SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 20, 2006
Universal Stainless & Alloy Products, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 000-25032 25-1724540
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
600 Mayer Street, Bridgeville, Pennsylvania 15017
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (412) 257-7600
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On July 20, 2006, Universal Stainless and Alloy Products, Inc. issued
a press release regarding its earnings for the second quarter ended June 30,
2006. A copy of the press release is attached hereto.
The information in this Current Report on Form 8-K, including the
attached press release, shall not be deemed "filed" for the purposes of Section
18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to
the liabilities of that section, nor shall it be deemed incorporated by
reference in any filing under the Securities Act of 1933, as amended, except as
shall be expressly set forth by specific reference in such a filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
By: /s/ Richard M. Ubinger
-------------------------------------
Vice President of Finance,
Chief Financial Officer and Treasurer
Dated: July 20, 2006
[GRAPHIC OMITTED]
CONTACTS: Richard M. Ubinger June Filingeri
Vice President of Finance, President
Chief Financial Officer and Treasurer Comm-Partners LLC
(412) 257-7606 (203) 972-0186
FOR IMMEDIATE RELEASE
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UNIVERSAL STAINLESS REPORTS RECORD SECOND QUARTER 2006 RESULTS
- EPS reaches $0.69 on sales of $48 million -
- Backlog rises to $128 million -
BRIDGEVILLE, PA, July 20, 2006 - Universal Stainless & Alloy Products,
Inc. (Nasdaq: USAP) reported today that net income for the second quarter of
2006 rose 41% to a record $4.6 million, or $0.69 per diluted share, on a 15%
increase in sales, which reached a record $48.0 million. This compares with net
income of $3.3 million, or $0.50 per diluted share, and sales of $41.9 million
reported in the second quarter of 2005. Net income for the six-months ended June
30, 2006 was $8.5 million, or $1.29 per diluted share, on sales of $93.0
million, in comparison to net income of $6.2 million, or $0.96 per diluted
share, and sales of $84.9 million in the year ago period.
Second quarter 2006 diluted EPS exceeded the Company's forecasted
range of $0.60 to $0.65 and sales were at the high end of the expected range of
$43 to $48 million.
President and CEO Mac McAninch commented: "Our growth momentum
continued in the second quarter because of the strength of our markets, the
benefits of our capital investment program and the effectiveness of our pricing
strategy. Aerospace demand continues to be a powerful driver in our marketplace,
especially in the requirement for remelted grades of steel, which is also
reflected in our growing record backlog. We were better able to respond to that
opportunity in the second quarter with the full benefit of our new vacuum-arc
remelt (VAR) furnace, which contributed to record sales for both segments of our
company. We are working to get our seventh VAR furnace operational before the
end of August. Our capital investments and our workforce additions enabled us to
meet our customer demand more effectively.
"Mr. McAninch concluded: "We expect our growth to continue in the
third quarter and are optimistic about the balance of the year and beyond. Our
optimism is based upon the positive outlook for all our end markets, the
continuing acute needs of our customers and global opportunities for our
products."
USAP REPORTS RECORD 2006 SECOND QUARTER RESULTS - Page 2 -
Segment Review
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In the second quarter of 2006, the Universal Stainless & Alloy Products
segment had record sales of $45.7 million and record operating income of $5.8
million, yielding an operating margin of 13%. This compares with second quarter
2005 sales of $37.2 million and operating income of $3.6 million, or 10% of
sales. In the first quarter of 2006, sales were $39.1 million and operating
income was $4.9 million, or 13% of sales.
The 23% increase in sales from the 2005 second quarter and the 17% increase
over the 2006 first quarter reflect the full-quarter contribution of a new
vacuum-arc remelt furnace installed in December 2005 in the Company's
Bridgeville facility as well as from two additional milling machines and a new
plate flattener added in the 2006 first quarter. The increase in sales over the
2005 second quarter also was due to higher product prices and a continued
favorable product mix, including strong growth in shipments of bar and plate
products to service centers and OEMs and of special shape products, which offset
lower shipments to rerollers. Increased shipments to service centers and OEMs
also contributed to the sales growth over the prior quarter. Operating income
rose 60% from the 2005 second quarter and 18% from the 2006 first quarter due to
the improved pricing and mix of products shipped and enhanced operating
efficiency due to the capital investments.
The Dunkirk Specialty Steel segment reported second quarter 2006 record
sales of $16.2 million and record operating income of $2.3 million, resulting in
an operating margin of 14%. This compares with sales of $12.4 million and
operating income of $1.8 million, or 15% of sales, in the second quarter of
2005. In the first quarter of 2006 sales were $14.0 million and operating income
of $1.5 million, resulting in an operating margin of 10%.
