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Previous: SUIZA FOODS CORP, 10-Q, 2000-05-12 |
Next: AEI INCOME & GROWTH FUND XXI LTD PARTNERSHIP, 10QSB, 2000-05-12 |
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ______ to ______
Commission File Number 0-25032
---------------------------
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 25-1724540
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
600 Mayer Street
Bridgeville, PA 15017
(Address of principal executive offices, including zip code)
(412) 257-7600
(Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- -----
As of April 30, 2000, there were 6,072,516 outstanding shares of the
Registrant's Common Stock, $.001 par value.
<PAGE>
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
This Quarterly Report on Form 10-Q contains historical information and forward-
looking statements. Statements looking forward are included in this Form 10-Q
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. They involve known and unknown risks and uncertainties such
as but not limited to expected market conditions that may cause the Company's
actual results to differ from future performance suggested herein. In the
context of forward-looking information provided in this Form 10-Q and in other
reports, please refer to the discussion of risk factors detailed in, as well as
the other information contained in, the Company's filings with the Securities
and Exchange Commission during the past 12 months.
<TABLE>
<CAPTION>
INDEX PAGE NO.
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Operations 2
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Cash Flows 4
Notes to the Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and 7
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market 9
Risk
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
1
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
For the
Three-month period ended
March 31,
2000 1999
---- ----
<S> <C> <C>
Net sales $18,089 $14,488
Cost of products sold 15,403 12,961
Selling and administrative expenses 1,102 1,014
------------- -------------
Operating income 1,584 513
Interest expense and other financing costs (222) (146)
Other income (expense), net 16 --
------------- -------------
Income before taxes 1,378 367
Income taxes
482 136
------------- -------------
Net income $ 896 $ 231
============= =============
Earnings per common share
Basic $ 0.15 $ 0.04
============= =============
Diluted $ 0.15 $ 0.04
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 269 $ 868
Accounts receivable (less allowance for doubtful
accounts of $433 and $418) 12,401 12,113
Inventory 18,429 15,730
Other current assets 1,668 1,564
--------- ---------
Total current assets 32,767 30,275
Property, plant and equipment, net 37,427 36,989
Other assets 1,026 915
--------- ---------
Total assets $ 71,220 $ 68,179
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable and bank overdrafts $ 8,082 $ 6,584
Current portion of long-term debt 1,838 1,836
Accrued employment costs 1,046 727
Other current liabilities 904 328
--------- ---------
Total current liabilities 11,870 9,475
Long-term debt 9,548 10,005
Deferred taxes 5,253 5,046
--------- ---------
Total liabilities 26,671 24,526
--------- ---------
Commitments and contingencies -- --
Stockholders' equity
Senior Preferred Stock, par value $.001 per share;
liquidation value $100 per share; 2,000,000
shares authorized; 0 shares issued and
outstanding -- --
Common Stock, par value $.001 per share;
10,000,000 shares authorized; 6,330,416 and
6,330,416 shares issued & outstanding 6 6
Additional paid-in capital 25,838 25,838
Retained earnings 20,249 19,353
Treasury Stock at cost; 257,900 and 257,900
common shares (1,544) (1,544)
--------- ---------
Total stockholders' equity 44,549 43,653
--------- ---------
Total liabilities and stockholders' equity $ 71,220 $ 68,179
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the
Three-month period ended
March 31,
2000 1999
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net income $ 896 $ 231
Adjustments to reconcile to net cash and cash equivalents
Provided by operating activities:
Depreciation and amortization 561 480
Deferred taxes 65 322
Changes in assets and liabilities:
Accounts receivable, net (288) (1,659)
Inventory (2,699) 61
Trade accounts payable and bank overdrafts 1,498 1,491
Other, net 818 696
----------- -----------
Net cash provided by operating activities 851 1,622
----------- -----------
Cash flow from investing activities:
Capital expenditures (995) (1,697)
----------- -----------
Net cash used in investing activities (995) (1,697)
----------- -----------
Cash flow from financing activities:
Net borrowing under revolving line of credit -- 117
Long-term debt payments (455) (103)
Purchase of Treasury Stock -- (875)
----------- -----------
Net cash used in financing activities (455) (861)
----------- -----------
Net decrease in cash (599) (936)
Cash and cash equivalents at beginning of period 868 1,437
----------- -----------
Cash and cash equivalents at end of period $ 269 $ 501
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid (net of amount capitalized) $ 96 $ 105
Income taxes paid $ 178 $ 3
</TABLE>
The accompanying notes are an integral part of these financial
statements.
