Form 10-Q.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 September 30, 2002 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 (Registrant's telephone number, including area code)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2003
OR
o
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 incorporation or organization)
(IRS Employer Identification No.)
600 Mayer Street
Bridgeville, PA 15017
(Address of principal executive offices, including zip code)
(412) 257-7600
(Registrant’s 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 _____ ---
Yes x
No o
Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act).
Yes o
No x
As of
November 14, 2002,April 30, 2003, there were6,280,5366,284,638 shares outstanding of theRegistrant'sRegistrant’s Common Stock,$.001$0.001 par value per share.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"“safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. They involve known and unknown risks and uncertainties that may cause theCompany'sCompany’s actual results in future periods to differ materially from forecasted results. Those risks include, among others, risks associated with theacquisition of the Empire Specialty Steel assets, and the start-uplimited operating history of Dunkirk Specialty Steel, LLC, risks associated with the Company’s ability to meet its current loan covenants, risks associated with the receipt, pricing and timing of future customer orders, risks related to the financial viability of customers, risks associated with the manufacturing process and production yields,risks associated with the negotiation of a new collective bargaining agreement with the hourly employees at the Bridgeville facility,and risks related to property, plant and equipment. 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, theCompany'sCompany’s Annual Report on Form 10-K and other filings with the Securities and Exchange Commission during the past 12 months.
DESCRIPTION
PAGE NO.
PART I.
Item 1.
2
3
4
Notes to the Unaudited Consolidated Condensed Financial Statements
5
Item 2.
Management'sManagement’s Discussion and Analysis of Financial Condition and Results of
8Operations9
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
1112
Item 4.
12
PART II.
Item 1.
13
Item 6.
13
14
15
1
Part I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS
Part I.
Item 1.
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Information)
(Unaudited)
For the For the Three-month period ended Nine-month period ended September 30, September 30, ------------------------ ----------------------- 2002 2001 2002 2001 ---- ---- ---- ----Net sales $15,919 $23,344 $54,937 $68,836 Cost of products sold 14,180 18,192 46,999 54,520 Selling and administrative expenses 1,541 1,301 4,451 4,675 ------- ------- ------- ------- Operating income 198 3,851 3,487 9,641 Interest expense and other financing costs (116) (138) (344) (479) Other income 39 15 101 37 ------- ------- ------- ------- Income before taxes 121 3,728 3,244 9,199 Income taxes (70) 1,398 1,070 3,449 ------- ------- ------- ------- Net income $ 191 $ 2,330 $ 2,174 $ 5,750 ======= ======= ======= ======= Earnings per common share Basic $ 0.03 $ 0.38 $ 0.35 $ 0.95 ======= ======= ======= ======= Diluted $ 0.03 $ 0.38 $ 0.35 $ 0.94 ======= ======= ======= =======
For the
Three-month period ended
March 31,
2003
2002
Net sales
$
14,700
$
17,596
Cost of products sold
14,680
14,245
Selling and administrative expenses
1,393
1,373
Operating income (loss)
(1,373
)
1,978
Interest expense and other financing costs
(95
)
(110
)
Other income
27
31
Income (loss) before taxes
(1,441
)
1,899
Income tax (benefit) expense
(858
)
693
Net income (loss)
$
(583
)
$
1,206
Earnings (loss) per common share
Basic
$
(0.09
)
$
0.20
Diluted
$
(0.09
)
$
0.20
The accompanying notes are an integral part of these consolidated condensed financial statements.
2
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars
(Dollars in Thousands)
September 30, 2002 December 31, 2001 (Unaudited)ASSETS Current assets Cash and cash equivalents $ 3,946 $ 5,454 Accounts receivable (less allowance for doubtful accounts of $320 and $434) 12,831 13,257 Inventory 24,831 17,900 Other current assets 2,941 1,482 ------- --------- Total current assets 44,549 38,093 Property, plant and equipment, net 42,749 41,202 Other assets 716 151 ------- --------- Total assets $88,014 $ 79,446 ======= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Trade accounts payable $ 6,245 $ 4,597 Outstanding checks in excess of bank balance 1,523 857 Current portion of long-term debt 1,925 1,832 Accrued employment costs 1,409 1,562 Other current liabilities 492 590 ------- --------- Total current liabilities 11,594 9,438 Long-term debt 7,962 6,490 Deferred taxes 7,609 7,146 ------- --------- Total liabilities 27,165 23,074 ------- --------- 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; 6,550,436 and 6,347,172 shares issued 7 6 Additional paid-in capital 28,243 25,941 Retained earnings 34,230 32,056 Treasury Stock at cost; 269,900 common shares held (1,631) (1,631) ------- --------- Total stockholders' equity 60,849 56,372 ------- --------- Total liabilities and stockholders' equity $88,014 $ 79,446 ======= =========
March 31,
2003
December 31,
2002
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents
$
6,347
$
3,308
Accounts receivable (less allowance for doubtful accounts of $294 and $298)
11,300
11,550
Inventory
21,667
22,717
Other current assets
3,346
3,581
Total current assets
42,660
41,156
Property, plant and equipment, net
41,315
42,246
Other assets
637
642
Total assets
$
84,612
$
84,044
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Trade accounts payable
$
4,842
$
4,190
Outstanding checks in excess of bank balance
691
275
Current portion of long-term debt
1,985
1,971
Accrued employment costs
1,053
1,019
Other current liabilities
444
163
Total current liabilities
9,015
7,618
Long-term debt
7,046
7,502
Deferred taxes
8,333
8,123
Total liabilities
24,394
23,243
Commitments and contingencies
—
—
Stockholders’ equity
Senior Preferred Stock, par value $0.001 per share; 1,980,000 shares authorized; 0 shares issued and outstanding
—
—
Common Stock, par value $0.001 per share; 10,000,000 shares authorized; 6,554,538 shares issued
7
7
Additional paid-in capital
28,277
28,277
Retained earnings
33,565
34,148
Treasury Stock at cost; 269,900 common shares held
(1,631
)
(1,631
)
Total stockholders’ equity
60,218
60,801
Total liabilities and stockholders’ equity
$
84,612
$
84,044
The accompanying notes are an integral part of these consolidated condensed financial statements.
