Olympic Steel Reports Record Third-Quarter 2021 Results

Rhea-AI Summary

Olympic Steel reported record financial results for Q3 2021, achieving a net income of $44.5 million ($3.87 per diluted share), compared to a loss of $1.5 million in Q3 2020. The company's sales reached $668 million, up from $300 million a year prior. Adjusted EBITDA soared to $70.5 million from $4.3 million. The sale of Detroit operations was countered by the acquisition of Shaw Stainless, enhancing profit potential. A regular quarterly cash dividend of $0.02 per share was declared, payable December 15, 2021.

Positive

• Record net income of $44.5 million for Q3 2021, a significant improvement from a net loss in Q3 2020.
• Sales increased 122.67% to $668 million from $300 million year-over-year.
• Adjusted EBITDA grew to $70.5 million compared to $4.3 million in Q3 2020.
• Successful acquisition of Shaw Stainless is expected to enhance earnings at a lower investment cost.
• Continuing strong customer demand and shipping volumes outpacing industry averages.

Negative

• LIFO pre-tax expense impacted Q3 results by $7.0 million.

Sales and profitability surpass record-setting levels of second quarter

Additional capital from strategic actions expected to improve returns in pursuit of higher value-added opportunities

CLEVELAND--(BUSINESS WIRE)-- Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced record quarterly financial results for the three months ended September 30, 2021. Net income for the third quarter totaled $44.5 million, or $3.87 per diluted share, compared with a net loss of $1.5 million, or $0.13 per diluted share, in the third quarter of 2020. The results include $7.0 million ($0.45 per share impact) of LIFO pre-tax expense in the third quarter of 2021, compared with $0.1 million of LIFO pre-tax income in the same period a year ago. Adjusted EBITDA for the third quarter of 2021 was $70.5 million, compared with $4.3 million in the third quarter of 2020.

The Company reported sales totaling $668 million for the third quarter of 2021, compared with $300 million in the third quarter of 2020.

“Our third-quarter financial results represent the best quarterly performance in Olympic Steel’s history. Sales, net income and EBITDA significantly exceeded our previous records set in the second quarter of this year,” said Richard T. Marabito, Chief Executive Officer.

Marabito added, “We have continued to execute our long-term strategy to further diversify our business, deliver consistent profitability and enhance shareholder value. As part of that effort, on September 17, we announced the sale of our Detroit operations which were primarily focused on the distribution of flat-rolled carbon steel to domestic automakers and their related suppliers. We quickly redeployed a portion of that sale’s proceeds on October 1 to acquire Shaw Stainless & Alloy, Inc., a stainless steel distributor, fabricator and end-product manufacturer. The acquisition of Shaw Stainless is expected to replace the former Detroit operations earnings stream at a fraction of the investment. We also continue to make investments in processing equipment and automation to drive growth, operational efficiency and safety results.”

Marabito concluded, “Customer demand and our shipping volumes remain strong, despite continued supply chain disruptions. Our total shipments have outpaced the industry through the first three quarters of this year, particularly in our higher-margin product categories. As a result of the outstanding efforts of our entire team, the success of our acquisitions, our strong balance sheet and commitment to our long-term strategy, we remain well-positioned for a strong fourth quarter and our continued pursuit of higher-margin growth opportunities.”

The Board of Directors also approved a regular quarterly cash dividend of $0.02 per share, which is payable on December 15, 2021, to shareholders of record on December 1, 2021.

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 (Loss) Per Diluted Share to Adjusted Net Income (Loss) 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
			9/30/2021				9/30/2020				9/30/2021				9/30/2020
	Net income per diluted share (GAAP):		$	3.87			$	(0.13	)		$	8.36			$	(0.64	)
	Excluding the following items:
	LIFO (Income) / Expense			0.45				(0.01	)			0.77				(0.07	)
	Gain on Sale of Detroit Operations			(0.23	)			-				(0.23	)			-
	Restructuring and other charges			-				-				-				0.21
	Adjusted net income per diluted share (non-GAAP):		$	4.09			$	(0.14	)		$	8.90			$	(0.50	)