4
<PAGE>
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1) The accompanying unaudited consolidated condensed financial statements
of operations for the three-month periods ended March 31, 2000 and
1999, balance sheets as of March 31, 2000 and December 31, 1999, and
statements of cash flows for the three-month periods ended March 31,
2000 and 1999 have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly,
these statements should be read in conjunction with the audited
financial statements as of and for the year ended December 31, 1999. In
the opinion of management, the accompanying unaudited, condensed
consolidated financial statements contain all adjustments, all of which
were of a normal recurring nature, necessary to present fairly, in all
material respects, the consolidated financial position at March 31,
2000 and December 31, 1999 and the consolidated results of operations
and of cash flows for the three-month periods ended March 31, 2000 and
1999, and are not necessarily indicative of the results to be expected
for the full year.
2) The reconciliation of the weighted average number of shares of Common
Stock outstanding utilized for the earnings per common share
computations are as follows:
<TABLE>
<CAPTION>
For the Three-Month Periods Ended
March 31,
2000 1999
---- ----
<S> <C> <C>
Weighted average number of shares
of Common Stock outstanding 6,072,516 6,163,314
Assuming exercise of stock options
and warrants reduced by the
number of shares which could
have been purchased with the
proceeds from exercise of such
stock options and warrants 3,568 --
----------- -----------
Weighted average number of shares
of Common Stock outstanding,
as adjusted 6,076,084 6,163,314
=========== ===========
</TABLE>
3) The major classes of inventory are as follows (dollars in thousands):
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
<S> <C> <C>
Raw materials and supplies $ 2,535 $ 2,427
Semi-finished and finished steel products 12,742 10,208
products
Operating materials 3,152 3,095
-------------- -----------------
Total inventory $18,429 $15,730
============== =================
</TABLE>
5
<PAGE>
4) Property, plant and equipment consists of the following (dollars in
thousands):
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
<S> <C> <C>
Land and land improvements $ 822 $ 822
Buildings 3,344 3,337
Machinery and equipment 37,377 37,329
Construction in progress 1,775 835
------------------- -------------------
43,318 42,323
Accumulated depreciation (5,891) (5,334)
------------------- -------------------
Property, plant and equipment, net $ 37,427 $ 36,989
=================== ===================
</TABLE>
5) The Company has reviewed the status of its environmental contingencies
and believes there are no significant changes from that disclosed in
the Company's Annual Report on Form 10-K for the year ended December
31, 1999.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
An analysis of the Company's operations for the three-month periods
ended March 31, 2000 and 1999 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
For the
Three-Month Periods Ended
March 31,
2000 1999
---- ----
<S> <C> <C>
Net sales
Stainless steel $14,565 $11,875
Tool steel 2,227 1,457
High temperature alloy steel 367 646
Conversion services 340 473
Other 590 37
--------------- ----------------
Total net sales $18,089 $14,488
--------------- ----------------
Cost of products sold
Raw materials 6,589 4,963
Other 8,814 7,998
--------------- ----------------
Total cost of products sold 15,403 12,961
--------------- ----------------
Selling and administrative expenses 1,102 1,014
--------------- ----------------
Operating income $ 1,584 $ 513
=============== ================
</TABLE>
Three-month period ended March 31, 2000 as compared to the similar period in
1999
The increase in net sales for the three-month period ended March 31, 2000 as
compared to the similar period in 1999 reflects increased shipments within the
forger, OEM and service center markets, partially offset by reduced shipments to
the reroller market and conversion customers, as well as higher selling prices.
The Company shipped approximately 10,800 tons during the three-month period
ended March 31, 2000, compared to approximately 10,200 tons during the three-
month period ended March 31, 1999. The increase in net sales and shipments
resulted from an increased demand for product from the power generation
industry, increased shipments of tool steel and finished bar products to the
service center market and higher selling prices. The higher selling prices were
a direct result of the implementation of an alloy surcharge mechanism in
conjunction with rising raw material costs, and by the price increases placed
into effect after September 1999.
Cost of products sold, as a percent of net sales, was 85.2% and 89.5% for the
three-month periods ended March 31, 2000 and 1999, respectively. This decrease
is primarily due to the impact of the alloy surcharge mechanism and sales price
increases in effect during the three-month period ended March 31, 2000. Selling
and administrative expenses remained relatively constant between 1999 and 2000.
