ZEUS Olympic Steel Inc

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

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 ofDecember 31,2022 As ofDecember 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 FlatProducts Tubular and PipeProducts

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 ofDecember 31,2022 As ofDecember 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 ofDecember 31,2022 As ofDecember 31,2021 Shareholders' equity per share

$

46.36

$

38.31

 

  Debt to equity ratio 0.32 to 1 0.77 to 1     Twelve Months EndedDecember 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