Olympic Steel Reports Fourth-Quarter and Full-Year 2022 Results

Rhea-AI Summary

Olympic Steel reported its quarterly and full-year results for 2022, marking the second most profitable year in its history. In Q4 2022, net income decreased to $4.0 million or $0.34 per diluted share compared to $24.9 million or $2.16 per share in Q4 2021. Full-year net income was $90.9 million, down from $121.1 million in 2021. Sales for 2022 rose to $2.6 billion, up from $2.3 billion in 2021. The Company emphasized a successful acquisition of Metal-Fab in January 2023, enhancing product offerings and manufacturing capabilities. Additionally, the quarterly dividend increased to $0.125 from $0.09 per share, reflecting a commitment to shareholder returns.

Positive

• Second most profitable year recorded; net income for 2022 at $90.9 million.
• Sales increased to $2.6 billion in 2022, up from $2.3 billion in 2021.
• Successful acquisition of Metal-Fab, expanding product portfolio and capabilities.
• Increased quarterly dividend from $0.09 to $0.125 per share.
• Reduced debt by $162 million, or 49%, enhancing liquidity for growth.

Negative

• Q4 2022 net income declined significantly to $4.0 million from $24.9 million in Q4 2021.
• Full-year net income down to $90.9 million, compared to $121.1 million in 2021.
• Adjusted EBITDA decreased to $152 million in 2022 from $211 million in 2021.

Second most profitable year in Company history; operating discipline and diversification strategy deliver more consistent results in all market cycles

January 2023 acquisition of Metal-Fab immediately accretive; broadens product offerings, manufacturing capabilities and geographic reach

Strong balance sheet, record cash flow and increased access to capital enable Company to continue investing in higher-return growth opportunities

Quarterly dividend increased from $0.09 to $0.125 per share

CLEVELAND--(BUSINESS WIRE)-- Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced results for the three and 12 months ended December 31, 2022.

Fourth-Quarter Results

Net income for the fourth quarter totaled $4.0 million, or $0.34 per diluted share, compared with net income of $24.9 million, or $2.16 per diluted share, in the fourth quarter of 2021. The results include $0.9 million of LIFO pre-tax income in the fourth quarter of 2022, compared with $9.9 million of LIFO pre-tax expense in the same period a year ago. Adjusted EBITDA for the fourth quarter of 2022 was $11.9 million, compared with $51.1 million in the fourth quarter of 2021. Sales for the fourth quarter of 2022 totaled $520 million, compared with $625 million in the fourth quarter of 2021.

Full-Year Results

Net income for 2022 totaled $90.9 million, or $7.87 per diluted share, compared with net income of $121.1 million, or $10.52 per diluted share, in 2021. The results include $0.6 million of LIFO pre-tax expense in 2022, compared with $21.9 million of LIFO pre-tax expense in 2021. Adjusted EBITDA for 2022 was $152.0 million, compared with $211.1 million in 2021. Sales for 2022 totaled $2.6 billion compared with $2.3 billion in 2021.

“Olympic Steel delivered another year of extraordinary performance in 2022, capped off by a strong finish in the fourth quarter. Our team weathered ongoing economic pressures and a historic decline in metals pricing to record the second most profitable year in Company history, with our Specialty Metals and Pipe and Tube segments hitting all-time profitability highs,” said Richard T. Marabito, Chief Executive Officer. “Our results validate that our strategy to reduce the impact of market cyclicality on our business is working. The deliberate steps we have taken to invest in diversified, higher-return products and services, along with our relentless focus on operational disciplines have improved our bottom line and strengthened our business for the long term.”

Marabito continued, “Importantly, we have also improved our position to invest in and accelerate growth. In 2022, our record cash flow enabled us to reduce our debt by $162 million, or 49%, providing increased liquidity for higher-return growth opportunities, including our January 2023 purchase of Metal-Fab, Inc., the second-largest acquisition in our history and our sixth acquisition in the last five years. Metal-Fab is a perfect fit for Olympic Steel, adding a consistent, recession-resistant track record of double-digit EBITDA margins and an expanded catalog of products to our growing portfolio of metal-intensive end-use products.”

As the Company reported on February 15, 2023, the Board of Directors approved a regular quarterly cash dividend of $0.125 per share, which is an increase of $0.035 per share from the Company’s last quarterly dividend of $0.09 per share. The dividend is payable on March 15, 2023, to shareholders of record on March 1, 2023. The Company has paid a regular quarterly dividend since March 2006.

