Olympic Steel Reports Second-Quarter 2022 Results

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

CLEVELAND--(BUSINESS WIRE)--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