Business Wire | Aug 5, 2021 04:30PM EDT

Olympic Steel Reports Record Second-Quarter 2021 Results

Aug. 05, 2021

CLEVELAND--(BUSINESS WIRE)--Aug. 05, 2021--Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced record financial results for the three months ended June 30, 2021. Net income for the second quarter totaled $29.6 million, or $2.58 per diluted share, compared with a net loss of $6.5 million, or $0.56 per diluted share, in the second quarter of 2020. The results include $4.0 million of LIFO pre-tax expense in the second quarter of 2021, compared with $0.5 million of LIFO pre-tax income in the same period a year ago. Adjusted EBITDA for the second quarter of 2021 was $51.7 million, compared with $0.5 million in the second quarter of 2020.

The Company reported sales totaling $556 million for the second quarter of 2021, compared with $248 million in the second quarter of 2020.

"The second quarter of 2021 was the most profitable quarter in the history of Olympic Steel. Our strategic execution and ongoing focus on working capital and operating expenses, combined with exceptional markets and historically high metal prices, resulted in record quarterly adjusted EBITDA of $51.7 million and our second consecutive quarter of record sales. Our shipping volumes have returned to pre-COVID levels and we expect steady demand to continue in the third quarter despite our customers navigating persistent component shortages and other supply chain and labor constraints," said Richard T. Marabito, Chief Executive Officer.

Marabito continued, "We are seeing the results of our long-term strategy to position Olympic Steel to deliver consistent profitability. We are optimistic about the future and, in the near term, anticipate a similarly strong third quarter. Our robust balance sheet was bolstered by our recently amended and extended $475 million credit facility to provide continued access to low-cost capital, financial flexibility and additional borrowing capacity to further pursue acquisition opportunities and our organic growth initiatives. We are hopeful that new infrastructure legislation will be passed this year and we are poised to be a key supplier to our customers who provide equipment and components that are critical to the nation's roads, bridges and other infrastructure."

The Board of Directors also approved a regular quarterly cash dividend of $0.02 per share, which is payable on September 15, 2021, to shareholders of record on September 1, 2021.

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 (Loss) Per Diluted Share to

Adjusted Net Income (Loss) Per Diluted 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 Six Months Ended June 30, June 30,

2021 2020 2021 2020





Net income (loss) per diluted share $ 2.58 $ (0.56 ) $ 4.49 $ (0.51 )(GAAP):



Excluding the following items:

LIFO (income) / expense 0.26 (0.03 ) 0.32 (0.06 )

Restructuring and other charges 0.22 0.22



Adjusted net income (loss) per diluted share $ 2.84 $ (0.38 ) $ 4.81 $ (0.35 )(non-GAAP):



Reconciliation of Net Income (Loss) to Adjusted EBITDA

(in thousands)

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

Three Months Ended

June 30,

Six Months Ended

June 30,

2021

2020

2021

2020

Net income (loss) (GAAP):

$

29,649

$

(6,454

)

$

51,657

$

(5,861

)

Excluding the following items:

Foreign exchange (income) loss included in net

income

(1

)

26

9

43

Interest and other expenses on debt

2,017

1,891

3,671

4,130

Income tax provision (benefit)

10,772

(2,948

)

18,689

(2,746

)

Depreciation and amortization

5,272

4,927

10,508

9,840

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

47,709

(2,558

)

84,534

5,406

LIFO (income) / Expense

4,000

(500

)

5,000

(1,000

)

Restructuring and other charges:

-

3,586

-

3,586

Adjusted EBITDA (non-GAAP)

$

51,709

$

528

$

89,534

$

7,992

Conference Call and Webcast

A simulcast of Olympic Steel's 2021 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 6, 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 supply chain disruption resulting from the imbalance of metal supply and end user demands related to the novel Corona Virus or COVID-19; 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; 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; 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; general and global business, economic, financial and political conditions, including legislation passed under the new 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; 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 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.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(in thousands)

The following table reconciles Adjusted EBITDA to the most directly comparableGAAP financial measure:





Three Months Ended Six Months Ended June 30, June 30,

2021 2020 2021 2020



Net income (loss) (GAAP): $ 29,649 $ (6,454 ) $ 51,657 $ (5,861 )



Excluding the following items:

Foreign exchange (income) loss included in net (1 ) 26 9 43 income

Interest and other expenses 2,017 1,891 3,671 4,130 on debt

Income tax provision 10,772 (2,948 ) 18,689 (2,746 ) (benefit)

Depreciation and amortization 5,272 4,927 10,508 9,840

Earnings before interest, taxes, depreciation and 47,709 (2,558 ) amortization (EBITDA) 84,534 5,406



LIFO (income) / Expense 4,000 (500 ) 5,000 (1,000 )

Restructuring and other - 3,586 - 3,586 charges:



Adjusted EBITDA (non-GAAP) $ 51,709 $ 528 $ 89,534 $ 7,992



Conference Call and Webcast

A simulcast of Olympic Steel's 2021 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 6, 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 supply chain disruption resulting from the imbalance of metal supply and end user demands related to the novel Corona Virus or COVID-19; 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; 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; 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; general and global business, economic, financial and political conditions, including legislation passed under the new 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; 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 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.