Interest expense and other financing costs increased from $146,000 for the
three-month period ended March 31, 1999 to $222,000 for the three-month period
ended March 31, 2000 primarily due to a reduction in capitalized interest and
higher interest rates on the PNC Term Loan.
The effective income tax rate utilized in the three-month periods ended March
31, 2000 and 1999 was 35% and 37%, respectively. The effective income tax rate
utilized in the current period reflects the anticipated effect of the Company's
permanent tax deductions against expected income levels in 2000.
7
<PAGE>
FINANCIAL CONDITION
The Company has financed its operating activities during the three-month period
ended March 31, 2000 through cash flows from operations and cash on hand at the
beginning of the period. At March 31, 2000, working capital approximated $20.9
million, as compared to $20.8 million at December 31, 1999. The ratio of current
assets to current liabilities decreased from 3.2:1 at December 31, 1999 to 2.8:1
at March 31, 2000. The debt to capitalization ratio was 20% at March 31, 2000,
and 21% at December 31, 1999. The decrease in the ratio of current assets to
current liabilities is primarily due to a decrease in cash which was used to
fund debt payments and an increase in liabilities to fund operations due to an
increase in product demand.
The Company's capital expenditures approximated $1.0 million for the three-month
period ended March 31, 2000 which primarily related to the purchase of a billet
grinder and other equipment for use at the Bridgeville facility. At March 31,
2000, the Company had outstanding purchase commitments in addition to the
expenditures incurred to date of approximately $0.3 million. These expenditures
are expected to be funded substantially from internally generated funds and
additional borrowings. As of March 31, 2000, the Company had $6.5 million
available for borrowings under a revolving line of credit with PNC Bank.
There were no shares of Common Stock repurchased by the Company during the
three-month period ended March 31, 2000. The Company is authorized to
repurchase an additional 57,100 shares of Common Stock as of March 31, 2000.
The Company anticipates that it will fund its 2000 working capital requirements,
its capital expenditures and the stock repurchase program primarily from funds
generated from operations and borrowings. The Company's long-term liquidity
requirements, including capital expenditures, are expected to be financed by a
combination of internally generated funds, borrowings and other sources of
external financing if needed.
2000 Outlook
The Company anticipates that its net sales for the three-month period ending
June 30, 2000 will be higher than the three-month period ended March 31, 2000 as
a result of improving demand from the power generation industry and the service
center market. Net sales during the second half of 2000 can further improve over
the first half of 2000 if demand from the service center market and the
aerospace industry increases.
8
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has reviewed the status of its market risk and believes there are no
significant changes from that disclosed in the Company's Annual Report on Form
10-K for the year ended December 31, 1999.
9
<PAGE>
Part II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27.1 Financial Data Schedule
b. No reports on Form 8-K were filed during the first quarter of
2000.
10
<PAGE>
SIGNATURES
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 thereunto duly authorized.
<TABLE>
<CAPTION>
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
<S> <C>
Date: May 12, 2000 /s/ Clarence M. McAninch
------------------------- ___________________________________________________________
Clarence M. McAninch
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date: May 12, 2000 /s/ Richard M. Ubinger
------------------------- ___________________________________________________________
Richard M. Ubinger
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
</TABLE>
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the March
31, 2000 Financial Statements included in the Company's Form 10-Q and is
qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 269
<SECURITIES> 0
<RECEIVABLES> 12,834
<ALLOWANCES> (433)
<INVENTORY> 18,429
<CURRENT-ASSETS> 32,766
<PP&E> 43,318
<DEPRECIATION> 5,891
<TOTAL-ASSETS> 71,220
<CURRENT-LIABILITIES> 11,870
<BONDS> 9,548
0
0
<COMMON> 6
<OTHER-SE> 44,543
<TOTAL-LIABILITY-AND-EQUITY> 71,220
<SALES> 18,089
<TOTAL-REVENUES> 18,089
<CGS> 15,411
<TOTAL-COSTS> 15,411
<OTHER-EXPENSES> 1,094
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 226
<INCOME-PRETAX> 1,378
<INCOME-TAX> 482
<INCOME-CONTINUING> 896
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 896
<EPS-BASIC> 0.15
<EPS-DILUTED> 0.15
</TABLE>
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