ZEUS Olympic Steel Inc

Diversification and operating disciplines drive performance despite challenging market conditions

Central Tube & Bar acquisition in October continues diversification strategy to invest in consistently high-performing businesses

Company remains well-positioned to execute on strategy to deliver more consistent results in all environments and drive profitable growth

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

Net income for the third quarter totaled $12.2 million, or $1.06 per diluted share, compared with net income of $12.0 million, or $1.04 per diluted share, in the third quarter of 2022. EBITDA for the third quarter of 2023 was $27.1 million, compared with $23.8 million in the third quarter of 2022. Third-quarter 2023 results include $2.0 million of LIFO pretax income and $4.0 million of pretax income from the Employee Retention Credit (under the CARES Act), compared with $1.5 million of LIFO pretax expense in the same period a year ago.

The Company reported sales totaling $526 million in the third quarter of 2023, compared with $634 million in the third quarter of 2022, due primarily to lower metal pricing year-over-year.

“Olympic Steel’s performance in a challenging third-quarter market demonstrates the benefits of our actions to deliver more consistent results in all environments,” said Richard T. Marabito, Chief Executive Officer. “Metal pricing declines accelerated in the back half of the quarter due to added macroeconomic uncertainty, leading to softer-than-anticipated volumes across the industry. Despite these headwinds, all Olympic segments were profitable, led by our Pipe and Tube business, which recorded one of its most profitable quarters ever, and strong results from our Carbon segment.”

Marabito continued, “On October 2, 2023, as previously announced, we completed the all-cash acquisition of Central Tube & Bar. The transaction, which marks the Company’s seventh acquisition in the past six years, is our latest strategic investment focused on growing our portfolio of products and services with higher-margin returns. Central Tube & Bar’s historical financial performance has been consistently strong, and we believe its value-added contract manufacturing capabilities, geographic reach in the South-Central United States and complementary culture make the company an excellent fit for our Pipe and Tube business.”

Olympic Steel remains well-positioned to continue executing on its growth strategy. Following the Central Tube acquisition, the Company’s total debt under its revolving credit facility was approximately $234 million, with availability of approximately $359 million, leaving significant capital to invest in additional acquisitions, new capacity and increased automation.

Marabito concluded, “We remain optimistic about the long-term outlook for the U.S. steel market and our business. As we finish another solid year, we are seeing a rebound in pricing. We believe improved market pricing dynamics, continued industrial backlogs and anticipated infrastructure spending, along with our ongoing efforts to invest in higher-return opportunities, will result in profitable growth in 2024.”

The Board of Directors approved a regular quarterly cash dividend of $0.125 per share, which is payable on December 15, 2023, to shareholders of record as of December 1, 2023. 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,

2023

 

2022

 

2023

 

2022

  Net income per diluted share (GAAP)

$

1.06

 

$

1.04

$

3.21

 

$

7.53

 

  Excluding the following items LIFO (income) / expense

 

(0.13

)

 

0.10

 

(0.19

)

 

0.10

 

Acquisition inventory fair market value adjustment

 

-

 

 

-

 

0.13

 

 

-

 

Acquisition related expenses

 

-

 

 

-

 

0.16

 

 

-

 

Gain on sale of warehouse

 

-

 

 

-

 

-

 

 

(0.13

)

Employee retention credit

 

(0.25

)

 

-

 

(0.25

)

 

-

 

  Adjusted net income per diluted share (non-GAAP)

$

0.68

 

$

1.14

$

3.06

 

$

7.50

 

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 9/30/2023 9/30/2022 9/30/2023 9/30/2022   Net income (GAAP):

$

12,230

 

$

12,046

$

37,121

 

$

86,972

 

Excluding the following items Foreign exchange loss included in net income

 

28

 

 

17

 

67

 

 

38

 

Interest and other expense on debt

 

3,953

 

 

3,007

 

12,379

 

 

7,276

 

Income tax provision

 

4,674

 

 

4,016

 

14,813

 

 

31,787

 

Depreciation and amortization

 

