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Olympic Steel Reports Second-Quarter 2022 Results

Company achieves record quarterly sales and delivers the second-most-profitable quarter in its history

Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced financial results for the three months ended June 30, 2022.

Net income for the second quarter totaled $37.6 million, or $3.26 per diluted share, compared with net income of $29.6 million, or $2.58 per diluted share, in the second quarter of 2021. The results include no LIFO adjustment in the second quarter of 2022, compared with $4.0 million of LIFO expense in the same period a year ago. Adjusted EBITDA for the second quarter of 2022 was $58.8 million, compared with $51.7 million in the second quarter of 2021.

The Company reported all-time record quarterly sales of $709 million in the second quarter of 2022, compared to $556 million in the second quarter of 2021.

“The continued strength of our three business segments in the second quarter drove another record-breaking performance for Olympic Steel. We achieved all-time record quarterly sales surpassing our first-quarter 2022 results to deliver the second-most-profitable quarter in the Company’s history,” said Richard T. Marabito, Chief Executive Officer. “Our success is rooted in our expansion into higher-return, value-added products, our five successful acquisitions over the past four years and our disciplined approach to working capital and expense management. During the second quarter, Specialty Metals achieved record quarterly sales and earnings, Pipe and Tube continued its run of strong results, and our Carbon Flat business delivered strong EBITDA.”

Marabito continued, “We are excited to advance our capital deployment strategy, making meaningful investments in all three of our business segments to expand our capacity to serve our growing customer base and enhance our returns. These investments include the addition of a second automotive stamping line in Winder, Georgia, a new leased 80,000-square-foot white metals fabrication facility in Bartlett, Illinois, and a 30,000-square-foot expansion of our Pipe and Tube facility in Des Moines, Iowa. We are also investing in automation and actively seeking additional acquisitions to further diversify our business by expanding our higher-return, value-added product and processing portfolio.

“While metal pricing is declining during the third quarter, we remain optimistic regarding underlying demand and our ability to consistently produce earnings in all market cycles,” Marabito concluded.

The Board of Directors approved a regular quarterly cash dividend of $0.09 per share, which is payable on September 15, 2022, to shareholders of record on September 1, 2022. The Company has paid a regular quarterly dividend since March 2006. The Company raised its quarterly dividend from $0.02 per share to $0.09 per share in March 2022.

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 Six months ended
June 30, June 30,

2022

2021

2022

2021

   
Net income per diluted share

$

3.26

 

$

2.58

 

$

6.49

 

$

4.49

 

   
Excluding the following items
LIFO Expense

 

-

 

 

0.26

 

 

-

 

 

0.32

 

Gain on Sale of Milan Warehouse

 

-

 

 

-

 

 

(0.13

)

 

-

 

   
Adjusted net income (loss) per diluted share (non-GAAP)

$

3.26

$

2.84

$

6.36

 

$

4.81

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 Six Months Ended
6/30/2022 6/30/2021 6/30/2022 6/30/2021
   
Net income (GAAP):

$

37,624

 

$

29,649

 

$

74,926

 

$

51,657

 

Excluding the following items:
Foreign exchange (income) loss included in net income

 

15

 

 

(1

)

 

21

 

 

9

 

Interest and other expense on debt

 

2,271

 

 

2,017

 

 

4,269

 

 

3,671

 

Income tax provision

 

13,955

 

 

10,772

 

 

27,771

 

 

18,689

 

Depreciation and amortization

 

4,946

 

 

5,272

 

 

9,928

 

 

10,508

 

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

 

58,811

 

 

47,709

 

 

116,915

 

 

84,534

 

   
LIFO Expense

 

-

 

 

4,000

 

 

-

 

 

5,000

 

Gain on Sale of Milan Warehouse

 

-

 

 

-

 

 

(2,083

)

 

-

 

   
Adjusted EBITDA (non-GAAP)

$

58,811

$

51,709

 

$

114,832

 

