Universal Stainless Reports Record First Quarter 2006 Results

EPS reaches $0.59 on sales of $45 million; Backlog rises to $118 million


BRIDGEVILLE, Pa., April 20, 2006 (PRIMEZONE) -- Universal Stainless & Alloy Products, Inc. (Nasdaq:USAP) reported today that net income for the first quarter of 2006 rose 33% to a record $3.9 million, or $0.59 per diluted share, on a 4% increase in sales, which reached a record $44.9 million. This is in comparison to net income of $2.9 million, or $0.45 per diluted share, and sales of $43.0 million reported in the 2005 first quarter.

First quarter 2006 sales were at the high end of the Company's forecasted range of $40 to $45 million and diluted EPS exceeded the expected range of $0.50 to $0.55.

President and CEO Mac McAninch commented: "Our record first quarter results reflected the continued strength of our niche markets, particularly aerospace. Our base price and surcharge initiatives enabled us to cope successfully with volatile raw material costs. Process improvements and our strategic shift to higher value products over the past year also contributed to our earnings growth."

Mr. McAninch continued: "We expect our markets to remain strong, which poses our greatest challenge - to meet the needs of our customers and respond to developing market opportunities. To do so, we have added a sixth vacuum-arc remelt (VAR) furnace that is now fully operational and announced plans to add a seventh in September, as well as to expand further our production of the high quality grades of steel required for aerospace and other applications. We also added two milling machines in the first quarter to increase finished bar production in Bridgeville. Installation of a plate flattener later in the current quarter will increase our tool steel and stainless steel plate production capability. In Dunkirk, we are adding employees to increase our production of finished bar products."

Mr. McAninch concluded: "Beyond these improvements underway, we will continue to review our manufacturing facilities to identify investments that will increase our sales potential, lower our production costs and meet the needs of our customers."

Segment Review

In the first quarter of 2006, the Universal Stainless & Alloy Products segment had sales of $39.1 million and operating income of $4.9 million, yielding an operating margin of 13%. This compares with first quarter 2005 sales of $38.4 million and operating income of $2.7 million, or 7% of sales, which included a $342,000 write-off of fixed assets and a $110,000 reduction in the bad debt reserve. In the 2005 fourth quarter, sales were $37.7 million and operating income was $4.7 million, or 12% of sales.

The 2% increase in sales compared with the 2005 first quarter was achieved despite a 23% reduction in tons shipped, although tons shipped were up 9% from the 2005 fourth quarter. The sales increase over the prior year first quarter was due to higher product prices and a continued favorable product mix, including strong growth in shipments of bar products to service centers and OEMs and of special shape products, which offset lower shipments to rerollers. The addition of two milling machines also benefited the most recent quarter. First quarter 2006 sales were 4% higher than the 2005 fourth quarter mainly due to increased shipments to rerollers, forgers and service centers, which offset lower OEM shipments. Operating income rose 85% from the 2005 first quarter and was up 6% from the 2005 fourth quarter due to the improved pricing and mix of products shipped.

The Dunkirk Specialty Steel segment reported first quarter 2006 sales of $14.0 million and operating income of $1.5 million, resulting in an operating margin of 10%. This compares with sales of $13.7 million and operating income of $1.9 million, or 14% of sales, in the first quarter of 2005. In the 2005 fourth quarter, sales were $13.0 million and operating income was $1.3 million, or 10% of sales.

Dunkirk's sales increased 2% over the 2005 first quarter and 8% over the 2005 fourth quarter due to higher selling prices and increased shipments of bar products to service centers and OEMs. Rod and wire product shipments were substantially lower than 2005 levels as the Company determined that the market pricing for certain rod and wire products did not meet its margin requirements. Operating income declined 21% from the first quarter of 2005 due to the higher cost of raw materials at the time of feedstock procurement. Operating income increased 16% over the fourth quarter of 2005 due to the improved pricing and product mix.

