Universal Stainless Reveals Optimistic Outlook for 2014
02/05/2014 - As it reported its 2013 earnings results, Universal Stainless revealed a more positive view about the current year, especially the second half, based on current market expectations.
Universal Stainless & Alloy Products, Inc. reported net sales of US$40.3 million for the fourth quarter of 2013 and a net loss of US$2.9 million, or US$0.41 per diluted share, including a write-down of a deferred state tax asset of approximately US$1.0 million, or US$0.14 per diluted share. In the fourth quarter of 2012, net sales were US$47.2 million and net income was US$1.1 million, or US$0.16 per diluted share.
Compared with the fourth quarter of 2012, tons shipped to the aerospace market increased 6% and power generation shipments were up 8%, while shipments to the oil and gas market were down 51% and heavy equipment market shipments were down 2%. However, backlog (before surcharges) in the fourth quarter increased by 17.2% to US$46.8 million from the third quarter of 2013 as a result of stronger fourth quarter 2013 bookings.
The company's gross margin for the fourth quarter of 2013 was US$1.5 million, or 3.7% of sales, compared with a gross margin as a percentage of sales of 12.7% in the fourth quarter of 2012. The decrease was primarily the result of lower shipments and operating activity, product mix and the misalignment of surcharges to raw material costs. As a result, the company incurred an operating loss of US$2.6 million in the fourth quarter of 2013 compared to operating income of US$1.8 million in the fourth quarter of 2012.
For full year 2013, the company's net sales were US$180.8 million and the net loss was US$4.1 million, or US$0.58 per diluted share. That compares with net sales of US$251.0 million and net income of US$14.6 million, or US$2.02 per diluted share, for 2012.
The company continued to generate positive cash from operations, which totaled US$7.5 million in the fourth quarter of 2013 and US$28.6 million for the full year of 2013. In turn, the company repaid US$4.8 million of its debt during the fourth quarter and US$16.9 million for all of 2013, primarily as a result of lowering inventory levels by US$11.7 million. Capital expenditures in 2013 totaled US$11.8 million compared to US$35.1 million for 2012.
Chairman, president and CEO Dennis Oates commented: "Our fourth quarter sales level was in line with our expectations, although the mix remained weighted towards lower margin semi-finished products.
"In contrast to most of the past year, we saw a substantial improvement in our order entry in the fourth quarter, which increased 26% sequentially and 42% from the fourth quarter of 2012.
"We also continued to achieve strong cash flow from operations in the quarter through our continued focus on managing inventories, controlling capital spending and reducing debt.
"The renewed pick-up in order entry started in October 2013 and has continued thus far in the first quarter, with our North Jackson facility strongly participating in the improvement. While we expect shipments for those orders to build progressively as we go through 2014, the improvement supports a more positive view about the current year, especially the second half, based on current market expectations.
"In the meantime, we will continue to execute our strategic plan to further realize the benefits of North Jackson and build upon the substantial progress in customer approvals, industry certifications achieved in 2013 and our continued new product development."
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.
Compared with the fourth quarter of 2012, tons shipped to the aerospace market increased 6% and power generation shipments were up 8%, while shipments to the oil and gas market were down 51% and heavy equipment market shipments were down 2%. However, backlog (before surcharges) in the fourth quarter increased by 17.2% to US$46.8 million from the third quarter of 2013 as a result of stronger fourth quarter 2013 bookings.
The company's gross margin for the fourth quarter of 2013 was US$1.5 million, or 3.7% of sales, compared with a gross margin as a percentage of sales of 12.7% in the fourth quarter of 2012. The decrease was primarily the result of lower shipments and operating activity, product mix and the misalignment of surcharges to raw material costs. As a result, the company incurred an operating loss of US$2.6 million in the fourth quarter of 2013 compared to operating income of US$1.8 million in the fourth quarter of 2012.
For full year 2013, the company's net sales were US$180.8 million and the net loss was US$4.1 million, or US$0.58 per diluted share. That compares with net sales of US$251.0 million and net income of US$14.6 million, or US$2.02 per diluted share, for 2012.
The company continued to generate positive cash from operations, which totaled US$7.5 million in the fourth quarter of 2013 and US$28.6 million for the full year of 2013. In turn, the company repaid US$4.8 million of its debt during the fourth quarter and US$16.9 million for all of 2013, primarily as a result of lowering inventory levels by US$11.7 million. Capital expenditures in 2013 totaled US$11.8 million compared to US$35.1 million for 2012.
Chairman, president and CEO Dennis Oates commented: "Our fourth quarter sales level was in line with our expectations, although the mix remained weighted towards lower margin semi-finished products.
"In contrast to most of the past year, we saw a substantial improvement in our order entry in the fourth quarter, which increased 26% sequentially and 42% from the fourth quarter of 2012.
"We also continued to achieve strong cash flow from operations in the quarter through our continued focus on managing inventories, controlling capital spending and reducing debt.
"The renewed pick-up in order entry started in October 2013 and has continued thus far in the first quarter, with our North Jackson facility strongly participating in the improvement. While we expect shipments for those orders to build progressively as we go through 2014, the improvement supports a more positive view about the current year, especially the second half, based on current market expectations.
"In the meantime, we will continue to execute our strategic plan to further realize the benefits of North Jackson and build upon the substantial progress in customer approvals, industry certifications achieved in 2013 and our continued new product development."
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.