3
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars
(Dollars in Thousands)
(Unaudited)
For the Nine-month period ended September 30, 2002 2001 ---- ----Cash flow from operating activities: Net income $ 2,174 $ 5,750 Adjustments to reconcile to net cash and cash equivalents provided by operating activities: Depreciation and amortization 2,412 2,036 Deferred taxes 379 632 Tax benefit from exercise of stock options 428 -- Changes in assets and liabilities: Accounts receivable, net 426 (3,113) Inventory (2,973) (2,206) Trade accounts payable 1,648 889 Accrued employment costs (153) 1,146 Other, net (1,850) 1,343 ------- ------- Net cash provided by operating activities 2,491 6,477 ------- ------- Cash flows from investing activities: Acquisition of assets and real property through purchase agreements (1,283) -- Capital expenditures (3,877) (4,178) ------- ------- Net cash used in investing activities (5,160) (4,178) ------- ------- Cash flows from financing activities: Proceeds from the exercise of stock options 1,852 -- Proceeds from issuance of Common Stock 23 26 Borrowings under revolving line of credit -- 8,893 Repayments under revolving line of credit -- (8,893) Proceeds from long-term debt -- 32 Repayments of long-term debt (1,381) (1,259) Purchase of Treasury Stock -- (87) Increase in outstanding checks in excess of bank balance 667 300 ------- ------- Net cash provided by (used in) financing activities 1,161 (988) ------- ------- Net (decrease) increase in cash and cash equivalents (1,508) 1,311 Cash and cash equivalents at beginning of period 5,454 1,109 ------- ------- Cash and cash equivalents at end of period $ 3,946 $ 2,420 ======= ======= Supplemental disclosure of cash flow information: Interest paid $ 249 $ 330 Income taxes paid $ 1,293 $ 2,174
For the
Three-month period ended
March 31,
2003
2002
Cash flow from operating activities:
Net income (loss)
$
(583
)
$
1,206
Adjustments to reconcile to net cash and cash equivalents Provided by operating activities:
Depreciation and amortization
827
772
Deferred taxes
185
272
Changes in assets and liabilities:
Accounts receivable, net
250
1,190
Inventory
1,050
328
Trade accounts payable
652
627
Accrued employment costs
34
(264
)
Refundable taxes
(43
)
—
Other, net
590
(43
)
Net cash provided by operating activities
2,962
4,088
Cash flow from investing activities:
Acquisition of assets and real property through purchase agreements
—
(1,271
)
Capital expenditures
(79
)
(352
)
Net cash used in investing activities
(79
)
(1,623
)
Cash flow from financing activities:
Proceeds from deferred loan agreement
200
—
Repayments of long-term debt
(460
)
(459
)
Increase in outstanding checks in excess of bank balance
416
361
Net cash provided by (used in) financing activities
156
(98
)
Net increase in cash and cash equivalents
3,039
2,367
Cash and cash equivalents at beginning of period
3,308
5,454
Cash and cash equivalents at end of period
$
6,347
$
7,821
Supplemental disclosure of cash flow information:
Interest paid
$
69
$
85
Income taxes paid
$
33
$
91
The accompanying notes are an integral part of these consolidated condensed financial statements.
4
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1 – Basis of Presentation
1)
The accompanying unaudited consolidated condensed financial statements of operations for thethree- and nine-monththree-month periods endedSeptember 30,March 31, 2003 and 2002,and 2001,balance sheets as ofSeptember 30, 2002March 31, 2003 and December 31,2001,2002, and statements of cash flows for thenine-monththree-month periods endedSeptember 30,March 31, 2003 and 2002,and 2001have 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 31,2001.2002. 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 atSeptember 30, 2002March 31, 2003 and December 31,20012002 and the consolidated results of operations and of cash flows for the periods endedSeptember 30,March 31, 2003 and 2002,and 2001,and are not necessarily indicative of the results to be expected for the full year.Acquisition 2) On February 8, 2002, the Company, through its wholly owned subsidiary, Dunkirk Specialty Steel, LLC ("Dunkirk Specialty Steel"), entered into a Personal Property Asset Purchase Agreement and a Real Property Purchase Agreement (the "Purchase Agreements") with the New York Job Development Authority (the "JDA") to acquire certain assets and real property formerly owned by Empire Specialty Steel, Inc. at its idled production facility located in Dunkirk, New York. These transactions were completed on February 14, 2002, and the plant became operational on March 14, 2002. Pursuant to the Purchase Agreements, Dunkirk Specialty Steel paid $1.1 million in cash and issued two ten-year, 5% interest bearing notes payable to the JDA for the combined amount of $3.0 million. No principal or interest payments are due under the notes during the first year. The purchase price, including related acquisition costs and adjustments for the discounted value of the JDA notes, of $4,140,000 was allocated as follows (dollars in thousands): Inventory $3,958 Assets Held for Sale 182 ------------ $4,140 ============ 5Note 2 – Common Stock
3)
The reconciliation of the weighted average number of shares of Common Stock outstanding utilized for the earnings per common share computations are as follows:
For the For the Three-month period ended Nine-month period ended September 30, September 30, 2002 2001 2002 2001 ---- ---- ---- ----Weighted average number of shares of Common Stock outstanding 6,280,536 6,084,231 6,178,207 6,082,244 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 27,279 26,436 67,501 19,514 ------------- ------------- -------------- -------------- Weighted average number of shares of Common Stock outstanding, as adjusted 6,307,815 6,110,667 6,245,708 6,101,758 ============= ============= ============== ==============
For the Three-month
period ended March 31,
2003
2002
Weighted average number of shares of Common Stock outstanding
6,284,638
6,077,272
Assuming exercise of stock options reduced by the number of shares which could have been purchased with the proceeds from the exercise of such stock options
981
35,315
Weighted average number of shares of Common Stock outstanding, as adjusted
6,285,619
6,112,587
Note 3 – Stock-Based Compensation Plans
The following table illustrates the effect on net income (loss) and earnings per share between the Company’s use of the intrinsic value method and the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee and director compensation (dollars, except per share amounts, in thousands):
For the Three-month
period ended March 31,
2003
2002
Net income (loss), as reported
$
(583
)
$
1,206
Total stock-based compensation expense determined Under fair-value based method, net of taxes
(28
)
(29
)
Pro forma net income (loss)
$
(611
)
$
1,177
Earnings (loss) per common share:
Basic – as reported
$
(0.09
)
$
0.20
Basic – pro forma
$
(0.10
)
$
0.19
Diluted – as reported
$
(0.09
)
$
0.20
Diluted – pro forma
$
(0.10
)
$
0.19
5
Note 4 – New Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). SFAS 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. SFAS 143 was effective for the Company on January 1, 2003 and did not have a material impact on the Company’s results of operations or financial condition.In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”). This statement supersedes Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS146 requires the recognition of a liability for costs associated with an exit or disposal activity when incurred. SFAS 146 also establishes that the liability should initially be measured and recorded at fair value. The provisions of SFAS 146 are effective for any exit and disposal activities initiated after December 31, 2002.
