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CLEVELAND--(BUSINESS WIRE)--Nov 3, 2022--
Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced financial results for the three months ended September 30, 2022.
Net income for the third quarter totaled $12.0 million, or $1.04 per diluted share, compared with net income of $44.5 million, or $3.87 per diluted share, in the third quarter of 2021. The results include $1.5 million of LIFO pretax expense ($0.10 per share impact) in the third quarter of 2022, compared with $7.0 million ($0.45 per share impact) of LIFO pretax expense in the same period a year ago. Adjusted EBITDA for the third quarter of 2022 was $25.3 million, compared with $70.5 million in the third quarter of 2021.
The Company reported sales totaling $634 million in the third quarter of 2022, compared with $668 million in the third quarter of 2021.
“Our third-quarter performance is further evidence that our strategy to diversify into higher-return, value-added products and services through acquisitions and organic growth has strengthened Olympic Steel,” said Richard T. Marabito, Chief Executive Officer. “As expected, metals pricing significantly declined during the quarter and macroeconomic uncertainty caused by ongoing supply chain constraints, labor shortages and inflation continued. The additional resilience built into our business, combined with our team’s hard work and sustained operating discipline, enabled Olympic Steel to withstand these challenges to deliver $25.3 million of Adjusted EBITDA for the third quarter. We simultaneously strengthened our balance sheet by reducing debt by $84 million, or 26%, so far this year.”
Marabito continued, “While we expect metals pricing to decline further and pressure profit margins in the fourth quarter, we are confident that we have reduced the impact of market cyclicality on our business. We anticipate strong cash flows and further debt reduction in the fourth quarter. We have significant capital to continue our diversification strategy by investing in additional acquisitions, new capacity, and efficiency through automation to deliver value to our shareholders.”
The Board of Directors approved a regular quarterly cash dividend of $0.09 per share, which is payable on December 15, 2022, to shareholders of record on December 1, 2022. The Company has paid a regular quarterly dividend since March 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 | Nine months ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2022 |
| 2021 |
|
| 2022 |
|
| 2021 |
| |||||
| Net income per diluted share | $ | 1.04 | $ | 3.87 |
| $ | 7.53 |
| $ | 8.36 |
| ||||
| Excluding the following items: | |||||||||||||||
| LIFO Expense |
| 0.10 |
| 0.45 |
|
| 0.10 |
|
| 0.77 |
| ||||
| Gain on Sale of Detroit Operation |
| - |
| (0.23 | ) |
| - |
|
| (0.23 | ) | ||||
| Gain on Sale of Milan Warehouse |
| - |
| - |
|
| (0.13 | ) |
| - |
| ||||
| Adjusted net income per diluted share (non-GAAP) | $ | 1.14 | $ | 4.09 |
| $ | 7.49 |
| $ | 8.90 |
|
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 | Nine Months Ended | ||||||||||||||
| 9/30/2022 | 9/30/2021 | 9/30/2022 | 9/30/2021 | ||||||||||||
| Net income (GAAP): | $ | 12,046 | $ | 44,533 |
| $ | 86,972 |
| $ | 96,190 |
| ||||
| Excluding the following items: | |||||||||||||||
| Foreign exchange loss included in net income |
| 17 |
| 15 |
|
| 38 |
|
| 24 |
| ||||
| Interest and other expense on debt |
| 3,007 |
| 1,947 |
|
| 7,276 |
|
| 5,618 |
| ||||
| Income tax provision |
| 4,016 |
| 15,665 |
|
| 31,787 |
|
| 34,354 |
| ||||
| Depreciation and amortization |
| 4,666 |
| 4,813 |
|
| 14,594 |
|
| 15,321 |
| ||||
| Earnings before interest, taxes, depreciation and | |||||||||||||||
| amortization (EBITDA) |
| 23,752 |
| 66,973 |
|
| 140,667 |
|
| 151,507 |
| ||||
| LIFO Expense |
| 1,500 |
| 7,000 |
|
| 1,500 |
|
| 12,000 |
| ||||
| Gain on Sale of Detroit Operation |
| - |
| (3,499 | ) |
| - |
|
| (3,499 | ) | ||||
| Gain on Sale of Milan Warehouse |
| - |
| - |
|
| (2,083 | ) |
| - |
