UNIVERSAL STAINLESS & ALLOY PRODUCTS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

Published: 2021-10-20 16:33:11 ET USAP

Forward-Looking Statements

Overview

COVID-19 Pandemic

Results of Operations

(A) Premium alloys represent all vacuum induction melted (VIM) products.

Net sales for the three months ended September 30, 2021 decreased $0.3 million, or 0.7%, compared to the same period in the prior year.

Gross margin:

Selling, general and administrative expenses:

Interest expense and other financing costs:

Income taxes:

Net income (loss):

Income (loss) before income taxes (2,782 ) (2.5 )

Market Segment Information

(A) Premium alloys represent all vacuum induction melted (VIM) products.

The majority of our products are sold to service centers rather than the ultimate end market customers. The end market information in this Quarterly Report is our estimate based upon our knowledge of our customers and the grade of material sold to them, which they will in-turn sell to the ultimate end market customer.

Our gross margin, as a percent of sales, was 3.7% for the nine months ended September 30, 2021 compared to 1.6% for the nine months ended September 30, 2020. The increase is primarily the result of a decrease in direct charges associated with lower activity levels due to the economic downturn, as well as the benefit of operating efficiencies at our facilities within the cost of products sold during the period and higher surcharges in our sales price.

Selling, general and administrative expenses:

Interest expense and other financing costs:

Income taxes:

Liquidity and Capital Resources

The Company applied for forgiveness of the PPP Term Note during the third quarter of 2020. In July 2021, PNC Bank notified the Company that forgiveness of the note was granted by the United States Small Business Administration. Accordingly, the PPP Term Note was forgiven in its entirety, including all related accrued interest. In the third quarter of 2021, we recognized forgiveness of the PPP Term Note and recorded a corresponding gain on extinguishment of debt in the Consolidated Statement of Operations for the period.

Net cash (used in) provided by operating activities:

Net cash used in investing activities:

Net cash provided by (used in) financing activities:

Raw materials

The Company was in compliance with all the applicable financial covenants on the date we entered into the Credit Agreement and through September 30, 2021.

The Facilities, which expire on March 17, 2026 (the 'Expiration Date"), are collateralized by a first lien on substantially all the assets of the Company and its subsidiaries, except that no real property is collateral under the Facilities other than Company's real property in North Jackson, Ohio.

The Company is required to pay a commitment fee of 0.25% based on the daily unused portion of the Revolving Credit Facility.

Notes

In connection with the acquisition of the North Jackson facility, in August 2011, we issued $20.0 million in aggregate principal amount of notes to the sellers of the North Jackson facility as partial consideration of the acquisition.

Leases