ZEUS Olympic Steel Inc

Company performance continues to reflect the benefits of its diversification strategy and investments in enhanced capabilities

Carbon segment delivers strong profitability, while Tubular and Pipe Products segment further capitalizes on growing demand for value-added offerings

Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced financial results for the three months ended June 30, 2023.

Net income for the second quarter totaled $15.0 million, or $1.30 per diluted share, compared with net income of $37.6 million, or $3.26 per diluted share, in the second quarter of 2022. The results include $1.0 million of LIFO pre-tax income in the second quarter of 2023, compared to no LIFO adjustment in the second quarter of 2022. Adjusted EBITDA for the second quarter of 2023 was $31.2 million, compared with $58.8 million in the second quarter of 2022.

The Company reported sales of $569 million in the second quarter of 2023, compared with $709 million in the second quarter of 2022. Distribution shipping volumes increased 2.4% year-over-year, while average selling prices decreased.

“Olympic Steel continued to deliver strong performance in the second quarter,” said Richard T. Marabito, Chief Executive Officer. “The consistency of our results, despite lower metals prices and challenges in the overall economy, is directly attributable to our efforts to diversify our product offerings and invest capital in higher-return opportunities. Our Carbon and Tubular and Pipe segments led the way, while our Specialty Metals business remained steady in the face of industry-wide white metals headwinds.”

Marabito said, “Our Carbon segment earned $18.4 million of Adjusted EBITDA for the quarter, while our Tubular and Pipe Products segment posted its fourth-strongest quarter of profitability ever with $10.1 million of Adjusted EBITDA by capitalizing on growing demand for our enhanced value-added processing capabilities.”

Marabito continued, “Our second-quarter results include the full earnings effect of Metal-Fab, our second largest acquisition in Company history, which was added to our family of companies in January 2023. Metal-Fab was a strong contributor to our second-quarter earnings and we will further benefit from Olympic Steel’s supply chain synergies during the second half of 2023. Several of our fabrication and automation projects also became operational during the quarter, including our new specialty metals and carbon fabricating facility in the Chicago market, further enhancing our capabilities and production efficiency. With a strong balance sheet and more than $340 million of borrowing availability, we are actively evaluating acquisitions and capital investments to advance our diversification strategy and foster additional profitable growth.”

Marabito concluded, “As we move into the third quarter, we expect overall demand to remain steady while reflecting normal seasonal trends. While the near-term economic outlook is somewhat unsettled, we remain optimistic about the long-term outlook for the steel market and we are confident that the steps we have taken position Olympic Steel to deliver more consistent results in all environments.”

The Board of Directors approved a regular quarterly cash dividend of $0.125 per share, which is payable on September 15, 2023, to shareholders of record on September 1, 2023. The Company has paid a regular quarterly dividend since March 2006.

The table that follows provides a reconciliation of certain non-GAAP measures to the most directly comparable measures prepared in accordance with GAAP. Additional reconciliations can be found in the Segment Financial Information table which also follows.

Olympic Steel, Inc.

Reconciliation of Net Income Per Diluted Share to Adjusted Net Income Per Diluted Share

(Figures may not foot due to rounding.)

The following table reconciles adjusted net income per diluted share to the most directly comparable GAAP

financial measure:

Three months ended Six months ended June 30, June 30,

2023

 

2022

 

2023

 

2022

  Net income per diluted share

$

1.30

 

$

3.26

$

2.15

 

$

6.49

 

  Excluding the following items LIFO income

 

(0.06

)

 

-

 

(0.06

)

 

-

 

Metal-Fab inventory fair market value adjustment

 

-

 

 

-

 

0.13

 

 

-

 

Acquisition related expenses

 

-

 

 

-

 

0.16

 

 

-

 

Gain on sale of Milan, IA warehouse

 

-

 

 

-

 

-

 

 

(0.13

)

  Adjusted net income per diluted share (non-GAAP)

