ZEUS Olympic Steel Inc

Diversified offerings in end products, higher-margin mix of flat-rolled products and additional fabrication capabilities drive profitability in a challenging pricing market

Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced financial results for the three months ended June 30, 2024.

Net income for the second quarter totaled $7.7 million, or $0.66 per diluted share, compared with net income of $15.0 million, or $1.30 per diluted share, in the second quarter of 2023. The results include $1.0 million of LIFO pre-tax income in both the second quarter of 2024 and 2023. Adjusted EBITDA for the second quarter of 2024 was $21.3 million, compared with $31.2 million in the second quarter of 2023.

The Company reported higher year-over-year shipping volumes on sales of $526 million in the second quarter of 2024, compared with $569 million in the second quarter of 2023.

“Olympic Steel’s ability to capitalize on our diversification strategy was critical to delivering profitability across all three business segments in the second quarter,” said Richard T. Marabito, Chief Executive Officer. “During the second quarter of 2024, hot-rolled index pricing fell 22% and has fallen 39% since the beginning of the year. Our efforts to grow and expand in end products, higher-margin flat-rolled products including coated products, and additional fabrication capabilities have strengthened our business and make us more resilient in challenging pricing environments. Our second-quarter results are a testament to this strategy, as well as to the dedication of our team to drive profitability in all market conditions.”

Marabito continued, “We are in an excellent financial position with a strong balance sheet and more than $340 million of borrowing availability. This access to capital gives us flexibility to grow organically and through acquisition. We recently ordered two new cut-to-length lines and one high-speed slitter to further expand our efforts in our coated and specialty metals product lines.”

Marabito concluded, “As we move into the second half of 2024, we remain committed to driving profitability and delivering on our disciplines around working capital and operating efficiencies. While we expect market conditions to remain challenging in the near term, we are confident that Olympic Steel is well-positioned to navigate these pressures to deliver consistent results for our shareholders.”

The Board of Directors approved a regular quarterly cash dividend of $0.15 per share, which is payable on September 16, 2024, to shareholders of record on September 2, 2024. The Company has paid a regular quarterly dividend since March 2006, increasing the dividend in each of the last three years.

The table that follows provides a reconciliation of certain non-GAAP measures to the most directly comparable measures prepared in accordance with GAAP. Additional reconciliations can be found in the Segment Financial Information table which also follows.

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,

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

  Net income per diluted share (GAAP)

$

0.66

 

$

1.30

 

$

1.40

 

$

2.15

 

  Excluding the following items LIFO income

 

(0.06

)

 

(0.06

)

 

(0.04

)

 

(0.06

)

Acquisition Inventory fair market value adjustment

 

-

 

 

-

 

 

-

 

 

0.13

 

Acquisition related expenses

 

-

 

 

-

 

 

-

 

 

0.16

 

  Adjusted net income per diluted share (non-GAAP)

$

0.60

 

$

1.24

 

$

1.36

 

$

2.38

 

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 6/30/2024 6/30/2023 6/30/2024 6/30/2023   Net income (GAAP):

$

7,660

 

$

15,019

 

$

16,357

 

$

24,891

 

Excluding the following items Other loss, net

 

21

 

 

28

 

 

40

 

 

39

 

Interest and other expense on debt

 

4,393

 

 

4,203

 

 

8,403

 

 

8,426

 

Income tax provision

 

3,036

 

 

6,522

 

 

6,248

 

 

10,139

 

Depreciation and amortization

 

7,227

 

 

6,473

 

 

14,561

 

 

12,674

 

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

 

22,337

 

 

32,245

 

 

45,609

 

 

56,169

 

  LIFO income

 

(1,000

)

 

(1,000

)

 

(600

)

 

(1,000

)

Acquisition Inventory fair market value adjustment

 

-

 

 

-

 

 

-

 

 

2,079

 

Acquisition related expenses

 

-

 

 

-

 

 

-

 

 

2,556

 

Adjusted EBITDA (non-GAAP)

$

21,337

 

$

31,245

 

$

45,009

 

$

59,804

 

