Business Wire | Nov 4, 2021 04:30PM EDT

Olympic Steel Reports Record Third-Quarter 2021 Results

Nov. 04, 2021

CLEVELAND--(BUSINESS WIRE)--Nov. 04, 2021--Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced record quarterly financial results for the three months ended September 30, 2021. Net income for the third quarter totaled $44.5 million, or $3.87 per diluted share, compared with a net loss of $1.5 million, or $0.13 per diluted share, in the third quarter of 2020. The results include $7.0 million ($0.45 per share impact) of LIFO pre-tax expense in the third quarter of 2021, compared with $0.1 million of LIFO pre-tax income in the same period a year ago. Adjusted EBITDA for the third quarter of 2021 was $70.5 million, compared with $4.3 million in the third quarter of 2020.

The Company reported sales totaling $668 million for the third quarter of 2021, compared with $300 million in the third quarter of 2020.

"Our third-quarter financial results represent the best quarterly performance in Olympic Steel's history. Sales, net income and EBITDA significantly exceeded our previous records set in the second quarter of this year," said Richard T. Marabito, Chief Executive Officer.

Marabito added, "We have continued to execute our long-term strategy to further diversify our business, deliver consistent profitability and enhance shareholder value. As part of that effort, on September 17, we announced the sale of our Detroit operations which were primarily focused on the distribution of flat-rolled carbon steel to domestic automakers and their related suppliers. We quickly redeployed a portion of that sale's proceeds on October 1 to acquire Shaw Stainless & Alloy, Inc., a stainless steel distributor, fabricator and end-product manufacturer. The acquisition of Shaw Stainless is expected to replace the former Detroit operations earnings stream at a fraction of the investment. We also continue to make investments in processing equipment and automation to drive growth, operational efficiency and safety results."

Marabito concluded, "Customer demand and our shipping volumes remain strong, despite continued supply chain disruptions. Our total shipments have outpaced the industry through the first three quarters of this year, particularly in our higher-margin product categories. As a result of the outstanding efforts of our entire team, the success of our acquisitions, our strong balance sheet and commitment to our long-term strategy, we remain well-positioned for a strong fourth quarter and our continued pursuit of higher-margin growth opportunities."

The Board of Directors also approved a regular quarterly cash dividend of $0.02 per share, which is payable on December 15, 2021, to shareholders of record on December 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 the most directly comparable GAAP financial measure:

Three Months Ended Nine Months Ended 9/30/2021 9/30/2020 9/30/2021 9/30/2020 Net income per diluted share $ 3.87 $ (0.13 ) $ 8.36 $ (0.64 ) (GAAP): Excluding the following items: LIFO (Income) / Expense 0.45 (0.01 ) 0.77 (0.07 )

Gain on Sale of Detroit Operations (0.23 ) - (0.23 ) -

Restructuring and other charges - - - 0.21

Adjusted net income per diluted $ 4.09 $ (0.14 ) $ 8.90 $ (0.50 ) share (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 EndedNine Months Ended9/30/20219/30/20209/30/20219/30/2020Net income (GAAP):$

44,533

$

(1,520

)

$

96,190

$

(7,381

)

Excluding the following items:Foreign exchange loss included in net income15

25

24

68

Interest and other expense on debt1,947

1,693

5,618

5,823

Income tax provision (benefit)15,665

(561

)

34,354

(3,307

)

Depreciation and amortization4,813

4,727

15,321

14,567

Earnings before interest, taxes, depreciation andamortization (EBITDA)66,973

4,364

151,507

9,770

LIFO (Income) / Expense7,000

(100

)

12,000

(1,100

)

Gain on Sale of Detroit Operations(3,499

)

-

(3,499

)

-

Restructuring and other charges-

-

-

3,586

Adjusted EBITDA (non-GAAP)$

70,474

$

4,264

$

160,008

$

12,256

Conference Call and Webcast

A simulcast of Olympic Steel's 2021 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 5, 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 of falling metals prices and inventory devaluation; 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, and other factors; supply disruptions and inflationary pressures, including the availability and rising costs of transportation and logistical services and labor; 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; 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 further diversify our business, deliver consistent profitability and enhance shareholder value, including, without limitation, our ability to successfully redeploy the proceeds from the sale of our Detroit operation and other capital; 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; 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 41 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 comparable GAAP financial measure:

Three Months Ended Nine Months Ended 9/30/2021 9/30/2020 9/30/2021 9/30/2020 Net income (GAAP): $ 44,533 $ (1,520 ) $ 96,190 $ (7,381 )

Excluding the following items: Foreign exchange loss 15 25 24 68 included in net income Interest and other expense on 1,947 1,693 5,618 5,823 debt Income tax provision 15,665 (561 ) 34,354 (3,307 ) (benefit) Depreciation and amortization 4,813 4,727 15,321 14,567

Earnings before interest, taxes, depreciation and amortization (EBITDA) 66,973 4,364 151,507 9,770

LIFO (Income) / Expense 7,000 (100 ) 12,000 (1,100 )

Gain on Sale of Detroit (3,499 ) - (3,499 ) - Operations Restructuring and other - - - 3,586 charges Adjusted EBITDA (non-GAAP) $ 70,474 $ 4,264 $ 160,008 $ 12,256

Conference Call and Webcast

A simulcast of Olympic Steel's 2021 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 5, 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 of falling metals prices and inventory devaluation; 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, and other factors; supply disruptions and inflationary pressures, including the availability and rising costs of transportation and logistical services and labor; 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; 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 further diversify our business, deliver consistent profitability and enhance shareholder value, including, without limitation, our ability to successfully redeploy the proceeds from the sale of our Detroit operation and other capital; 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; 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 41 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 Nine months ended