$

1.24

 

$

3.26

$

2.38

 

$

6.36

 

   

Reconciliation of Net Income to Adjusted EBITDA

(in thousands)

The following table reconciles Adjusted EBITDA to the most directly comparable GAAP financial measure:

Three Months Ended Six Months Ended 6/30/2023 6/30/2022 6/30/2023 6/30/2022   Net income (GAAP):

$

15,019

 

$

37,624

$

24,891

 

$

74,926

 

Excluding the following items: Foreign exchange loss included in net income

 

28

 

 

15

 

39

 

 

21

 

Interest and other expense on debt

 

4,203

 

 

2,271

 

8,426

 

 

4,269

 

Income tax provision

 

6,522

 

 

13,955

 

10,139

 

 

27,771

 

Depreciation and amortization

 

6,473

 

 

4,946

 

12,674

 

 

9,928

 

  Earnings before interest, taxes, depreciation and amortization (EBITDA)

 

32,245

 

 

58,811

 

56,169

 

 

116,915

 

  LIFO income

 

(1,000

)

 

-

 

(1,000

)

 

-

 

Metal-Fab inventory fair market value adjustment

 

-

 

 

-

 

2,079

 

 

-

 

Acquisition related expenses

 

-

 

 

-

 

2,556

 

 

-

 

Gain on sale of Milan, IA warehouse

 

-

 

 

-

 

-

 

 

(2,083

)

  Adjusted EBITDA (non-GAAP)

$

31,245

 

$

58,811

$

59,804

 

$

114,832

 

Conference Call and Webcast

A simulcast of Olympic Steel’s 2023 second-quarter earnings conference call can be accessed via the Investor Relations section of the Company’s website at www.olysteel.com. The live simulcast will begin at 10 a.m. ET on August 4, 2023, and a replay will be available for approximately 14 days thereafter.