Dunkirk's sales increased 31% over the 2005 second quarter and 16% over the
2006 first quarter due to improved feedstock supply from the Bridgeville
facility and workforce additions that helped increase throughput. The sales
growth over both prior periods also reflected higher selling prices and
increased shipments of bar and wire products to service centers and OEMs. Those
factors also contributed to a 23% increase in operating income over the 2005
second quarter and a 54% increase over the 2006 first quarter, which had been
impacted by the higher cost of raw materials at the time of feedstock
procurement.
Business Outlook
----------------
The following statements are based on the Company's current expectations. These
statements are forward-looking, and actual results may differ materially.
The Company estimates that third quarter 2006 sales will range from $45 to
$50 million and that diluted EPS will range from $0.65 to $0.70. This compares
with sales of $43.1 million and diluted EPS of $0.51 in the third quarter of
2005.
USAP REPORTS RECORD 2006 SECOND QUARTER RESULTS - Page 3 -
The following factors were considered in developing these estimates:
o The Company's total backlog at June 30, 2006 approximated $128 million
compared to $118 million at March 31, 2006, reflecting robust aerospace
demand and continued strong power generation, petrochemical and tool steel
markets.
o Sales from the Dunkirk Specialty Steel segment are expected to increase to
$17 million due to the increased capability of the Bridgeville facility to
supply remelted steel feedstock as well as from the increased headcount.
Webcast
-------
A simultaneous Webcast of the Company's conference call discussing the
second quarter of 2006 and the third quarter outlook, scheduled at 10:00 a.m.
(Eastern) today, will be available on the Company's website at
www.univstainless.com, and thereafter archived on the website. A telephone
replay of the conference call will be available beginning at 12:00 noon
(Eastern) today and continuing through July 27th. It can be accessed by dialing
706-645-9291, passcode 2702994. This is a toll call.
About Universal Stainless & Alloy Products, Inc.
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Universal Stainless & Alloy Products, Inc., headquartered in Bridgeville,
Pa., manufactures and markets a broad line of semi-finished and finished
specialty steels, including stainless steel, tool steel and certain other
alloyed steels. The Company's products are sold to rerollers, forgers, service
centers, original equipment manufacturers and wire redrawers.
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, risks
associated with the receipt, pricing and timing of future customer orders, risks
associated with significant fluctuations that may occur in raw material and
energy prices, risks associated with the manufacturing process and production
yields, risks related to property, plant and equipment and risks related to the
ultimate outcome of the Company's current and future litigation and regulatory
matters. 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.
- FINANCIAL TABLES FOLLOW -
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share information)
(Unaudited)
CONSOLIDATED STATEMENT OF OPERATIONS
For the Quarter Ended For the Six-Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Net Sales
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Stainless steel $ 35,015 $ 34,205 $ 68,433 $ 67,824
Tool steel 7,410 4,359 13,237 10,376
High-strength low alloy steel 3,241 1,642 5,793 2,764
High-temperature alloy steel 1,744 711 4,113 1,736
Conversion services 504 850 1,233 1,964
Other 105 96 147 218
-------- -------- -------- --------
Total net sales 48,019 41,863 92,956 84,882
Cost of products sold 37,692 34,197 74,012 70,607
Selling and administrative expenses 2,879 2,385 5,135 4,292
-------- -------- -------- --------
Operating income 7,448 5,281 13,809 9,983
Interest expense (269) (200) (535) (372)
Other income 2 3 4 63
-------- -------- -------- --------
Income before taxes 7,181 5,084 13,278 9,674
Income tax provision 2,585 1,831 4,780 3,483
-------- -------- -------- --------
Net income $ 4,596 $ 3,253 $ 8,498 $ 6,191
======== ======== ======== ========
Earnings per share - Basic $ 0.72 $ 0.51 $ 1.32 $ 0.97
======== ======== ======== ========
Earnings per share - Diluted $ 0.69 $ 0.50 $ 1.29 $ 0.96
======== ======== ======== ========
Weighted average shares of
Common Stock outstanding
Basic 6,426,374 6,363,831 6,421,848 6,357,189
Diluted 6,615,204 6,451,326 6,588,813 6,459,901
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MARKET SEGMENT INFORMATION
For the Quarter Ended For the Six-Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Net Sales
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Service centers $ 26,318 $ 17,050 $ 49,356 $ 35,357
Rerollers 7,377 11,250 15,224 23,278
