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     141  0 Kommentare Universal Stainless Reports Third Quarter 2020 Results

    • Q3 2020 Sales total $37.4 million; Premium alloy sales up 13.9% from Q3 2019
    • Q3 2020 Net Loss of $7.0 million, or $0.79 per diluted share; Net loss of $3.9 million, or $0.44 per diluted share, excluding $4.3 million (pre-tax) of fixed cost absorption charges and $0.3 million (pre-tax) gain on insurance proceeds
    • EBITDA is a loss of $3.6 million in Q3 2020; Adjusted EBITDA totals $0.6 million
    • Quarter-end Backlog of $54.8 million versus $71.8 million at end of Q2 2020
    • Managed working capital declines $16.8 million, while total debt declines $11.9 million from Q2 2020
    • Q3 cash flow from operations totals $13.0 million

    BRIDGEVILLE, Pa., Oct. 21, 2020 (GLOBE NEWSWIRE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported net sales for the third quarter of 2020 of $37.4 million, a decrease of 28.7% from $52.5 million in the second quarter of 2020, and 33.8% lower than $56.6 million in the third quarter of 2019.

    Sales of premium alloys in the third quarter of 2020 were $9.2 million, or 24.5% of sales, compared with $12.4 million, or 23.7% of sales, in the second quarter of 2020, and $8.0 million, or 14.2% of sales, in the third quarter of 2019.

    Chairman, President and CEO Dennis Oates commented: “The third quarter was consistent with our expectation for a sequential step-down in quarterly sales and operating activity, which took its toll on profitability. COVID-19 continues to impact demand, especially in the aerospace and oil & gas end markets.

    “On a more promising note, order entry improved over second quarter levels, with September bookings at their highest level since March. Additionally, cancellations slowed during the quarter. We continue to expect measured improvement in activity levels beginning in 2021.

    “Amid challenging third quarter conditions, we remained focused on execution, and saw a further shift in our sales mix to premium alloys, which reached nearly one-quarter of total third quarter sales. Premium alloys are our highest priority for targeted growth, and we continued to see demand for defense and specialty applications. Our new product development and approval activity continues as well.

    “While aided by our premium alloy sales, third quarter margins were negatively impacted by lower activity levels and included fixed cost absorption direct charges in the quarter, which was expected.

    “We focused on working capital reduction in the third quarter which resulted in positive cash flow. This focus resulted in both inventory and debt declines compared to the second quarter, with inventory reduced by $14.1 million, and debt levels reduced by nearly $12.0 million.

    “Looking towards the balance of the year, we will continue to execute our strategy to pursue market opportunities while adapting our operations to current activity levels as well as maintaining our focus on inventory and debt reduction.”

    Mr. Oates concluded: “Our team has made commendable progress thus far in 2020 under extremely difficult conditions through their unrelenting determination and effort. With the ongoing support of our customers and our focus on producing the critical products required by our markets, we look forward to an improved 2021.”

    COVID-19 Response Summary

    • Each of the Company’s facilities is an essential operation and continues to remain operational in accordance with the laws of the states in which the facilities are located.
    • The Company continues to monitor the pandemic’s impact on the markets the Company serves, including the aerospace and oil & gas markets. The Company’s sales to the aerospace market have declined, primarily due to the cancellation or delay in orders for new airplanes due to the fall-off in air travel caused by the COVID-19 pandemic, as well as a sharp decline in aftermarket sales due to the significant reduction in air travel. The Company also has experienced extreme pressure in demand from the oil & gas market.
    • On April 15, 2020, the Company entered into a $10.0 million term note pursuant to the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security Act. The Company applied for full forgiveness of the PPP term note in the 2020 third quarter, and the PPP loan forgiveness process is currently underway.
    • While the Company expects the effects of the pandemic and the related responses to continue to negatively impact its results of operations, cash flows and financial position, the uncertainty over the duration and severity of the economic and operational impacts of COVID-19 means the Company cannot reasonably estimate the related future impacts at this time.
    • The Company continues to adapt its operations due to lower activity levels. As a result, the Company has taken measures to align its cost structure with current forecasted revenue and operating levels.

