Business Wire | Feb 25, 2021 06:30AM EST

Olympic Steel Reports Fourth-Quarter and Full-Year 2020 Results

Feb. 25, 2021

CLEVELAND--(BUSINESS WIRE)--Feb. 25, 2021--Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced financial results for the three and 12 months ended December 31, 2020.

Fourth-Quarter Results

Net income for the fourth quarter totaled $1.8 million, or $0.16 per diluted share, compared with a net loss of $0.9 million, or $0.08 per diluted share, in the fourth quarter of 2019. The results include $0.4 million of LIFO pre-tax income in the fourth quarter of 2020, compared with $2.4 million of LIFO pre-tax income in the same period a year ago. Adjusted EBITDA for the fourth quarter of 2020 was $9.9 million, compared with $3.4 million in the fourth quarter of 2019.

Sales for the fourth quarter of 2020 totaled $332 million, compared with $320 million in the fourth quarter of 2019. The increase in sales was the result of a 3% increase in consolidated volumes compared with the fourth quarter of the prior year.

Full-Year Results

Net loss for 2020 totaled $5.6 million, or $0.49 per diluted share, compared with net income of $3.9 million, or $0.34 per diluted share, in 2019. The results include $1.5 million of LIFO income in 2020, compared with $3.7 million of LIFO income in 2019. Sales for 2020 totaled $1.2 billion, compared with $1.6 billion in 2019.

The impact of LIFO and the reconciliation of Adjusted Net Income Per Diluted Share and Adjusted EBITDA to the most directly comparable GAAP measures are included below.

"Olympic Steel delivered its strongest performance of the year in the fourth quarter of 2020, which is a true testament to the hard work and resilience of our entire team," said Richard T. Marabito, Chief Executive Officer. "We are proud to finish this unprecedented year on a high note by delivering improved profitability while safely operating as an essential business."

Marabito continued, "Market dynamics became increasingly favorable throughout the fourth quarter, as shipping volumes approached pre-pandemic levels and metals prices rose, driving sales increases across all three of our segments. At the same time, we maintained the disciplines enacted early in the pandemic, including operating expense reductions, improved inventory turns and reduction of debt to a four-year low, all of which contributed to the successful fourth quarter. In addition, we continue to execute on our strategy to profitably grow and reduce cyclicality, with the successful December 2020 acquisition of Action Stainless & Alloys, Inc., which brings a talented team, additional product offerings and an expanded geographic footprint, including Texas, Missouri and Arkansas, to grow our specialty metals business."

Marabito concluded, "We enter 2021 with optimism and momentum as market conditions are favorable and metal prices have reached all-time highs. We will stay vigilant in our operational discipline to capitalize on efficiencies and operate with flexibility in the face of the ongoing pandemic, the recovering economy and changing industry dynamics. Looking forward, we believe we are in an excellent position to drive significantly higher profitability in the first quarter of 2021, while executing on our long-term strategy to further diversify our business through both investing in higher-return growth opportunities and through additional acquisitions."

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 PerDiluted Share

(Figures may not foot due to rounding.)

The following table reconciles adjusted net income per diluted share to themost directly comparable GAAP financial measure:

Three Months Ended Twelve Months Ended December 31, December 31,

2020 2019 2020 2019





Net income (loss) per diluted $ 0.16 $ (0.08 ) $ (0.49 ) $ 0.34 share (GAAP):



Excluding the following items:

LIFO income (0.02 ) (0.15 ) (0.09 ) (0.23 )

Restructuring and other charges:

Net loss on sale of assets - - 0.13 -

Mexico facility exit - - 0.05 -

COVID-related severance and bad - - 0.03 - debt expense



Adjusted net income (loss) per $ 0.14 $ (0.23 ) $ (0.37 ) $ 0.11diluted share (non-GAAP):

Reconciliation of Net Income to EBITDA

(in thousands)

The following table reconciles EBITDA to the most directly comparable GAAP financial measure:

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2020

2019

2020

2019

Net income (loss) (GAAP):

$

1,786

$

(890

)

$

(5,595

)

$

3,856

Excluding the following items:

Foreign exchange (income) loss included in net Income

5

(1

)

73

32

Interest and other expenses on debt

1,588

2,304

7,411

11,289

Income tax provision (benefit)

1,991

(398

)

(1,316

)

1,433

Depreciation and amortization

4,923

4,821

19,490

19,030

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

10,293

5,836

20,063

35,640

LIFO Income

(417

)

(2,419

)