| ||||
| Adjusted EBITDA (non-GAAP) | $ | 25,252 | $ | 70,474 |
| $ | 140,084 |
| $ | 160,008 |
|
Conference Call and Webcast
A simulcast of Olympic Steel’s 2022 third-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 November 4, 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, energy, 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; supplier consolidation or addition of additional capacity; 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 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; general and global business, economic, financial and political conditions, including, but not limited to, recessionary conditions and 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; 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; 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; 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; 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 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 | Nine months ended | |||||||||||
| September 30 | September 30 | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
| Net sales | $ | 634,437 | $ | 668,466 | $ | 2,039,946 | $ | 1,687,667 | ||||
| Costs and expenses | ||||||||||||
| Cost of materials sold (excludes items shown separately below) |
| 527,466 |
| 520,866 |
| 1,643,119 |
| 1,304,234 | ||||
| Warehouse and processing |
| 27,397 |
| 26,208 |
| 79,069 |
| 76,153 | ||||
| Administrative and general |
| 26,929 |
| 24,811 |
| 88,520 |
| 74,328 | ||||
| Distribution |
| 15,131 |
| 14,424 |
| 46,613 |
| 42,086 | ||||
| Selling |
| 10,589 |
| 12,155 |
| 31,905 |
| 30,408 | ||||
| Occupancy |
| 3,173 |
| 3,029 |
| 10,053 |
| 8,951 | ||||
| Depreciation |
| 4,062 |
| 4,243 |
| 12,766 |
| 13,557 | ||||
| Amortization |
| 604 |
| 570 |
| 1,828 |
| 1,764 | ||||
| Total costs and expenses |
| 615,351 |
| 606,306 |
| 1,913,873 |
| 1,551,481 | ||||
| Operating income |
| 19,086 |
| 62,160 |
| 126,073 |
| 136,186 | ||||
| Other loss, net |
| 17 |
| 15 |
| 38 |
| 24 | ||||
| Income before interest and income taxes |
| 19,069 |
| 62,145 |
| 126,035 |
| 136,162 | ||||
| Interest and other expense on debt |
| 3,007 |
| 1,947 |
| 7,276 |
| 5,618 | ||||
| Income before income taxes |
| 16,062 |
| 60,198 |
| 118,759 |
| 130,544 | ||||
| Income tax provision |
| 4,016 |
| 15,665 |
| 31,787 |
| 34,354 | ||||
| Net income | $ | 12,046 | $ | 44,533 | $ | 86,972 | $ | 96,190 | ||||
| Earnings per share: | ||||||||||||
| Net income per share - basic | $ | 1.04 | $ | 3.88 | $ | 7.53 | $ | 8.37 | ||||
| Weighted average shares outstanding - basic |
| 11,548 |
| 11,492 |
| 11,543 |
| 11,491 | ||||
| Net income per share - diluted | $ | 1.04 | $ | 3.87 | $ | 7.53 | $ | 8.36 | ||||
| Weighted average shares outstanding - diluted |
| 11,557 |
| 11,515 |
| 11,548 |
| 11,509 | ||||
Olympic Steel, Inc. | ||||||||
Balance Sheets | ||||||||
(in thousands) | ||||||||
As of | As of | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 10,232 |
| $ | 9,812 |
| ||
| Accounts receivable, net |
| 279,344 |
|
| 284,570 |
| ||
Inventories, net (includes LIFO reserves of $21,236 and $19,736 as of September 30, 2022 and December 31, 2021 respectively) | 508,103 | 485,029 | ||||||
| Prepaid expenses and other |
| 7,447 |
|
| 9,989 |
| ||
| Total current assets |
| 805,126 |
|
| 789,400 |
| ||
| Property and equipment, at cost |
| 424,051 |
|
| 413,396 |
| ||
| Accumulated depreciation |
| (276,918 | ) |
| (266,340 | ) | ||
| Net property and equipment |
| 147,133 |
|
| 147,056 |
| ||
| Goodwill |
| 10,496 |
|
| 10,496 |
| ||
| Intangible assets, net |
| 32,439 |
|
| 33,653 |
| ||
| Other long-term assets |
| 14,315 |
|
| 15,241 |
| ||
| Right of use asset, net |
| 27,475 |
|
| 27,726 |
| ||
| Total assets | $ | 1,036,984 |
| $ | 1,023,572 |
| ||
| Liabilities | ||||||||
| Accounts payable | $ | 167,081 |
| $ | 148,649 |
| ||
| Accrued payroll |
| 38,071 |
|
| 44,352 |
| ||
| Other accrued liabilities |
| 19,441 |
|
| 25,395 |
| ||
| Current portion of lease liabilities |
| 6,124 |
|
| 5,940 |