	Reconciliation of Net Income (Loss) 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
			9/30/2021				9/30/2020				9/30/2021				9/30/2020
	Net income (GAAP):		$	44,533			$	(1,520	)		$	96,190			$	(7,381	)
	Excluding the following items:
	Foreign exchange loss included in net income			15				25				24				68
	Interest and other expense on debt			1,947				1,693				5,618				5,823
	Income tax provision (benefit)			15,665				(561	)			34,354				(3,307	)
	Depreciation and amortization			4,813				4,727				15,321				14,567
	Earnings before interest, taxes, depreciation and
	amortization (EBITDA)			66,973				4,364				151,507				9,770
	LIFO (Income) / Expense			7,000				(100	)			12,000				(1,100	)
	Gain on Sale of Detroit Operations			(3,499	)			-				(3,499	)			-
	Restructuring and other charges			-				-				-				3,586
	Adjusted EBITDA (non-GAAP)		$	70,474			$	4,264			$	160,008			$	12,256

Conference Call and Webcast

A simulcast of Olympic Steel’s 2021 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 5, 2021, 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; 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, and other factors; supply disruptions and inflationary pressures, including the availability and rising costs of transportation and logistical services and labor; 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; 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; general and global business, economic, financial and political conditions, including legislation passed under the new 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; 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; 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 further diversify our business, deliver consistent profitability and enhance shareholder value, including, without limitation, our ability to successfully redeploy the proceeds from the sale of our Detroit operation and other capital; 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; rising interest rates and their impacts on our variable interest rate debt; 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; 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; 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 41 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 (Loss) (in thousands, except per-share data)
		Three months ended								Nine months ended
		September 30								September 30
		2021				2020				2021				2020
Net sales		$	668,466			$	299,921			$	1,687,667			$	902,597
Costs and expenses
Cost of materials sold (excludes items shown separately below)			520,866				239,967				1,304,234				718,726
Warehouse and processing			26,208				19,471				76,153				62,173
Administrative and general			24,811				16,507				74,328				52,577
Distribution			14,424				11,226				42,086				33,133
Selling			12,155				6,130				30,408				18,863
Occupancy			3,029				2,256				8,951				7,355
Depreciation			4,243				4,347				13,557				13,422
Amortization			570				380				1,764				1,145
Total costs and expenses			606,306				300,284				1,551,481				907,394
Operating income (loss)			62,160				(363	)			136,186				(4,797	)
Other loss, net			(15	)			(25	)			(24	)			(68	)
Income (loss) before interest and income taxes			62,145				(388	)			136,162				(4,865	)
Interest and other expense on debt			1,947				1,693				5,618				5,823
Income (loss) before income taxes			60,198				(2,081	)			130,544				(10,688	)
Income tax provision (benefit)			15,665				(561	)			34,354				(3,307	)
Net income (loss)		$	44,533			$	(1,520	)		$	96,190			$	(7,381	)
Earnings per share:
Net income (loss) per share - basic		$	3.88			$	(0.13	)		$	8.37			$	(0.64	)
Weighted average shares outstanding - basic			11,492				11,452				11,491				11,447
Net income (loss) per share - diluted		$	3.87			$	(0.13	)		$	8.36			$	(0.64	)
Weighted average shares outstanding - diluted			11,515				11,452				11,509				11,447