(1,517

)

(3,669

)

Restructuring and other charges:

Net loss on sale of assets

-

-

2,109

-

Mexico facility exit

-

-

900

-

COVID-related severance and bad debt expense

-

-

577

-

Adjusted EBITDA (non-GAAP)

$

9,876

$

3,417

$

22,132

$

31,971

Conference Call and Webcast

A simulcast of Olympic Steel's 2020 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 9 a.m. ET on February 25, 2021, 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 associated with the novel coronavirus, or COVID-19, pandemic, including, but not limited to supply chain disruptions and 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; risks of falling metals prices and inventory devaluation; general and global business, economic, financial and political conditions, including legislation passed under the new administration; competitive factors such as the availability, 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; 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; 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; the availability and rising costs of transportation and logistical services; 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; rising interest rates and their impacts on our variable interest rate debt; 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; 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; 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 36 facilities in North America.

For additional information, please visit the Company's website at www.olysteel.com or https://olysteel.irpass.com/Contact_Us?BzID=2195

Reconciliation of Net Income to EBITDA

(in thousands)

The following table reconciles EBITDA to the most directly comparable GAAPfinancial measure:

Three Months Ended Twelve Months Ended December 31, December 31,

2020 2019 2020 2019



Net income (loss) (GAAP): $ 1,786 $ (890 ) $ (5,595 ) $ 3,856



Excluding the following items:

Foreign exchange (income) 5 (1 ) 73 32loss included in net Income

Interest and other expenses 1,588 2,304 7,411 11,289 on debt

Income tax provision 1,991 (398 ) (1,316 ) 1,433 (benefit)

Depreciation and amortization 4,923 4,821 19,490 19,030

Earnings before interest, taxes, depreciation and 10,293 5,836 amortization (EBITDA) 20,063 35,640

LIFO Income (417 ) (2,419 ) (1,517 ) (3,669 )

Restructuring and other charges:

Net loss on sale of assets - - 2,109 -

Mexico facility exit - - 900 -

COVID-related severance and - - 577 - bad debt expense

Adjusted EBITDA (non-GAAP) $ 9,876 $ 3,417 $ 22,132 $ 31,971

Conference Call and Webcast

A simulcast of Olympic Steel's 2020 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 9 a.m. ET on February 25, 2021, 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 associated with the novel coronavirus, or COVID-19, pandemic, including, but not limited to supply chain disruptions and 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; risks of falling metals prices and inventory devaluation; general and global business, economic, financial and political conditions, including legislation passed under the new administration; competitive factors such as the availability, 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; 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; 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; the availability and rising costs of transportation and logistical services; 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; rising interest rates and their impacts on our variable interest rate debt; 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; 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; 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 36 facilities in North America.

For additional information, please visit the Company's website at www.olysteel.com or https://olysteel.irpass.com/Contact_Us?BzID=2195

Olympic Steel, Inc.

Consolidated Statements of Net Income

(in thousands, except per-share data)

Three months ended Twelve months ended December 31, December 31, 2020 2019 2020 2019

Net sales $ 331,547 $ 319,740 $ 1,234,144 $ 1,579,040

Costs and expensesCost of materialssold (excludes items 260,373 251,130 979,099 1,280,110 shown separatelybelow)Warehouse and 20,918 23,519 83,091 99,457 processingAdministrative and 18,874 18,786 71,451 76,863 generalDistribution 11,595 10,989 44,728 48,159

Selling 7,187 7,080 26,050 28,839

Occupancy 2,307 2,400 9,662 9,972

Depreciation 4,514 4,475 17,936 17,686

Amortization 409 346 1,554 1,344

Total costs and 326,177 318,725 1,233,571 1,562,430 expenses Operating income 5,370 1,015 573 16,610

Other income (loss), (5 ) 1 (73 ) (32 )net Income before 5,365 1,016 500 16,578 financing costs andincome taxes Interest and other 1,588 2,304 7,411 11,289 expense on debt Income (loss) before 3,777 (1,288 ) (6,911 ) 5,289 income taxes Income tax provision 1,991 (398 ) (1,316 ) 1,433 (benefit) Net income (loss) $ 1,786 $ (890 ) $ (5,595 ) $ 3,856

Earnings per share: Net income (loss) $ 0.16 $ (0.08 ) $ (0.49 ) $ 0.34 per share - basic Weighted average 11,451 11,416 11,447 11,509 shares outstanding -basic Net income (loss) $ 0.16 $ (0.08 ) $ (0.49 ) $ 0.34 per share - diluted Weighted average 11,475 11,416 11,447 11,509 shares outstanding -dilutedOlympic Steel, Inc.

