Universal Stainless Reports Fourth Quarter 2012 Results in Line With Company Guidance

- Sales are $47.2 Million; EPS is $0.16

- Quarter-end Backlog Totals $51.7 Million

BRIDGEVILLE, Pa., Jan. 29, 2013 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) today reported fourth quarter results in line with its recent guidance. Sales for the fourth quarter of 2012 were $47.2 million compared with $62.2 million in the fourth quarter of 2011.

Operating income for the fourth quarter of 2012 was $1.8 million, or 3.7% of sales, including $1.3 million of ramp-up expense for the Company's North Jackson operation. This compares with operating income of $7.0 million, or 11.3% of sales, in the fourth quarter of 2011, which included $0.9 million of expense for the start-up of North Jackson acquired by the Company in August 2011. Excluding the effect of North Jackson in both periods, operating income was 6.8% of sales in the fourth quarter of 2012 and 12.8% of sales in the fourth quarter of 2011.

Net income for the fourth quarter of 2012 was $1.1 million, or $0.16 per diluted share. This included a benefit of $0.04 per diluted share due to state income tax adjustments. It also included $0.12 per diluted share of North Jackson ramp-up expense. In the fourth quarter of 2011, net income was $4.3 million, or $0.59 per diluted share, including $0.13 per diluted share of start-up expense related to North Jackson.

On January 18, 2013, the Company reported that it expected fourth quarter 2012 revenues to approximate $47 million and diluted earnings per share to approximate $0.15 to $0.17.

For full year 2012, sales were $251.0 million compared with $252.6 million in 2011. Net income for 2012 was $14.6 million, or $2.02 per diluted share, compared with $18.1 million, or $2.56 per diluted share, in 2011. Net income for 2012 included expense for the North Jackson ramp-up of $0.20 per diluted share compared to $0.51 per diluted share of expense in 2011 for the acquisition, financing and start-up of the North Jackson operation.

For the fourth quarter of 2012, the Company had positive cash flow from operations of $12.7 million, even after continued investment in the ramp-up of North Jackson. Capital expenditures in the fourth quarter of 2012 were $4.3 million, including $3.0 million for the North Jackson operation. At December 31, 2012, the Company had total debt of $106.7 million, or 35.0% of total capitalization.

Shipment volume for the fourth quarter of 2012 decreased 25% from the fourth quarter of 2011. This reflected a 19% increase in tons shipped to the service center plate market, offset by decreases of 20%, 41% and 53% in shipments to the aerospace, petrochemical and power generation markets, respectively.

Chairman, President and CEO Dennis Oates commented: "Our fourth quarter sales were consistent with low activity levels industry-wide. An expected pick-up in order entry at year end failed to materialize as economic uncertainty kept customers focused on inventory reduction. An exception was the solid demand for service center plate products in the quarter, which have applications in the automotive and heavy industrial markets.

"We achieved further operational improvement company-wide in the fourth quarter, including commissioning of additional equipment and process modifications that will benefit quality and cycle time. However, lower shipment volume and the continued ramp-up of our North Jackson operation resulted in a consolidated operating margin of 3.7% for the quarter.

"We are successfully entering the final stages of the North Jackson ramp-up. The approval process with customers for our vacuum induction melting (VIM) products is proceeding with prime and first-tier OEMs in our major markets.

"Despite a slowdown in order activity that began for us in the second quarter of 2012, our full year sales approximated those of 2011, and our operating margin, even with North Jackson, approached 10% for 2012. We expect our North Jackson operation to begin making an increasingly positive contribution to our results as we go through 2013. In addition, there are early signs that some customers are returning to the market, although most are predicting a gradual recovery in meaningful demand. We are fully focused on further strengthening our position to respond to that demand as it returns."

Segment Review

For the fourth quarter of 2012, the Universal Stainless & Alloy Products segment, which includes the North Jackson operation, had sales of $37.6 million and operating income of $0.2 million, including North Jackson ramp-up costs, yielding an operating margin of 0.6% of sales. In the fourth quarter of 2011, segment sales were $49.2 million, and operating income including North Jackson ramp-up costs was $4.0 million, or 8.2% of sales.

Segment sales decreased 24% from the fourth quarter of 2011 on 22% lower tons shipped mainly due to decreased shipments to all customer categories except service centers.

