Exhibit 99.1

 

LOGO

 

CONTACTS:   Dennis M. Oates   Christopher T. Scanlon    June Filingeri
  Chairman,   VP Finance, CFO    President
  President and CEO   and Treasurer    Comm-Partners LLC
  (412) 257-7609   (412) 257-7662    (203) 972-0186

FOR IMMEDIATE RELEASE

UNIVERSAL STAINLESS REPORTS STRONG RESULTS ON CONTINUED SALES GROWTH IN

THIRD QUARTER OF 2018

 

   

Q3 2018 Sales of $69.1 million, up 35.7% from Q3 2017

 

   

Q3 2018 Net Income increases to $3.9 million, or $0.44 per diluted share, versus loss of $0.3 million, or $0.04 per diluted share, in Q3 2017

 

   

EBITDA totals $10.1 million in Q3 2018, up 79.5% from Q3 2017

 

   

Quarter-End Backlog of $111.4 million, up 68.3% from Q3 2017 and up 6.9% sequentially

BRIDGEVILLE, PA, October 24, 2018 – Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported net sales of $69.1 million for the third quarter of 2018, an increase of 35.7% from $50.9 million in the third quarter of 2017, and up 4.5% from $66.1 million in the 2018 second quarter. All end markets contributed to the year-over-year growth, with the exception of power generation. Aerospace remained the Company’s largest end market, at 54.0% of total Company sales. Third quarter 2018 aerospace sales totaled $37.3 million, up 34.6% from the third quarter of 2017.

Sales of premium alloys in the third quarter of 2018 totaled $9.2 million, or 13.3% of sales, compared with $7.4 million, or 14.5% of sales, in the third quarter of 2017, and $12.0 million, or 18.2% of sales, in the second quarter of 2018.

For the first nine months of 2018, sales increased 30.5% to $198.9 million from $152.4 million in the same period of 2017. Sales of premium alloys increased 65.4% to $33.0 million, or 16.6% of sales, in the first nine months of 2018, from $20.0 million, or 13.1% of sales, in same period of 2017.

The Company’s gross margin for the third quarter of 2018 totaled $10.4 million, or 15.1% of sales, compared with $5.5 million, or 10.7% of sales, in the third quarter of 2017, and $11.7 million, or 17.7% of sales, in the 2018 second quarter.

Selling, general and administrative expenses were $5.1 million, or 7.4% of sales, for the third quarter of 2018, compared with $4.4 million, or 8.7% of sales, in the third quarter of 2017, and $5.8 million, or 8.9% of sales, for the second quarter of 2018.

Net income for the third quarter of 2018 totaled $3.9 million, or $0.44 per diluted share, (which includes an additional 1.4 million weighted average shares outstanding due to the second quarter 2018 equity issuance), compared with a loss of $0.3 million, or $0.04 per diluted share, in the third quarter of 2017, and net income of $4.0 million, or $0.50 per diluted share, in the second quarter of 2018, (which included an additional 0.6 million weighted average shares outstanding due to the second quarter equity issuance). Additionally, the net loss in third quarter in 2017 included unusual charges of $0.06 per diluted share related to facility fires as well as discrete tax items. Net income in the 2018 second quarter included other income of $0.06 per diluted share as a result of a favorable legal settlement.

 

1


For the first nine months of 2018, net income increased to $10.1 million, or $1.23 per diluted share, versus a net loss of $0.3 million, or $0.03 per diluted share, in the first nine months of 2017.

The Company’s EBITDA for the third quarter of 2018 was $10.1 million, compared with $5.6 million in the third quarter of 2017, and $11.2 million in the second quarter of 2018.

Managed working capital at September 30, 2018 totaled $136.9 million compared with $125.5 million at June 30, 2018 and included accounts receivable of $44.2 million and inventory of $122.8 million, continuing to reflect strong markets and increased business activity.

Backlog (before surcharges) at September 30, 2018 was $111.4 million, an increase of 6.9% from June 30, 2018, and 68.3% higher than at the end of the 2017 third quarter.

The Company’s total debt at September 30, 2018 was $62.5 million, compared with $57.1 million at the end of the second quarter of 2018 and $77.1 million at the end of the third quarter of 2017.

Capital expenditures for the third quarter of 2018 totaled $6.6 million compared to $4.2 million for the second quarter of 2018 and $1.6 million in the third quarter of 2017. The increase in capital expenditures was driven by the Company’s mid-size bar cell project at its Dunkirk, NY facility, which is proceeding and should begin production in the fourth quarter. Once completed, benefits related to this project are expected to include both cost and inventory reductions, as well as quality and cycle time improvements.