Forward-Looking Statements

It is the Company’s policy not to endorse any analyst’s sales or earnings estimates. Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as “may,” “will,” “anticipate,” “should,” “intend,” “expect,” “believe,” “estimate,” “project,” “plan,” “potential,” and “continue,” as well as the negative of these terms or similar expressions. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those implied by such statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Such risks and uncertainties include, but are not limited to: risks of falling metals prices and inventory devaluation; supply disruptions and inflationary pressures, including the availability and rising costs of transportation, energy, logistical services and labor; risks associated with shortages of skilled labor, increased labor costs and our ability to attract and retain qualified personnel; rising interest rates and their impacts on our variable interest rate debt; risks associated with supply chain disruption resulting from the imbalance of metal supply and end-user demands, including additional shutdowns as a result of infectious disease outbreaks in large markets, such as China, and other factors; risks associated with the invasion of Ukraine, including economic sanctions, or additional war or military conflict, could adversely affect global metals supply and pricing; general and global business, economic, financial and political conditions, including, but not limited to, recessionary conditions and legislation passed under the current administration; supplier consolidation or addition of new capacity; risks associated with infectious disease outbreaks, including, but not limited to customer closures, reduced sales and profit levels, slower payment of accounts receivable and potential increases in uncollectible accounts receivable, falling metals prices that could lead to lower of cost or net realizable value inventory adjustments and the impairment of intangible and long-lived assets, negative impacts on our liquidity position, inability to access our traditional financing sources and increased costs associated with and less ability to access funds under our asset-based credit facility, or ABL Credit Facility, and the capital markets; our ability to successfully integrate recent acquisitions into our business and risks inherent with the acquisitions in the achievement of expected results, including whether the acquisition will be accretive and within the expected timeframe; the adequacy of our existing information technology and business system software, including duplication and security processes; the levels of imported steel in the United States and the tariffs initiated by the U.S. government in 2018 under Section 232 of the Trade Expansion Act of 1962 and imposed tariffs and duties on exported steel or other products, U.S. trade policy and its impact on the U.S. manufacturing industry; the inflation or deflation existing within the metals industry, as well as product mix and inventory levels on hand, which can impact our cost of materials sold as a result of the fluctuations in the last-in, first-out, or LIFO, inventory valuation; increased customer demand without corresponding increase in metal supply could lead to an inability to meet customer demand and result in lower sales and profits; competitive factors such as the availability, and global pricing of metals and production levels, industry shipping and inventory levels and rapid fluctuations in customer demand and metals pricing; customer, supplier and competitor consolidation, bankruptcy or insolvency; the timing and outcomes of inventory lower of cost or net realizable value adjustments and LIFO income or expense; reduced production schedules, layoffs or work stoppages by our own, our suppliers’ or customers’ personnel; cyclicality and volatility within the metals industry; reduced availability and productivity of our employees, increased operational risks as a result of remote work arrangements, including the potential effects on internal controls, as well as cybersecurity risks and increased vulnerability to security breaches, information technology disruptions and other similar events; fluctuations in the value of the U.S. dollar and the related impact on foreign steel pricing, U.S. exports, and foreign imports to the United States; the successes of our efforts and initiatives to improve working capital turnover and cash flows, and achieve cost savings; our ability to generate free cash flow through operations and repay debt; the amounts, successes and our ability to continue our capital investments and strategic growth initiatives, including acquisitions and our business information system implementations; events or circumstances that could adversely impact the successful operation of our processing equipment and operations; the impacts of union organizing activities and the success of union contract renewals; changes in laws or regulations or the manner of their interpretation or enforcement could impact our financial performance and restrict our ability to operate our business or execute our strategies; events or circumstances that could impair or adversely impact the carrying value of any of our assets; risks and uncertainties associated with intangible assets, including impairment charges related to indefinite lived intangible assets; our ability to pay regular quarterly cash dividends and the amounts and timing of any future dividends; our ability to repurchase shares of our common stock and the amounts and timing of repurchases, if any; our ability to sell shares of our common stock under the at-the-market equity program; and unanticipated developments that could occur with respect to contingencies such as litigation, arbitration and environmental matters, including any developments that would require any increase in our costs for such contingencies.

In addition to financial information prepared in accordance with GAAP, this document also contains adjusted earnings per diluted share, adjusted EBITDA and segment adjusted EBITDA, which are non-GAAP financial measures. Management’s view of the Company’s performance includes adjusted earnings per share, adjusted EBITDA and segment adjusted EBITDA, and management uses these non-GAAP financial measures internally for planning and forecasting purposes and to measure the performance of the Company. We believe these non-GAAP financial measures provide useful and meaningful information to us and investors because they enhance investors’ understanding of the continuing operating performance of our business and facilitate the comparison of performance between past and future periods. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. Additionally, the presentation of these measures may be different from non-GAAP financial measures used by other companies. A reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures is provided above.

About Olympic Steel

Founded in 1954, Olympic Steel is a leading U.S. metals service center focused on the direct sale of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel, aluminum, tin plate, and metal-intensive branded products. The Company’s CTI subsidiary is a leading distributor of steel tubing, bar, pipe, valves and fittings, and fabricator of value-added parts and components. Headquartered in Cleveland, Ohio, Olympic Steel operates from 44 facilities in North America.

For additional information, please visit the Company’s website at www.olysteel.com.

Olympic Steel, Inc.