September 30 September 30

2021 2020 2021 2020

Net sales $ 668,466 $ 299,921 $ 1,687,667 $ 902,597

Costs and expensesCost of materials sold 520,866 239,967 1,304,234 718,726 (excludes items shownseparately below)Warehouse and 26,208 19,471 76,153 62,173 processingAdministrative and 24,811 16,507 74,328 52,577 generalDistribution 14,424 11,226 42,086 33,133

Selling 12,155 6,130 30,408 18,863

Occupancy 3,029 2,256 8,951 7,355

Depreciation 4,243 4,347 13,557 13,422

Amortization 570 380 1,764 1,145

Total costs and 606,306 300,284 1,551,481 907,394 expenses Operating income 62,160 (363 ) 136,186 (4,797 )(loss) Other loss, net (15 ) (25 ) (24 ) (68 )

Income (loss) before 62,145 (388 ) 136,162 (4,865 )interest and incometaxes Interest and other 1,947 1,693 5,618 5,823 expense on debt Income (loss) before 60,198 (2,081 ) 130,544 (10,688 )income taxes Income tax provision 15,665 (561 ) 34,354 (3,307 )(benefit) Net income (loss) $ 44,533 $ (1,520 ) $ 96,190 $ (7,381 )

Earnings per share: Net income (loss) per $ 3.88 $ (0.13 ) $ 8.37 $ (0.64 )share - basic Weighted average 11,492 11,452 11,491 11,447 shares outstanding -basic Net income (loss) per $ 3.87 $ (0.13 ) $ 8.36 $ (0.64 )share - diluted Weighted average 11,515 11,452 11,509 11,447 shares outstanding -dilutedOlympic Steel, Inc.Balance Sheet(in thousands)

As of As of September December 31, 30, 2020 2021Assets Cash and cash equivalents $ 15,143 $ 5,533

Accounts receivable, net 303,236 151,601

Inventories, net (includes LIFO credit of $9,885 417,979 240,001 and LIFO debit of $2,115 as of September 30, 2021and December 31, 2020 respectively)Prepaid expenses and other 12,459 5,069

Total current assets 748,817 402,204

Property and equipment, at cost 412,635 434,579

Accumulated depreciation (265,360 ) (277,379 )

Net property and equipment 147,275 157,200

Goodwill 5,234 5,123

Intangible assets, net 31,307 32,593

Other long-term assets 15,203 18,131

Right of use asset, net 23,470 25,354

Total assets $ 971,306 $ 640,605

Liabilities Accounts payable $ 160,034 $ 87,291

Accrued payroll 35,493 10,985

Other accrued liabilities 28,450 22,869

Current portion of lease liabilities 5,457 5,580

Total current liabilities 229,434 126,725

Credit facility revolver 297,880 160,609

Other long-term liabilities 16,620 22,478

Deferred income taxes 10,365 9,818

Lease liabilities 18,292 19,965

Total liabilities 572,591 339,595

Shareholders' Equity Preferred stock - -

Common stock 133,174 132,382

Accumulated other comprehensive loss (2,827 ) (4,215 )

Retained earnings 268,368 172,843

Total shareholders' equity 398,715 301,010

Total liabilities and shareholders' equity $ 971,306 $ 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 September 30, Carbon Flat Products Specialty Metals Flat Tubular and Pipe Products Products

2021 2020 2021 2020 2021 2020

Tons sold 244,519 224,199 41,203 33,735 N/A N/A

Net sales $ 404,596 $ 167,948 $ 164,179 $ 80,904 $ 99,691 $ 51,069

Average 1,655 749 3,985 2,398 N/A N/Aselling priceper tonCost of 321,005 134,845 120,227 69,790 79,634 35,332materialssoldGross profit 83,591 33,103 43,952 11,114 20,057 15,737

Operating 46,427 34,707 19,289 8,666 17,703 14,993expensesOperating 37,164 (1,604 ) 24,663 2,448 2,354 744income (loss) Depreciation 2,698 2,852 858 513 1,239 1,344andamortization Nine months ended September 30, Carbon Flat Products Specialty Metals Flat Tubular and Pipe Products Products

2021 2020 2021 2020 2021 2020

Tons sold 728,750 672,133 123,278 92,642 N/A N/A

Net sales $ 976,480 $ 511,726 $ 428,533 $ 223,887 $ 282,654 $ 166,984

Average 1,340 761 3,476 2,417 N/A N/Aselling priceper tonCost of 755,111 412,907 331,348 191,108 217,775 114,711materialssoldGross profit 221,369 98,819 97,185 32,779 64,879 52,273

Operating 132,572 111,197 50,798 25,605 53,166 44,999expensesOperating 88,797 (12,378 ) 46,387 7,174 11,713 7,274income (loss) Depreciation 8,570 8,932 2,662 1,457 4,035 4,076andamortization As of As of September December 30, 31, 2021 2020AssetsFlat-products $ 721,133 $ 404,269

Tubular and 249,566 235,516 pipe productsCorporate 607 820

Total assets $ 971,306 $ 640,605

Other Information

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

As of As of September 30, December 31, 2021 2020Shareholders' equity per share $ 35.99 $ 27.18

Debt to equity ratio 0.75 to 1 0.53 to 1 Nine Months Ended September 30, 2021 2020

Net cash from (used for) operating activities (126,937 ) 28,653

Cash dividends per share $ 0.06 $ 0.06

View source version on businesswire.com: https://www.businesswire.com/news/home/20211104006325/en/

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