6,185

 

 

4,666

 

18,859

 

 

14,594

 

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

 

27,070

 

 

23,752

 

83,239

 

 

140,667

 

  LIFO (income) / expense

 

(2,000

)

 

1,500

 

(3,000

)

 

1,500

 

Acquisition inventory fair market value adjustment

 

-

 

 

-

 

2,079

 

 

-

 

Acquisition related expenses

 

-

 

 

-

 

2,556

 

 

-

 

Gain on sale of warehouse

 

-

 

 

-

 

-

 

 

(2,083

)

Employee retention credit

 

(4,000

)

 

-

 

(4,000

)

 

-

 

  Adjusted EBITDA (non-GAAP)

$

21,070

 

$

25,252

$

80,874

 

$

140,084

 

Conference Call and Webcast

A simulcast of Olympic Steel’s 2023 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 3, 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 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; 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; 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: 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, including Central Tube and Bar, Inc., or CTB, 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; 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 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 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, valves and fittings; tin plate and manufactured products. The Company was founded in 1954 and operates from 47 locations across 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

2023

2022

2023

2022

  Net sales

$

526,411

$

634,437

$

1,668,755

$

2,039,946

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

 

414,480

 

527,466

 

1,308,988

 

1,643,119

Warehouse and processing

 

28,954

 

27,397

 

91,125

 

79,069

Administrative and general

 

26,181

 

26,929

 

91,047

 

88,520

Distribution

 

16,342

 

15,131

 

51,531

 

46,613

Selling

 

9,587

 

10,589

 

30,373

 

31,905

Occupancy

 

3,797

 

3,173

 

12,452

 

10,053

Depreciation

 

5,008

 

4,062

 

15,330

 

12,766

Amortization

 

1,177

 

604

 

3,529

 

1,828

  Total costs and expenses

 

505,526

 

615,351

 

1,604,375

 

1,913,873

  Operating income

 

20,885

 

19,086

 

64,380

 

126,073

  Other loss, net

 

28

 

17

 

67

 

38

  Income before interest and income taxes

 

20,857

 

19,069

 

64,313

 

126,035

  Interest and other expense on debt

 

3,953

 

3,007

 

12,379

 

7,276

  Income before income taxes

 

16,904

 

16,062

 

51,934

 

118,759

  Income tax provision

 

4,674

 

4,016

 

14,813

 

31,787

  Net income

$

12,230

$

12,046

$

37,121

$

86,972

    Earnings per share:   Net income per share - basic

$

1.06

$

1.04

$

3.21

$

7.53

  Weighted average shares outstanding - basic

 

11,586

 

11,548

 

11,568

 

11,543

  Net income per share - diluted

$

1.06

$

1.04

$

3.21

$

7.53

  Weighted average shares outstanding - diluted

 

11,592

 

11,557

 

11,571

 

11,548

Olympic Steel, Inc.

Balance Sheets

(in thousands)

  As of September 30, 2023 As ofDecember 31, 2022 Assets   Cash and cash equivalents

$

9,091

 

$

12,189

 

Accounts receivable, net

 

227,847

 

 

219,789

 

Inventories, net (includes LIFO reserves of $17,301 and $20,301 as of September 30, 2023 and December 31, 2022, respectively)

 

392,354

 

 

416,931

 

Prepaid expenses and other

 

12,608

 

 

9,197

 

  Total current assets

 

641,900

 

 

658,106

 

  Property and equipment, at cost

 

466,499

 

 

429,810

 

Accumulated depreciation

 

(292,280

)

 

(281,478

)

  Net property and equipment

 

174,219

 

 

148,332

 

  Goodwill

 

43,690

 

 

10,496

 

Intangible assets, net

 

84,028

 

 

32,035

 

Other long-term assets

 

15,425

 

 

14,434

 

Right of use asset, net

 

33,544

 

 

28,224

 

  Total assets

$

992,806

 

$

891,627

 

  Liabilities   Accounts payable

$

127,671

 

$

101,446

 

