Universal Stainless reports first quarter sales
May 30, 2009
BRIDGEVILLE, Pa. — Universal Stainless & Alloy Products, Inc. has reported that sales for the first quarter of 2009 were $42.2 million, which was at the high end of its forecast of $32 million to $42 million. This compares with sales of $56.8 million in the first quarter of 2008. The company recorded a net loss for the first quarter of 2009 of $3.8 million, or $0.57 per diluted share, which included unusual charges of $3.6 million equivalent to $0.53 per share, after-tax, as detailed below. The company announced on March 24 that the deepening recession and economic uncertainty would contribute to an expected loss for the quarter and include unusual charges. In the first quarter of 2008, the Company recorded net income of $4.7 million, or $0.70 per diluted share. The first quarter of 2009 included the following unusual charges (totaling $6.0 million pre-tax): ¯ $1.9 million increase to the bad debt reserve due to the inability of a privately held service center customer to pay amounts owed on 2008 business and a related $0.5 million increase to the inventory reserve; ¯ $1.5 million due to a decline in raw material values and the consumption of high cost material during the quarter; ¯ $1 million write-down of stock inventory; * $0.9 million attributed to the reduction of operating levels; and ¯ $0.2 million resulting from a 20 percent reduction in salaried employees Cash flow from operations remained positive in the first quarter of 2009 and totaled $2.6 million. Capital expenditures were a near-record $3.7 million including initial expenditures of $2.5 million for the $13 million melt shop upgrade project. At March 31, cash was $25.8 million, working capital was $100.6 million and long-term debt was $12.9 million. President and CEO Dennis Oates commented: “The persistence of very difficult economic and credit conditions in the first quarter of 2009 resulted in reduced market demand, significant de-stocking in the specialty steel supply channel and liquidity problems for several of our privately-held customers. We have executed plans to aggressively reduce costs, generate cash and adjust our operating levels to market realities. “These actions are designed to improve our performance under current conditions and position us to seize opportunities when the markets recover. We continue to strengthen our organization with industry veterans through the addition of Bill Beible as Senior Vice President of Operations and the naming of Chris Ayers to our Board of Directors. Lastly, our strategic investment program is progressing on time and on budget. These investments are focused on reducing production cycle times, increasing customer service levels, improving material yields, reducing operating costs and enhancing working capital management.” Mr. Oates concluded: “Given the unprecedented uncertainty in our industry, we are not providing specific earnings guidance for the second quarter of 2009. We anticipate that second quarter sales will be below those of the first quarter of 2009 based on current low order entry and a decline in our backlog to $58 million at March 31 from $75 million at year-end. Our performance in the second quarter of 2009 is expected to be aided by our cost saving initiatives and better alignment of material costs to surcharges. We also expect to generate positive cash flow and maintain our strong balance sheet.” Segment Review For the first quarter of 2009, the Universal Stainless & Alloy Products segment had sales of $36.7 million and an operating loss of $3.9 million, including $5.0 million of unusual charges. In the first quarter of 2008, sales were $48.2 million and operating income was $4.9 million, or 10 percent of sales. In the fourth quarter of 2008, sales were $53.1 million and operating income of $1.9 million, or 3 percent of sales. Segment sales declined 24 percent from the first quarter of 2008 primarily due to a 19 percent decrease in tons shipped. Increased shipments to forgers and OEMs were offset by lower shipments to rerollers and to service centers, mainly of tool steel plate. Segment sales decreased 31 percent from the fourth quarter of 2008 on 19 percent fewer tons shipped. The Dunkirk Specialty Steel segment recorded sales of $11.4 million and an operating loss of $2.5 million for the first quarter of 2009, including unusual charges of $1.0 million. In the first quarter of 2008, sales were $20.1 million and operating income was $2.8 million, or 14 percent of sales. In the fourth quarter of 2008, sales were $11.4 million and the operating loss of $1.3 million, including a $248,000 charge related to the relocation of the round bar finishing line to Dunkirk from Bridgeville. Dunkirk’s sales declined 43 percent from the first quarter of 2008 while tons shipped decreased 28 percent due to lower shipments to all customer categories and lower surcharges. Dunkirk’s sales were level with the fourth quarter of 2008 while tons shipped increased 23 percent, with the benefit of a strong increase in shipments to service centers offset by lower surcharges.
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