The Company’s tax rate for the nine months ended September 30, 2018 was 19.1% and included approximately $0.1 million of discrete tax expense. Excluding discrete items, the underlying annual effective tax rate was 18.5%. The Company’s third quarter income tax expense totaled $0.5 million and was favorably impacted by discrete tax items totaling $0.3 million. Favorable discrete items included research and development credits and stock option exercise benefits.

Additionally, during the quarter, the Company entered into new labor agreements with the hourly employees of its North Jackson and Bridgeville facilities. A six-year collective bargaining agreement with the hourly employees at its North Jackson Specialty Steel facility was effective on July 1st and a new five-year agreement with the hourly employees at its Bridgeville facility was agreed to effective September 1st. One-time costs incurred in the quarter in the negotiation and management of the new Bridgeville labor agreement totaled $0.1 million, or $0.01 per diluted share.

Chairman, President and CEO Dennis Oates commented: “Third quarter 2018 sales exceeded $69 million, driven by continued strength in nearly all of our end markets. Premium alloy sales and bookings remain strong, with sales growth of 24% from the third quarter of 2017. We continue to maintain a very favorable outlook for our premium products, as we exited the third quarter with record premium product bookings and backlog.”

Mr. Oates continued, “Business conditions remain strong, with robust demand in the aerospace market continuing. We are encouraged by our record backlog and order entry levels, which we believe will position us well into 2019 as well as in the fourth quarter. We look forward to closing out 2018 with continued strong year over year growth.”

Conference Call and Webcast

The Company has scheduled a conference call for today, October 24, 2018, at 10:00 a.m. (Eastern) to discuss third quarter 2018 results. Those wishing to listen to the live conference call via telephone should dial 706-679-0668, passcode 6082079. A simultaneous webcast will be available on the Company’s website at www.univstainless.com, and thereafter archived on the website through the end of the fourth quarter of 2018.

 

2


About Universal Stainless & Alloy Products, Inc.

Universal Stainless & Alloy Products, Inc., established in 1994 and 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. More information is available at www.univstainless.com.

Forward-Looking Information Safe Harbor

Except for historical information contained herein, the statements in this release are forward-looking statements that are made pursuant to the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company’s actual results in future periods to differ materially from forecasted results. Those risks include, among others, the Company’s ability to maintain its relationships with its significant customers and market segments; the Company’s response to competitive factors in its industry that may adversely affect the market for finished products manufactured by the Company or its customers; the Company’s ability to compete successfully with domestic and foreign producers of specialty steel products and products fashioned from alternative materials; the demand for the Company’s products and the prices at which the Company is able to sell its products in the aerospace industry, from which a substantial amount of our sales is derived; the Company’s ability to develop, commercialize, market and sell new applications and new products; the receipt, pricing and timing of future customer orders; the impact of changes in the Company’ product mix on the Company’s profitability; the Company’s ability to maintain the availability of raw materials and operating supplies with acceptable pricing; the availability and pricing of electricity, natural gas and other sources of energy that the Company needs for the manufacturing of its products; risks related to property, plant and equipment, including the Company’s reliance on the continuing operation of critical manufacturing equipment; the Company’s success in timely concluding collective bargaining agreements and avoiding strikes or work stoppages; the Company’s ability to attract and retain key personnel; the Company’s ongoing requirement for continued compliance with laws and regulations, including applicable safety and environmental regulations; the ultimate outcome of the Company’s current and future litigation matters; the Company’s ability to meet its debt service requirements and to comply with applicable financial covenants; risks associated with conducting business with suppliers and customers in foreign countries; risks related to acquisitions that the Company may make; the Company’s ability to protect its information technology infrastructure against service interruptions, data corruption, cyber-based attacks or network security breaches; the impact on the Company’s effective tax rates of changes in tax rules, regulations and interpretations in the United States and other countries where it does business; and the impact of various economic, credit and market risk uncertainties. Many of these factors are not within the Company’s control and involve known and unknown risks and uncertainties that may cause the Company’s actual results in future periods to be materially different from any future performance suggested herein. Any unfavorable change in the foregoing or other factors could have a material adverse effect on the Company’s business, financial condition and results of operations. Further, the Company operates in an industry sector where securities values may be volatile and may be influenced by economic and other factors beyond the Company’s control. Certain of these risks and other risks are described in the Company’s filings with the Securities and Exchange Commission (SEC) over the last 12 months, copies of which are available from the SEC or may be obtained upon request from the Company.

