Universal Stainless & Alloy Products Inc. (NASDAQ:USAP) Q2 2020 Earnings Conference Call - Final Transcript
Jul 29, 2020 • 10:00 am ET
Ladies and gentlemen, thank you for standing by, and welcome to the Universal Stainless Steel [Phonetic] Alloy Products Second Quarter 2020 Conference Call and Webcast.
I would now like to hand the conference over to your speaker today, June Filingeri. Thank you. Please go ahead, ma'am.
Thank you, Christel. Good morning.
This is June Filingeri of Comm-Partners, and I also would like to welcome you to the Universal Stainless conference call and webcast. We're here to discuss the company's second quarter 2020 results reported this morning. With us from management are Denny Oates, Chairman, President and Chief Executive Officer, Chris Zimmer, Executive Vice President and Chief Commercial Officer, John Arminas, Vice President of Administration and General Counsel, and Chris Scanlon, Vice President, Finance, Chief Financial Officer 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. Christel will instruct you on procedures at that time. Also please note that in this morning's call, management will make forward-looking statements. Under Private Securities Litigation Reform Act of 1995, I would like to remind you of the risks related to these statements, which are more fully described in today's press release and in the company's filings with the Securities and Exchange Commission.
With the formalities complete, I would now like to turn the call over to Denny Oates. Denny, we are ready to begin.
Dennis M. Oates
Thanks, June. Good morning, everyone. Thanks for joining us here today.
As we reported in the morning's release -- in this morning's release, the coronavirus pandemic continues to cause serious dislocation in the metal supply chain, taking its toll on end-market demand, especially in aerospace and oil and gas. The rapidly deteriorating conditions in both these end markets have caused the supply chain to adjust quickly with substantial reductions in new mill orders and a drive to reduce inventory. For Universal, that has meant low order entry, the pushout of delivery dates and some cancellations, albeit mainly on long lead-time products not yet in production.
Average monthly order entry declined from $15.3 million before surcharges in the first quarter to $7.1 million in the second quarter. Cancellations during the quarter totaled $10.5 million. All of our plants operated throughout the quarter working through our backlog. We ended the quarter with total backlog before surcharges of $71.8 million, down from $110.7 million at the end of the first quarter, which points to the challenges we will confront in the second half of 2020. We do, however, expect to see sequential quarterly improvement in business activity beginning in 2021. These negative trends were becoming evident at the time of our last call, but the magnitude and duration of the downturn were uncertain. We outlined a plan to reduce costs and increase liquidity during the second quarter. Specifically, we said we would reduce plant activity levels in line with market conditions, we would flex spending down on all fronts and we would cut capital spending