Olympic Steel Reports Third-Quarter 2024 Results

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, 2024. Net income for the third quarter totaled $2.7 million, or $0.23 per diluted share, compared with net income of $12.2 million, or $1.06 per diluted share, in the third quarter of 2023. EBITDA for the third quarter of 2024 was $15.0 million, compared with $27.1 million in the third quarter of 2023. Both third-quarter 2024 and 2023 results include $2.0 million of LIFO pretax income. The Company reported sales totaling $470 million in the third quarter of 2024, compared with $526 million in the third quarter of 2023, due primarily to year-over-year declines in metal pricing. “Olympic Steel’s strategies for diversification enabled all three business segments to deliver EBITDA-positive results despite industry-wide pricing pressure,” said Richard T. Marabito, Chief Executive Officer. “Macroeconomic trends during the third quarter resulted in lower overall OEM contractual demand, pressuring margins across all segments. Despite these headwinds, we have remained profitable through our diversification into counter-cyclical steel-intensive end products, focusing on higher-margin opportunities such as flat-rolled coated products, and expansion of our fabrication capabilities.” Marabito continued, “During the third quarter, we reduced our debt by approximately $12 million to $197 million, and we entered the fourth quarter with approximately $304 million of credit availability. In response to the ongoing uncertainty in the macroeconomic environment, we are closely managing our operating expenses, while continuing to invest in equipment automation and processing that will drive efficiency, productivity and future growth.” Marabito concluded, “Overall, we believe the success of our acquisitions and our capital investments in key organic growth areas, has created a stronger and more resilient Olympic Steel. As we showed in the third quarter, we can deliver profitable results even in challenging times. We also have the strategic focus and financial flexibility to further invest in organic and acquisitive growth opportunities in steel-intensive end products, fabricating and automation to enhance our throughput, quality, safety and profitability. Despite near-term market challenges, we remain optimistic for the long-term outlook for Olympic Steel and our industry.” The Board of Directors approved a regular quarterly cash dividend of $0.15 per share, which is payable on December 16, 2024, to shareholders of record as of December 2, 2024. 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, 2024 2023 2024 2023 Net income per diluted share (GAAP) $ 0.23 $ 1.06 $ 1.64 $ 3.21 Excluding the following items LIFO income (0.12 ) (0.13 ) (0.16 ) (0.19 ) Acquisition Inventory fair market value adjustment - - - 0.13 Acquisition related expenses - - - 0.16 Employee retention credit - (0.25 ) - (0.25 ) Adjusted net income per diluted share (non-GAAP) $ 0.11 $ 0.68 $ 1.48 $ 3.06 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 September 30, September 30, 2024 2023 2024 2023 Net income (GAAP): $ 2,734 $ 12,230 $ 19,091 $ 37,121 Excluding the following items Other loss, net 26 28 66 67 Interest and other expense on debt 3,880 3,953 12,283 12,379 Income tax provision 1,169 4,674 7,417 14,813 Depreciation and amortization 7,234 6,185 21,795 18,859 Earnings before interest, taxes, depreciation and amortization (EBITDA) 15,043 27,070 60,652 83,239 LIFO income (2,000 ) (2,000 ) (2,600 ) (3,000 ) Acquisition Inventory fair market value adjustment - - - 2,079 Acquisition related expenses - - - 2,556 Employee retention credit - (4,000 ) - (4,000 ) Adjusted EBITDA (non-GAAP) $ 13,043 $ 21,070 $ 58,052 $ 80,874 Conference Call and Webcast A simulcast of Olympic Steel’s 2024 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 1, 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; 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; supply disruptions and inflationary pressures, including the availability and rising costs of transportation, energy, logistical services and labor; 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; supplier consolidation or addition of new capacity; risks associated with the war in 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; risks associated with shortages of skilled labor, increased labor costs and our ability to attract and retain qualified 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; rising interest rates and their impacts on our variable interest rate debt; customer, supplier and competitor consolidation, bankruptcy or insolvency; cyclicality and volatility within the metals industry; the timing and outcomes of inventory lower of cost or net realizable value adjustments and LIFO income or expense; 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 impacts of union organizing activities and the success of union contract renewals; 