    Quarterly and Year-to-Date Results of Operations

    For the first nine months of 2020, net sales totaled $148.4 million, compared with $187.8 million in the same period of 2019. Sales of premium alloys were $29.3 million, or 19.7% of sales, year-to-date in 2020, compared with $30.2 million, or 16.1% of sales, in the first nine months of 2019.

    The Company's gross margin for the third quarter of 2020 was a loss of $4.4 million, or (11.8%) of sales, compared with $1.9 million, or 3.7% of sales, in the second quarter of 2020, and $5.3 million, or 9.4% of sales, in the third quarter of 2019. Third quarter gross margin included $4.3 million of fixed cost absorption charges incurred due to reduced production levels. Excluding these charges, third quarter 2020 gross margin was at a break-even level.

    Selling, general and administrative expenses were $4.2 million, or 11.1% of sales, in the third quarter of 2020, a decrease of 23.0% from $5.4 million, or 10.3% of sales, in the second quarter of 2020, and an 8.2% decrease from $4.5 million, or 8.0% of sales, in the third quarter of 2019.

    The net loss for the third quarter of 2020 was $7.0 million, or $0.79 per diluted share, compared with a net loss of $3.3 million, or $0.38 per diluted share, in the second quarter of 2020, and net income of $0.8 million, or $0.09 per diluted share, in the third quarter of 2019. The third quarter 2020 net loss, excluding $4.3 million of fixed cost absorption charges and a $0.3 million gain on insurance proceeds, totaled $3.9 million, or $0.44 per diluted share.

    For the first nine months of 2020, the net loss was $11.7 million, or $1.33 per diluted share, compared with net income of $4.1 million, or $0.46 per diluted share, in the first nine months of 2019.

    The Company’s EBITDA for the third quarter of 2020 was a loss of $3.6 million, compared with $1.4 million in the second quarter of 2020, and $6.0 million in the third quarter of 2019. Third quarter 2020 adjusted EBITDA, excluding the fixed cost absorption charges and insurance gain, totaled $0.6 million.

    Managed working capital at September 30, 2020 totaled $135.0 million, compared with $151.8 million at June 30, 2020, and $144.9 million at the end of the third quarter of 2019. The 11.1% sequential decrease in managed working capital compared in the 2020 third quarter was due mainly to reduced accounts receivable and inventory levels. Inventory totaled $120.9 million at the end of the third quarter of 2020, a decrease of $14.1 million, or 10.5%, from $135.1 million at the end of the second quarter of 2020. Year-to-date inventories have been reduced by $26.5 million or 17.9%.

    Backlog (before surcharges) at September 30, 2020 was $54.8 million, compared with $71.8 million at June 30, 2020, and $118.3 million at the end of the 2019 third quarter.

    The Company’s total debt at September 30, 2020 was $60.6 million, a decrease of $11.9 million from June 30, 2020, and a decrease of $5.5 million from the end of the 2019 third quarter. Total debt at September 30, 2020 includes a $10.0 million term note, issued on April 15, 2020, pursuant to PPP. In the third quarter, the Company applied for full PPP loan forgiveness.

    Capital expenditures for the third quarter of 2020 totaled $1.3 million, compared with $3.2 million for the second quarter of 2020, and $3.9 million in the third quarter of 2019. Year-to-date capital expenditures totaled $8.5 million.

    Conference Call and Webcast

    The Company has scheduled a conference call for today, October 21st, at 10:00 a.m. (Eastern) to discuss third quarter 2020 results. Those wishing to listen to the live conference call via telephone should dial 706-679-0668, passcode 2178515. 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 2020.

