Universal Stainless & Alloy Products Inc.

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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 Ended For the Year Ended
  December 31, December 31,
  2012 2011 2012 2011*
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 Ended For the Year Ended
  December 31, December 31,
  2012 2011 2012 2011*
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 Ended For the Year Ended
  December 31, December 31,
  2012 2011 2012 2011*
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 Ended For the Year Ended
  December 31, December 31,
  2012 2011 2012 2011
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,
  2012 2011
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,
  2012 2011*
   
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

Source: Universal Stainless & Alloy Products, Inc.
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