Conference Call and Webcast

A simulcast of Olympic Steel’s 2024 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 2, 2024, 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; supplier consolidation or addition of new capacity; rising interest rates and their impacts on our variable interest rate debt; risks associated with the invasion of Ukraine, including economic sanctions, and the conflicts in the Middle East, or additional war, military conflict, or hostilities could adversely affect global metals supply and pricing; general and global business, economic, financial and political conditions, including, but not limited to, recessionary conditions, legislation passed under the current administration and the 2024 U.S. presidential election; reduced production schedules, layoffs or work stoppages by our own, our suppliers' or customers' personnel; risks associated with supply chain disruption resulting from the imbalance of metal supply and end-user demands, including additional shutdowns as a result of infectious disease outbreaks in large markets, such as China, and other factors; 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 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; risks associated with infectious disease outbreaks, 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 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; 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 LIFO income or expense; 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; cyclicality and volatility within the metals industry; 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; risks and uncertainties associated with intangible assets, including impairment charges related to indefinite lived intangible assets; our ability to generate free cash flow through operations and repay debt; 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; 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 (NASDAQ: ZEUS) is a leading U.S. metals service center focused on the direct sale and value-added processing of carbon and coated sheet, plate, and coil products; stainless steel sheet, plate, bar and coil; aluminum sheet, plate and coil; pipe, tube, bar, valves and fittings; tin plate and metal-intensive end-use products, including water treatment systems; commercial, residential and industrial venting and air filtration systems; Wright® brand self-dumping hoppers; and EZ-Dumper® dump inserts. Headquartered in Cleveland, Ohio, Olympic Steel operates from 47 facilities.

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,

2024

 

2023

 

2024

 

2023

  Net sales

$

526,250

$

569,268

$

1,052,892

$

1,142,344

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

 

406,547

 

441,872

 

814,085

 

894,508

Warehouse and processing

 

33,243

 

31,522

 

66,136

 

62,171

Administrative and general

 

29,167

 

31,681

 

59,319

 

64,866

Distribution

 

17,462

 

17,448

 

34,220

 

35,189

Selling

 

13,201

 

10,389

 

24,737

 

20,786

Occupancy

 

4,293

 

4,111

 

8,786

 

8,655

Depreciation

 

5,839

 

5,245

 

11,845

 

10,322

Amortization

 

1,388

 

1,228

 

2,716

 

2,352

  Total costs and expenses

 

511,140

 

543,496

 

1,021,844

 

1,098,849

  Operating income

 

15,110

 

25,772

 

31,048

 

43,495

  Other loss, net

 

21

 

28

 

40

 

39

  Income before interest and income taxes

 

15,089

 

25,744

 

31,008

 

43,456

  Interest and other expense on debt

 

4,393

 

4,203

 

8,403

 

8,426

  Income before income taxes

 

10,696

 

21,541

 

22,605

 

35,030

  Income tax provision

 

3,036

 

6,522

 

6,248

 

10,139

  Net income

$

7,660

$

15,019

$

16,357

$

24,891

    Earnings per share:   Net income per share - basic

$

0.66

$

1.30

$

1.40

$

2.15

  Weighted average shares outstanding - basic

 

11,662

 

11,569

 

11,663

 

11,570

  Net income per share - diluted

$

0.66

$

1.30

$

1.40

$

2.15

  Weighted average shares outstanding - diluted

 

11,662

 

11,572

 

11,663

 

11,572

Olympic Steel, Inc.

Balance Sheets

(in thousands)

  As ofJune 30, 2024 As ofDecember 31, 2023 Assets   Cash and cash equivalents

$

9,443

 

$

13,224

 

Accounts receivable, net

 

216,682

 

 

191,149

 

Inventories, net (includes LIFO reserves of $11,443 and $12,043 as of June 30, 2024 and December 31, 2023, respectively)

 

386,240

 

 

386,535

 

Prepaid expenses and other

 

10,725

 

 

12,261

 

  Total current assets

 

623,090

 

 

603,169

 

  Property and equipment, at cost

 

495,879

 

 

483,448

 

Accumulated depreciation

 

(308,685

)

 

(297,340

)

  Net property and equipment

 

187,194

 

 

186,108

 

  Goodwill

 

52,091

 

 

52,091

 

Intangible assets, net

 

90,474

 

 

92,621

 

Other long-term assets

 

19,150

 

 

16,466

 

Right of use asset, net

 

34,297

 

 

34,380

 

  Total assets

$

1,006,296

 