Sales for the Dunkirk Specialty Steel segment were $19.4 million for the fourth quarter of 2012, and operating income was $1.0 million, yielding an operating margin of 5.1% of sales. This compares with sales in the fourth quarter of 2011 of $24.5 million and operating income of $2.5 million, or 10.1% of sales.

Dunkirk's sales decreased 21% from the fourth quarter of 2011 on a 26% decrease in tons shipped mainly due to decreased shipments to all customer categories except OEM.

Webcast

The Company has scheduled a conference call for today, January 29, at 10:00 a.m. (Eastern) to discuss fourth quarter results. 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 first quarter of 2013.  

About Universal Stainless & Alloy Products, Inc.

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. The Company's products are used in a variety of industries, including aerospace, power generation, petrochemical 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. 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 concentrated nature of the Company's customer base to date and the Company's dependence on its significant customers; the receipt, pricing and timing of future customer orders; changes in product mix; the limited number of raw material and energy suppliers and significant fluctuations that may occur in raw material and energy prices; risks related to property, plant and equipment,  including the Company's reliance on the continuing operation of critical manufacturing equipment; risks associated with labor matters; 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 and matters; risks related to acquisitions that the Company may make; 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

- TABLES FOLLOW -

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except share and per share information)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
     
 For the Quarter EndedFor the Year Ended
 December 31,December 31,
 2012201120122011*
Net Sales    
Stainless steel  $ 34,471 $ 52,203 $ 195,315 $ 202,000
Tool steel  4,782 3,587 20,420 21,963
High-strength low alloy steel  4,938 3,607 21,897 17,532
High-temperature alloy steel  1,688 1,772 7,787 6,809
Conversion services  1,037 960 4,868 3,905
Scrap sales and other 234 39 703 387
Total net sales  47,150 62,168 250,990 252,596
Cost of products sold  41,183 50,264 209,841 205,148
Selling and administrative expenses  4,215 4,891 17,746 17,761
Operating income  1,752 7,013 23,403 29,687
Interest expense  (668) (569) (2,592) (1,421)
Other income  51 24 140 212
Income before income taxes  1,135 6,468 20,951 28,478
Income tax provision  54 2,212 6,334 10,356
Net income  $ 1,081 $ 4,256 $ 14,617 $ 18,122
     
Earnings per common share – Basic  $ 0.16 $ 0.62 $ 2.13 $ 2.65
Earnings per common share – Diluted  $ 0.16 $ 0.59 $ 2.02 $ 2.56
     
Weighted average shares of Common Stock outstanding    
Basic  6,907,744 6,839,979 6,874,669 6,826,490
Diluted  7,455,809 7,418,002 7,454,030 7,138,824
     
MARKET SEGMENT INFORMATION
     
 For the Quarter EndedFor the Year Ended
 December 31,December 31,
 2012201120122011*
Net Sales    
Service centers  $ 30,943 $ 33,624 $ 151,034 $ 131,624
Forgers  5,754 11,640 36,678 48,432
Rerollers  5,492 11,131 37,343 47,114
Original equipment manufacturers  3,181 3,583 15,874 16,427
Wire redrawers  509 1,191 4,490 4,707
Conversion services 1,037 960 4,868 3,905
Scrap sales and other 234 39 703 387
Total net sales  $ 47,150 $ 62,168 $ 250,990 $ 252,596
     
Tons Shipped  8,877 11,820 47,802 50,164
     
* Consolidated results include the North Jackson operation from its acquisition date of August 18, 2011.
 
BUSINESS SEGMENT RESULTS
     
Universal Stainless & Alloy Products Segment    
     
 For the Quarter EndedFor the Year Ended
 December 31,December 31,
 2012201120122011*
Net Sales    
Stainless steel  $ 21,145 $ 31,899 $ 120,071 $ 125,936
Tool steel  4,024 3,064 17,584 20,248
High-strength low alloy steel  969 1,210 6,062 3,026
High-temperature alloy steel  522 741 2,647 2,791
Conversion services 963 782 4,439 2,985
Scrap sales and other 116 42 481 401
  27,739 37,738 151,284 155,387
Intersegment  9,815 11,434 61,618 69,946
     
Total net sales  37,554 49,172 212,902 225,333
Material cost of sales  20,192 24,621 107,042 116,959
Operation cost of sales  14,455 17,203 82,980 76,014
Selling and administrative expenses  2,684 3,312 11,332 12,184
     
Operating income  $ 223 $ 4,036 $ 11,548 $ 20,176
     
* The Universal Stainless & Alloy Products segment includes the North Jackson operation from its acquisition date of August 18, 2011.
     