In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires that upon issuance of a guarantee, a guarantor must recognize a liability for the fair value of an obligation assumed under a guarantee. FIN 45 also requires additional disclosures by a guarantor in its interim and annual financial statements about the obligations associated with guarantees issued. The recognition provisions of FIN 45 will be effective for any guarantees that are issued or modified after December 31, 2002. The provisions of FIN 45 are not expected to have a material impact on our results of operations or financial position.
In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123” (“SFAS 148”). This statement amends SFAS No. 123, “Accounting for Stock Based Compensation” to provide alternative methods of voluntary transitioning to the fair value based method of accounting for stock-based employee compensation. SFAS 148 also requires disclosure of the method used to account for stock-based employee compensation and the effect of the method on reported results in both annual and interim financial statements. The Company does not intend to change its current method of accounting for stock-based employee compensation unless required by the issuance of a new pronouncement. The Company has adopted the disclosure requirements of SFAS 148 as of December 31, 2002.
In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities – an interpretation of ARB No. 51” (“FIN 46”). FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 was effective January 31, 2003 and did not have a material impact on the Company s results of operations or financial condition. This statement was adopted during the first quarter 2003 and did not impact the Company’s results of operations or financial condition.
In April 2003, the FASB issued Statement No. 149, “Amendment of Statement 133 on Derivative instruments and Hedging”. This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”. This statement will be adopted in 2003 and is not expected to impact the Company’s results of operations or financial condition.
Note 5 - Inventory
4)
The major classes of inventory are as follows (dollars in thousands):
September 30, 2002 December 31, 2001Raw materials and supplies $ 1,993 $ 1,880 Semi-finished and finished steel products 20,284 13,593 Operating materials 2,554 2,427 ------------------- -------------------- Total inventory $ 24,831 $ 17,900 =================== ====================
March 31, 2003
December 31, 2002
Raw materials and supplies
$
1,851
$
1,719
Semi-finished and finished steel products
17,539
18,588
Operating materials
2,277
2,410
Total inventory
$
21,667
$
22,717
6
Note 6 - Property, Plant and Equipment
5)
Property, plant and equipment consists of the following (dollars in thousands):
September 30, 2002 December 31, 2001Land and land improvements $ 822 $ 822 Buildings 5,949 4,701 Machinery and equipment 47,590 43,572 Construction in progress 1,221 2,641 -------------------- -------------------- 55,582 51,736 Accumulated depreciation (12,833) (10,534) -------------------- -------------------- Property, plant and equipment, net $ 42,749 $ 41,202 ==================== ====================
March 31,
2003
December 31 ,
2002
Land and land improvements
$
822
$
822
Buildings
5,987
5,987
Machinery and equipment
48,160
48,110
Construction in progress
801
980
55,770
55,899
Accumulated depreciation
(14,455
)
(13,653
)
Property, plant and equipment, net
$
41,315
$
42,246
Property, plant and equipment includes a capital lease with Armco, which merged with and into AK Steel in 1999 (“Armco”), for the land and certain buildings and structures located in Bridgeville (the “Bridgeville Lease”). The Bridgeville Lease is for a ten-year term which commenced on August 15, 1994, with three five-year options to renew on the same terms at the Company’s discretion at a rental of $1 per year plus payment of real and personal property taxes and other charges associated with the property.
On February 6,
Environmental 6)2003, the Company submitted a notice to exercise its option to purchase all of the property permitted under the Bridgeville Lease for $1. The ESR building, which houses the Company’s four electro-slag remelting furnaces and ancillary equipment, is not included in the option to purchase. The Company will continue to operate the equipment in the ESR building under the existing lease due to expire on August 15, 2004. The Company has expressed an interest to purchase or extend the current lease for the ESR building to AK Steel. In the event that the lease of the ESR building is not extended and the property is not purchased, the relocation of the ESR equipment would have an adverse material effect on the financial condition of the Company.Effective January 1, 2003, the Company entered into a $200,000 Deferred Loan Agreement maturing on December 31, 2006 with the City of Dunkirk, New York. No principal or interest payments will be required under the Deferred Loan Agreement provided the Company hires 30 new employees and more than 50% of those jobs are made available to certain Dunkirk City residents. The Company believes it will meet the conditions of the Deferred Loan Agreement. Therefore, the proceeds have been applied to reduce the acquisition cost of new equipment at the Company’s Dunkirk facility.