Consolidated Statements of Net Income

(in thousands, except per-share data)

 

Three months ended

 

Six months ended

June 30

 

June 30

2023

 

2022

 

2023

 

2022

  Net sales

$

569,268

$

709,176

$

1,142,344

$

1,405,509

  Costs and expenses Cost of materials sold (excludes items shown separately below)

 

441,872

 

560,546

 

894,508

 

1,115,653

Warehouse and processing

 

31,522

 

27,624

 

62,171

 

51,672

Administrative and general

 

31,681

 

31,969

 

64,866

 

61,591

Distribution

 

17,448

 

16,441

 

35,189

 

31,482

Selling

 

10,389

 

10,494

 

20,786

 

21,316

Occupancy

 

4,111

 

3,291

 

8,655

 

6,880

Depreciation

 

5,245

 

4,354

 

10,322

 

8,704

Amortization

 

1,228

 

592

 

2,352

 

1,224

  Total costs and expenses

 

543,496

 

655,311

 

1,098,849

 

1,298,522

  Operating income

 

25,772

 

53,865

 

43,495

 

106,987

  Other loss, net

 

28

 

15

 

39

 

21

  Income before interest and income taxes

 

25,744

 

53,850

 

43,456

 

106,966

  Interest and other expense on debt

 

4,203

 

2,271

 

8,426

 

4,269

  Income before income taxes

 

21,541

 

51,579

 

35,030

 

102,697

  Income tax provision

 

6,522

 

13,955

 

10,139

 

27,771

  Net income

$

15,019

$

37,624

$

24,891

$

74,926

    Earnings per share:   Net income per share - basic

$

1.30

$

3.26

$

2.15

$

6.49

  Weighted average shares outstanding - basic

 

11,569

 

11,538

 

11,570

 

11,536

  Net income per share - diluted

$

1.30

$

3.26

$

2.15

$

6.49

  Weighted average shares outstanding - diluted

 

11,572

 

11,545

 

11,572

 

11,540

Olympic Steel, Inc.

Balance Sheets

(in thousands)

  As of June 30, 2023 As of December 31, 2022 Assets   Cash and cash equivalents

$

15,170

 

$

12,189

 

Accounts receivable, net

 

227,992

 

 

219,789

 

Inventories, net (includes LIFO reserves of $19,301 and $20,301 as of June 30, 2023 and December 31, 2022, respectively)

 

405,944

 

 

416,931

 

Prepaid expenses and other

 

11,510

 

 

9,197

 

  Total current assets

 

660,616

 

 

658,106

 

  Property and equipment, at cost

 

463,291

 

 

429,810

 

Accumulated depreciation

 

(288,300

)

 

(281,478

)

  Net property and equipment

 

174,991

 

 

148,332

 

  Goodwill

 

43,690

 

 

10,496

 

Intangible assets, net

 

84,944

 

 

32,035

 

Other long-term assets

 

15,958

 

 

14,434

 

Right of use asset, net

 

33,783

 

 

28,224

 

  Total assets

$

1,013,982

 

$

891,627

 

  Liabilities   Accounts payable

$

124,087

 

$

101,446

 

Accrued payroll

 

25,180

 

 

40,334

 

Other accrued liabilities

 

22,647

 

 

16,824

 

Current portion of lease liabilities

 

6,878

 

 

6,098

 

  Total current liabilities

 

178,792

 

 

164,702

 

  Credit facility revolver

 

238,240

 

 

165,658

 

Other long-term liabilities

 

17,334

 

 

12,619

 

Deferred income taxes

 

13,611

 

 

10,025

 

Lease liabilities

 

27,542

 

 

22,655

 

  Total liabilities

 

475,519

 

 

375,659

 

    Shareholders' Equity   Preferred stock

 

-

 

 

-

 

Common stock

 

135,566

 

 

134,724

 

Accumulated other comprehensive income

 

856

 

 

1,311

 

Retained earnings

 

402,041

 

 

379,933

 

  Total shareholders' equity

 

538,463

 

 

515,968

 

  Total liabilities and shareholders' equity

$

1,013,982

 

$

891,627

 

Olympic Steel, Inc.

Segment Financial Information

(In thousands, except tonnage and per-ton data. Figures may not foot to consolidated totals due to Corporate expenses.)