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; 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 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, valves and fittings; tin plate and manufactured products. The Company was founded in 1954 and operates from 47 locations across 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, 2024 2023 2024 2023 Net sales $ 469,996 $ 526,411 $ 1,522,888 $ 1,668,755 Costs and expenses Cost of materials sold (excludes items shown separately below) 363,144 414,480 1,177,229 1,308,988 Warehouse and processing 31,719 28,954 97,855 91,125 Administrative and general 28,226 26,181 87,545 91,047 Distribution 16,881 16,342 51,101 51,531 Selling 10,721 9,587 35,458 30,373 Occupancy 4,262 3,797 13,048 12,452 Depreciation 5,740 5,008 17,585 15,330 Amortization 1,494 1,177 4,210 3,529 Total costs and expenses 462,187 505,526 1,484,031 1,604,375 Operating income 7,809 20,885 38,857 64,380 Other loss, net 26 28 66 67 Income before interest and income taxes 7,783 20,857 38,791 64,313 Interest and other expense on debt 3,880 3,953 12,283 12,379 Income before income taxes 3,903 16,904 26,508 51,934 Income tax provision 1,169 4,674 7,417 14,813 Net income $ 2,734 $ 12,230 $ 19,091 $ 37,121 Earnings per share: Net income per share - basic $ 0.23 $ 1.06 $ 1.64 $ 3.21 Weighted average shares outstanding - basic 11,695 11,586 11,673 11,568 Net income per share - diluted $ 0.23 $ 1.06 $ 1.64 $ 3.21 Weighted average shares outstanding - diluted 11,695 11,592 11,673 11,571 Olympic Steel, Inc. Balance Sheets (in thousands) As ofSeptember 30, 2024 As ofDecember 31, 2023 Assets Cash and cash equivalents $ 11,116 $ 13,224 Accounts receivable, net 197,592 191,149 Inventories, net (includes LIFO reserves of $9,443 and $12,043 as of September 30, 2024 and December 31, 2023, respectively) 399,394 386,535 Prepaid expenses and other 14,306 12,261 Total current assets 622,408 603,169 Property and equipment, at cost 506,631 483,448 Accumulated depreciation (313,775 ) (297,340 ) Net property and equipment 192,856 186,108 Goodwill 52,091 52,091 Intangible assets, net 89,342 92,621 Other long-term assets 19,642 16,466 Right of use asset, net 35,672 34,380 Total assets $ 1,012,011 $ 984,835 Liabilities Accounts payable $ 125,342 $ 119,718 Accrued payroll 23,366 30,113 Other accrued liabilities 22,569 22,593 Current portion of lease liabilities 5,671 7,813 Total current liabilities 176,948 180,237 Credit facility revolver 197,276 190,198 Other long-term liabilities 24,810 20,151 Deferred income taxes 11,571 11,510 Lease liabilities 30,796 27,261 Total liabilities 441,401 429,357 Shareholders' Equity Preferred stock - - Common stock 138,040 136,541 Accumulated other comprehensive income (loss) (408 ) 41 Retained earnings 432,978 418,896 Total shareholders' equity 570,610 555,478 Total liabilities and shareholders' equity $ 1,012,011 $ 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 September 30, Carbon Flat Products Specialty Metals Flat Products Tubular and Pipe Products 2024 2023 2024 2023 2024 2023 Tons sold 1 204,211 207,145 29,738 27,936 N/A N/A Net sales $ 264,849 $ 304,478 $ 125,693 $ 132,763 $ 79,454 $ 89,170 Average selling price per ton 1,297 1,470 4,227 4,752 N/A N/A Cost of materials sold 208,093 242,532 103,450 111,622 51,601 60,326 Gross profit 56,756 61,946 22,243 21,141 27,853 28,844 Operating expenses 56,322 51,997 17,307 16,473 21,377 18,811 Operating income 434 9,949 4,936 4,668 6,476 10,033 Depreciation and amortization 4,028 3,568 1,005 871 2,184 1,729 LIFO income - - - - (2,000 ) (2,000 ) Nine Months Ended September 30, Carbon Flat Products Specialty Metals Flat Products Tubular and Pipe Products 2024 2023 2024 2023 2024 2023 Tons sold 1 652,976 651,758 91,336 89,163 N/A N/A Net sales $ 873,579 $ 940,925 $ 386,100 $ 446,327 $ 263,209 $ 281,503 Average selling price per ton 1,338 1,444 4,227 5,006 N/A N/A Cost of materials sold 687,704 744,040 315,984 371,935 173,541 193,013 Gross profit 185,875 196,885 70,116 74,392 89,668 88,490 Operating expenses 171,423 166,295 53,400 53,786 69,068 59,345 Operating income 14,452 30,590 16,716 20,606 20,600 29,145 Depreciation and amortization 12,221 10,891 2,922 2,878 6,600 5,038 LIFO income - - - - (2,600 ) (3,000 ) 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. As ofSeptember 30,2024 As ofDecember 31,2023 Assets Flat-products $ 666,508 $ 649,744 Tubular and pipe products 344,289 333,677 Corporate 1,214 1,414 Total assets $ 1,012,011 $ 984,835 Other Information (in thousands, except per-share and ratio data) As of September 30, 2024 As of December 31, 2023 Shareholders' equity per share $ 51.26 $ 49.90 Debt to equity ratio 0.35 to 1 0.34 to 1 Nine Months Ended September 30, 2024 2023 Net cash from operating activities $ 19,114 $ 120,999 Cash dividends per share $ 0.45 $ 0.38

Olympic Steel Reports Third-Quarter 2024 Results

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