$

89,534

Conference Call and Webcast

A simulcast of Olympic Steel’s 2022 second-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 August 5, 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 and 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; 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 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 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; 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; 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; 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; 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; 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 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 Six months ended
June 30 June 30

2022

2021

2022

2021

   
Net sales

$

709,176

 

$

556,077

 

$

1,405,509

 

$

1,019,201

 

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

 

560,546

 

 

428,704

 

 

1,115,653

 

 

783,368

 

Warehouse and processing

 

27,624

 

 

26,539

 

 

51,672

 

 

49,945

 

Administrative and general

 

31,969

 

 

26,463

 

 

61,591

 

 

49,517

 

Distribution

 

16,441

 

 

14,099

 

 

31,482

 

 

27,662

 

Selling

 

10,494

 

 

9,787

 

 

21,316

 

 

18,253

 

Occupancy

 

3,291

 

 

2,776

 

 

6,880

 

 

5,922

 

Depreciation

 

4,354

 

 

4,664

 

 

8,704

 

 

9,314

 

Amortization

 

592

 

 

608

 

 

1,224

 

 

1,194

 

    
Total costs and expenses

 

655,311

 

 

513,640

 

 

1,298,522

 

 

945,175

 

   
Operating income

 

53,865

 

 

42,437

 

 

106,987

 

 

74,026

 

   
Other income (loss), net

 

(15

)

 

1

 

 

(21

)

 

(9

)

   
Income before interest and income taxes

 

53,850

 

 

42,438

 

 

106,966

 

 

74,017

 

   
Interest and other expense on debt

 

2,271

 

 

2,017

 

 

4,269

 

 

3,671

 

   
Income before income taxes

 

51,579

 

 

40,421

 

 

102,697

 

 

70,346

 

   
Income tax provision

 

13,955

 

 

10,772

 

 

27,771

 

 

18,689

 

   
Net income

$

37,624

 

$

29,649

 

$

74,926

 

$

51,657

 

   
   
Earnings per share:
   
Net income per share - basic

$

3.26

 

$

2.58

 

$

6.49

 

$

4.50

 

   
Weighted average shares outstanding - basic

 

11,538

 

 

11,492

 

 

11,536

 

 

11,491

 

   
Net income per share - diluted

$

3.26

 

$

2.58

 

$

6.49

 

$

4.49

 

   
Weighted average shares outstanding - diluted

 

11,545

 

 

11,504

 

11,540

 

 

11,501

 

Olympic Steel, Inc.

Balance Sheets

(in thousands)

   
As of

June 30,

2022
As of

December 31,

2021
Assets
   
Cash and cash equivalents

$

8,446

 

$

9,812

 

Accounts receivable, net

 

320,917

 

 

284,570

 

Inventories, net (includes LIFO reserves of $19,736 as of June 30, 2022 and December 31, 2021 respectively)

 

511,135

 

 

485,029

 

Prepaid expenses and other

 

14,398

 

 

9,989

 

   
Total current assets

 

854,896

 

 

789,400

 

   
Property and equipment, at cost

 

419,732

 

 

413,396

 

Accumulated depreciation

 

(272,786

)

 

(266,340

)

   
Net property and equipment

 

146,946

 

 

147,056

 

   
Goodwill

 

10,496

 

 

10,496

 

Intangible assets, net

 

32,844

 

 

33,653

 

Other long-term assets

 

13,427

 

 

15,241

 

Right of use asset, net

 

27,507

 

 

27,726

 

   
Total assets

$

1,086,116

 

$

1,023,572

 

   
Liabilities
   
Accounts payable

$

182,410

 

$

148,649

 

Accrued payroll

 

34,660

 

 

44,352

 

Other accrued liabilities

 

21,402

 

 

25,395

 

Current portion of lease liabilities

 

6,127

 

 

5,940

 

   
Total current liabilities

 

244,599

 

 

224,336

 

   
Credit facility revolver

 

287,880

 

 

327,764

 

Other long-term liabilities

 

11,439

 

 

15,006

 

Deferred income taxes

 

20,790

 

 

