ZEUS Olympic Steel Inc

Strategy to diversify and expand into higher-value processing and manufactured products contributes to financial performance in the face of pricing headwinds

Company remains in a strong operational and financial position to invest in additional higher-value growth opportunities to drive profitability and advance its strategy

Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced financial results for the three months ended March 31, 2024.

Net income for the first quarter totaled $8.7 million, or $0.75 per diluted share, compared with net income of $9.9 million, or $0.85 per diluted share, in the first quarter of 2023. The results include $0.4 million of LIFO expense in the first quarter of 2024, compared with no LIFO adjustment in the first quarter of 2023. EBITDA for the first quarter of 2024 was $23.3 million, comparable to the $23.9 million earned in the first quarter of 2023.

The Company reported sales for the first quarter of 2024 totaling $527 million, compared with $573 million in the first quarter of 2023.

“Olympic Steel delivered solid results in the first quarter, with all three segments contributing to our profitability,” said Richard T. Marabito, Chief Executive Officer. “Shipping volumes were up over 9% sequentially from the fourth quarter, and we maintained our margins despite index pricing for hot-rolled steel falling more than 31% from January through mid-March. We also continued to navigate falling stainless steel surcharges throughout the first quarter. Our strategy to diversify and expand our portfolio of higher-value manufactured products provides a counter-cyclical benefit to falling metal prices and helps drive profitability regardless of market conditions.”

Marabito continued, “During the first quarter, we gained market share and expanded our offerings of fabrication and value-added products. Moving into the second quarter, pricing has begun to recover on some products, and demand remains steady. While market dynamics continue to shift, we remain committed to our disciplines around working capital, operating expenses and cash flow. Our balance sheet remains strong, enabling us to continue to invest strategically in organic growth, automation and acquisition opportunities that align with our priorities for long-term success. We are optimistic about our ability to deliver results for our shareholders.”

The Board of Directors approved a regular quarterly cash dividend of $0.15 per share, which is payable on June 17, 2024, to shareholders of record on June 3, 2024. The Company has paid regular quarterly dividends dating back to 2006.

The table that follows provides a reconciliation of non-GAAP measures to the most directly comparable measures prepared in accordance with GAAP.

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 March 31,

2024

2023

  Net income per diluted share (GAAP)

$

0.75

$

0.85

  Excluding the following items

LIFO expense

 

0.03

 

-

Acquisition Inventory fair market value adjustment

 

-

 

0.13

Acquisition related expenses

 

-

 

0.16

  Adjusted net income per diluted share (non-GAAP)

$

0.77

$

1.15

 

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 3/31/2024 3/31/2023   Net income (GAAP):

$

8,697

$

9,872

Excluding the following items Foreign exchange loss included in net income

 

19

 

11

Interest and other expense on debt

 

4,010

 

4,223

Income tax provision

 

3,212

 

3,617

Depreciation and amortization

 

7,334

 

6,201

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

 

23,272

 

23,924

  LIFO expense

 

400

 

-

Acquisition Inventory fair market value adjustment

 

-

 

2,079

Acquisition related expenses

 

-

 

2,556

Adjusted EBITDA (non-GAAP)

$

23,672

$

28,559

Conference Call and Webcast

A simulcast of Olympic Steel’s 2024 first-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 May 3, 2024, 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; supplier consolidation or addition of new capacity; risks associated with the invasion of Ukraine, including economic sanctions, and the conflicts in the Middle East, or additional war, military conflict, or hostilities 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; reduced production schedules, layoffs or work stoppages by our own, our suppliers' or customers' personnel; 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; 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; 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; 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; 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; risks and uncertainties associated with intangible assets, including impairment charges related to indefinite lived intangible assets; 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; 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 and adjusted EBITDA, which are non-GAAP financial measures. Management's view of the Company's performance includes adjusted earnings per share and 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 (NASDAQ: ZEUS) is a leading U.S. metals service center focused on the direct sale and value-added processing of carbon and coated sheet, plate, and coil products; stainless steel sheet, plate, bar and coil; aluminum sheet, plate and coil; pipe, tube, bar, valves and fittings; tin plate and metal-intensive end-use products, including bollards, water treatment systems; commercial, residential and industrial venting and air filtration systems; Wright® brand self-dumping hoppers; and EZ-Dumper® dump inserts. Headquartered in Cleveland, Ohio, Olympic Steel operates from 47 facilities.

