Olympic Steel Reports First-Quarter Results

First-Quarter Net Sales Increased 19% to $446 Million in 2019

Board Declares Regular Quarterly Cash Dividend

CLEVELAND–(BUSINESS WIRE)–Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals
service center, today announced financial results for the three months
ended March 31, 2019.

First-quarter 2019 net sales increased 19%, to $446 million, compared
with $376 million in the first quarter of 2018. The increase in net
sales was driven by higher average selling prices. Net income was $2.1
million, or $0.18 per diluted share, in the first quarter, compared with
$7.6 million, or $0.67 per diluted share, in the same quarter of 2018.
While current-year profit margins were pressured by declining steel
prices, first-quarter 2019 sales and earnings were sequentially higher
than fourth-quarter results. First-quarter results include the Company’s
January 2019 acquisition of McCullough Industries. There was no LIFO
adjustment made during the first quarter of 2019.

“Net sales in the first quarter were up nearly 20% over the same quarter
in the prior year, despite lower shipments for carbon flat products,
mirroring the industry’s market trend,” said Chief Executive Officer
Richard T. Marabito. “Our Specialty Metals and Tubular and Pipe
businesses performed well, with strong contributions to our
first-quarter results.”

“Our most recent acquisition, McCullough Industries, is off to an
exceptional start, with profitability and integration contributions in
line with our expectations. As we advance our long-term growth strategy,
we continue to evaluate opportunities with similar vertical downstream
advantages, proven track records of profitability and strong management
teams.”

“Seasonally, the second quarter is typically stronger than the first
quarter, and we are optimistic about contributions from successful
execution of our recent capital investments. We will remain focused on
controlling our operating expenses and improving inventory turnover
throughout the year,” Marabito said.

The Company’s Board of Directors also approved a regular quarterly cash
dividend of $0.02 per share, which is payable on June 17, 2019, to
shareholders of record on June 3, 2019.

The table that follows provides a reconciliation of non-GAAP measures to
measures prepared in accordance with GAAP.

 

Olympic Steel, Inc.

Reconciliation of Net Income Per Diluted Share to Adjusted Net
Income Per Diluted Share

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

 

 

 
Three Months Ended
March 31,
2019   2018
 
 
Net income per diluted share (GAAP): $ 0.18 $ 0.67
 
Excluding the following items:
LIFO expense     0.03
Adjusted net income per diluted share (non-GAAP): $ 0.18 $ 0.70
 

Conference Call and Webcast

A simulcast of Olympic Steel’s 2019 first-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. EST on May 2, and a replay will
be available for approximately 14 days thereafter.

Forward-Looking Statements

It is the Company’s policy not to endorse any analyst’s sales or
earnings estimates. Forward-looking statements in this release are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are typically
identified by words or phrases such as “may,” “will,” “anticipate,”
“should,” “intend,” “expect,” “believe,” “estimate,” “project,” “plan,”
“potential,” and “continue,” as well as the negative of these terms or
similar expressions. Such forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to
differ materially from those implied by such statements. Readers are
cautioned not to place undue reliance on these forward-looking
statements. Such risks and uncertainties include, but are not limited
to: risks of falling metals prices and inventory devaluation; general
and global business, economic, financial and political conditions;
competitive factors such as the availability, global production levels
and pricing of metals, industry shipping and inventory levels and rapid
fluctuations in customer demand and metals pricing; 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 newly 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;
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 availability, and increased costs, of labor related to
tighter employment markets; the availability and rising costs of
transportation and logistical services; customer, supplier and
competitor consolidation, bankruptcy or insolvency; reduced production
schedules, layoffs or work stoppages by our own, our suppliers’ or
customers’ personnel; the adequacy of our existing information
technology and business system software, including duplication and
security processes; the adequacy of our efforts to mitigate cyber
security risks and threats; 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
market 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, which
is a non-GAAP financial measure. Management’s view of the Company’s
performance includes adjusted earnings per share, and management uses
this non-GAAP financial measure internally for planning and forecasting
purposes and to measure the performance of the Company. We believe this
non-GAAP financial measure provides useful and meaningful information to
us and investors because it enhances investors’ understanding of the
continuing operating performance of our business and facilitates the
comparison of performance between past and future periods. This non-GAAP
financial measure should be considered in addition to, but not as a
substitute for, the information prepared in accordance with GAAP. A
reconciliation of this non-GAAP measure to the most directly comparable
GAAP financial measure 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
fabricates pressure parts for the electric utility industry.
Headquartered in Cleveland, Ohio, Olympic Steel operates from 30
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 Comprehensive Income

(in thousands, except per-share data)