  Three months ended June 30, Carbon Flat Products Specialty Metals Flat Products Tubular and Pipe Products

2023

 

2022

 

2023

 

2022

 

2023

 

2022

  Tons sold 1

 

226,275

 

210,604

 

28,711

 

38,386

 

N/A

 

 

N/A

 

  Net sales

$

326,629

$

370,665

$

147,000

$

226,964

$

95,639

 

$

111,547

 

Average selling price per ton

 

1,444

 

1,760

 

5,120

 

5,913

 

N/A

 

 

N/A

 

Cost of materials sold

 

253,072

 

310,633

 

122,600

 

164,441

 

66,200

 

 

85,472

 

Gross profit

 

73,557

 

60,032

 

24,400

 

62,523

 

29,439

 

 

26,075

 

Operating expenses

 

58,862

 

44,414

 

17,721

 

26,050

 

20,068

 

 

18,775

 

Operating income

 

14,695

 

15,618

 

6,679

 

36,473

 

9,371

 

 

7,300

 

  Depreciation and amortization

 

3,716

 

2,698

 

1,023

 

1,008

 

1,716

 

 

1,222

 

LIFO income

 

-

 

-

 

-

 

-

 

(1,000

)

 

-

 

Adjusted EBITDA

 

18,411

 

18,316

 

7,702

 

37,481

 

10,087

 

 

8,522

 

    Six months ended June 30, Carbon Flat Products Specialty Metals Flat Products Tubular and Pipe Products

2023

 

2022

 

2023

 

2022

 

2023

 

2022

  Tons sold 1

 

444,613

 

416,687

 

61,227

 

76,830

 

N/A

 

 

N/A

 

  Net sales

$

636,447

$

750,214

$

313,564

$

426,443

$

192,333

 

$

228,852

 

Average selling price per ton

 

1,431

 

1,800

 

5,121

 

5,550

 

N/A

 

 

N/A

 

Cost of materials sold

 

501,508

 

638,346

 

260,313

 

305,431

 

132,687

 

 

171,876

 

Gross profit

 

134,939

 

111,868

 

53,251

 

121,012

 

59,646

 

 

56,976

 

Operating expenses

 

114,298

 

86,375

 

37,313

 

50,455

 

40,534

 

 

35,094

 

Operating income

 

20,641

 

25,493

 

15,938

 

70,557

 

19,112

 

 

21,882

 

  Depreciation and amortization

 

7,323

 

5,372

 

2,007

 

2,013

 

3,309

 

 

2,508

 

LIFO income

 

-

 

-

 

-

 

-

 

(1,000

)

 

-

 

Metal-Fab inventory fair market value adjustment

 

2,079

 

-

 

-

 

-

 

-

 

 

-

 

Gain on sale of Milan, IA warehouse

 

-

 

-

 

-

 

-

 

-

 

 

(2,083

)

Adjusted EBITDA

 

30,043

 

30,865

 

17,945

 

72,570

 

21,421

 

 

22,307

 

  1 The Company does not report tons sold for McCullough Industries, EZ Dumper, or Metal-Fab in the Carbon Flat Products Segment, Shaw Stainless in the Specialty Metals Flat Products Segment or the Tubular and Pipe Products Segment.

Other Information

(in thousands, except per-share and ratio data)

  As ofJune 30,2023 As ofDecember 31,2022 Assets Flat-products

$

737,819

$

631,607

Tubular and pipe products

 

274,562

 

258,412

Corporate

 

1,601

 

1,608

Total assets

$

1,013,982

$

891,627

    Other information   As ofJune 30,2023 As ofDecember 31,2022 Shareholders' equity per share

$

48.37

$

46.36

  Debt to equity ratio 0.44 to 1 0.32 to 1     Six Months Ended June 30,

2023

2022

  Net cash from operating activities

$

79,196

$

47,687

  Cash dividends per share

$

0.25

$

0.18

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230802582756/en/

Richard A. Manson Chief Financial Officer (216) 672-0522 ir@olysteel.com