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 March 31

2024

2023

  Net sales

$

526,642

$

573,076

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

 

407,538

 

452,636

Warehouse and processing

 

32,893

 

30,649

Administrative and general

 

30,152

 

33,185

Distribution

 

16,758

 

17,741

Selling

 

11,536

 

10,397

Occupancy

 

4,493

 

4,544

Depreciation

 

6,006

 

5,077

Amortization

 

1,328

 

1,124

Total costs and expenses

 

510,704

 

555,353

Operating income

 

15,938

 

17,723

Other loss, net

 

19

 

11

Income before interest and income taxes

 

15,919

 

17,712

Interest and other expense on debt

 

4,010

 

4,223

Income before income taxes

 

11,909

 

13,489

Income tax provision

 

3,212

 

3,617

Net income

$

8,697

$

9,872

    Earnings per share: Net income per share - basic

$

0.75

$

0.85

Weighted average shares outstanding - basic

 

11,663

 

11,570

Net income per share - diluted

$

0.75

$

0.85

Weighted average shares outstanding - diluted

 

11,663

 

11,571

Olympic Steel, Inc.

Balance Sheets

(in thousands)

As of March 31, 2024 As ofDecember 31, 2023 Assets   Cash and cash equivalents

$

10,340

 

$

13,224

 

Accounts receivable, net

 

214,753

 

 

191,149

 

Inventories, net (includes LIFO reserves of $12,443 and $12,043 as of March 31, 2024 and December 31, 2023, respectively)

 

397,567

 

 

386,535

 

Prepaid expenses and other

 

9,304

 

 

12,261

 

Total current assets

 

631,964

 

 

603,169

 

  Property and equipment, at cost

 

487,968

 

 

483,448

 

Accumulated depreciation

 

(303,462

)

 

(297,340

)

Net property and equipment

 

184,506

 

 

186,108

 

  Goodwill

 

52,091

 

 

52,091

 

Intangible assets, net

 

91,559

 

 

92,621

 

Other long-term assets

 

18,864

 

 

16,466

 

Right of use asset, net

 

32,795

 

 

34,380

 

Total assets

$

1,011,779

 

$

984,835

 

  Liabilities   Accounts payable

$

149,429

 

$

119,718

 

Accrued payroll

 

16,475

 

 

30,113

 

Other accrued liabilities

 

19,273

 

 

22,593

 

Current portion of lease liabilities

 

7,786

 

 

7,813

 

Total current liabilities

 

192,963

 

 

180,237

 

  Credit facility revolver

 

196,800

 

 

190,198

 

Other long-term liabilities

 

22,420

 

 

20,151

 

Deferred income taxes

 

10,897

 

 

11,510

 

Lease liabilities

 

25,714

 

 

27,261

 

Total liabilities

 

448,794

 

 

429,357

 

    Shareholders' Equity   Preferred stock

 

-

 

 

-

 

Common stock

 

137,063

 

 

136,541

 

Accumulated other comprehensive loss

 

-

 

 

41

 

Retained earnings

 

425,922

 

 

418,896

 

Total shareholders' equity

 

562,985

 

 

555,478

 

Total liabilities and shareholders' equity

$

1,011,779

 

$

984,835

 

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 March 31, Carbon Flat Products Specialty Metals Flat Products Tubular and Pipe Products

2024

 

2023

 

2024

 

2023

 

2024

 

2023

  Tons sold 1

 

219,675

 

218,338

 

29,903

 

32,516

 

N/A

 

N/A

  Net sales

$

300,975

$

309,818

$

129,534

$

166,564

$

96,133

$

96,694

Average selling price per ton

 

1,370

 

1,419

 

4,332

 

5,123

 

N/A

 

N/A

Cost of materials sold

 

235,615

 

248,436

 

107,590

 

137,713

 

64,333

 

66,487

Gross profit

 

65,360

 

61,382

 

21,944

 

28,851

 

31,800

 

30,207

Operating expenses

 

56,703

 

55,436

 

18,013

 

19,592

 

24,173

 

20,466

Operating income

 

8,657

 

5,946

 

3,931

 

9,259

 

7,627

 

9,741

  Depreciation and amortization

 

4,081

 

3,607

 

988

 

984

 

2,248

 

1,593

LIFO (income) / expense

 

-

 

-

 

-

 

-

 

400

 

-

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 for the entire Tubular and Pipe Products Segment. As of March 31, 2024 As of December 31, 2023                         Assets                         Flat-products

$

674,903

$

649,744

                        Tubular and pipe products

 

335,528

 

333,677

                        Corporate

 

1,348

 

1,414

                        Total assets

$

1,011,779

$

984,835

                       

Other Information

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

As of March 31, 2024 As ofDecember 31, 2023 Shareholders' equity per share

$

50.58

 

$

49.90

Debt to equity ratio 0.35 to 1 0.34 to 1     Three Months Ended March 31,

2024

2023

  Net cash from (used for) operating activities

$

(2,608

)

$

52,440

Cash dividends per share

$

0.15

 

$

0.13

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240501942669/en/

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