Marabito concluded, “Olympic Steel is a stronger and more resilient company, and we are off to a fast start in 2023. In January, we increased our asset-based revolver from $475 million to $625 million, providing additional capital to further execute our growth and diversification strategy. We are also pleased to reward shareholders through an increased quarterly dividend.”

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							Twelve months ended
		December 31,							December 31,
		2022				2021			2022				2021
Net income per diluted share		$	0.34			$	2.16		$	7.87			$	10.52
Excluding the following items
LIFO (Income) Expense			(0.07	)			0.63			0.04				1.39
Gain on Sale of Detroit Operation			-				-			-				(0.23	)
Gain on Sale of Milan Warehouse			-				-			(0.13	)			-
Adjusted net income per dilluted share (non-GAAP)		$	0.28			$	2.79		$	7.77			$	11.69

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							Twelve Months Ended
		12/31/2022				12/31/2021			12/31/2022				12/31/2021
Net income (GAAP):		$	3,959			$	24,861		$	90,931			$	121,051
Excluding the following items:
Foreign exchange loss included in net income			7				12			45				36
Interest and other expense on debt			2,804				2,013			10,080				7,631
Income tax provision			904				9,394			32,691				43,748
Depreciation and amortization			5,144				4,995			19,738				20,316
Earnings before interest, taxes, depreciation and amortization (EBITDA)			12,818				41,275			153,485				192,782
LIFO Expense (Income)			(935	)			9,850			565				21,850
Gain on Sale of Detroit Operation			-				-			-				(3,499	)
Gain on Sale of Milan Warehouse			-				-			(2,083	)			-
Adjusted EBITDA (non-GAAP)		$	11,883			$	51,125		$	151,967			$	211,133

Conference Call and Webcast

A simulcast of Olympic Steel’s 2022 fourth-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 February 24, 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 related to the novel coronavirus, or COVID-19, including additional shutdowns in large markets, such as China, and other factors; supplier consolidation or addition of new capacity; 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; 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, 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; 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 last-in, first-out, or 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; 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 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 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, inclusive of the two new locations added as part of the Metal-Fab acquisition on January 3, 2023.

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						Twelve months ended
		December 31,						December 31,
		2022			2021			2022			2021
Net sales		$	520,044		$	624,586		$	2,559,990		$	2,312,253
Costs and expenses
Cost of materials sold (excludes items shown separately below)			430,811			497,818			2,073,930			1,802,052
Warehouse and processing			25,599			26,864			104,668			103,017
Administrative and general			25,484			30,289			114,004			104,617
Distribution			13,916			13,318			60,529			55,404
Selling			8,269			11,473			40,174			41,881
Occupancy			3,147			3,549			13,200			12,500
Depreciation			4,519			4,395			17,285			17,952
Amortization			625			600			2,453			2,364
Total costs and expenses			512,370			588,306			2,426,243			2,139,787
Operating income			7,674			36,280			133,747			172,466
Other loss, net			7			12			45			36
Income before interest and income taxes			7,667			36,268			133,702			172,430
Interest and other expense on debt			2,804			2,013			10,080			7,631
Income before income taxes			4,863			34,255			123,622			164,799
Income tax provision			904			9,394			32,691			43,748
Net income		$	3,959		$	24,861		$	90,931		$	121,051
Earnings per share:
Net income per share - basic		$	0.34		$	2.16		$	7.87		$	10.53
Weighted average shares outstanding - basic			11,554			11,492			11,551			11,492
Net income per share - diluted		$	0.34		$	2.16		$	7.87		$	10.52
Weighted average shares outstanding - diluted			11,567			11,510			11,559			11,503

