Olympic Steel Reports Third-Quarter 2022 Results

Rhea-AI Summary

Olympic Steel, Inc. (Nasdaq: ZEUS) reported net income of $12.0 million ($1.04 per diluted share) for Q3 2022, down from $44.5 million ($3.87 per share) in Q3 2021. Sales decreased to $634 million from $668 million year-over-year. Adjusted EBITDA fell to $25.3 million from $70.5 million. The company faced challenges due to declining metals pricing and macroeconomic uncertainties but was able to reduce debt by $84 million (26%) this year. A quarterly cash dividend of $0.09 per share was approved, continuing the dividend since March 2006.

Positive

• Reduced debt by $84 million (26%) in 2022.
• Continued payment of quarterly dividends since March 2006.
• Expecting strong cash flows and further debt reduction in Q4.

Negative

• Net income decreased by 73% from Q3 2021.
• Sales dropped from $668 million to $634 million year-over-year.
• Adjusted EBITDA fell by 64% compared to Q3 2021.

Diversification strategy and operational discipline drive strong financial performance through shifting market conditions

CLEVELAND--(BUSINESS WIRE)-- 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 September 30, 2022				As of December 31, 2021
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 Products
			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 Products
			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 December 31, 2021
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/

Richard A. Manson

Chief Financial Officer

(216) 672-0522

ir@olysteel.com

Source: Olympic Steel, Inc.

FAQ

What were Olympic Steel's Q3 2022 financial results?

In Q3 2022, Olympic Steel recorded a net income of $12.0 million, or $1.04 per diluted share, down from $44.5 million, or $3.87 per share in Q3 2021.

How did Olympic Steel's sales perform in Q3 2022?

Sales for Q3 2022 were $634 million, compared to $668 million in Q3 2021.

What is the expected impact of metals pricing on Olympic Steel's profits?

Olympic Steel anticipates further declines in metals pricing will pressure profit margins in Q4 2022.

What dividend did Olympic Steel declare for shareholders?

Olympic Steel declared a regular quarterly cash dividend of $0.09 per share, payable on December 15, 2022.

How much did Olympic Steel reduce its debt in 2022?

The company reduced its debt by $84 million, representing a 26% decrease so far this year.