    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; uncertainty regarding the return to service of the Boeing 737 MAX aircraft; the Company’s ability to compete successfully with domestic and foreign producers of specialty steel products and products fashioned from alternative materials; changes in overall 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’s 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; the ultimate outcome of the Company’s PPP loan forgiveness application; risks associated with conducting business with suppliers and customers in foreign countries; public health issues, including the outbreak of COVID-19 and its uncertain impact on our facilities and operations and our customers and suppliers and the effectiveness of the Company’s actions taken in response to these risks; 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 from 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 SEC, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and the subsequent Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, 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 that 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 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 calculation 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]

    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,  
      2020     2019     2020     2019  
                                   
    Net sales $ 37,434     $ 56,568     $ 148,407     $ 187,836  
                                   
    Cost of products sold   41,861       51,260       145,988       166,052  
                                   
    Gross margin   (4,427 )     5,308       2,419       21,784  
                                   
    Selling, general and administrative expenses   4,153       4,525       15,458       15,095  
                                   
    Operating (loss) income   (8,580 )     783       (13,039 )     6,689  
                                   
    Interest expense   586       989       2,232       2,809  
    Deferred financing amortization   56       56       169       171  
    Other income, net   (288 )     (452 )     (302 )     (421 )
                                   
    (Loss) income before income taxes   (8,934 )     190       (15,138 )     4,130  
                                   
    (Benefit) provision for income taxes   (1,934 )     (577 )     (3,396 )     55  
                                   
    Net (loss) income $ (7,000 )   $ 767     $ (11,742 )   $ 4,075  
                                   
    Net (loss) income per common share - Basic $ (0.79 )   $ 0.09     $ (1.33 )   $ 0.46  
    Net (loss) income per common share - Diluted $ (0.79 )   $ 0.09     $ (1.33 )   $ 0.46  
                                   
                                   
    Weighted average shares of common stock outstanding:                              
    Basic   8,829,732       8,787,837       8,813,880       8,780,590  
    Diluted   8,829,732       8,879,441       8,813,880       8,870,240  



    MARKET SEGMENT INFORMATION
                                 
      Three months ended     Nine months ended
      September 30,       September 30,
    Net Sales 2020     2019       2020       2019
                                 
    Service centers $ 25,983     $ 38,693     $ 103,877     $ 129,996
    Original equipment manufacturers   4,405       4,862       16,624       19,318
    Rerollers   3,173       6,629       13,612       20,016
    Forgers   3,451       5,589       12,027       15,408
    Conversion services and other sales   422       795       2,267       3,098
                                 
    Total net sales $ 37,434     $ 56,568     $ 148,407     $ 187,836
                                 
    Tons shipped   6,046       9,776       25,153       31,656
                                 
    MELT TYPE INFORMATION
                                 
      Three months ended     Nine months ended
      September 30,     September 30,
    Net Sales 2020     2019     2020     2019
                                 
    Specialty alloys $ 27,847     $ 47,730     $ 116,869     $ 154,511
    Premium alloys *   9,165       8,043       29,271       30,227
    Conversion services and other sales   422       795       2,267       3,098
                                 
    Total net sales $ 37,434     $ 56,568     $ 148,407     $ 187,836
                                 
    END MARKET INFORMATION **
                                 
      Three months ended     Nine months ended
      September 30,     September 30,
    Net Sales 2020     2019     2020     2019
                                 
    Aerospace $ 25,138     $ 40,876     $ 104,686     $ 132,818
    Power generation   1,590       2,884       5,923       8,588
    Oil & gas   2,755       5,653       10,778       18,767
    Heavy equipment   4,662       4,352       16,364       17,973
    General industrial, conversion services and other sales   3,289       2,803       10,656       9,690
                                 
    Total net sales $ 37,434     $ 56,568     $ 148,407     $ 187,836
                                 
    * 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.                