Note 7 – Commitments and Contingencies
The Company has reviewed the status of itsenvironmentalcommitments and contingencies and believes there are no significant changes from that disclosed in theCompany'sCompany’s Annual Report on Form 10-K for the year ended December 31,2001.2002, except as follows:On June 29, 2001, suit was filed against the Company in the Court of Common Pleas of Allegheny County, Pennsylvania by Teledyne Technologies, Incorporated (“Teledyne”). The suit alleges that steel product manufactured by the Company was defective and the Company was or should have been aware of the defects. Teledyne has alleged that the defective steel supplied by the Company caused certain crankshafts sold by Teledyne for use in aircraft engines to be defective. As a result, Teledyne is claiming damages relating to the recall, replacement and repair of aircraft engines.
Teledyne was recently unsuccessful in its pursuit of a similar claim brought against another specialty steel producer who supplied the same steel product. After in-depth investigation, it is the Company’s position that the suit is without merit and it intends to vigorously defend that position. Additionally, the Company believes that it has insurance coverage that is available for this claim. At this time, the Company is engaged in discovery and believes that the final disposition of this suit will not have a material adverse effect on the financial condition and the results of operations of the Company.
On April 7, 2003 United States Aviation Underwriters, Inc., (“USAU”) a New York corporation, as managers and on
7
behalf of United States Aircraft Insurance Group (“USAIG”), the Company’s Aircraft Products Liability insurance carrier, filed suit in the Court of Common Pleas of Allegheny County, Pennsylvania asking the court for a declaratory judgement as to what actual liability and obligations were applicable to USAIG relating to the insurance policy issued to the Company, and the allegations made by Teledyne. The Company believes that USAIG is responsible for providing insurance coverage with regard to the Teledyne allegations. To date USAIG has provided for and continues to provide for a defense to the Teledyne claim. While the Company believes that insurance coverage is available for the defense and damages, if any, relating to the Teledyne claim, an unfavorable ruling in both the USAIG suit and the Teledyne claim could have a material adverse effect on the Company’s financial condition.
Note 8 - Business Segments
7) Statement of Financial Accounting Standards (SFAS) 131, "Disclosures about Segments of an Enterprise and Related Information", requires companies to disclose segment information on the same basis as that used internally by executive management to evaluate segment performance.
The Company is comprised of two business segments: Universal Stainless & Alloy Products, which consists of the Bridgeville and Titusville facilities, and Dunkirk Specialty Steel, theCompany'sCompany’s wholly owned subsidiary located in Dunkirk, New York. TheCompany manufactures and markets semi-finished and finished specialty steel products, including stainless steel, tool steel and certain other alloyed steels.UniversalStainless'Stainless & Alloy Products manufacturing process involves melting, remelting, treating and hot and cold rolling of semi-finished and finished specialty steels. Dunkirk SpecialtySteel'sSteel’s manufacturing process involves hot rolling and finishing of specialty steel bar, rod and wire.Sales between the segments are generally made at market-related prices. Other income, net, represents interest income. Corporate assets are primarily cash and cash equivalents, prepaid insurance costs, investment in Dunkirk Specialty Steel and corporate operating assets.The Segment Data(dollars in thousands):
For the For the Three-Month Period Ended Nine-Month Period Ended September 30, September 30, 2002 2001 2002 2001 ----------- ---------------- ---------------- ---------------Net sales Universal Stainless & Alloy Products $15,211 $23,344 $53,731 $68,836 Dunkirk Specialty Steel 3,983 -- 6,362 -- Intersegment (3,275) -- (5,156) -- ----------- -------------- ---------------- --------------- Consolidated net sales 15,919 23,344 54,937 68,836 ----------- -------------- ---------------- --------------- Operating income (loss Universal Stainless & Alloy Products 490 3,874 4,682 9,698 Dunkirk Specialty Steel (291) -- (1,173) -- Corporate costs (1) (23) (22) (57) ----------- -------------- ---------------- --------------- Total operating income 198 3,851 3,487 9,641 ----------- -------------- ---------------- --------------- Interest expense and other financing costs (116) (138) (344) (479) ----------- -------------- ---------------- --------------- Other income 39 15 101 37 ----------- -------------- ---------------- --------------- Consolidated income before taxes $ 121 $ 3,728 $ 3,244 $ 9,199 =========== ============== ================ ===============September 30, December 31, 2002 2001 ---- ----Total assets: Universal Stainless & Alloy Products $71,511 $73,225 Dunkirk Specialty Steel 10,111 -- Corporate assets 6,392 6,221 ------------ ---------------- Consolidated total assets $88,014 $79,446 ============ ================7Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations An analysis of the Company's operations for the three-and nine-month periods ended September 30, 2002 and 2001are as follows (dollars in thousands):
For the Three-month
period ended March 31,
2003
2002
Net sales:
Universal Stainless & Alloy Products
$
12,401
$
17,636
Dunkirk Specialty Steel
4,784
207
Intersegment
(2,485
)
(247
)
Consolidated net sales
$
14,700
$
17,596
Operating income (loss):
Universal Stainless & Alloy Products
$
(774
)
$
2,484
Dunkirk Specialty Steel
(599
)
(506
)
Total operating income (loss)
$
(1,373
)
$
1,978
Interest expense and other financing costs:
Universal Stainless & Alloy Products
$
58
$
92
Dunkirk Specialty Steel
37
18
Total interest expense and other financing costs
$
95
$
110
Other income
Universal Stainless & Alloy Products
$
23
$
27
Dunkirk Specialty Steel
4
4
Total other income
$
27
$
31
March 31,
2003
December 31,
2002
Total assets:
Universal Stainless & Alloy Products
$
62,514
$
65,413
Dunkirk Specialty Steel
12,674
12,337
Corporate assets
9,424
6,294
Consolidated total assets
$
84,612
$
84,044
8
Three-and nine-monthResults of Operations
