Universal Stainless(US:USAP)2023-02-24 19:27Sales and Revenue - For the year ended December 31, 2022, approximately 60-70% of the company's net sales were derived from stainless steel products[12]. - Total net sales for 2022 were $202.1 million, a 29.6% increase from $155.9 million in 2021[103]. - Net sales for the year ended December 31, 2022 increased by $46.2 million, or 29.6%, compared to 2021, primarily due to an increase in average selling prices[107]. - Specialty alloys accounted for $160.4 million, or 79.3% of total net sales in 2022, while premium alloys contributed $39.2 million, or 19.4%[105]. - Aerospace sales increased to $137.5 million, representing 68.0% of total net sales in 2022, up from 58.7% in 2021[106]. - Approximately 68% of the company's sales in 2022 were derived from the aerospace market[57]. Financial Performance - The net loss for 2022 was $8.07 million, a significant increase of 965% from a net loss of $0.76 million in 2021[103]. - Operating loss decreased to $6.99 million in 2022 from $12.27 million in 2021, marking a 43% improvement[103]. - The gross margin improved to 7.0% of net sales in 2022, up from 5.1% in 2021, despite a $5.4 million impact from a liquid metal spill[99]. - The company reported a net loss of $8.1 million in 2022, compared to a net loss of $0.8 million in 2021, with the prior year benefiting from a $10.0 million gain on debt forgiveness[114]. - The gross margin for 2022 was 7.0% of net sales, improved from 5.1% in 2021, attributed to higher activity levels and better operating leverage[108]. - Interest expense increased by 109.3% to $4.16 million in 2022 compared to $1.99 million in 2021[103]. Costs and Expenses - The cost of raw materials represented approximately 35%-40% of the cost of products sold for each of the years 2022, 2021, and 2020[19]. - The average price of major raw materials increased for 2021 compared to 2020 and also increased for 2022 compared to 2021, but generally decreased in the second half of 2022[19]. - Selling, general and administrative expenses increased by $0.9 million in 2022, primarily due to higher business insurance costs[109]. - Interest expense rose to $4.4 million in 2022 from $2.0 million in 2021, driven by higher interest rates and increased average debt balances[110]. - The company invested $15 million to grow inventory in 2022 due to higher raw material prices and carrying costs[100]. Order Backlog and Customer Concentration - The backlog of orders as of December 31, 2022, was approximately $287.9 million, compared to $134.5 million at December 31, 2021[22]. - The company's five largest customers accounted for approximately 58% of net sales for the year ended December 31, 2022[53]. - The largest customer accounted for approximately 21% of net sales in 2022, while another customer accounted for approximately 18%[21]. Employment and Labor - The company had 622 employees as of December 31, 2022, compared to 558 in 2021[27]. - The company faces challenges in attracting and retaining skilled personnel due to a tight labor market[68]. - The company had 475 employees covered under collective bargaining agreements, which may lead to strikes or work stoppages if agreements are not successfully concluded[70]. International Sales - International sales approximated 5% of annual sales in 2022, down from 7% in 2021 and 2020[21]. - International sales approximated 5% of total net sales in 2022, compared to 7% in both 2021 and 2020[199]. Capital and Financing - The company has a $105.0 million senior secured revolving credit facility and a $15.0 million senior secured term loan facility[65]. - The company maintained approximately $24 million of remaining availability under its revolving credit facility as of December 31, 2022[127]. - Financing activities provided $22.9 million in cash during 2022, mainly through net borrowings on the revolving credit facility[132]. Inventory and Reserves - The company’s net inventory totaled approximately $154 million as of December 31, 2022, and is stated at the lower of cost or net realizable value[182]. - The net change in inventory reserves for the year ended December 31, 2022, was a decrease of $1.1 million, while the changes for 2021 and 2020 were increases of $0.3 million and $1.1 million, respectively[200]. - The company maintains an inventory reserve for slow-moving inventory and inventory under quality control evaluation[158]. Regulatory and Market Risks - The company continues to experience adverse impacts from COVID-19, including lower productivity and global supply chain disruptions[49]. - The company is subject to risks associated with global economic and market factors, which may affect performance and demand[51]. - The company’s operations are subject to stringent environmental regulations, which may result in significant liabilities and costs[73]. Internal Controls and Management - The effectiveness of internal control over financial reporting was assessed as effective as of December 31, 2022[170]. - Management regularly monitors the ability to collect unpaid sales invoices, indicating a proactive approach to credit risk management[157].