Non-GAAP Financial Measures

This press release includes discussions of financial measures that have not been determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). These measures include earnings (loss) before interest, income taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA. We include these measurements to enhance the understanding of our operating performance. We believe that EBITDA, considered along with net earnings (loss), is a relevant indicator of trends relating to cash generating activity of our operations. Adjusted EBITDA excludes the effect of share-based compensation expense and other non-cash generating activity such as impairments and the write-off of deferred financing costs. We believe excluding these costs provides a consistent comparison of the cash generating activity of our operations. We believe that EBITDA and Adjusted EBITDA are useful to investors as they facilitate a comparison of our operating performance to other companies who also use EBITDA and Adjusted

 

3


EBITDA as supplemental operating measures. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measures. These non-GAAP measures may not be entirely comparable to similarly titled measures used by other companies due to potential differences among calculations methodologies. A reconciliation of these non-GAAP financial measures to their most directly comparable financial measure prepared in accordance with GAAP is included in the tables that follow.

-TABLES FOLLOW -

 

4


UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

FINANCIAL HIGHLIGHTS

(Dollars in Thousands, Except Per Share Information)

(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

 

     Three months ended     Nine months ended  
     September 30,     September 30,  
     2018     2017     2018     2017  

Net Sales

        

Stainless steel

   $ 46,754     $ 34,106     $ 137,384     $ 106,296  

High-strength low alloy steel

     5,444       3,359       15,535       10,949  

Tool steel

     13,130       9,202       31,537       24,924  

High-temperature alloy steel

     2,149       3,208       9,627       8,085  

Conversion services and other sales

     1,579       1,012       4,781       2,115  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net sales

     69,056       50,887       198,864       152,369  

Cost of products sold

     58,631       45,423       167,472       135,494  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     10,425       5,464       31,392       16,875  

Selling, general and administrative expenses

     5,131       4,448       16,187       13,676  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     5,294       1,016       15,205       3,199  

Interest expense

     906       1,059       3,245       3,018  

Deferred financing amortization

     60       63       195       191  

Other (income) expense, net

     (48     (23     (690     (43
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     4,376       (83     12,455       33  

Provision (benefit) for income taxes

     460       176       2,376       283  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 3,916     $ (259   $ 10,079     $ (250
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share - Basic

   $ 0.45     $ (0.04   $ 1.27     $ (0.03
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share - Diluted

   $ 0.44     $ (0.04   $ 1.23     $ (0.03
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares of common stock outstanding

        

Basic

     8,699,953       7,228,277       7,931,783       7,221,426  

Diluted

     8,952,749       7,228,277       8,166,759       7,221,426  

 

5


MARKET SEGMENT INFORMATION

 

     Three months ended      Nine months ended  
     September 30,      September 30,  
     2018      2017      2018      2017  

Net Sales

           

Service centers

   $ 49,889      $ 35,507      $ 139,152      $ 105,618  

Original equipment manufacturers

     4,981        4,361        15,232        13,239  

Rerollers

     6,530        5,640        23,188        17,452  

Forgers

     6,077        4,367        16,511        13,945  

Conversion services and other sales

     1,579        1,012        4,781        2,115  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 69,056      $ 50,887      $ 198,864      $ 152,369  
  

 

 

    

 

 

    

 

 

    

 

 

 

Tons shipped

     12,385        9,829        34,681        30,250  
  

 

 

    

 

 

    

 

 

    

 

 

 

MELT TYPE INFORMATION

 

     Three months ended      Nine months ended  
     September 30,      September 30,  
     2018      2017      2018      2017  

Net Sales

           

Specialty alloys

   $ 58,325      $ 42,511      $ 161,048      $ 130,287  

Premium alloys *

     9,152        7,364        33,035        19,967  

Conversion services and other sales

     1,579        1,012        4,781        2,115  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 69,056      $ 50,887      $ 198,864      $ 152,369  
  

 

 

    

 

 

    

 

 

    

 

 

 

END MARKET INFORMATION **

 

     Three months ended      Nine months ended  
     September 30,      September 30,  
     2018      2017      2018      2017  

Net Sales

           

Aerospace

   $ 37,302      $ 27,717      $ 113,742      $ 83,404  

Power generation

     2,714        3,259        7,337        12,267  

Oil & gas

     8,926        4,593        25,211        14,296  

Heavy equipment

     13,423        9,698        32,506        26,331  

General industrial, conversion services and other sales

     6,691        5,620        20,068        16,071  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 69,056      $ 50,887      $ 198,864      $ 152,369  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

*

Premium alloys represent all vacuum induction melted (VIM) products.

