14% from the second quarter of 2011 and 25% below the 2012 first quarter. Operating income was 10.8% of sales in the second quarter of 2012 compared with 13.4% in the second quarter of 2011 and 13.0% of sales in the 2012 first quarter.
Net income for the second quarter of 2012 was $4.5 million, or $0.62 per diluted share, which includes a benefit of $0.02 per diluted share due to research and development tax credits. This compares with net income of $5.5 million, or $0.79 per diluted share, in the second quarter of 2011, which included $0.04 per diluted share of expense for the acquisition of the Company's North Jackson facility. In the first quarter of 2012, net income was $6.3 million, or $0.86 per diluted share, including a benefit of $0.07 per diluted share due to state income tax adjustments as well as an after-tax loss of $0.2 million, or $0.03 per diluted share, attributable to the ramp-up of North Jackson. The operating income of the Company's North Jackson facility was accretive to second quarter 2012 results.
For the second quarter of 2012, the company narrowed its negative cash flow from operations to $0.5 million despite investment in working capital and in the ramp-up of North Jackson. Capital expenditures were $10.3 million in the second quarter, including $7.2 million for the North Jackson operation. At June 30, 2012, the company had total debt of $114.7 million, or 37.3% of total capitalization.
Shipment volume for the second quarter of 2012 increased 6% from the second quarter of 2011 but was 5% lower than the 2012 first quarter. Compared to the first quarter of 2012, tons shipped to the aerospace, petrochemical and power generation markets declined by 10%, 11% and 25%, respectively, while service center plate volume increased 48%.
Chairman, President and CEO Dennis Oates commented, "Despite continued end market strength, we experienced changes in our customers' buying patterns as the second quarter progressed. Falling raw material prices and the prospect of lower future surcharges combined with growing economic caution influenced customers to reduce their order quantities, negatively impacting our shipment volume, order entry and backlog.
"The lower shipment volume and the gap between surcharges and our raw material costs reduced margins in the second quarter, although our operating margin as a percentage of sales remained above 10%. As anticipated we reached an important milestone in the quarter with our North Jackson facility becoming operationally accretive for the first time.
"Soft demand due to channel inventory adjustments is expected to continue through the normal summer slowdown. However, the fundamental drivers of our end markets remain in place and our long-term growth strategy and prospects remain intact."
Segment Review
For the second quarter of 2012, the Universal Stainless & Alloy Products segment, including the North Jackson operation, had sales of $61.8 million and operating income of $4.5 million, yielding an operating margin of 7.2% of sales. In the second quarter of 2011, sales were $60.4 million and operating income was $6.4 million, or 10.7% of sales. For the first quarter of 2012, sales were $60.3 million and operating income was $5.8 million, or 9.6% of sales.
Segment sales increased 2% from the second quarter of 2011 on 2% higher tons shipped mainly due to increased shipments to service centers and of conversion pounds with the addition of North Jackson, offset by lower shipments to forgers of quick-turn ingot. Segment sales increased 3% from the 2012 first quarter on a 2% increase in volume, including higher shipments of tool steel to service centers, offset by lower shipments to forgers.
Sales for the Dunkirk Specialty Steel segment were $25.3 million for the second quarter of 2012 and operating income was $2.7 million, yielding an operating margin of 10.7% of sales. This compares with sales in the second quarter of 2011 of $25.6 million and operating income of $3.0 million, or 11.6% of sales. In the first quarter of 2012, sales were $30.5 million and operating income was $3.4 million, or 11.0% of sales
Dunkirk's sales decreased 1% from the second quarter of 2011 on a 5% decrease in tons shipped. Dunkirk's sales decreased 17% from the 2012 first quarter on 18% lower tons shipped, due to lower shipments to all major customer categories.
Universal Stainless & Alloy Products, Inc., headquartered in Bridgeville, Pa., manufactures and markets semi-finished and finished specialty steels, including stainless steel, tool steel and certain other alloyed steels. Its products are used in a variety of industries, including aerospace, power generation, petrochemical and heavy equipment manufacturing.