Olympic Steel, Inc.
Balance Sheets
(in thousands)
		As of December 31, 2022				As of December 31, 2021
Assets
Cash and cash equivalents		$	12,189			$	9,812
Accounts receivable, net			219,789				284,570
Inventories, net (includes LIFO reserves of $20,301 and $19,736 as of December 31, 2022 and December 31, 2021 respectively)			416,931				485,029
Prepaid expenses and other			9,197				9,989
Total current assets			658,106				789,400
Property and equipment, at cost			429,810				413,396
Accumulated depreciation			(281,478	)			(266,340	)
Net property and equipment			148,332				147,056
Goodwill			10,496				10,496
Intangible assets, net			32,035				33,653
Other long-term assets			14,434				15,241
Right of use asset, net			28,224				27,726
Total assets		$	891,627			$	1,023,572
Liabilities
Accounts payable		$	101,446			$	148,649
Accrued payroll			40,334				44,352
Other accrued liabilities			16,824				25,395
Current portion of lease liabilities			6,098				5,940
Total current liabilities			164,702				224,336
Credit facility revolver			165,658				327,764
Other long-term liabilities			12,619				15,006
Deferred income taxes			10,025				9,890
Lease liabilities			22,655				22,137
Total liabilities			375,659				599,133
Shareholders' Equity
Preferred stock			-				-
Common stock			134,724				133,427
Accumulated other comprehensive loss			1,311				(1,996	)
Retained earnings			379,933				293,008
Total shareholders' equity			515,968				424,439
Total liabilities and shareholders' equity		$	891,627			$	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 December 31,
		Carbon Flat Products							Specialty Metals Flat Products						Tubular and Pipe Products
		2022				2021			2022			2021			2022				2021
Tons sold			187,110				192,545			31,073			34,529			N/A				N/A
Net sales		$	270,132			$	367,670		$	161,278		$	157,218		$	88,634			$	99,698
Average selling price per ton			1,444				1,910			5,190			4,553			N/A				N/A
Cost of materials sold			232,615				304,509			133,495			110,477			64,701				82,832
Gross profit			37,517				63,161			27,783			46,741			23,933				16,866
Operating expenses			39,727				41,884			19,750			22,584			18,054				21,226
Operating income (loss)			(2,210	)			21,277			8,033			24,157			5,879				(4,360	)
Depreciation and amortization			2,810				2,716			1,023			1,030			1,293				1,232
LIFO expense / (income)			-				-			-			-			(935	)			9,850
		Twelve months ended December 31,
		Carbon Flat Products							Specialty Metals Flat Products						Tubular and Pipe Products
		2022				2021			2022			2021			2022				2021
Tons sold			806,919				921,295			142,092			157,807			N/A				N/A
Net sales		$	1,356,605			$	1,344,150		$	776,022		$	585,751		$	427,363			$	382,352
Average selling price per ton			1,681				1,459			5,461			3,712			N/A				N/A
Cost of materials sold			1,164,459				1,059,620			589,472			441,825			319,999				300,607
Gross profit			192,146				284,530			186,550			143,926			107,364				81,745
Operating expenses			167,131				174,456			92,888			73,382			72,508				74,392
Operating income			25,015				110,074			93,662			70,544			34,856				7,353
Depreciation and amortization			10,695				11,286			4,060			3,692			4,913				5,267
LIFO expense			-				-			-			-			565				21,850
		As of December 31, 2022				As of December 31, 2021
Assets
Flat-products		$	631,607			$	777,074
Tubular and pipe products			258,412				245,962
Corporate			1,608				536
Total assets		$	891,627			$	1,023,572

Other Information
(in thousands, except per-share and ratio data)
(in thousands except per share data)		As of December 31, 2022			As of December 31, 2021
Shareholders' equity per share		$	46.36		$	38.31
Debt to equity ratio		0.32 to 1			0.77 to 1
		Twelve Months Ended December 31,
		2022			2021
Net cash from (used for) operating activities		$	185,853		$	(146,374	)
Cash dividends per share		$	0.36		$	0.08

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230222006003/en/

Richard A. Manson

Chief Financial Officer

(216) 672-0522

ir@olysteel.com

Source: Olympic Steel, Inc.

FAQ

What are Olympic Steel's Q4 2022 financial results?

In Q4 2022, Olympic Steel reported a net income of $4.0 million, or $0.34 per diluted share, down from $24.9 million, or $2.16 per diluted share in Q4 2021.

How did Olympic Steel perform in the full year 2022?

For full-year 2022, Olympic Steel generated a net income of $90.9 million, a decrease from $121.1 million in 2021, with sales increasing to $2.6 billion.

What was the impact of the Metal-Fab acquisition on Olympic Steel?

The acquisition of Metal-Fab in January 2023 is expected to broaden Olympic Steel’s product offerings and manufacturing capabilities, enhancing growth opportunities.

What is the new quarterly dividend for Olympic Steel?

Olympic Steel increased its quarterly dividend to $0.125 per share, up from $0.09 per share, reflecting a commitment to returning value to shareholders.

How much debt did Olympic Steel reduce in 2022?

Olympic Steel reduced its debt by $162 million, or 49%, in 2022, improving its liquidity position.