**

The majority of our products are sold to service centers rather than the ultimate end market customers. The end market information in this press release is our estimate based upon our knowledge of our customers and the grade of material sold to them, which they will in-turn sell to the ultimate end market customer.

 

6


CONDENSED CONSOLIDATED BALANCE SHEETS

 

     September 30,      December 31,  
     2018      2017  

Assets

     

Cash

   $ 33      $ 207  

Accounts receivable, net

     44,185        24,990  

Inventory, net

     122,839        116,663  

Other current assets

     3,068        4,404  
  

 

 

    

 

 

 

Total current assets

     170,125        146,264  

Property, plant and equipment, net

     174,446        174,444  

Other long-term assets

     6,681        523  
  

 

 

    

 

 

 

Total assets

   $ 351,252      $ 321,231  
  

 

 

    

 

 

 

Liabilities and Stockholders’ Equity

     

Accounts payable

   $ 30,129      $ 34,898  

Accrued employment costs

     6,595        4,075  

Current portion of long-term debt

     3,896        4,707  

Other current liabilities

     1,171        1,268  
  

 

 

    

 

 

 

Total current liabilities

     41,791        44,948  

Long-term debt, net

     58,563        75,006  

Deferred income taxes

     11,964        9,605  

Other long-term liabilities, net

     2,840        4  
  

 

 

    

 

 

 

Total liabilities

     115,158        129,563  

Stockholders’ equity

     236,094        191,668  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 351,252      $ 321,231  
  

 

 

    

 

 

 

 

7


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

 

     Nine months ended  
     September 30,  
     2018     2017  

Operating activities:

    

Net income (loss)

   $ 10,079     $ (250

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

    

Depreciation and amortization

     14,460       14,032  

Deferred income tax

     2,327       318  

Share-based compensation expense

     1,046       1,367  

Changes in assets and liabilities:

    

Accounts receivable, net

     (19,195     (7,122

Inventory, net

     (7,890     (16,693

Accounts payable

     (3,964     10,666  

Accrued employment costs

     2,595       (922

Income taxes

     (36     (131

Other, net

     1,307       (399
  

 

 

   

 

 

 

Net cash provided by operating activities

     729       866  

Investing activity:

    

Capital expenditures

     (13,211     (4,699
  

 

 

   

 

 

 

Net cash used in investing activity

     (13,211     (4,699

Financing activities:

    

Borrowings under revolving credit facility

     347,395       240,750  

Payments on revolving credit facility

     (351,918     (232,909

Proceeds under New Markets Tax Credit financing

     2,835       —    

Payments on term loan facility, capital leases, and notes

     (11,821     (3,908

Payments of financing costs

     (1,105     —    

Proceed from public offering, net of cash expenses

     32,246       —    

Proceeds from exercise of stock options

     834       104  
  

 

 

   

 

 

 

Net cash provided by financing activities

     18,466       4,037  
  

 

 

   

 

 

 

Net increase in cash and restricted cash

     5,984       204  

Cash and restricted cash at beginning of period

     207       75  
  

 

 

   

 

 

 

Cash and restricted cash at end of period

   $ 6,191     $ 279  
  

 

 

   

 

 

 

 

8


RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA

 

     Three Months ended     Nine months ended  
     September 30,     September 30,  
     2018      2017     2018      2017  

Net income (loss)

   $ 3,916      $ (259   $ 10,079      $ (250

Interest expense

     906        1,059       3,245        3,018  

Provision (Benefit) for income taxes

     460        176       2,376        283  

Depreciation and amortization

     4,845        4,667       14,460        14,032  
  

 

 

    

 

 

   

 

 

    

 

 

 

EBITDA

     10,127        5,643       30,160        17,083  

Share-based compensation expense

     369        396       1,046        1,367  
  

 

 

    

 

 

   

 

 

    

 

 

 

Adjusted EBITDA

   $ 10,496      $ 6,039     $ 31,206      $ 18,450  
  

 

 

    

 

 

   

 

 

    

 

 

 

 

9

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