Balance Sheets

(in thousands)

As of As of

December 31, December 31,

2020 2019

Assets Cash and cash equivalents $ 5,533 $ 5,742

Accounts receivable, net 151,601 133,572

Inventories, net (includes LIFO debits of $2,115 240,001 273,531 and $598 as of December 31, 2020 and 2019respectively)Prepaid expenses and other 5,069 6,997

Total current assets 402,204 419,842

Property and equipment, at cost 434,579 417,124

Accumulated depreciation (277,379 ) (260,331 )

Net property and equipment 157,200 156,793

Goodwill 5,123 3,423

Intangible assets, net 32,593 29,259

Other long-term assets 18,131 14,439

Right of use asset, net 25,354 25,799

Total assets $ 640,605 $ 649,555

Liabilities Accounts payable $ 87,291 $ 69,452

Accrued payroll 10,985 13,196

Other accrued liabilities 22,869 12,958

Current portion of lease liabilities 5,580 5,481

Total current liabilities 126,725 101,087

Credit facility revolver 160,609 192,925

Other long-term liabilities 22,478 14,511

Deferred income taxes 9,818 12,262

Lease liabilities 19,965 20,418

Total liabilities 339,595 341,203

Shareholders' Equity Preferred stock - -

Common stock 132,382 131,647

Treasury stock - (335 )

Accumulated other comprehensive loss (4,215 ) (2,281 )

Retained earnings 172,843 179,321

Total shareholders' equity 301,010 308,352

Total liabilities and shareholders' equity $ 640,605 $ 649,555

Olympic Steel, Inc.

Segment Financial Information

(In thousands, except tonnage and per-ton data. Figures may not foot toconsolidated totals due to Corporate expenses.)

Three months ended December 31.

Specialty Metals Flat Tubular and Pipe Carbon Flat Products Products Products

2020 2019 2020 2019 2020 2019

Tons sold 225,576 221,446 34,031 30,439 N/A N/A

Net sales $ 178,547 $ 176,982 $ 89,303 $ 81,916 $ 63,697 $ 60,842

Average 791.52 799.21 2,624.17 2,691.15 N/A N/Aselling priceper tonCost of 138,881 141,172 75,326 68,795 46,166 41,163materialssoldGross profit 39,666 35,810 13,977 13,121 17,531 19,679

Operating 37,577 40,230 9,485 9,072 15,786 15,625expensesOperating $ 2,089 $ (4,420 ) $ 4,492 $ 4,049 $ 1,745 $ 4,054income (loss) Depreciation $ 3,009 $ 3,000 $ 494 $ 427 $ 1,402 $ 1,352andamortization Twelve Months Ended December 31,

Specialty Metals Flat Tubular and Pipe Carbon Flat Products Products Products

2020 2019 2020 2019 2020 2019

Tons sold 897,709 1,010,340 126,673 141,828 N/A N/A

Net sales $ 690,273 $ 926,903 $ 313,190 $ 363,634 $ 230,681 $ 288,503

Average 768.93 917.42 2,472.43 2,563.91 N/A N/Aselling priceper tonCost of 551,788 763,549 266,434 310,931 160,877 205,630materialssoldGross profit 138,485 163,354 46,756 52,703 69,804 82,873

Operating 148,774 168,377 35,090 38,382 60,785 64,266expensesOperating $ (10,289 ) $ (5,023 ) $ 11,666 $ 14,321 $ 9,019 $ 18,607income (loss) Depreciation $ 11,941 $ 11,624 $ 1,951 $ 1,830 $ 5,478 $ 5,408andamortization As of As of December December 31, 31, 2019 2020

AssetsFlat-products $ 404,269 $ 432,566

Tubular and 235,516 215,841 pipe productsCorporate 820 1,148

Total assets $ 640,605 $ 649,555

Other Information

(in thousands except per-share and ratio data)

As of As of

(in thousands except per share data) December 31, December 31,

2020 2019

$ $ Shareholders' equity per share 27.18 28.04

Debt to equity ratio 0.53 to 1 0.63 to 1 Twelve Months Ended

December 31,

2020 2019

Net cash from (used for) operating $ $ activities 61,652 129,621

$ $ Cash dividends per share 0.08 0.08

View source version on businesswire.com: https://www.businesswire.com/news/home/20210225005491/en/

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