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Universal Stainless Reports Strong Second Quarter 2011 Results
08/01/2011 - Universal Stainless & Alloy Products reported net income of $5.5 million on sales of $63.3 million for the second quarter, and net income of $9.97 million on sales of $123.1 million for the first six months of 2011.
Universal Stainless & Alloy Products, Inc. reported net income of $5.5 million on sales of $63.3 million for the second quarter, and net income of $9.97 million on sales of $123.1 million for the first six months of 2011.
The $5.5 million ($0.79 per diluted share) net income reflects a 33% increase from the year-ago second quarter and a 24% increase from the previous quarter (1Q2011).
Results included pre-tax expenses of $0.4 million and $0.5 million, equivalent to $0.03 and $0.04 per diluted share, respectively, related to the company's agreement to acquire the assets of Patriot Special Metals. The company has received early termination of the Hart-Scott-Rodino Act waiting period for the acquisition and expects to close the transaction in the current third quarter.
Sales of $63.3 million reflect a 23% increase from the year-ago second quarter and a 6% increase from the previous quarter.
Operating income was $8.5 million, an increase of 32% from the year-ago second quarter and 22% higher than the previous quarter (1Q2011). Operating income as a percentage of sales, reached 13.4%, the company’s highest operating margin since 2007.
Cash flow from operations was $1.1 million while the company continued to invest in working capital, including $2.4 million in capital expenditures for the quarter. At June 30, 2011, the company had cash of $28.0 million and total debt of $9.4 million.
Total shipment volume increased 7% from the year-ago second quarter but was 3% lower than the previous quarter (1Q2011). Compared with the previous quarter, the volume shipped to the petrochemical market increased 3%, while volumes shipped to the aerospace, power generation and service center plate markets were down 6%, 14% and 4%, respectively.
Management Comments — "Business continued at healthy levels in the second quarter despite some order entry slowing in June amidst declining nickel prices and lower surcharges,” commented Chairman, President and CEO Dennis Oates. “Backlog remained strong at $90 million, in line with both the first quarter and with the favorable outlook for our end markets, especially aerospace and petrochemical. Our consolidated operating margin continued to improve through a higher value sales mix and further cost reductions. Our investment in working capital and capital improvements also continued in the second quarter.
"We are proceeding toward the closing of the Patriot Special Metals acquisition, with early regulatory approval received and with financing as well as construction and installation of equipment on track. This acquisition is a major growth initiative for Universal that will broaden our production capabilities, expand our range in higher-value products and enhance our ability to enter into attractive new market niches. We expect the acquisition to significantly strengthen our industry position and enable us to better serve clients and to capture substantial new market opportunity."
Second Quarter Segment Review — The company’s Universal Stainless & Alloy Products segment had sales of $60.5 million and operating income of $6.4 million, yielding an operating margin of 10.7% of sales. This compares with sales of $49.7 million and operating income of $6.8 million, or 13.7% of sales, in the year-ago second quarter. In the previous quarter (1Q2011), sales were $55.2 million and operating income was $4.9 million, or 8.9% of sales.
Segment sales rose 22% from the year-ago second quarter on a 13% increase in tons shipped mainly due to higher shipments to Dunkirk for finished product production. Segment sales rose 10% from the previous quarter on equivalent volume due to higher shipments to Dunkirk and service centers offset by lower shipments to rerollers.
Sales for the Dunkirk Specialty Steel segment reached a record $25.6 million and operating income was $3.0 million, yielding an operating margin of 11.6% of sales. This compares with sales in the year-ago second quarter of $13.3 million and operating income of $1.3 million, or 9.6% of sales. In the previous quarter (1Q2011), sales were $22.0 million and operating income was $2.3 million, or 10.6% of sales.
Dunkirk's sales increased 93% from the year-ago second quarter on a 67% increase in tons shipped mainly due to an 86% increase in shipments to service centers. Dunkirk's sales increased 16% from their previous record level in the previous quarter on an 11% increase in tons shipped, also mainly due to higher shipments to service centers.
Headquartered in Bridgeville, Pa., Universal Stainless & Alloy Products, Inc. manufactures and markets semi-finished and finished specialty steels, including stainless steel, tool steel and certain other alloyed steels. The company's products are used in a variety of industries, including aerospace, power generation, petrochemical and heavy equipment manufacturing. The company was established in 1994.
