Olympic Steel Reports 35% Growth in 2017 Second-Quarter Net Income

First-Half 2017 Net Income Triples, on 30% Higher Sales

Board Declares Regular Quarterly Cash Dividend

CLEVELAND--()--Olympic Steel Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced significantly improved financial results for the three- and six-month periods ended June 30, 2017.

Net sales increased 30% in 2017’s second quarter, to $356.2 million, compared with $273.6 million in net sales during the same quarter last year. Year-to-date net sales also rose 30%, reaching $691.1 million, versus $532.0 million in the first six months of 2016. Higher shipping volume and higher selling prices accounted for the year-over-year increase in net sales for both periods.

“Demand for our products has been steadily improving since late last year,” said Chairman and Chief Executive Officer Michael D. Siegal. “With increased customer demand, we continue to outpace the overall market and have increased our market share. This is attributable to our customer service exemplified by consistent on-time delivery and dependable quality.”

Second-quarter net income in 2017 was $4.8 million, or $0.42 per diluted share, compared with net income of $3.6 million, or $0.32 per diluted share, in 2016’s second quarter. Net income in the second quarter of 2017 was negatively impacted by $0.4 million, or $0.02 per diluted share, of LIFO expense recorded in the quarter. There was no LIFO impact in the same quarter of last year. In addition, 2017 second-quarter net income was reduced by $0.03 per diluted share related to the net loss generated by the Siler City, North Carolina facility, which the Company closed in July.

“The cost-containment initiatives we began instituting two years ago remain a focus for our operating teams,” Siegal said. “As expected, consistent operational discipline combined with growing shipments, are manifesting in higher profitability.”

Net income in the first half of 2017 surged to $12.5 million, or $1.10 per diluted share, up from $2.8 million, or $0.25 per diluted share in 2016’s comparable period. First-half 2017 results include LIFO expense totaling $0.8 million, or $0.04 per share, compared with no LIFO impact in the first half of 2016. As previously disclosed, an out-of-period income tax adjustment recorded in the first quarter of 2017 resulted in a one-time reduction of income tax expense. That adjustment increased net income in the first half of 2017 by $1.9 million, or $0.17 per diluted share.

The Company’s Board of Directors also approved a regular quarterly cash dividend of $0.02 per share, which is payable on Sept. 15, 2017, to shareholders of record on Sept. 1, 2017.

Conference Call and Webcast

A simulcast of Olympic Steel’s 2017 second-quarter earnings conference call can be accessed via the Investor Relations section of the Company’s website at www.olysteel.com. The simulcast will begin at 10 a.m. EDT on Aug. 3, and a replay of the call 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: 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; cyclicality and volatility within the metals industry; the strengthening of the U.S. dollar and the related impact on foreign steel pricing, U.S. exports, and foreign imports to the United States; the levels of imported steel in the United States and any associated tariffs and duties; the availability and costs of transportation and logistical services; the successes of our strategic efforts and initiatives to increase sales volumes, maintain or improve working capital turnover and free cash flows, improve our customer service, and achieve cost savings, including our internal program to improve earnings; our ability to generate free cash flow through operations and repay debt within anticipated time frames; 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 additional impairment charges related to indefinite lived intangible assets; events or circumstances that could adversely impact the successful operation of our processing equipment and operations; the amounts, successes and our ability to continue our capital investments and strategic growth initiatives, including our business information system implementations; the successes of our operational initiatives to improve our operating, cultural and management systems and reduce our costs; the ability to comply with the terms of our asset-based credit facility; the ability of our customers and third parties to honor their agreements related to derivative instruments; customer, supplier and competitor consolidation, bankruptcy or insolvency; reduced production schedules, layoffs or work stoppages by our own, our suppliers’ or customers’ personnel; the impacts of union organizing activities and the success of union contract renewals; the timing and outcomes of lower of cost or market adjustments and last-in, first-out, or LIFO, income or expense; the ability of our customers (especially those that may be highly leveraged, and those with inadequate liquidity) to maintain their credit availability; the inflation or deflation existing within the metals industry, as well as our 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; 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; access to capital and global credit markets; 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; 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; and 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.