| ||
| Total current liabilities |
| 230,717 |
|
| 224,336 |
| ||
| Credit facility revolver |
| 244,200 |
|
| 327,764 |
| ||
| Other long-term liabilities |
| 11,245 |
|
| 15,006 |
| ||
| Deferred income taxes |
| 16,317 |
|
| 9,890 |
| ||
| Lease liabilities |
| 21,850 |
|
| 22,137 |
| ||
| Total liabilities |
| 524,329 |
|
| 599,133 |
| ||
| Shareholders' Equity | ||||||||
| Preferred stock |
| - |
|
| - |
| ||
| Common stock |
| 134,423 |
|
| 133,427 |
| ||
| Accumulated other comprehensive income (loss) |
| 1,256 |
|
| (1,996 | ) | ||
| Retained earnings |
| 376,976 |
|
| 293,008 |
| ||
| Total shareholders' equity |
| 512,655 |
|
| 424,439 |
| ||
| Total liabilities and shareholders' equity | $ | 1,036,984 |
| $ | 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 September 30, | ||||||||||||||||||
| Carbon Flat Products | Specialty Metals Flat Products | Tubular and Pipe | ||||||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||||
| Tons sold |
| 203,122 |
| 244,519 |
| 34,189 |
| 41,203 |
| N/A |
| N/A | ||||||
| Net sales | $ | 336,259 | $ | 404,596 | $ | 188,301 | $ | 164,179 | $ | 109,877 | $ | 99,691 | ||||||
| Average selling price per ton |
| 1,655 |
| 1,655 |
| 5,508 |
| 3,985 |
| N/A |
| N/A | ||||||
| Cost of materials sold |
| 293,498 |
| 321,005 |
| 150,546 |
| 120,227 |
| 83,422 |
| 79,634 | ||||||
| Gross profit |
| 42,761 |
| 83,591 |
| 37,755 |
| 43,952 |
| 26,455 |
| 20,057 | ||||||
| Operating expenses |
| 41,029 |
| 46,427 |
| 22,683 |
| 19,289 |
| 19,360 |
| 17,703 | ||||||
| Operating income |
| 1,732 |
| 37,164 |
| 15,072 |
| 24,663 |
| 7,095 |
| 2,354 | ||||||
| Depreciation and amortization |
| 2,513 |
| 2,698 |
| 1,024 |
| 858 |
| 1,112 |
| 1,239 | ||||||
| LIFO expense |
| - |
| - |
| - |
| - |
| 1,500 |
| 7,000 | ||||||
| Nine months ended September 30, | ||||||||||||||||||
| Carbon Flat Products | Specialty Metals Flat Products | Tubular and Pipe | ||||||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||||
| Tons sold |
| 619,809 |
| 728,750 |
| 111,019 |
| 123,278 |
| N/A |
| N/A | ||||||
| Net sales | $ | 1,086,473 | $ | 976,480 | $ | 614,744 | $ | 428,533 | $ | 338,729 | $ | 282,654 | ||||||
| Average selling price per ton |
| 1,753 |
| 1,340 |
| 5,537 |
| 3,476 |
| N/A |
| N/A | ||||||
| Cost of materials sold |
| 931,844 |
| 755,111 |
| 455,977 |
| 331,348 |
| 255,298 |
| 217,775 | ||||||
| Gross profit |
| 154,629 |
| 221,369 |
| 158,767 |
| 97,185 |
| 83,431 |
| 64,879 | ||||||
| Operating expenses |
| 127,404 |
| 132,572 |
| 73,138 |
| 50,798 |
| 54,454 |
| 53,166 | ||||||
| Operating income |
| 27,225 |
| 88,797 |
| 85,629 |
| 46,387 |
| 28,977 |
| 11,713 | ||||||
| Depreciation and amortization |
| 7,885 |
| 8,570 |
| 3,037 |
| 2,662 |
| 3,620 |
| 4,035 | ||||||
| LIFO expense |
| - |
| - |
| - |
| - |
| 1,500 |
| 12,000 |
As of September 30, 2022 | As of December 31, 2021 | |||||
| Assets | ||||||
| Flat-products | $ | 774,536 | $ | 777,074 | ||
| Tubular and pipe products |
| 262,130 |
| 245,962 | ||
| Corporate |
| 318 |
| 536 | ||
| Total assets | $ | 1,036,984 | $ | 1,023,572 |
Other Information | |||||||
(in thousands, except per-share and ratio data) | |||||||
| (in thousands except per share data) | |||||||
As of September 30, 2022 | As of | ||||||
| Shareholders' equity per share | $ | 46.06 | $ | 38.31 | |||
| Debt-to-equity ratio | 0.48 to 1 | 0.77 to 1 | |||||
| Nine Months Ended September 30, | |||||||
| 2022 |
| 2021 |
| |||
| Net cash from (used for) operating activities | $ | 98,251 | $ | (126,938 | ) | ||
| Cash dividends per share | $ | 0.27 | $ | 0.06 |
|
View source version on businesswire.com:https://www.businesswire.com/news/home/20221102006004/en/
CONTACT: Richard A. Manson
Chief Financial Officer
(216) 672-0522
ir@olysteel.com
KEYWORD: OHIO UNITED STATES NORTH AMERICA
INDUSTRY KEYWORD: OTHER MANUFACTURING MANUFACTURING STEEL
SOURCE: Olympic Steel, Inc.
Copyright Business Wire 2022.
PUB: 11/03/2022 04:30 PM/DISC: 11/03/2022 04:32 PM
http://www.businesswire.com/news/home/20221102006004/en