Forgers 6,857 7,907 14,421 14,170
Original equipment manufacturers 4,956 2,598 9,555 4,922
Wire redrawers 1,876 2,113 3,020 4,985
Conversion services 504 850 1,233 1,964
Other 131 95 147 206
-------- -------- -------- --------
Total net sales $ 48,019 $ 41,863 $ 92,956 $ 84,882
======== ======== ======== ========
Tons shipped 12,741 13,383 24,785 28,613
======== ======== ======== ========
BUSINESS SEGMENT RESULTS
Universal Stainless & Alloy Products Segment
For the Quarter Ended For the Six-Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Net Sales
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Stainless steel $ 22,444 $ 23,536 $ 46,011 $ 45,313
Tool steel 7,254 4,247 12,614 10,154
High-strength low alloy steel 1,690 920 2,929 1,313
High-temperature alloy steel 718 703 1,759 1,728
Conversion services 384 705 922 1,656
Other 72 43 112 160
-------- -------- -------- --------
32,562 30,154 64,347 60,324
Intersegment 13,138 7,003 20,490 15,258
-------- -------- -------- --------
Total net sales 45,700 37,157 84,837 75,582
Material cost of sales 20,346 18,454 37,754 38,280
Operation cost of sales 17,484 13,304 32,735 28,083
Selling and administrative expenses 2,026 1,755 3,555 2,896
-------- -------- -------- --------
Operating income $ 5,844 $ 3,644 $ 10,793 $ 6,323
======== ======== ======== ========
Dunkirk Specialty Steel Segment
For the Quarter Ended For the Six-Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
Net Sales
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Stainless steel $ 12,571 $ 10,669 $ 22,422 $ 22,511
Tool steel 156 112 623 222
High-strength low alloy steel 1,551 722 2,864 1,451
High-temperature alloy steel 1,026 8 2,354 8
Conversion services 120 145 311 308
Other 33 53 35 58
-------- -------- -------- --------
15,457 11,709 28,609 24,558
Intersegment 722 663 1,557 1,481
-------- -------- -------- --------
Total net sales 16,179 12,372 30,166 26,039
Material cost of sales 8,938 6,442 16,909 13,556
Operation cost of sales 4,131 3,465 7,953 7,389
Selling and administrative expenses 853 630 1,580 1,396
-------- -------- -------- --------
Operating income $ 2,257 $ 1,835 $ 3,724 $ 3,698
======== ======== ======== ========
CONSOLIDATED BALANCE SHEET
June 30, December 31,
2006 2005
---- ----
Assets
------
Cash $ 512 $ 620
Accounts receivable, net 32,843 27,963
Inventory 59,129 51,398
Deferred taxes 1,398 1,084
Other current assets 1,452 1,706
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Total current assets 95,334 82,771
Property, plant & equipment, net 49,560 45,761
Other assets 498 495
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Total assets $ 145,392 $ 129,027
========= ==========
Liabilities and Stockholders' Equity
------------------------------------
Trade accounts payable $ 13,660 $ 12,579
Deferred revenue 4,326 384
Accrued employment costs 3,981 2,958
Outstanding checks in excess of bank balance 3,386 3,101
Current portion of long-term debt 2,459 1,555
Other current liabilities 1,173 530
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Total current liabilities 28,985 21,107
Bank revolver 6,831 6,117
Long-term debt 10,018 11,200
Deferred taxes 9,609 9,600
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Total liabilities 55,443 48,024
Stockholders' equity 89,949 81,003
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Total liabilities and stockholders' equity $ 145,392 $ 129,027
========= ==========
CONSOLIDATED STATEMENT OF CASH FLOW DATA
For the Six-month Period Ended June 30,
2006 2005
---- ----
Cash flows provided by operating activities:
Net income $ 8,498 $ 6,191
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 1,639 1,532
Loss on retirement of fixed assets - 342
Deferred tax (decrease) increase (343) 412
Stock based compensation expense 126 -
Tax benefit from exercise of stock options - 115
Excess tax benefits from share-based
payment arrangements (115) -
Changes in assets and liabilities:
Accounts receivable, net (4,880) (3,107)
Inventory (7,731) (9,955)
Trade accounts payable 1,081 4,731
Deferred revenue 3,942 151
Accrued employment costs 1,023 1,045
Other, net 899 890
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Cash flow provided by operating activities 4,139 2,347
--------- ----------
Cash flow used in investing activities:
Capital expenditures (5,290) (2,931)
--------- ----------
Cash flow used in investing activities (5,290) (2,931)
--------- ----------
Cash flows used in financing activities:
Revolving credit net borrowings 714 (4,057)
Proceeds from long-term debt - 8,050
Long-term debt repayments (278) (618)
Net change in outstanding checks in excess
of bank balance 285 (2,186)
Proceeds from issuance of common stock 207 312
Excess tax benefits from share-based payment
arrangements 115 -
--------- ----------
Cash flow used in financing activities 1,043 1,501
--------- ----------
Net cash flow $ (108) $ 917
========= ==========