Universal Stainless & Alloy Products Inc. (NASDAQ:USAP) Q3 2018 Earnings Conference Call Transcript
Oct 24, 2018 • 10:00 am ET
Good day, ladies and gentlemen, and welcome to the USAP Third Quarter 2018 Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this call is being recorded.
I would now like to introduce your host for today's conference, June Filingeri. You may begin.
Thank you, Sarah. Good morning. This is June Filingeri of Commpartners, and I also would like to welcome you to the Universal Stainless conference call and webcast. We are here to discuss the company's third quarter 2018 results reported this morning.
With us from management are Denny Oates, Chairman, President and CEO; Chris Zimmer, EVP and CCO; Paul McGrath, VP of Administration and General Counsel; and Chris Scanlon, VP, Finance, CFO and Treasurer.
Before I turn the call over to management, let me quickly review procedures. After management has made formal remarks, we will take your questions. The conference operator will instruct you on procedures at that time.
(Forward Looking Cautionary Statements)
With these formalities complete, I would like to turn the call over to Denny Oates. Denny, we are ready to begin.
Good morning, everyone. Thanks for joining us today. This morning we announced that sales reached $69.1 million in the third quarter, and year-to-date sales are approaching $200 million, driven by broad based and strong business conditions. Normal third quarter seasonality was somewhat muted this year. Frankly, it's rare for a third quarter sales number to exceed the second quarter in our industry. Incoming business as measured by bookings of $69.2 million before surcharges continued at near record levels during the quarter, and our backlog reached a record of $111.4 million at September 30, validating that the demand cycle remains intact.
Taking a closer look at the details. Third quarter sales of $69.1 million were up 35.7% from the third quarter last year and up 4.5% from the 2018 second quarter. Tool steel sales were especially strong in the quarter and reached a record $13.1 million. Premium alloys sales totaled $9.2 million, an increase of 24.3% from the 2017 third quarter, but lower than the record second quarter 2018. I should point out that third quarter bookings and September 30 backlog reflect record levels for our premium products and will remain upbeat about our prospects for future growth.
Gross margin as a percentage of sales for the third quarter of 2018 was 15.1%, which was the second highest in 13 quarters, but trailed 17.7% achieved in the 2018 second quarter. Lower value shipments coupled with spending and production inefficiencies associated with our new labor contracts adversely impacted margins. Similarly, earnings before interest, taxes and depreciation of $10.1 million increased from the third quarter of 2017 by a noteworthy 79.5%. It was 9.8% lower sequentially.
Third quarter net income totaled $3.9 million or $0.44 per diluted share compared with a loss of $300,000 or $0.04 per diluted share in the third quarter of