An analysis of the Company’s operations for the three-month periods endedSeptember 30,March 31, 2003 and 2002 is as follows (dollars in thousands):
For the Three-month
period ended March 31,
2003
2002
Net sales
Stainless steel
$
11,237
$
13,460
Tool steel
1,901
1,334
High-strength low alloy steel
671
574
High-temperature alloy steel
517
1,743
Conversion services
333
395
Other
41
90
Total net sales
$
14,700
$
17,596
Cost of products sold
14,680
14,245
Selling and administrative expenses
1,393
1,373
Operating income (loss)
$
(1,373
)
$
1,978
Three-month period ended March 31, 2003 as compared to the similar
periodsperiod in20012002The decrease in net sales for the
three-and nine-month periodsthree-month period endedSeptember 30, 2002March 31, 2003 as compared to the similarperiodsperiod in20012002 reflectsfurther shrinkage ofcontinued weak demandfrom two important end markets,for aerospace and power generation products resulting from production cutbacks of power generation turbines andaerospace.commercial aircraft. Net sales to those markets in the current quarter are down52%20% and65%, respectively, from last year. Net sales to those markets for the current nine-month period are down 30% and 47%55%, respectively, from the same period last year. These declinesare primarily due to production cutbackswere partially offset by increases in the sale ofpower generation equipment and commercial aircraft. Sales of wire-rod from Dunkirk Specialty Steel,commodity, tool steel andcommodity reroller products have partially offset the lower sales to the power generation and aerospace markets. Management believed that the increased demand for tool steel products in early 2002 indicated the anticipation of an improving economy, while the increased demand for commodity reroller products reflected the impact of the Section 201 tariffs imposed by President Bush in March 2002 on imported specialty steelpetrochemical products.These trends did not continue during the current quarter.The Company shipped approximately8,6007,400 tonsand 11,900 tons forduring the three-monthperiodsperiod endedSeptember 30, 2002 and 2001 respectively, and 29,600March 31, 2003, compared to approximately 8,300 tonsand 35,300 tons forduring thenine-month periodsthree-month period endedSeptember 30, 2002 and 2001, respectively.March 31, 2002.Cost of products sold, as a percentage of net sales, was
89.1%99.9% and77.9%81.0% for the three-month periods endedSeptember 30,March 31, 2003 and 2002,and 2001, respectively, and was 85.6% and 79.2% for the nine-month periods ended September 30, 2002 and 2001,respectively. This increase is primarily due tothehigher raw material, labor and energy costs, shift in product mix and lower production volumes at the Bridgeville and Titusvillefacilities, and the start-up costs incurred relating tofacilities. In addition, Dunkirk SpecialtySteel.Steel, the Company’s wholly owned subsidiary that acquired the assets of Empire Specialty Steel on February 14, 2002 and became operational on March 14, 2002, did not generate sufficient order volumes to operate profitably for the three-months ended March 31, 2003.Selling and administrative expenses increased by
$240,000 in$20,000 from the 2002 period primarily due to higher insurance costs partially offset by lower employment costs during the three-month period endedSeptember 30, 2002 as compared to September 30, 2001 and decreased by $224,000 for the nine-month period ended September 30, 2002 as compared to September 30, 2001. The Bridgeville facility is currently operating under a day-to-day extension of the collective bargaining agreement that was scheduled to terminate AugustMarch 31,2002. Although this was in place, while the facility operated under the extension management modified certain aspects of the facility's normal operations relating to production processes, security and maintenance to accommodate the current situation. These modifications resulted in a $267,000 increase in selling and administrative expenses for the three-month period ended September 30, 2002. The year-to-date decrease is primarily due to the recognition of a $330,000 bad debt charge, a $190,000 severance obligation to its former Vice President of Operations and a $100,000 investment firm fee charged in 2001.2003.Interest expense and other financing costs decreased
by $22,000 in the three-month period ended September 30, 2002 8as compared to the three-month period ended September 30, 2001 and decreased by $135,000 in the nine-month period ended September 30, 2002 as compared to the nine-month period ended September 30, 2001. The decreases were primarily due to a reduction in borrowings under the revolving line of credit with PNC Bank and lower interest rates between the two periods, partially offset by the interest expense recognized on the debt issued in conjunction with the acquisition of the Empire Specialty Steel assets by Dunkirk Specialty Steel. During the three-month period ended September 30, 2002, the Company's estimated annual effective income tax rate decreasedfrom36.5%, which was utilized through June 30, 2002, to 33%. This reduction increased net income by $113,000$110,000 for the three-month period endedSeptember 30, 2002.March 31, 2002 to $95,000 for the three-month period ended March 31, 2003 primarily due to the continued reduction in long-term debt outstanding.The effective income tax rate utilized in the three-month periods ended March 31, 2003 and 2002 was 59.5% and 36.5%, respectively. The effective income rate utilized in the current period reflects the anticipated effect of the
Company'sCompany’s permanent tax deductions against expected income levels in2002.2003. The effective income tax rate for the remainder of 2003 is expected to approximate 37%.9
Business Segment Results
An analysis of the net sales and operating income for the reportable segments for thethree-and nine-monththree-month periods endedSeptember 30,March 31, 2003 and 2002and 2001is as follows (dollars in thousands):
For the For the Three-Month Period Ended Nine-Month Period Ended September 30, September 30, 2002 2001 2002 2001 ----------- ---------- ---------- -----------Net sales Universal Stainless & Alloy Products $15,211 $23,344 $53,731 $68,836 Dunkirk Specialty Steel 3,983 -- 6,362 -- Intersegment (3,275) -- (5,156) -- ----------- ---------- ---------- ----------- Consolidated net sales 15,919 23,344 54,937 68,836 ----------- ---------- ---------- ----------- Operating income (loss) Universal Stainless & Alloy Products 490 3,874 4,682 9,698 Dunkirk Specialty Steel (291) -- (1,173) -- Corporate costs (1) (23) (22) (57) ----------- ---------- ---------- ----------- Total operating income $ 198 $ 3,851 $ 3,487 $ 9,641 =========== ========== ========== ===========