    CONDENSED CONSOLIDATED BALANCE SHEETS
                 
      September 30,     December 31,
      2020     2019
    Assets            
                 
    Cash $ 58     $ 170
    Accounts receivable, net   26,451       35,595
    Inventory, net   120,947       147,402
    Other current assets   4,824       8,300
                 
    Total current assets   152,280       191,467
    Property, plant and equipment, net   168,623       176,061
    Other long-term assets   997       871
                 
    Total assets $ 321,900     $ 368,399
                 
    Liabilities and Stockholders' Equity            
                 
    Accounts payable $ 12,443     $ 40,912
    Accrued employment costs   3,235       4,449
    Current portion of long-term debt   16,690       3,934
    Other current liabilities   1,664       830
                 
    Total current liabilities   34,032       50,125
    Long-term debt, net   43,879       60,411
    Deferred income taxes   7,609       10,962
    Other long-term liabilities, net   3,739       3,765
                 
    Total liabilities   89,259       125,263
    Stockholders’ equity   232,641       243,136
                 
    Total liabilities and stockholders’ equity $ 321,900     $ 368,399



    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW  
                   
      Nine months ended  
      September 30,  
      2020     2019  
                   
    Operating activities:              
    Net (loss) income $ (11,742 )   $ 4,075  
    Adjustments for non-cash items:              
    Depreciation and amortization   14,721       14,235  
    Deferred income tax   (3,380 )     577  
    Share-based compensation expense   1,129       1,100  
    Changes in assets and liabilities:              
    Accounts receivable, net   9,144       (3,804 )
    Inventory, net   25,093       (7,628 )
    Accounts payable   (25,399 )     (9,728 )
    Accrued employment costs   (1,214 )     (4,109 )
    Income taxes   207       (56 )
    Other   4,045       (3,735 )
                   
    Net cash provided by (used in) operating activities   12,604       (9,073 )
                   
    Investing activity:              
    Capital expenditures   (8,480 )     (13,308 )
                   
    Net cash used in investing activity   (8,480 )     (13,308 )
                   
    Financing activities:              
    Borrowings under revolving credit facility   101,559       145,688  
    Payments on revolving credit facility   (112,498 )     (123,097 )
    Proceeds from Paycheck Protection Program Note   10,000       -  
    Payments on term loan facility, finance leases, and notes   (3,383 )     (3,424 )
    Issuance of common stock under share-based plans   86       327  
                   
    Net cash (used in) provided by financing activities   (4,236 )     19,494  
                   
    Net decrease in cash and restricted cash   (112 )     (2,887 )
    Cash and restricted cash at beginning of period   170       4,091  
    Cash and restricted cash at end of period $ 58     $ 1,204  



    RECONCILIATION OF NET (LOSS) INCOME TO EBITDA AND ADJUSTED EBITDA
                                 
      Three months ended     Nine months ended
      September 30,     September 30,
      2020     2019     2020     2019
                                 
    Net (loss) income $ (7,000 )   $ 767     $ (11,742 )   $ 4,075
    Interest expense   586       989       2,232       2,809
    (Benefit) provision for income taxes   (1,934 )     (577 )     (3,396 )     55
    Depreciation and amortization   4,732       4,813       14,721       14,235
    EBITDA   (3,616 )     5,992       1,815       21,174
    Share-based compensation expense   295       332       1,129       1,100
    Loss on sale of excess scrap   -       -       354       -
    Fixed cost absorption direct charge   4,264       -       4,465       -
    Employee severance costs   -       -       620       -
    Fire-related (benefit) expense   (307 )     (350 )     (307 )     7
    Adjusted EBITDA $ 636     $ 5,974     $ 8,076     $ 22,281



    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



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    Universal Stainless Reports Third Quarter 2020 Results Q3 2020 Sales total $37.4 million; Premium alloy sales up 13.9% from Q3 2019Q3 2020 Net Loss of $7.0 million, or $0.79 per diluted share; Net loss of $3.9 million, or $0.44 per diluted share, excluding $4.3 million (pre-tax) of fixed cost absorption …