9,890

 

Lease liabilities

 

21,849

 

 

22,137

 

   
Total liabilities

 

586,557

 

 

599,133

 

   
   
Shareholders' Equity
   
Preferred stock

 

-

 

 

-

 

Common stock

 

134,089

 

 

133,427

 

Accumulated other comprehensive loss

 

(462

)

 

(1,996

)

Retained earnings

 

365,932

 

 

293,008

 

   
Total shareholders' equity

 

499,559

 

 

424,439

 

   
Total liabilities and shareholders' equity

$

1,086,116

 

$

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 June 30,
Carbon Flat Products Specialty Metals Flat

Products
Tubular and Pipe

Products

2022

2021

2022

2021

2022

2021

   
Tons sold

 

210,604

 

 

244,383

 

 

38,386

 

 

40,188

 

 

N/A

 

 

N/A

 

   
Net sales

$

370,665

 

$

325,511

 

$

226,964

 

$

138,035

 

$

111,547

 

$

92,531

 

Average selling price per ton

 

1,760

 

 

1,332

 

 

5,913

 

 

3,435

 

 

N/A

 

 

N/A

 

Cost of materials sold

 

310,633

 

 

249,934

 

 

164,441

 

 

107,587

 

 

85,472

 

 

71,183

 

Gross profit

 

60,032

 

 

75,577

 

 

62,523

 

 

30,448

 

 

26,075

 

 

21,348

 

Operating expenses

 

44,414

 

 

45,143

 

 

26,050

 

 

16,746

 

 

18,775

 

 

18,309

 

Operating income

 

15,618

 

 

30,434

 

 

36,473

 

 

13,702

 

 

7,300

 

 

3,039

 

   
Depreciation and amortization

 

2,698

 

 

2,949

 

 

1,008

 

 

901

 

 

1,222

 

 

1,404

 

LIFO expense

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

4,000

 

   
Three months ended March 31,
Carbon Flat Products Specialty Metals Flat

Products
Tubular and Pipe

Products

2022

2021

2022

2021

2022

2021

   
Tons sold

 

416,687

 

 

484,231

 

 

76,830

 

 

82,075

 

 

N/A

 

 

N/A

 

   
Net sales

$

750,214

 

$

571,884

 

$

426,443

 

$

264,354

 

$

228,852

 

$

182,963

 

Average selling price per ton

 

1,800

 

 

1,181

 

 

5,550

 

 

3,221

 

 

N/A

 

 

N/A

 

Cost of materials sold

 

638,346

 

 

434,106

 

 

305,431

 

 

211,121

 

 

171,876

 

 

138,141

 

Gross profit

 

111,868

 

 

137,778

 

 

121,012

 

 

53,233

 

 

56,976

 

 

44,822

 

Operating expenses

 

86,375

 

 

86,145

 

 

50,455

 

 

31,509

 

 

35,094

 

 

35,463

 

Operating income

 

25,493

 

 

51,633

 

 

70,557

 

 

21,724

 

 

21,882

 

 

9,359

 

   
Depreciation and amortization

 

5,372

 

 

5,872

 

 

2,013

 

 

1,804

 

 

2,508

 

 

2,796

 

LIFO expense

 

-

 

-

 

-

 

-

 

-

 

5,000

   
As of

June 30,

2022
As of

December 31,

2021
Assets
Flat-products

$

828,286

 

$

777,074

 

Tubular and pipe products

 

257,402

 

 

245,962

 

Corporate

 

428

 

 

536

 

Total assets

$

1,086,116

 

$

1,023,572

 

Other Information

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

   
(in thousands except per share data) As of

June 30,

2022
As of

December 31,

2021
Shareholders' equity per share

$

44.89

 

$

38.31

 

   
Debt to equity ratio

0.58 to 1

0.77 to 1

   
   
Six Months Ended June 30,

2022

2021

   
Net cash from (used for) operating activities

 

47,687

 

 

(95,744

)

   
Cash dividends per share

$

0.18

$

0.04

 

 

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