For the Three-month
period ended March 31,
2003
2002
Net sales:
Universal Stainless & Alloy Products
$
12,401
$
17,636
Dunkirk Specialty Steel
4,784
207
Intersegment
(2,485
)
(247
)
Consolidated net sales
$
14,700
$
17,596
Operating income (loss):
Universal Stainless & Alloy Products
$
(774
)
$
2,484
Dunkirk Specialty Steel
(599
)
(506
)
Total operating income (loss)
$
(1,373
)
$
1,978
Universal Stainless & Alloy Products Segment
Net sales for the
three-and nine-month periodsthree-month period endedSeptember 30, 2002March 31, 2003 for this segment, whichconsistconsists of the Bridgeville and Titusville facilities, were$8.1 and $15.1$5.2 million lowerrespectively,than the sameperiodsperiod a year ago. This decrease reflects lower demand for power generation and aerospace products, partially offset by an increase in demand for petrochemical and tool steelproducts and for commodity reroller products, including shipments to the Dunkirk Specialty Steel segment.products.Operating income for the Universal Stainless & Alloy Products segment decreased by
$3.4 million in the three-month period ended September 30, 2002 as compared to September 30, 2001 and decreased by $5.0 million for the nine-month period ended September 30, 2002 as compared to September 30, 2001.$3.3 million. This decrease was primarily dueprimarilytothehigher raw material, labor and energy costs, shift in productmix.mix and lower production volumes at the Bridgeville and Titusville facilities.Dunkirk Specialty Steel Segment
On February 8, 2002, the Company, through its wholly owned subsidiary, Dunkirk Specialty Steel, entered into a Property Asset Purchase Agreement and a Real Property Purchase Agreement (the "Purchase Agreements") with the New York Job Development Authority (the "JDA") to acquire certain assets and real property formerly owned by Empire Specialty Steel, Inc. at its idled production facility located in Dunkirk, New York. These transactions were completed on February 14, 2002. Dunkirk Specialty Steel manufactures and markets finished bar, rod and wire specialty steel products. The facility became operational on March 14, 2002.Net sales
for the three-and nine-month periods ended September 30, 2002 for this segment were $4.0 and $6.4 million, respectively. This primarily reflects sales to service centers. The operating loss for the Dunkirk Specialty Steel 9segment was $291,000for the three-month period endedSeptember 30, 2002 and $1,173,000March 31, 2003 for this segment were $4.8 million compared to $207,000 for thenine-monthsame period in 2002. This primarily reflects sales of rod and wire products and finished bar to service centers. The Dunkirk Specialty Steel segment did not generate sufficient order volumes to operate profitably and incurred an operating loss of $599,000 for the three-months endedSeptember 30, 2002, which primarily relates to the start-up costs incurred since February 14, 2002.March 31, 2003.Financial Condition
The Company has financed its2002operating activities during the three-month period ended March 31, 2003 through cash flows from operations and cash on hand at the beginning of the period. AtSeptember 30, 2002,March 31, 2003, working capital approximated$33.0$33.6 million, as compared to$28.7$33.5 million at December 31,2001. The increase in working capital is primarily attributable to an increase in work in process inventory to support the anticipated growth of Dunkirk Specialty Steel.2002. The ratio of current assets to current liabilitieswas 3.8:1 at September 30, 2002 and 4.0:decreased from 5.4:1 at December 31,2001.2002 to 4.7:1 at March 31, 2003. The debt to capitalization ratio was14.0%13.0% atSeptember 30, 2002March 31, 2003 and12.9%13.5% at December 31,2001.2002.The
Company'sCompany limited its capital expendituresexcludingfor thecoststhree-month period ended March 31, 2003 to $79,000. The Company will continue to limit its capital expenditures until current market conditions improve.Effective January 1, 2003, the Company entered into a $200,000 Deferred Loan Agreement maturing on December 31, 2006 with the City of Dunkirk, New York. No principal or interest payments will be required under the Deferred Loan Agreement provided the Company hires 30 new employees and more than 50% of those jobs are made available to certain Dunkirk City residents. The Company believes it will meet the conditions of the Deferred Loan Agreement. Therefore, the proceeds have been applied to reduce the acquisition cost of new equipment at the Company’s Dunkirk
NY acquisition, approximated $3.9 million forfacility.The Company satisfies its capital requirements primarily through the
nine-month period ended September 30, 2002, which primarily aresale of Common Stock and the issuance of long-term debt. The Company does not maintain off-balance sheet arrangements other than operating leases nor does it participate in non-exchange traded contracts requiring fair value accounting treatment or material relatedto the Bridgeville and Dunkirk facilities.party transaction arrangements.At
September 30, 2002,March 31, 2003, the Company hadoutstanding purchase commitments in addition to the expenditures incurred to dateall ofapproximately $350,000. The Company expended $1.3 million in connection with the Purchase Agreements entered into with the JDA to acquire certain assets and real property formerly owned by Empire Specialty Steel, Inc. As of September 30, 2002, the Company hadits $6.5 millionavailable for borrowings under arevolving line of credit with PNCBank.Bank available for10
borrowings. On February 18, 2003, the Company and PNC Bank agreed to adjust certain financial ratio covenants through December 31, 2003 as a result of the Company’s 2003 earnings projections. The Company is in compliance with its covenants as of March 31, 2003. The Company believes, however, that it will be in technical violation of certain financial covenants at June 30, 2003 as a result of the loss recognized for the three-month period ended March 31, 2003 and the projected loss for the three-months ending June 30, 2003. The Company has initiated discussions with PNC Bank and expects to either adjust the covenant restrictions in order to maintain compliance or obtain the necessary waivers until market conditions improve.