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 second quarter 2006 sales will range from $43 to $48 million and that diluted EPS will range from $0.60 to $0.65. This compares with sales of $41.9 million and diluted EPS of $0.50 in the second quarter of 2005.

The following factors were considered in developing these estimates:



  - The Company's total backlog at March 31, 2005 approximated
    $118 million compared to $116 million at December 31, 2005,
    reflecting robust aerospace demand and continued strong power
    generation, petrochemical and tool steel markets.
  - The second quarter is also expected to benefit from a full-quarter
    contribution of the new vacuum-arc remelt furnace installed in
    December 2005, from the two additional milling machines and from
    a new plate flattener to be added late in the current quarter.
  - Sales from the Dunkirk Specialty Steel segment are expected to
    increase to $15 million due to anticipated increases in bar
    shipments, partially offset by lower rod and wire shipments.

Webcast

A simultaneous Webcast of the Company's conference call discussing the first quarter of 2006 and the second 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 April 27th. It can be accessed by dialing 706-645-9291, passcode 7518654. This is a toll call.

About Universal Stainless & Alloy Products, Inc.

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.



              UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
                         FINANCIAL HIGHLIGHTS
         (Dollars in thousands, except per share information)
                              (Unaudited)

                 CONSOLIDATED STATEMENT OF OPERATIONS

                                         For the Quarter Ended
                                                March 31,
                                          2006           2005
                                       -----------    -----------
      Net Sales

 Stainless steel                       $    33,418    $    33,619
 Tool steel                                  5,827          6,017
 High-strength low alloy steel               2,552          1,122
 High-temperature alloy steel                2,369          1,025
 Conversion services                           729          1,114
 Other                                          42            122
                                       -----------    -----------
     Total net sales                        44,937         43,019
 Cost of products sold                      36,320         36,410
 Selling and administrative expenses         2,256          1,907
                                       -----------    -----------
     Operating income                        6,361          4,702
 Interest expense                             (266)          (172)
 Other income                                    2             60
                                       -----------    -----------
     Income before taxes                     6,097          4,590
 Income tax provision                        2,195          1,652
                                       -----------    -----------
     Net income                        $     3,902    $     2,938
                                       ===========    ===========
 Earnings per share - Basic            $      0.61    $      0.46
                                       ===========    ===========
 Earnings per share - Diluted          $      0.59    $      0.45
                                       ===========    ===========

 Weighted average shares of
 Common Stock outstanding
     Basic                               6,417,323      6,350,547
     Diluted                             6,559,491      6,468,475


                      MARKET SEGMENT INFORMATION

                                        For the Quarter Ended
                                              March 31,
                                         2006          2005
                                        -------       -------
      Net Sales

 Service centers                        $23,038       $18,307
 Rerollers                                7,847        12,028
 Forgers                                  7,564         6,263
 Original equipment manufacturers         4,599         2,324
 Wire redrawers                           1,144         2,872
 Conversion services                        729         1,114
 Other                                       16           111
                                        -------       -------
     Total net sales                    $44,937       $43,019
                                        =======       =======
 Tons shipped                            12,045        15,230
                                        =======       =======

                       BUSINESS SEGMENT RESULTS

 Universal Stainless & Alloy Products Segment

                                             For the Quarter Ended
                                                    March 31,
                                               2006          2005
      Net Sales                              -------       -------

 Stainless steel                             $23,567       $21,777
 Tool steel                                    5,360         5,907
 High-strength low alloy steel                 1,239           393
 High-temperature alloy steel                  1,041         1,025
 Conversion services                             538           951
 Other                                            40           117
                                             -------       -------
                                              31,785        30,170
 Intersegment                                  7,352         8,255
                                             -------       -------
     Total net sales                          39,137        38,425
 Material cost of sales                       17,408        19,826
 Operation cost of sales                      15,251        14,779
 Selling and administrative expenses           1,529         1,141
                                             -------       -------
     Operating income                        $ 4,949       $ 2,679
                                             =======       =======

