Olympic Steel Reports Fourth-Quarter and Full-Year 2023 Results
- None.
- None.
Insights
The recent financial results reported by Olympic Steel, Inc. indicate a notable increase in net income for the fourth quarter of 2023 compared to the same period in the previous year. This is a significant metric for investors as net income directly affects the earnings per share (EPS), a key determinant of a company's profitability and often a driver of its stock price. The quarterly dividend increase of 20% is a strong signal of confidence from management in the company's financial health and future prospects, potentially making the stock more attractive to income-focused investors.
However, the full-year results show a decline in net income and adjusted EBITDA compared to the previous year, which could raise concerns about the company's year-over-year growth trajectory. The impact of this decline on investor sentiment could be mitigated by the company's successful diversification strategy and operational discipline, which have led to a strong balance sheet and the ability to pursue higher-return investments, as indicated by the CEO's statement.
The LIFO method accounting, which resulted in pre-tax income, is an inventory valuation method that assumes the last items placed in inventory are the first sold during a period of inflation, this method can result in lower cost of goods sold and higher net income. The significant LIFO pre-tax income in 2023 compared to a LIFO pre-tax expense in 2022 suggests that inventory costs have been managed effectively, which is positive for the company's margins.
Olympic Steel's performance in the Pipe and Tube segment, which delivered its second most profitable year ever, demonstrates the company's ability to capitalize on market segments with robust demand. This performance is particularly noteworthy in the context of a hot-rolled carbon steel index pricing decline of more than 45% during the year, which underscores the company's resilience and strategic positioning within the industry.
The company's acquisitions of Metal-Fab and Central Tube and Bar appear to be highly strategic, contributing to immediate strong EBITDA returns. This suggests effective use of capital for growth and could be a positive indicator for future revenue streams. The mention of a disciplined approach to inventory management and cash flow, coupled with a strong balance sheet, positions Olympic Steel favorably for sustainable growth and might attract investors looking for companies with prudent financial management practices.
The increase in total debt by only $25 million despite significant investments is an indication of the company's financial prudence and could be reassuring for stakeholders concerned about over-leverage. The availability of approximately $339 million provides the company with a cushion and flexibility for future investments or to weather potential market downturns.
The dividend policy of Olympic Steel, which has seen a cumulative increase since 2022, is a reflection of the company's operational success and financial stability. Regular and increasing dividends are often interpreted as a sign of a company's mature stage in its business cycle and its ability to generate consistent cash flow. This policy can have a stabilizing effect on the stock, making it appealing to a certain class of investors, particularly in volatile markets.
The company's reference to managing operating expenses and debt while seeking opportunities for expansion indicates a balanced approach to growth and profitability. This is crucial in the metals service industry, where commodity price fluctuations can significantly impact margins. The company's ability to maintain profitability in the face of a significant decline in hot-rolled carbon steel index pricing suggests strong operational efficiency and cost management, which are important factors for long-term sustainability.
Olympic Steel's focus on higher-value-add products could be a strategic move to differentiate itself in a commoditized market and enhance profit margins. This strategy may lead to more stable revenue streams and reduce the company's exposure to raw material price volatility, potentially resulting in a more predictable and resilient business model.
Strong finish to the year led by Pipe and Tube segment delivering its second most profitable year ever
Shareholders rewarded with a quarterly dividend increase of
Company enters 2024 in position of strength due to success of diversification strategy and operational disciplines
Fourth-Quarter Results
Net income for the fourth quarter totaled
Full-Year Results
Net income for 2023 totaled
“Olympic Steel’s strong performance in the fourth quarter and for the full year reflects the success of our strategy to build a more diversified company that delivers results and creates shareholder value even under challenging market conditions,” said Richard T. Marabito, Chief Executive Officer. “For the second year in a row, we withstood a hot-rolled carbon steel index pricing decline of more than
Marabito said, “All three of our business segments positively impacted Olympic Steel’s results for the fourth quarter and full year. Our Pipe and Tube business delivered its second most profitable year ever, and our Carbon business showed its resiliency in navigating the pricing pressures of 2023. While Specialty Metals faced industry-wide stainless steel pricing headwinds, this segment contributed consistent positive EBITDA for both the fourth quarter and the full year.”
Marabito continued, “Our inventory management and strong cash flow have fortified our balance sheet. During 2023, we invested
The Company’s Board of Directors approved a regular first quarter 2024 cash dividend of
Marabito concluded, “As we head into 2024, Olympic Steel is stronger than ever. We remain committed to our disciplines around working capital, operating expenses, cash flow and debt, while we seek opportunities to further expand our portfolio of higher-return, higher-value-add products. We are confident in our ability to build on our success, drive profitable growth and deliver strong value for shareholders.”