Olympic Steel, Inc.
Balance Sheet
(in thousands)
		As of September 30, 2021				As of December 31, 2020
Assets
Cash and cash equivalents		$	15,143			$	5,533
Accounts receivable, net			303,236				151,601
Inventories, net (includes LIFO credit of $9,885 and LIFO debit of $2,115 as of September 30, 2021 and December 31, 2020 respectively)			417,979				240,001
Prepaid expenses and other			12,459				5,069
Total current assets			748,817				402,204
Property and equipment, at cost			412,635				434,579
Accumulated depreciation			(265,360	)			(277,379	)
Net property and equipment			147,275				157,200
Goodwill			5,234				5,123
Intangible assets, net			31,307				32,593
Other long-term assets			15,203				18,131
Right of use asset, net			23,470				25,354
Total assets		$	971,306			$	640,605
Liabilities
Accounts payable		$	160,034			$	87,291
Accrued payroll			35,493				10,985
Other accrued liabilities			28,450				22,869
Current portion of lease liabilities			5,457				5,580
Total current liabilities			229,434				126,725
Credit facility revolver			297,880				160,609
Other long-term liabilities			16,620				22,478
Deferred income taxes			10,365				9,818
Lease liabilities			18,292				19,965
Total liabilities			572,591				339,595
Shareholders' Equity
Preferred stock			-				-
Common stock			133,174				132,382
Accumulated other comprehensive loss			(2,827	)			(4,215	)
Retained earnings			268,368				172,843
Total shareholders' equity			398,715				301,010
Total liabilities and shareholders' equity		$	971,306			$	640,605

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
		2021			2020				2021			2020			2021			2020
Tons sold			244,519			224,199				41,203			33,735			N/A			N/A
Net sales		$	404,596		$	167,948			$	164,179		$	80,904		$	99,691		$	51,069
Average selling price per ton			1,655			749				3,985			2,398			N/A			N/A
Cost of materials sold			321,005			134,845				120,227			69,790			79,634			35,332
Gross profit			83,591			33,103				43,952			11,114			20,057			15,737
Operating expenses			46,427			34,707				19,289			8,666			17,703			14,993
Operating income (loss)			37,164			(1,604	)			24,663			2,448			2,354			744
Depreciation and amortization			2,698			2,852				858			513			1,239			1,344
		Nine months ended September 30,
		Carbon Flat Products							Specialty Metals Flat Products						Tubular and Pipe Products
		2021			2020				2021			2020			2021			2020
Tons sold			728,750			672,133				123,278			92,642			N/A			N/A
Net sales		$	976,480		$	511,726			$	428,533		$	223,887		$	282,654		$	166,984
Average selling price per ton			1,340			761				3,476			2,417			N/A			N/A
Cost of materials sold			755,111			412,907				331,348			191,108			217,775			114,711
Gross profit			221,369			98,819				97,185			32,779			64,879			52,273
Operating expenses			132,572			111,197				50,798			25,605			53,166			44,999
Operating income (loss)			88,797			(12,378	)			46,387			7,174			11,713			7,274
Depreciation and amortization			8,570			8,932				2,662			1,457			4,035			4,076
		As of September 30, 2021			As of December 31, 2020
Assets
Flat-products		$	721,133		$	404,269
Tubular and pipe products			249,566			235,516
Corporate			607			820
Total assets		$	971,306		$	640,605

Other Information (in thousands, except per-share and ratio data)
		As of September 30, 2021				As of December 31, 2020
Shareholders' equity per share		$	35.99			$	27.18
Debt to equity ratio		0.75 to 1				0.53 to 1
		Nine Months Ended September 30,
		2021				2020
Net cash from (used for) operating activities			(126,937	)			28,653
Cash dividends per share		$	0.06			$	0.06

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211104006325/en/

Richard A. Manson

Chief Financial Officer

(216) 672-0522

ir@olysteel.com

Source: Olympic Steel, Inc.

FAQ

What are Olympic Steel's Q3 2021 financial results?

Olympic Steel reported a record net income of $44.5 million for Q3 2021, with sales of $668 million and adjusted EBITDA of $70.5 million.

How did Olympic Steel's Q3 2021 results compare to Q3 2020?

In Q3 2020, Olympic Steel had a net loss of $1.5 million, while in Q3 2021, it achieved a net income of $44.5 million.

What is the stock symbol for Olympic Steel?

The stock symbol for Olympic Steel is ZEUS.

What dividend has Olympic Steel declared for December 2021?

Olympic Steel declared a quarterly cash dividend of $0.02 per share, payable on December 15, 2021.

What strategic actions did Olympic Steel take recently?

Olympic Steel sold its Detroit operations and acquired Shaw Stainless to enhance profitability.