There were no shares of Common Stock repurchased by the Company during the
nine-monththree-month period endedSeptember 30, 2002.March 31, 2003. The Company is authorized to repurchase an additional 45,100 shares of Common Stock as ofSeptember 30, 2002.March 31, 2003.The Company anticipates that it will fund its
remaining 20022003 working capital requirements, its capital expenditures and the stock repurchase program primarily from funds generated from operations and borrowings. TheCompany'sCompany’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.20022003 Outlook
These are forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995, and actual results may vary.The Company estimates that
itssecond quarter 2003 salesforwill range from $15 to $19 million and that it will incur a net loss per diluted share ranging from $0.07 to $0.12. In thefourthsecond quarter of 2002,will be between $11sales were $21.4 million and$15 million, versus sales of $21.8 million in the prior year period. Diluteddiluted earnings per sharefor the fourth quarter of 2002 are currently projected to range from a net loss of $0.03 to a net profit of $0.01, compared with $0.31 reported in the fourth quarter of 2001.were $0.12. The following factors were considered in developing these estimates:.. The Company's backlog approximated $18 million on September 30, 2002
•
The Company’s total backlog approximated $14.6 million on March 31, 2003, as compared
to $21 million on June 30, 2002. .. Salesto $14 million on December 31, 2002.•
Demand for reroll and forging semi-finished products from the Universal Stainless & Alloy Products segment is expected to increase in anticipation of improving economic conditions.
•
Sales from the Dunkirk Specialty Steel segment are expected to exceed the $5 million level in the 2003 second quarter.
•
The projected net loss for the 2003 second quarter was determined utilizing an estimated effective income tax rate of 37%.
New Accounting Pronouncements
In August 2001, theCompany's reroller customers are expected to partially offset further declines in sales toFASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). SFAS 143 establishes accounting standards for theOEMrecognition andforger markets as a resultmeasurement ofreduced demand from the power generationan asset retirement obligation andaerospace industries. .. Sales from Dunkirk Specialty Steel are expected to approximate $4 million in the fourth quarter, level with the third quarter. Cost improvement initiatives underway at Dunkirk are expected to continue reducingitslevel of operating losses. .. The hourly employees at the Company's Bridgeville facility continue to work under a day-to-day extension of the collective bargaining agreement while the two parties continue negotiations. That agreement betweenassociated asset retirement cost. SFAS 143 was effective for the Company on January 1, 2003 and did not have a material impact on theUnited SteelworkersCompany’s results ofAmerica would have expired August 31, 2002. The fourth quarter estimate is dependent upon that extension continuing through the remainder of the quarteroperations orthe successful negotiation of a new contract. 10New Accounting Pronouncements In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections".financial condition.In June 2002, the FASB issued
StatementSFAS No. 146,"Accounting“Accounting for Costs Associated with Exit or DisposalActivities"Activities” (“SFAS 146”).TheseThis statement supersedes Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS146 requires the recognition of a liability for costs associated with an exit or disposal activity when incurred. SFAS 146 also establishes that the liability should initially be measured and recorded at fair value. The provisions of SFAS 146 will be effective for any exit and disposal activities initiated after December 31, 2002.In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires that upon issuance of a guarantee, a guarantor must recognize a liability for the fair value of an obligation assumed under a guarantee. FIN 45 also requires additional disclosures by a guarantor in its interim and annual financial statements about the obligations associated with guarantees issued. The recognition provisions of FIN 45 will be effective for any guarantees that are issued or modified after December 31, 2002. The provisions of FIN 45 are not expected to have a material impact on our results of operations or financial position.
11
In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123” (“SFAS 148”). This statement amends SFAS No. 123, “Accounting for Stock Based Compensation” to provide alternative methods of voluntary transitioning to the fair value based method of accounting for stock-based employee compensation. SFAS 148 also requires disclosure of the method used to account for stock-based employee compensation and the effect of the method on reported results in both annual and interim financial statements. The Company does not intend to change its current method of accounting for stock-based employee compensation unless required by the issuance of a new pronouncement. The Company has adopted the disclosure requirements of SFAS 148 as of December 31, 2002.
In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities – an interpretation of ARB No. 51” (“FIN 46”). FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 was effective January 31, 2003 and did not have a material impact on the Company s results of operations or financial condition. This statement was adopted during the first quarter 2003 and did not impact the Company’s results of operations or financial condition.
In April 2003, the FASB issued Statement No. 149, “Amendment of Statement 133 on Derivative instruments and Hedging”. This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”. This statement will be adopted in 2003 and
areis not expected to impact theCompany'sCompany’s results of operations or financial condition.Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Item 3.
The Company has reviewed the status of its market risk and believes there are no significant changes from that disclosed in the
Company'sCompany’s Annual Report on Form 10-K for the year ended December 31,2001,2002, except as provided in this Form10-Q. Item 4. CONTROLS AND PROCEDURES10-Q in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 4.
An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer
("CEO"(“CEO”) and Chief Financial Officer("CFO"(“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports that we file or submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported in accordance with the rules and forms of the Securities and Exchange Commission. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to their evaluation.11Part II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS12
Part II.
ITEM 1.
