Q2 2020 Sales total $52.5 million; Premium alloy sales rise 62.3% sequentially
Q2 2020 Net Loss of $3.3 million, or $0.38 per diluted share; Net loss of $2.4 million, or $0.27 per diluted share, excluding charges in response to the COVID-19 pandemicEBITDA totals $1.4 million in Q2 2020Quarter-end Backlog of $71.8 million versus $110.7 million at end of Q1 2020Q2 2020 cash flow from operations totaled $7.4 millionBRIDGEVILLE, Pa., July 29, 2020 (GLOBE NEWSWIRE) — Universal Stainless & Alloy Products, Inc. (Nasdaq: USAP) today reported that net sales for the second quarter of 2020 were $52.5 million, a decrease of 10.3% from $58.5 million in the first quarter of 2020, and 26.1% lower than $71.0 million in the second quarter of 2019.
Sales of premium alloys in the second quarter of 2020 increased 62.3% to $12.4 million, or 23.7% of sales, compared with $7.7 million, or 13.1% of sales, in the first quarter of 2020, while 2.9% lower than the record $12.8 million, or 18.0% of sales, in the second quarter of 2019. Chairman, President and CEO Dennis Oates commented: “The COVID-19 pandemic continues to cause dislocation in the metals supply chain, as it takes a further sharp toll on end market demand, especially in aerospace and oil & gas.“In aerospace, the decrease in aircraft production rates has been further impacted by reduced air travel causing airlines to cancel and delay orders for new airplanes. Aftermarket demand declined in the quarter due to the significant reduction in air traffic which began in March. While defense market sales remained strong, demand and related sales levels from the aerospace and oil and gas markets remain under extreme pressure.“Our premium alloy sales increased 62.3% from the first quarter to $12.4 million, nearing the record level achieved in the second quarter of 2019. Premium alloys remain our highest priority for targeted growth and we continue to gain traction with new products and approvals, with underlying demand coming from defense and specialty applications. Tool steel sales remained solid in the second quarter, while sales to the general industrial market grew 27.7% from the first quarter.“Even with the areas of strength in the second quarter, our current order entry and backlog point to a sequential step-down in quarterly sales and operating activity for the balance of the year.“We are adapting our operations to lower activity levels, aggressively reducing costs, and generating cash. As a result, our current cost structure is in-line with our forecasted revenues and operating levels. We will continue to review demand and operating levels as the markets we serve continue to evolve.”COVID-19 Response SummaryEach of the Company’s facilities is considered to be an essential operation and remains 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 caused by 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 term note in a principal amount of $10.0 million pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act. The related eight-week forgiveness period expired June 11, 2020, and the Company will apply for full forgiveness of the term note.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 current cost structure with reduced forecasted revenue and operating levels.Quarterly and Year-to-Date Results of OperationsFor the first six months of 2020, sales totaled $111.0 million, compared with $131.3 million in the same period of 2019. Sales of premium alloys were $20.1 million, or 18.1% of sales, in the first half of 2020, compared with $22.2 million, or 16.9% of sales, in the first half of 2019.The Company’s gross margin for the second quarter of 2020 was $1.9 million, or 3.7% of sales, compared with 8.4% of sales in the first quarter of 2020, and 12.8% of sales in the second quarter of 2019. Second quarter 2020 gross margin includes a $0.2 million direct charge due to reduced production levels negatively impacting the Company’s absorption of fixed costs, and a $0.4 million loss on the sale of excess scrap, which generated cash receipts of $0.8 million. Excluding these charges, gross margin totaled $2.5 million, or 4.8% of sales.Selling, general and administrative (SG&A) expenses were $5.4 million, or 10.3% of sales, in the second quarter of 2020, representing a 8.6% decrease compared with $5.9 million, or 10.1% of sales, in the first quarter of 2020, and a 3.7% decrease from $5.6 million, or 7.9% of sales, in the second quarter of 2019. Second quarter 2020 selling, general and administrative expenses include $0.6 million of employee severance expense.The net loss for the second quarter of 2020 was $3.3 million, or $0.38 per diluted share, compared with a net loss of $1.4 million, or $0.16 per diluted share, in the first quarter of 2020, and net income of $2.1 million, or $0.24 per diluted share, in the second quarter of 2019. Net loss, as adjusted for COVID-19 pandemic related charges of $1.2 million, which include gross margin and SG&A items, totaled $2.4 million, or $0.27 per diluted share.For the first six months of 2020, the net loss was $4.7 million, or $0.54 per diluted share, compared with net income of $3.3 million, or $0.37 per diluted share, in the first six months of 2019.The Company’s EBITDA for the second quarter of 2020 was $1.4 million, compared with $4.0 million in the first quarter of 2020, and $8.2 million in the second quarter of 2019.Managed working capital at June 30, 2020 totaled $151.8 million, compared with $153.5 million at March 31, 2020, and $147.8 million at the end of the second quarter of 2019. The decrease in managed working capital compared with the 2020 first quarter was due mainly to a reduction in work-in-process inventory. Inventory totaled $135.1 million at the end of the second quarter of 2020, a decrease of $11.7 million, or 8.0%, from $146.8 million at the end of the first quarter of 2020. The decline in accounts payable was driven by decreased melt activity and a corresponding decline in production related spending. Also contributing to the decline in accounts payable was a reduction in capital expenditure activity.Backlog (before surcharges) at June 30, 2020 was $71.8 million, compared with $110.7 million at March 31, 2020, and $116.9 million at the end of the 2019 second quarter. Declines in order entry activity have contributed to reduced backlog levels as customers adapt to changing market conditions and demand levels.The Company’s total debt at June 30, 2020 was $72.5 million, a decrease of $3.8 million from $76.3 million at March 31, 2020. Total debt at June 30, 2020 includes a $10.0 million term note, issued on April 15, 2020, pursuant to the Paycheck Protection Program.Capital expenditures for the second quarter of 2020 totaled $3.2 million, compared with $4.0 million for the first quarter of 2020, and $3.8 million in the second quarter of 2019.Chairman, President and CEO Dennis Oates concluded: “In the face of the unprecedented challenges confronting both our Company and our industry, Universal continues to be strengthened by the critical products we produce, by the support of our customers, and by the dedication and diligence of our employees. We remain deeply committed to the safety and wellbeing of our employees and to our customers.”Conference Call and WebcastThe Company has scheduled a conference call for today, July 29th, at 10:00 a.m. (Eastern) to discuss second quarter 2020 results. Those wishing to listen to the live conference call via telephone should dial 706-679-0668, passcode 1491355. 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 third 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
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