Olympic Steel, Inc.Consolidated Statements of Net Income (Loss)(in thousands, except per-share data)



Three months ended Six months ended

June 30 June 30

2021 2020 2021 2020

Net sales $ 556,077 $ 248,296 $ 1,019,201 $ 602,676

Costs and expensesCost of materials sold 428,704 196,237 783,368 478,759 (excludes items shownseparately below)Warehouse and processing 26,539 19,626 49,945 42,702

Administrative and 26,463 17,011 49,517 36,070 generalDistribution 14,099 9,618 27,662 21,907

Selling 9,787 5,923 18,253 12,733

Occupancy 2,776 2,439 5,922 5,099

Depreciation 4,664 4,559 9,314 9,075

Amortization 608 368 1,194 765

Total costs and expenses 513,640 255,781 945,175 607,110

Operating income (loss) 42,437 (7,485 ) 74,026 (4,434 )

Other income (loss), net 1 (26 ) (9 ) (43 )

Income (loss) before 42,438 (7,511 ) 74,017 (4,477 )interest and incometaxes Interest and other 2,017 1,891 3,671 4,130 expense on debt Income (loss) before 40,421 (9,402 ) 70,346 (8,607 )income taxes Income tax provision 10,772 (2,948 ) 18,689 (2,746 )(benefit) Net income (loss) $ 29,649 $ (6,454 ) $ 51,657 $ (5,861 )

Earnings per share: Net income (loss) per $ 2.58 $ (0.56 ) $ 4.50 $ (0.51 )share - basic Weighted average shares 11,492 11,446 11,491 11,445 outstanding - basic Net income (loss) per $ 2.58 $ (0.56 ) $ 4.49 $ (0.51 )share - diluted Weighted average shares 11,504 11,446 11,501 11,445 outstanding - diluted Olympic Steel, Inc.Balance Sheet(in thousands)



As of As of June 30, December 31, 2021 2020

Assets Cash and cash equivalents $ 11,636 $ 5,533

Accounts receivable, net 264,451 151,601

Inventories, net (includes LIFO credit of $2,885 373,277 240,001 and LIFO debit of $2,115 as of June 30, 2021 andDecember 31, 2020 respectively)Prepaid expenses and other 10,295 5,069

Total current assets 659,659 402,204

Property and equipment, at cost 434,506 434,579

Accumulated depreciation (282,487 ) (277,379 )

Net property and equipment 152,019 157,200

Goodwill 5,234 5,123

Intangible assets, net 31,666 32,593

Other long-term assets 15,587 18,131

Right of use asset, net 23,524 25,354

Total assets $ 887,689 $ 640,605

Liabilities Accounts payable $ 154,390 $ 87,291

Accrued payroll 24,913 10,985

Other accrued liabilities 31,542 22,869

Current portion of lease liabilities 5,525 5,580

Total current liabilities 216,370 126,725

Credit facility revolver 268,975 160,609

Other long-term liabilities 17,305 22,478

Deferred income taxes 12,968 9,818

Lease liabilities 18,251 19,965

Total liabilities 533,869 339,595

Shareholders' Equity Preferred stock - -

Common stock 132,916 132,382

Accumulated other comprehensive loss (3,153 ) (4,215 )

Retained earnings 224,057 172,843

Total shareholders' equity 353,820 301,010

Total liabilities and shareholders' equity $ 887,689 $ 640,605

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 June 30, Carbon Flat Products Specialty Metals Flat Tubuluar and Pipe Products Products

2021 2020 2021 2020 2021 2020

Tons sold 244,383 184,824 40,188 24,337 N/A N/A

Net sales $ 325,511 $ 140,811 $ 138,035 $ 54,495 $ 92,531 $ 52,990

Average 1,332 762 3,435 2,239 N/A N/Aselling priceper tonCost of 249,934 114,925 107,587 45,083 71,183 36,229materialssoldGross profit 75,577 25,886 30,448 9,412 21,348 16,761

Operating 45,143 35,314 16,746 7,421 18,309 14,536expensesOperating 30,434 (9,428 ) 13,702 1,991 3,039 2,225income (loss) Depreciation 2,949 3,070 901 447 1,404 1,368andamortization Six months ended June 30, Specialty Metals Flat Tubuluar and Pipe Carbon Flat Products Products Products

2021 2020 2021 2020 2021 2020

Tons sold 484,231 447,934 82,075 58,907 N/A N/A

Net sales $ 571,884 $ 343,778 $ 264,354 $ 142,983 $ 182,963 $ 115,915

Average 1,181 767 3,221 2,427 N/A N/Aselling priceper tonCost of 434,106 278,062 211,121 121,318 138,141 79,379materialssoldGross profit 137,778 65,716 53,233 21,665 44,822 36,536

Operating 86,145 76,490 31,509 16,939 35,463 30,006expensesOperating 51,633 (10,774 ) 21,724 4,726 9,359 6,530income (loss) Depreciation 5,872 6,080 1,804 944 2,796 2,732andamortization As of As of June 30, December 2021 31, 2020

AssetsFlat-products $ 640,826 $ 404,269

Tubular and 246,185 235,516 pipe productsCorporate 678 820

Total assets $ 887,689 $ 640,605

Other information(in thousands except per share data) As of June 30, As of December 31, 2021 2020 Shareholders' equity per share $ 31.94 $ 27.18

Debt to equity ratio 0.76 to 1 0.53 to 1 Six Months Ended June 30,

2021 2020

Net cash from (used for) operating (95,744 ) 3,512activities Cash dividends per share $ 0.04 $ 0.04

View source version on businesswire.com: https://www.businesswire.com/news/home/20210805006138/en/

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