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Olympic Steel Reports Second-Quarter 2022 Results

Company achieves record quarterly sales and delivers the second-most-profitable quarter in its history

CLEVELAND, August 04, 2022--(BUSINESS WIRE)--Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced financial results for the three months ended June 30, 2022.

Net income for the second quarter totaled $37.6 million, or $3.26 per diluted share, compared with net income of $29.6 million, or $2.58 per diluted share, in the second quarter of 2021. The results include no LIFO adjustment in the second quarter of 2022, compared with $4.0 million of LIFO expense in the same period a year ago. Adjusted EBITDA for the second quarter of 2022 was $58.8 million, compared with $51.7 million in the second quarter of 2021.

The Company reported all-time record quarterly sales of $709 million in the second quarter of 2022, compared to $556 million in the second quarter of 2021.

"The continued strength of our three business segments in the second quarter drove another record-breaking performance for Olympic Steel. We achieved all-time record quarterly sales surpassing our first-quarter 2022 results to deliver the second-most-profitable quarter in the Company’s history," said Richard T. Marabito, Chief Executive Officer. "Our success is rooted in our expansion into higher-return, value-added products, our five successful acquisitions over the past four years and our disciplined approach to working capital and expense management. During the second quarter, Specialty Metals achieved record quarterly sales and earnings, Pipe and Tube continued its run of strong results, and our Carbon Flat business delivered strong EBITDA."

Marabito continued, "We are excited to advance our capital deployment strategy, making meaningful investments in all three of our business segments to expand our capacity to serve our growing customer base and enhance our returns. These investments include the addition of a second automotive stamping line in Winder, Georgia, a new leased 80,000-square-foot white metals fabrication facility in Bartlett, Illinois, and a 30,000-square-foot expansion of our Pipe and Tube facility in Des Moines, Iowa. We are also investing in automation and actively seeking additional acquisitions to further diversify our business by expanding our higher-return, value-added product and processing portfolio.

"While metal pricing is declining during the third quarter, we remain optimistic regarding underlying demand and our ability to consistently produce earnings in all market cycles," Marabito concluded.

The Board of Directors approved a regular quarterly cash dividend of $0.09 per share, which is payable on September 15, 2022, to shareholders of record on September 1, 2022. The Company has paid a regular quarterly dividend since March 2006. The Company raised its quarterly dividend from $0.02 per share to $0.09 per share in March 2022.

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

Six months ended

June 30,

June 30,

2022

2021

2022

2021

Net income per diluted share

$

3.26

$

2.58

$

6.49

$

4.49

Excluding the following items

LIFO Expense

-

0.26

-

0.32

Gain on Sale of Milan Warehouse

-

-

(0.13

)

-

Adjusted net income (loss) per diluted share (non-GAAP)

$

3.26

$

2.84

$

6.36

$

4.81

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

6/30/2022

6/30/2021

6/30/2022

6/30/2021

Net income (GAAP):

$

37,624

$

29,649

$

74,926

$

51,657

Excluding the following items:

Foreign exchange (income) loss included in net income

15

(1

)

21

9

Interest and other expense on debt

2,271

2,017

4,269

3,671

Income tax provision

13,955

10,772

27,771

18,689

Depreciation and amortization

4,946

5,272

9,928

10,508

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

58,811

47,709

116,915

84,534

LIFO Expense

-

4,000

-

5,000

Gain on Sale of Milan Warehouse

-

-

(2,083

)

-

Adjusted EBITDA (non-GAAP)

$

58,811

$

51,709

$

114,832

$

89,534

Conference Call and Webcast

A simulcast of Olympic Steel’s 2022 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 5, 2022, 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 and logistical services and labor; risks associated with supply chain disruption resulting from the imbalance of metal supply and end-user demands related to the novel coronavirus, or COVID-19, including additional shutdowns in large markets, such as China, and other factors; risks associated with shortages of skilled labor, increased labor costs and our ability to attract and retain qualified personnel; risks associated with the invasion of Ukraine, including economic sanctions, or additional war or military conflict, could adversely affect global metals supply and pricing; rising interest rates and their impacts on our variable interest rate debt; risks associated with the COVID-19 pandemic, 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, 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, negative impacts on our liquidity position, inability to access our traditional financing sources on the same or reasonably similar terms as were available before the COVID-19 pandemic 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; 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 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; general and global business, economic, financial and political conditions, including legislation passed under the current administration; 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; supplier consolidation or addition of additional capacity; customer, supplier and competitor consolidation, bankruptcy or insolvency; reduced production schedules, layoffs or work stoppages by our own, our suppliers’ or customers’ personnel; cyclicality and volatility within the metals industry; the adequacy of our efforts to mitigate cyber security risks and threats, especially with employees working remotely due to the COVID-19 pandemic; 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; our ability to sell shares of our common stock under the at-the-market equity program; the adequacy of our existing information technology and business system software, including duplication and security processes; the amounts, successes and our ability to continue our capital investments and strategic growth initiatives, including acquisitions and our business information system implementations; 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; 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; the timing and outcomes of inventory lower of cost or net realizable value adjustments and last-in, first-out, or LIFO, income or expense; 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; 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 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 42 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

2022

2021

2022

2021

Net sales

$

709,176

$

556,077

$

1,405,509

$

1,019,201

Costs and expenses

Cost of materials sold (excludes items shown separately below)