$

984,835

 

  Liabilities   Accounts payable

$

119,104

 

$

119,718

 

Accrued payroll

 

20,545

 

 

30,113

 

Other accrued liabilities

 

19,084

 

 

22,593

 

Current portion of lease liabilities

 

6,582

 

 

7,813

 

  Total current liabilities

 

165,315

 

 

180,237

 

  Credit facility revolver

 

209,186

 

 

190,198

 

Other long-term liabilities

 

23,281

 

 

20,151

 

Deferred income taxes

 

10,613

 

 

11,510

 

Lease liabilities

 

28,448

 

 

27,261

 

  Total liabilities

 

436,843

 

 

429,357

 

    Shareholders' Equity   Preferred stock

 

-

 

 

-

 

Common stock

 

137,541

 

 

136,541

 

Accumulated other comprehensive loss

 

-

 

 

41

 

Retained earnings

 

431,912

 

 

418,896

 

  Total shareholders' equity

 

569,453

 

 

555,478

 

  Total liabilities and shareholders' equity

$

1,006,296

 

$

984,835

 

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

2024

2023

2024

2023

2024

2023

  Tons sold 1

 

229,090

 

226,275

 

31,695

 

28,711

 

N/A

 

 

N/A

 

  Net sales

$

307,755

$

326,629

$

130,873

$

147,000

$

87,622

 

$

95,639

 

Average selling price per ton

 

1,343

 

1,444

 

4,129

 

5,120

 

N/A

 

 

N/A

 

Cost of materials sold

 

243,996

 

253,072

 

104,944

 

122,600

 

57,607

 

 

66,200

 

Gross profit

 

63,759

 

73,557

 

25,929

 

24,400

 

30,015

 

 

29,439

 

Operating expenses

 

58,398

 

58,862

 

18,080

 

17,721

 

23,518

 

 

20,068

 

Operating income

 

5,361

 

14,695

 

7,849

 

6,679

 

6,497

 

 

9,371

 

  Depreciation and amortization

 

4,112

 

3,716

 

929

 

1,023

 

2,168

 

 

1,716

 

LIFO (income) / expense

 

-

 

-

 

-

 

-

 

(1,000

)

 

(1,000

)

  Six Months Ended June 30, Carbon Flat Products Specialty Metals Flat Products Tubular and Pipe Products

2024

2023

2024

2023

2024

2023

  Tons sold 1

 

448,765

 

444,613

 

61,598

 

61,227

 

N/A

 

 

N/A

 

  Net sales

$

608,730

$

636,447

$

260,407

$

313,564

$

183,755

 

$

192,333

 

Average selling price per ton

 

1,356

 

1,431

 

4,228

 

5,121

 

N/A

 

 

N/A

 

Cost of materials sold

 

479,611

 

501,508

 

212,534

 

260,313

 

121,940

 

 

132,687

 

Gross profit

 

129,119

 

134,939

 

47,873

 

53,251

 

61,815

 

 

59,646

 

Operating expenses

 

115,101

 

114,298

 

36,093

 

37,313

 

47,691

 

 

40,534

 

Operating income

 

14,018

 

20,641

 

11,780

 

15,938

 

14,124

 

 

19,112

 

  Depreciation and amortization

 

8,193

 

7,323

 

1,917

 

2,007

 

4,416

 

 

3,309

 

LIFO (income) / expense

 

-

 

-

 

-

 

-

 

(600

)

 

(1,000

)

  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 for the entire Tubular and Pipe Products Segment.

Other Information

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

  As ofJune 30,2024 As ofDecember 31,2023 Assets Flat-products

$

665,840

 

$

649,744

Tubular and pipe products

 

339,175

 

 

333,677

Corporate

 

1,281

 

 

1,414

Total assets

$

1,006,296

 

$

984,835

    Other information As ofJune 30,2024 As ofDecember 31,2023 Shareholders' equity per share

$

51.15

 

$

49.90

  Debt to equity ratio 0.37 to 1 0.34 to 1     Six Months Ended June 30,

2024

2023

  Net cash from (used for) operating activities

$

(5,512

)

$

79,196

  Cash dividends per share

$

0.30

 

$

0.25

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240731141949/en/

Richard A. Manson Chief Financial Officer (216) 672-0522 ir@olysteel.com