Dunkirk Specialty Steel Segment     
     
 For the Quarter EndedFor the Year Ended
 December 31,December 31,
 2012201120122011
Net Sales    
Stainless steel  $ 13,326 $ 20,304 $ 75,244 $ 76,064
Tool steel  758 523 2,836 1,715
High-strength low alloy steel  3,969 2,397 15,835 14,506
High-temperature alloy steel  1,166 1,031 5,140 4,018
Conversion services  74 178 429 920
Scrap sales and other 118 (3) 222 (14)
  19,411 24,430 99,706 97,209
Intersegment  36 43 350 169
     
Total net sales  19,447 24,473 100,056 97,378
Material cost of sales  11,512 14,971 58,642 59,835
Operation cost of sales  5,421 5,459 25,616 21,689
Selling and administrative expenses  1,531 1,579 6,414 5,577
     
Operating income  $ 983 $ 2,464 $ 9,384 $ 10,277
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
   
 December 31,December 31,
 20122011
Assets  
   
Cash  $ 321 $ 274
Accounts receivable, net 24,287 34,554
Inventory, net  95,749 85,088
Deferred income taxes 22,739 28,438
Refundable income taxes 1,594 4,844
Other current assets  2,740 2,198
   
Total current assets  147,430 155,396
Property, plant and equipment, net  206,150 183,148
Goodwill 20,268 20,479
Other long-term assets  2,418 2,649
   
Total assets  $ 376,266 $ 361,672
   
Liabilities and Stockholders' Equity  
   
Accounts payable  $ 10,610 $ 29,912
Accrued employment costs  4,671 7,547
Current portion of long-term debt  1,500 3,000
Other current liabilities  735 966
   
Total current liabilities  17,516 41,425
Long-term debt  105,242 91,650
Deferred income taxes  55,227 48,291
   
Total liabilities  177,985 181,366
Stockholders' equity  198,281 180,306
   
Total liabilities and stockholders' equity  $ 376,266 $ 361,672
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
   
 For the Year Ended
 December 31,
 20122011*
  
Operating Activities:  
 Net income  $ 14,617 $ 18,122
 Adjustments to reconcile net income to net cash provided by operating activities:   
 Depreciation and amortization  12,627 7,271
 Gain on sale of property, plant and equipment  (12) (20)
 Deferred income tax  12,635 10,072
 Share-based compensation expense, net  1,314 1,408
 Changes in assets and liabilities:   
 Accounts receivable, net  10,267 (5,281)
 Inventory, net  (10,661) (15,378)
 Accounts payable  (20,130) (5)
 Accrued employment costs  (2,876) 2,057
 Income taxes  3,208 (4,672)
 Other, net  (180) (2,887)
   
 Net cash provided by operating activities  20,809 10,687
   
 Investing Activities:   
 Capital expenditures, net of amount included in current liabilities  (34,229) (16,790)
 Business acquisition, net of convertible notes assumed  -- (91,298)
 Proceeds from sale of property, plant and equipment  14 20
   
 Net cash used in investing activities  (34,215) (108,068)
   
 Financing Activities:   
 Borrowings under revolving credit facility, net  32,092 34,650
 Payment on term loan facility  (20,000) --
 Borrowings under term loan facility  -- 40,000
 Debt repayments  -- (10,823)
 Proceeds from the issuance of Common Stock  1,608 627
 Payment of deferred financing costs  (348) (1,371)
 Tax benefit from share-based payment arrangements  335 172
 Purchase of Treasury Stock  (234) --
   
 Net cash provided by financing activities  13,453 63,255
   
 Net increase (decrease) in cash and cash equivalents  47 (34,126)
 Cash at beginning of period  274 34,400
   
 Cash at end of period  $ 321 $ 274
   
 Supplemental Non-Cash Investing and Financing Activities:   
 Capital expenditures included in current liabilities  $ 828 $ 7,690
 Convertible notes issued as acquisition consideration  $ -- $ 20,000
   
* Consolidated results include the North Jackson operation from its acquisition date of August 18, 2011.
CONTACT: Dennis Oates
         Chairman,
         President and CEO
         (412) 257-7609
         
         Douglas McSorley
         VP Finance, CFO
         and Treasurer
         (412) 257-7606
         
         June Filingeri
         President
         Comm-Partners LLC
         (203) 972-0186

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