 
Three Months Ended Mar. 31,

2019

  2018
 
Net sales $ 445,919   $ 375,598
 
Costs and expenses

Cost of materials sold (excludes items shown separately below)

366,382 294,777
Warehouse and processing 25,611 23,436
Administrative and general 20,129 18,872
Distribution 12,835 12,139
Selling 7,340 7,228
Occupancy 2,798 2,555
Depreciation 4,431 4,024
Amortization   319     222  
 
Total costs and expenses   439,845     363,253  
 
Operating income 6,074 12,345
 
Other income (loss), net   14     (46 )
 
Income before interest and income taxes 6,088 12,299
Interest and other expense on debt   3,242     1,986  
 
Income before income taxes 2,846 10,313
Income tax provision   772     2,684  
 
Net income $ 2,074   $ 7,629  
 
Earnings per share:
 

Net income per share – basic

$ 0.18   $ 0.67  
 

Weighted average shares outstanding – basic

  11,488     11,418  
 
Net income per share – diluted $ 0.18   $ 0.67  
 
Weighted average shares outstanding – diluted   11,488     11,418  
 
   
Olympic Steel, Inc.
Consolidated Balance Sheets

(in thousands)

 
At Mar. 31, 2019   At Dec. 31, 2018
Assets
 
Cash and cash equivalents $ 5,113 $ 9,319
Accounts receivable, net 204,448 175,252
Inventories, net (includes LIFO reserve of $3,071 as of March 31,
2019 and December 31, 2018)
342,876 368,738
Prepaid expenses and other   9,886       9,460  
Total current assets   562,323       562,769  
 
Property and equipment, at cost 410,053 403,785
Accumulated depreciation   (248,346 )     (244,176 )
Net property and equipment   161,707       159,609  
 
Goodwill 3,264 2,358
Intangible assets, net 30,192 24,914
Other long-term assets 11,770 11,090
Right of use asset, net   30,106        
Total assets $ 799,362     $ 760,740  
 
 
Liabilities
Accounts payable $ 99,524 $ 95,367
Accrued payroll 9,346 19,665
Other accrued liabilities 14,974 13,395
Current portion of lease liabilities   5,861        
Total current liabilities   129,705       128,427  
 
Credit facility revolver 313,269 302,530
Other long-term liabilities 10,225 9,327
Deferred income taxes 12,686 13,465
Lease liabilities     24,277        
Total Liabilities     490,162       453,749  
 
Shareholder’s Equity
Common stock 132,275 130,778
Treasury stock (196 ) (132 )
Accumulated other comprehensive loss (1,078 )
Retained earnings   178,199       176,345  
Total shareholders’ equity   309,200       306,991  
Total liabilities and shareholders’ equity $ 799,362     $ 760,740  
 
 
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 March 31,
   
Carbon Flat   Specialty Metals Flat   Tubular and Pipe
Products Products

Products1

2019   2018 2019   2018 2019   2018
Tons sold1   273,171   297,604   35,784   24,863 NA NA
 
Net sales $ 278,536 $ 240,894 $ 88,097 $ 65,529 $ 79,286 $ 69,175
Average selling price per ton 1,020 809 2,462 2,636 NA NA
Cost of materials sold2   233,316   189,775   76,245   56,131 56,821   48,871
Gross profit3 45,220 51,119 11,852 9,398 22,465 20,304
Operating expenses4   43,994   43,013   9,608   6,387 16,850   16,037
Operating income $ 1,226 $ 8,106 $ 2,244 $ 3,011 $ 5,615 $ 4,267
 
Depreciation and Amortization $ 2,814 $ 2,560 $ 526 $ 204 $ 1,368 $ 1,456
 
At March 31, 2019 At Dec. 31, 2018
Assets
Flat products $ 584,006 $ 560,116
Tubular and pipe products 213,931 200,016
Corporate   1,425   608
Total assets $ 799,362 $ 760,740
 
 
Other Information
   
(In thousands, except per-share data) At March 31, 2019 At Dec. 31, 2018
Shareholders’ equity per share $ 28.09 $ 27.89
 
Debt-to-equity ratio 1.01 to 1 0.99 to 1
 
Three Months Ended March 31,
2019 2018
 
Net cash used for operating activities $ (1,165 ) $ (43,455 )
 
Cash dividends per share $ 0.02 $ 0.02
 
1   Tonnage is less meaningful for the Tubular and Pipe Products segment
and, therefore, is not reported.
2 Includes $0.5 million of LIFO expense in the three months ended
March 31, 2018.
3 Gross profit is calculated as net sales less the cost of materials
sold.
4 Operating expenses are calculated as total costs and expenses less
the cost of materials sold from the Consolidated Statements of
Comprehensive Income.

Contacts

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

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