560,546

428,704

1,115,653

783,368

Warehouse and processing

27,624

26,539

51,672

49,945

Administrative and general

31,969

26,463

61,591

49,517

Distribution

16,441

14,099

31,482

27,662

Selling

10,494

9,787

21,316

18,253

Occupancy

3,291

2,776

6,880

5,922

Depreciation

4,354

4,664

8,704

9,314

Amortization

592

608

1,224

1,194

Total costs and expenses

655,311

513,640

1,298,522

945,175

Operating income

53,865

42,437

106,987

74,026

Other income (loss), net

(15

)

1

(21

)

(9

)

Income before interest and income taxes

53,850

42,438

106,966

74,017

Interest and other expense on debt

2,271

2,017

4,269

3,671

Income before income taxes

51,579

40,421

102,697

70,346

Income tax provision

13,955

10,772

27,771

18,689

Net income

$

37,624

$

29,649

$

74,926

$

51,657

Earnings per share:

Net income per share - basic

$

3.26

$

2.58

$

6.49

$

4.50

Weighted average shares outstanding - basic

11,538

11,492

11,536

11,491

Net income per share - diluted

$

3.26

$

2.58

$

6.49

$

4.49

Weighted average shares outstanding - diluted

11,545

11,504

11,540

11,501

Olympic Steel, Inc.

Balance Sheets

(in thousands)

As of
June 30,
2022

As of
December 31,
2021

Assets

Cash and cash equivalents

$

8,446

$

9,812

Accounts receivable, net

320,917

284,570

Inventories, net (includes LIFO reserves of $19,736 as of June 30, 2022 and December 31, 2021 respectively)

511,135

485,029

Prepaid expenses and other

14,398

9,989

Total current assets

854,896

789,400

Property and equipment, at cost

419,732

413,396

Accumulated depreciation

(272,786

)

(266,340

)

Net property and equipment

146,946

147,056

Goodwill

10,496

10,496

Intangible assets, net

32,844

33,653

Other long-term assets

13,427

15,241

Right of use asset, net

27,507

27,726

Total assets

$

1,086,116

$

1,023,572

Liabilities

Accounts payable

$

182,410

$

148,649

Accrued payroll

34,660

44,352

Other accrued liabilities

21,402

25,395

Current portion of lease liabilities

6,127

5,940

Total current liabilities

244,599

224,336

Credit facility revolver

287,880

327,764

Other long-term liabilities

11,439

15,006

Deferred income taxes

20,790

9,890

Lease liabilities

21,849

22,137

Total liabilities

586,557

599,133

Shareholders' Equity

Preferred stock

-

-

Common stock

134,089

133,427

Accumulated other comprehensive loss

(462

)

(1,996

)

Retained earnings

365,932

293,008

Total shareholders' equity

499,559

424,439

Total liabilities and shareholders' equity

$

1,086,116

$

1,023,572

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

2022

2021

2022

2021

2022

2021

Tons sold

210,604

244,383

38,386

40,188

N/A

N/A

Net sales

$

370,665

$

325,511

$

226,964

$

138,035

$

111,547

$

92,531

Average selling price per ton

1,760

1,332

5,913

3,435

N/A

N/A

Cost of materials sold

310,633

249,934

164,441

107,587

85,472

71,183

Gross profit

60,032

75,577

62,523

30,448

26,075

21,348

Operating expenses

44,414

45,143

26,050

16,746

18,775

18,309

Operating income

15,618

30,434

36,473

13,702

7,300

3,039

Depreciation and amortization

2,698

2,949

1,008

901

1,222

1,404

LIFO expense

-

-

-

-

-

4,000

Three months ended March 31,

Carbon Flat Products

Specialty Metals Flat
Products

Tubular and Pipe
Products

2022

2021

2022

2021

2022

2021

Tons sold

416,687

484,231

76,830

82,075

N/A

N/A

Net sales

$

750,214

$

571,884

$

426,443

$

264,354

$

228,852

$

182,963

Average selling price per ton

1,800

1,181

5,550

3,221

N/A

N/A

Cost of materials sold

638,346

434,106

305,431

211,121

171,876

138,141

Gross profit

111,868

137,778

121,012

53,233

56,976

44,822

Operating expenses

86,375

86,145

50,455

31,509

35,094

35,463

Operating income

25,493

51,633

70,557

21,724

21,882

9,359

Depreciation and amortization

5,372

5,872

2,013

1,804

2,508

2,796

LIFO expense

-

-

-

-

-

5,000

As of
June 30,
2022

As of
December 31,
2021

Assets

Flat-products

$

828,286

$

777,074

Tubular and pipe products

257,402

245,962

Corporate

428

536

Total assets

$

1,086,116

$

1,023,572

Other Information

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

(in thousands except per share data)

As of
June 30,
2022

As of
December 31,
2021

Shareholders' equity per share

$

44.89

$

38.31

Debt to equity ratio

0.58 to 1

0.77 to 1

Six Months Ended June 30,

2022

2021

Net cash from (used for) operating activities

47,687

(95,744

)

Cash dividends per share

$

0.18

$

0.04

View source version on businesswire.com: https://www.businesswire.com/news/home/20220804005624/en/

Contacts

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