Accrued payroll

 

29,617

 

 

40,334

 

Other accrued liabilities

 

22,069

 

 

16,824

 

Current portion of lease liabilities

 

7,015

 

 

6,098

 

  Total current liabilities

 

186,372

 

 

164,702

 

  Credit facility revolver

 

196,527

 

 

165,658

 

Other long-term liabilities

 

17,531

 

 

12,619

 

Deferred income taxes

 

15,869

 

 

10,025

 

Lease liabilities

 

27,186

 

 

22,655

 

  Total liabilities

 

443,485

 

 

375,659

 

    Shareholders' Equity   Preferred stock

 

-

 

 

-

 

Common stock

 

135,981

 

 

134,724

 

Accumulated other comprehensive loss

 

461

 

 

1,311

 

Retained earnings

 

412,879

 

 

379,933

 

  Total shareholders' equity

 

549,321

 

 

515,968

 

  Total liabilities and shareholders' equity

$

992,806

 

$

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 September 30, Carbon Flat Products Specialty Metals Flat Products Tubular and Pipe Products

2023

 

2022

 

2023

 

2022

 

2023

 

2022

  Tons sold 1

 

207,145

 

203,122

 

27,936

 

34,189

 

N/A

 

N/A

 

  Net sales

$

304,478

$

336,259

$

132,763

$

188,301

$

89,170

$

109,877

 

Average selling price per ton

 

1,470

 

1,655

 

4,752

 

5,508

 

N/A

 

N/A

 

Cost of materials sold

 

242,532

 

293,498

 

111,622

 

150,546

 

60,326

 

83,422

 

Gross profit

 

61,946

 

42,761

 

21,141

 

37,755

 

28,844

 

26,455

 

Operating expenses

 

51,997

 

41,029

 

16,473

 

22,683

 

18,811

 

19,360

 

Operating income

 

9,949

 

1,732

 

4,668

 

15,072

 

10,033

 

7,095

 

  Depreciation and amortization

 

3,568

 

2,513

 

871

 

1,024

 

1,729

 

1,112

 

LIFO income / (expense)

 

-

 

-

 

-

 

-

 

2,000

 

(1,500

)

    Nine months ended September 30, Carbon Flat Products Specialty Metals Flat Products Tubular and Pipe Products

2023

 

2022

 

2023

 

2022

 

2023

 

2022

  Tons sold 1

 

651,758

 

619,809

 

89,163

 

111,019

 

N/A

 

N/A

 

  Net sales

$

940,925

$

1,086,473

$

446,327

$

614,744

$

281,503

$

338,729

 

Average selling price per ton

 

1,444

 

1,753

 

5,006

 

5,537

 

N/A

 

N/A

 

Cost of materials sold

 

744,040

 

931,844

 

371,935

 

455,977

 

193,013

 

255,298

 

Gross profit

 

196,885

 

154,629

 

74,392

 

158,767

 

88,490

 

83,431

 

Operating expenses

 

166,295

 

127,404

 

53,786

 

73,138

 

59,345

 

54,454

 

Operating income

 

30,590

 

27,225

 

20,606

 

85,629

 

29,145

 

28,977

 

  Depreciation and amortization

 

10,891

 

7,885

 

2,878

 

3,037

 

5,038

 

3,620

 

LIFO income / (expense)

 

-

 

-

 

-

 

-

 

3,000

 

(1,500

)

  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.   As of September 30, 2023 As of December 31, 2022 Assets Flat-products

$

708,766

$

631,607

Tubular and pipe products

 

282,300

 

258,412

Corporate

 

1,740

 

1,608

Total assets

$

992,806

$

891,627

Other Information

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

As of September 30, 2023 As of December 31, 2022 Shareholders' equity per share

$

49.34

$

46.36

  Debt to equity ratio 0.36 to 1 0.32 to 1     Nine Months Ended September 30,

2023

2022

  Net cash from operating activities

$

120,999

$

98,300

  Cash dividends per share

$

0.38

$

0.27

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231102779305/en/

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