 Dunkirk Specialty Steel Segment

                                           For the Quarter Ended
                                                  March 31,
                                             2006          2005
      Net Sales                            -------       -------

 Stainless steel                           $ 9,851       $11,842
 Tool steel                                    467           110
 High-strength low alloy steel               1,313           729
 High-temperature alloy steel                1,328            --
 Conversion services                           191           163
 Other                                           2             5
                                           -------       -------
                                            13,152        12,849
 Intersegment                                  835           818
                                           -------       -------
     Total net sales                        13,987        13,667
 Material cost of sales                      7,971         7,114
 Operation cost of sales                     3,822         3,924
 Selling and administrative expenses           727           766
                                           -------       -------
     Operating income                      $ 1,467       $ 1,863
                                           =======       =======

                      CONSOLIDATED BALANCE SHEET

                                                March 31,  December 31,
                                                  2006        2005
                                                --------    --------
      Assets

 Cash                                           $    487    $    620
 Accounts receivable, net                         29,844      27,963
 Inventory                                        55,693      51,398
 Deferred taxes                                    1,247       1,084
 Other current assets                              1,380       1,706
                                                --------    --------
     Total current assets                         88,651      82,771
 Property, plant & equipment, net                 47,190      45,761
 Other assets                                        491         495
                                                --------    --------
     Total assets                               $136,332    $129,027
                                                ========    ========

      Liabilities and Stockholders' Equity

 Trade accounts payable                         $ 14,075    $ 12,579
 Deferred revenue                                  3,871         384
 Outstanding checks in excess of bank balance      2,896       3,101
 Accrued income tax                                2,732         368
 Accrued employment costs                          2,347       2,958
 Current portion of long-term debt                 2,005       1,555
 Other current liabilities                           483         162
                                                --------    --------
     Total current liabilities                    28,409      21,107
 Bank revolver                                     2,821       6,117
 Long-term debt                                   10,609      11,200
 Deferred taxes                                    9,518       9,600
                                                --------    --------
     Total liabilities                            51,357      48,024
 Stockholders' equity                             84,975      81,003
                                                --------    --------
     Total liabilities and
      stockholders' equity                      $136,332    $129,027
                                                ========    ========

               CONSOLIDATED STATEMENT OF CASH FLOW DATA

              For the Three-month Period Ended March 31,

                                                      2006       2005
                                                    -------    -------
 Cash flows provided by operating activities:
  Net income                                        $ 3,902    $ 2,938
  Adjustments to reconcile to net cash
   provided by operating activities:
    Depreciation and amortization                       795        769
    Loss on retirement of fixed assets                   --        342
    Deferred tax (decrease) increase                   (238)       539
    Stock based compensation expense                     41         --
    Tax benefit from exercise of stock options           --        115
    Excess tax benefits from share-based
     payment arrangements                                (6)        --
  Changes in assets and liabilities:
   Accounts receivable, net                          (1,881)    (4,790)
   Inventory                                         (4,295)    (5,404)
   Trade accounts payable                             1,496      4,544
   Deferred revenue                                   3,487        646
   Accrued income tax payable                         2,370        520
   Accrued employment costs                            (611)       147
   Other, net                                           656        907
                                                    -------    -------
 Cash flow provided by operating activities           5,716      1,273
                                                    -------    -------
 Cash flow used in investing activities:
   Capital expenditures                              (2,216)      (584)
                                                    -------    -------
 Cash flow used in investing activities              (2,216)      (584)
                                                    -------    -------
 Cash flows used in financing activities:
  Revolving credit net (repayments) borrowings       (3,296)     1,807
  Long-term debt repayments                            (141)      (484)
  Net change in outstanding checks in excess
   of bank balance                                     (205)    (1,684)
  Proceeds from issuance of common stock                  3        264
  Excess tax benefits from share-based
   payment arrangements                                   6         --
                                                    -------    -------
 Cash flow used in financing activities              (3,633)       (97)
                                                    -------    -------
     Net cash flow                                  $  (133)   $   592
                                                    =======    =======


            

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