On June 29, 2001, suit was filed against the Company in the Court of Common Pleas of Allegheny County, Pennsylvania by Teledyne Technologies, Incorporated
("Teledyne"(“Teledyne”). The suit alleges that steel product manufactured by the Company was defective and the Company was or should have been aware of the defects. Teledyne has alleged that the defective steel supplied by the Company caused certain crankshafts sold by Teledyne for use in aircraft engines to be defective. As a result, Teledyne is claiming damages relating to the recall, replacement and repair of aircraft engines.After in-depth investigation it is the Company's position that the suit is without merit and intends to vigorously defend its position.Teledyne was recently unsuccessful in its pursuit of a similar claim brought against another specialty steel producer who supplied the same steel product. After in-depth investigation, it is the Company’s position that the suit is without merit and it intends to vigorously defend that position. Additionally, the Company believes that it has insurance coverage
will bethat is available for this claim.The Company filed an Answer and New Matter to the Amended Complaint on September 27, 2002.At this time, the Company is engaged indiscovery. The Companydiscovery and believes that the final disposition of this suit will not have a material adverse effect on the financial condition and the results of operations of the Company.Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits- none. b. Two ReportsOn April 7, 2003 United States Aviation Underwriters, Inc., (“USAU”) a New York corporation, as managers and on
Form 8Kbehalf of United States Aircraft Insurance Group (“USAIG”), the Company’s Aircraft Products Liability insurance carrier, filed suit in the Court of Common Pleas of Allegheny County, Pennsylvania asking the court for a declaratory judgement as to what actual liability and obligations werefiled during the second quarter 2002. These Reports covered Press Releases under item 5, Other Events, and no financial statements were filed with these reports. 1.) A Report on Form 8K was filed on September 4, 2002 which the Company announced that it had reduced its third quarter earnings estimates. 2.) A Report on Form 8K was filed on September 17, 2002applicable to USAIG relating to theday-to-day extension ofinsurance policy issued to theCollective Bargaining Agreement coveringCompany, and thehourly employees atallegations made by Teledyne. The Company believes that USAIG is responsible for providing insurance coverage with regard to theCompany's Bridgeville facility. 12Teledyne allegations. To date USAIG has provided for and continues to provide for a defense to the Teledyne claim. While the Company believes that insurance coverage is available for the defense and damages, if any, relating to the Teledyne claim, an unfavorable ruling in both the USAIG suit and the Teledyne claim could have a material adverse effect on the Company’s financial condition.
Item 6.
a.
Exhibits – none.
b.
Two Repots on Form 8-K were filed during the first quarter 2003. These Reports covered Press Releases under item 5, Other Events, and no financial statements were filed with these reports.
1.)
A Report on Form 8-K was filed on January 22, 2003 in which the Company announced the results for the fourth quarter and year ended December 31, 2002.
2.)
A Report on Form 8-K was filed on March 19, 2003 in which the Company revised the first quarter 2003 earnings estimates.
13
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.
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. Date: November
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
Date:
May 12, 2003
/s/ C. M. MCANINCH
Clarence M. McAninch
President and Chief Executive Officer
(Principal Executive Officer)Date:
May 12, 2003
/s/ RICHARD M. UBINGER
Richard M. Ubinger
Vice President of Finance,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)14
2002 /s/ C. M. McAninch -------------------- ------------------------------------------ Clarence M. McAninch President and Chief Executive Officer (Principal Executive Officer) Date: November 14, 2002 /s/ Richard M. Ubinger -------------------- ------------------------------------------ Richard M. Ubinger Vice President of Finance, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 13CERTIFICATIONS
I, Clarence M. McAninch, President and Chief Executive Officer of Universal Stainless & Alloy Products, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Universal Stainless & Alloy Products, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 /s/ C. M. McAninch ------------------ Clarence M. McAninch President and Chief Executive Officer (Principal Executive Officer) 14I, Richard M. Ubinger, Vice President of Finance, Chief Financial Officer and Treasurer of Universal Stainless & Alloy Products, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Universal Stainless & Alloy Products, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 /s/ Richard M. Ubinger ---------------------- Richard M. Ubinger Vice President of Finance, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)
I, Clarence M. McAninch, President and Chief Executive Officer of Universal Stainless & Alloy Products, Inc., certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Universal Stainless & Alloy Products, Inc.;
2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a)
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a)
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.
The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: May 12, 2003
/s/ C. M. MCANINCH
Clarence M. McAninch
President and Chief Executive Officer
(Principal Executive Officer)15
I, Richard M. Ubinger, Vice President of Finance, Chief Financial Officer and Treasurer of Universal Stainless & Alloy Products, Inc., certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Universal Stainless & Alloy Products, Inc.;
2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a)
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a)
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.
The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: May 12, 2003
/s/ RICHARD M. UBINGER
Richard M. Ubinger
Vice President of Finance,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)16
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Quarterly Report of Universal Stainless & Alloy Products, Inc. (the
"Company"“Company”) on Form 10-Q for the period endedSeptember 30, 2002March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the"Report"“Report”), I, Clarence M. McAninch, President and Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:1.
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
Date:
May 12, 2003
/s/ C. M. MCANINCH
Clarence M. McAninch
President and Chief Executive Officer
(Principal Executive Officer)A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies the Form 10-Q and shall not be treated as having been filed as part of the
Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. Date: November 14, 2002 /s/ C. M. McAninch -------------------- -------------------------------------- Clarence M. McAninch President and Chief Executive Officer (Principal Executive Officer)Form 10-Q.In connection with the Quarterly Report of Universal Stainless & Alloy Products, Inc. (the
"Company"“Company”) on Form 10-Q for the period endedSeptember 30, 2002March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the"Report"“Report”), I, Richard M. Ubinger, Vice President of Finance, Chief Financial Officer and Treasurer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:3.
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
Date:
May 12, 2003
/s/ RICHARD M. UBINGER
Richard M. Ubinger
Vice President of Finance,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies the Form 10-Q and shall not be treated as having been filed as part of the
Securities Exchange Act of 1934; and 4. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. Date: November 14, 2002 /s/ Richard M. Ubinger -------------------- -------------------------------------- Richard M. Ubinger Vice President of Finance, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 16
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