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, | |||||||||||||||
2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Net income per diluted share (GAAP) | $ |
0.64 |
|
$ |
0.34 |
|
$ |
3.85 |
|
$ |
7.87 |
|
||||
| Excluding the following items | ||||||||||||||||
| LIFO (income) / expense |
|
(0.35 |
) |
|
(0.07 |
) |
|
(0.52 |
) |
|
0.04 |
|
||||
| Acquisition inventory fair market value adjustment |
|
0.01 |
|
|
- |
|
|
0.14 |
|
|
- |
|
||||
| Acquisition related expenses |
|
0.06 |
|
|
- |
|
|
0.22 |
|
|
- |
|
||||
| Gain on sale of warehouse |
|
- |
|
|
- |
|
|
- |
|
|
(0.13 |
) |
||||
| Employee retention credit |
|
- |
|
|
- |
|
|
(0.25 |
) |
|
- |
|
||||
| Adjusted net income per diluted share (non-GAAP) | $ |
0.36 |
|
$ |
0.28 |
|
$ |
3.44 |
|
$ |
7.77 |
|
||||
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 | |||||||||||||||
| 12/31/2023 | 12/31/2022 | 12/31/2023 | 12/31/2022 | |||||||||||||
| Net income (GAAP): | $ |
7,408 |
|
$ |
3,959 |
|
$ |
44,529 |
|
$ |
90,931 |
|
||||
| Excluding the following items | ||||||||||||||||
| Foreign exchange loss included in net income |
|
11 |
|
|
7 |
|
|
78 |
|
|
45 |
|
||||
| Interest and other expense on debt |
|
3,627 |
|
|
2,804 |
|
|
16,006 |
|
|
10,080 |
|
||||
| Income tax provision |
|
2,245 |
|
|
904 |
|
|
17,058 |
|
|
32,691 |
|
||||
| Depreciation and amortization |
|
7,584 |
|
|
5,144 |
|
|
26,443 |
|
|
19,738 |
|
||||
| Earnings before interest, taxes, depreciation and | ||||||||||||||||
| amortization (EBITDA) |
|
20,875 |
|
|
12,818 |
|
|
104,114 |
|
|
153,485 |
|
||||
| LIFO (income) / expense |
|
(5,258 |
) |
|
(935 |
) |
|
(8,258 |
) |
|
565 |
|
||||
| Acquisition inventory fair market value adjustment |
|
134 |
|
|
- |
|
|
2,212 |
|
|
- |
|
||||
| Acquisition related expenses |
|
947 |
|
|
- |
|
|
3,503 |
|
|
- |
|
||||
| Gain on sale of warehouse |
|
- |
|
|
- |
|
|
- |
|
|
(2,083 |
) |
||||
| Employee retention credit |
|
- |
|
|
- |
|
|
(4,000 |
) |
|
- |
|
||||
| Adjusted EBITDA (non-GAAP) | $ |
16,698 |
|
$ |
11,883 |
|
$ |
97,571 |
|
$ |
151,967 |
|
||||
Conference Call and Webcast
A simulcast of Olympic Steel’s 2023 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 23, 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 labor and energy; 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
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
For additional information, please visit the Company’s website at www.olysteel.com.
Olympic Steel, Inc. |
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Consolidated Statements of Net Income |
||||||||||||
(in thousands, except per-share data) |
||||||||||||
| Three months ended | Twelve months ended | |||||||||||
| December 31 | December 31 | |||||||||||
2023 |
2022 |
2023 |
2022 |
|||||||||
| Net sales | $ |
489,408 |
$ |
520,044 |
$ |
2,158,163 |
$ |
2,559,990 |
||||
| Costs and expenses | ||||||||||||
| Cost of materials sold (excludes items shown separately below) |
|
375,675 |
|
430,811 |
|
1,684,663 |
|
2,073,930 |
||||
| Warehouse and processing |
|
31,087 |
|
25,599 |
|
122,212 |
|
104,668 |
||||
| Administrative and general |
|
31,192 |
|
25,484 |
|
122,239 |
|
114,004 |
||||
| Distribution |
|
15,448 |
|
13,916 |
|
66,979 |
|
60,529 |
||||
| Selling |
|
11,063 |
|
8,269 |
|
41,436 |
|
40,174 |
||||
| Occupancy |
|
4,068 |
|
3,147 |
|
16,520 |
|
13,200 |
||||
| Depreciation |
|
6,215 |
|
4,519 |
|
21,545 |
|
17,285 |
||||
| Amortization |
|
1,369 |
|
625 |
|
4,898 |
|
2,453 |
||||
| Total costs and expenses |
|
476,117 |
|
512,370 |
|
2,080,492 |
|
2,426,243 |
||||
| Operating income |
|
13,291 |
|
7,674 |
|
77,671 |
|
133,747 |
||||
| Other loss, net |
|
11 |
|
7 |
|
78 |
|
45 |
||||
| Income before interest and income taxes |
|
13,280 |
|
7,667 |
|
77,593 |
|
133,702 |
||||
| Interest and other expense on debt |
|
3,627 |
|
2,804 |
|
16,006 |
|
10,080 |
||||
| Income before income taxes |
|
9,653 |
|
4,863 |
|
61,587 |
|
123,622 |
||||
| Income tax provision |
|
2,245 |
|
904 |
|
17,058 |
|
32,691 |
||||
| Net income | $ |
7,408 |
$ |
3,959 |
$ |
44,529 |
$ |
90,931 |
||||
| Earnings per share: | ||||||||||||
| Net income per share - basic | $ |
0.64 |
$ |
0.34 |
$ |
3.85 |
$ |
7.87 |
||||
| Weighted average shares outstanding - basic |
|
11,578 |
|
11,554 |
|
11,573 |
|
11,551 |
||||
| Net income per share - diluted | $ |
0.64 |
$ |
0.34 |
$ |
3.85 |
$ |
7.87 |
||||
| Weighted average shares outstanding - diluted |
|
11,587 |
|
11,567 |
|
11,578 |
|
11,559 |
||||
Olympic Steel, Inc. |
||||||||
Balance Sheets |
||||||||
(in thousands) |
||||||||
| As of December 31, 2023 |
As of December 31, 2022 |
|||||||
| Assets | ||||||||
| Cash and cash equivalents | $ |
13,224 |
|
$ |
12,189 |
|
||
| Accounts receivable, net |
|
191,149 |
|
|
219,789 |
|
||
| Inventories, net (includes LIFO reserves of |
|
386,535 |
|
|
416,931 |
|
||
| Prepaid expenses and other |
|
12,261 |
|
|
9,197 |
|
||
| Total current assets |
|
603,169 |
|
|
658,106 |
|
||
| Property and equipment, at cost |
|
483,448 |
|
|
429,810 |
|
||
| Accumulated depreciation |
|
(297,340 |
) |
|
(281,478 |
) |
||
| Net property and equipment |
|
186,108 |
|
|
148,332 |
|
||
| Goodwill |
|
52,091 |
|
|
10,496 |
|
||
| Intangible assets, net |
|
92,621 |
|
|
32,035 |
|
||
| Other long-term assets |
|
16,466 |
|
|
14,434 |
|
||
| Right of use asset, net |
|
34,380 |
|
|
28,224 |
|
||
| Total assets | $ |
984,835 |
|
$ |
891,627 |
|
||
| Liabilities | ||||||||
| Accounts payable | $ |
119,718 |
|
$ |
101,446 |
|
||
| Accrued payroll |
|
30,113 |
|
|
40,334 |
|
||
| Other accrued liabilities |
|
22,593 |
|
|
16,824 |
|
||
| Current portion of lease liabilities |
|
7,813 |
|
|
6,098 |
|
||
| Total current liabilities |
|
180,237 |
|
|
164,702 |
|
||
| Credit facility revolver |
|
190,198 |
|
|
165,658 |
|
||
| Other long-term liabilities |
|
20,151 |
|
|
12,619 |
|
||
| Deferred income taxes |
|
11,510 |
|
|
10,025 |
|
||
| Lease liabilities |
|
27,261 |
|
|
22,655 |
|
||
| Total liabilities |
|
429,357 |
|
|
375,659 |
|
||
| Shareholders' Equity | ||||||||
| Preferred stock |
|
- |
|
|
- |
|
||
| Common stock |
|
136,541 |
|
|
134,724 |
|
||
| Accumulated other comprehensive loss |
|
41 |
|
|
1,311 |
|
||
| Retained earnings |
|
418,896 |
|
|
379,933 |
|
||
| Total shareholders' equity |
|
555,478 |
|
|
515,968 |
|
||
| Total liabilities and shareholders' equity | $ |
984,835 |
|
$ |
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 December 31, | ||||||||||||||||||||
| Carbon Flat Products | Specialty Metals Flat Products |
Tubular and Pipe Products |
||||||||||||||||||
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
|||||||||||||||
| Tons sold 1 |
|
202,434 |
|
187,110 |
|
|
26,424 |
|
31,073 |
|
N/A |
|
N/A |
|
||||||
| Net sales | $ |
280,169 |
$ |
270,132 |
|
$ |
121,400 |
$ |
161,278 |
$ |
87,839 |
$ |
88,634 |
|
||||||
| Average selling price per ton |
|
1,384 |
|
1,444 |
|
|
4,594 |
|
5,190 |
|
N/A |
|
N/A |
|
||||||
| Cost of materials sold |
|
219,627 |
|
232,615 |
|
|
101,849 |
|
133,495 |
|
54,199 |
|
64,701 |
|
||||||
| Gross profit |
|
60,542 |
|
37,517 |
|
|
19,551 |
|
27,783 |
|
33,640 |
|
23,933 |
|
||||||
| Operating expenses |
|
56,549 |
|
39,727 |
|
|
17,274 |
|
19,750 |
|
22,093 |
|
18,054 |
|
||||||
| Operating income | $ | 3,993 |
$ | (2,210 |
) |
$ | 2,277 |
$ | 8,033 |
$ | 11,547 |
$ | 5,879 |
|
||||||
| Depreciation and amortization |
|
3,871 |
|
2,810 |
|
|
1,051 |
|
1,023 |
|
2,644 |
|
1,293 |
|
||||||
| LIFO income / (expense) |
|
- |
|
- |
|
|
- |
|
- |
|
5,258 |
|
935 |
|
||||||
| Twelve months ended December 31, | ||||||||||||||||||||
| Carbon Flat Products | Specialty Metals Flat Products |
Tubular and Pipe Products |
||||||||||||||||||
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
|||||||||||||||
| Tons sold 1 |
|
854,192 |
|
806,919 |
|
|
115,587 |
|
142,092 |
|
N/A |
|
N/A |
|
||||||
| Net sales | $ |
1,221,093 |
$ |
1,356,605 |
|
$ |
567,728 |
$ |
776,022 |
$ |
369,342 |
$ |
427,363 |
|
||||||
| Average selling price per ton |
|
1,430 |
|
1,681 |
|
|
4,912 |
|
5,461 |
|
N/A |
|
N/A |
|
||||||
| Cost of materials sold |
|
963,667 |
|
1,164,459 |
|
|
473,784 |
|
589,472 |
|
247,212 |
|
319,999 |
|
||||||
| Gross profit |
|
257,426 |
|
192,146 |
|
|
93,944 |
|
186,550 |
|
122,130 |
|
107,364 |
|
||||||
| Operating expenses |
|
222,844 |
|
167,131 |
|
|
71,060 |
|
92,888 |
|
81,438 |
|
72,508 |
|
||||||
| Operating income | $ | 34,582 |
$ | 25,015 |
|
$ | 22,884 |
$ | 93,662 |
$ | 40,692 |
$ | 34,856 |
|
||||||
| Depreciation and amortization |
|
14,762 |
|
10,695 |
|
|
3,929 |
|
4,060 |
|
7,682 |
|
4,913 |
|
||||||
| LIFO income / (expense) |
|
- |
|
- |
|
|
- |
|
- |
|
8,258 |
|
(565 |
) |
||||||
| 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 December 31, 2023 |
As of December 31, 2022 |
|||||||||||||
| Assets | ||||||||||||||
| Flat-products | $ |
649,744 |
$ |
631,607 |
||||||||||
| Tubular and pipe products |
|
333,677 |
|
258,412 |
||||||||||
| Corporate |
|
1,414 |
|
1,608 |
||||||||||
| Total assets | $ |
984,835 |
$ |
891,627 |
||||||||||
Other Information |
||||||
(in thousands, except per-share and ratio data) |
||||||
| As of December 31, 2023 |
As of December 31, 2022 |
|||||
| Shareholders' equity per share | $ |
49.90 |
$ |
46.36 |
||
| Debt to equity ratio | 0.34 to 1 |
0.32 to 1 |
||||
| Twelve Months Ended December 31, |
||||||
2023 |
2022 |
|||||
| Net cash from operating activities | $ |
175,159 |
$ |
185,853 |
||
| Cash dividends per share | $ |
0.50 |
$ |
0.36 |
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20240221524711/en/
Richard A. Manson
Chief Financial Officer
(216) 672-0522
ir@olysteel.com
Source: Olympic Steel, Inc.
FAQ
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