About Olympic Steel

Founded in 1954, Olympic Steel is a leading U.S. metals service center focused on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel and aluminum 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 http://ir.olysteel.com/Contact_Us?BzID=2195

   
Olympic Steel, Inc.
Consolidated Statements of Comprehensive Income

(in thousands, except per-share data)

 
Three Months Ended June 30, Six Months Ended June 30,
2017   2016 2017   2016
(unaudited) (unaudited)
Net sales $ 356,195 $ 273,608 $ 691,088 $ 531,957
 
Costs and expenses

Cost of materials sold (excludes items shown separately below)

283,041 205,688 541,495 405,508
Warehouse and processing 21,838 21,035 45,339 41,527
Administrative and general 17,887 16,011 36,052 32,051
Distribution 10,568 9,560 20,933 18,767
Selling 6,496 6,045 13,007 11,732
Occupancy 2,191 2,158 4,501 4,495
Depreciation 4,319 4,550 8,633 9,059
Amortization   222     222     444     444  
 
Total costs and expenses   346,562     265,269     670,404     523,583  
 
Operating income 9,633 8,339 20,684 8,374
 
Other income (loss), net   (28 )   (58 )   (54 )   (63 )
 

Income before interest and income taxes

9,605 8,281 20,630 8,311
Interest and other expense on debt   1,788     1,274     3,414     2,559  
Income before income taxes 7,817 7,007 17,216 5,752
Income tax provision   3,020     3,457     4,720     2,969  
 
Net income $ 4,797   $ 3,550   $ 12,496   $ 2,783  
 
Earnings per share:
 
Net income per share - basic $ 0.42   $ 0.32   $ 1.10   $ 0.25  
 

Weighted average shares outstanding - basic

 

  11,383     11,182     11,382     11,199  
 
Net income per share - diluted $ 0.42   $ 0.32   $ 1.10   $ 0.25  
 

Weighted average shares outstanding - diluted

 

  11,390     11,182     11,387     11,199  
 

     
Olympic Steel, Inc.
Consolidated Balance Sheets

(in thousands)

 
At June 30, 2017 At Dec. 31 2016
(unaudited)
Assets
 
Cash and cash equivalents $ 4,126 $ 2,315
Accounts receivable, net 158,202 101,902

Inventories, net (includes LIFO debit of $7,269 as of June 30, 2017 and $8,045 as of Dec. 31, 2016)

262,740 254,526
Prepaid expenses and other 6,345 6,197
Assets held for sale   844     -  
Total current assets   432,257     364,940  
 
Property and equipment, at cost 375,808 374,242
Accumulated depreciation   (225,141 )   (218,476 )
Net property and equipment   150,667     155,766  
 
Intangible assets, net 23,424 23,869
Other long-term assets   11,861     11,493  
Total assets $ 618,209   $ 556,068  
 
Liabilities
 
Current portion of long-term debt $ 930 $ 1,825
Accounts payable 83,834 79,458
Accrued payroll 12,292 8,445
Other accrued liabilities   11,654     15,170  
Total current liabilities   108,710     104,898  
Credit facility revolver 210,728 164,599
Other long-term liabilities 10,781 10,062
Deferred income taxes   21,728     23,119  
Total liabilities   351,947     302,678  
 
Shareholders' Equity
 
Preferred stock - -
Common stock 129,392 128,619
Treasury stock (568 ) (609 )
Retained earnings   137,438     125,380  
Total shareholders' equity   266,262     253,390  
Total liabilities and shareholders' equity $ 618,209   $ 556,068  
 

 
Olympic Steel, Inc.
Segment Financial Information

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

 
Three Months Ended June 30:
  (unaudited)
Carbon Flat   Specialty Metals Flat   Tubular and Pipe
Products Products

Products1

2017   2016 2017   2016 2017   2016
Tons Sold1   308,458   272,447   22,539   21,768 NA NA
 
Net Sales $ 237,058 $ 173,122 $ 58,280 $ 49,529 $ 60,857 $ 50,957
Average selling price per ton 769 635 2,586 2,275 NA NA
Cost of materials sold2   189,650   129,137   50,046   41,991   43,345   34,560
Gross profit3 47,408 43,985 8,234 7,538 17,512 16,397
Operating expenses4   40,169   38,316   5,375   4,971   15,168   14,264
Operating income $ 7,239 $ 5,669 $ 2,859 $ 2,567 $ 2,344 $ 2,133
 
Depreciation and Amortization 2,905 2,988 198 190 1,412 1,568
 
 
Six Months Ended June 30:
(unaudited)
Carbon Flat Specialty Metals Flat Tubular and Pipe
Products Products

Products1

2017 2016 2017 2016 2017 2016
Tons Sold1   612,250   539,297   45,732   41,591 NA NA
 
Net Sales $ 453,974 $ 334,556 $ 116,235 $ 95,359 $ 120,879 $ 102,042
Average selling price per ton 741 620 2,542 2,294 NA NA
Cost of materials sold2   358,823   255,664   98,330   81,186   84,342   68,658
Gross profit3 95,151 78,892 17,905 14,173 36,537 33,384
Operating expenses4   80,537   75,401   11,061   9,850   31,706   29,008
Operating income $ 14,614 $ 3,491 $ 6,844 $ 4,323 $ 4,831 $ 4,376
 
Depreciation and Amortization 5,794 5,942 424 383 2,808 3,127

1

  Tonnage is less meaningful for the Tubular and Pipe Products segment and therefore, is not reported.

2

Includes $0.4 million, and $0.8 million, of LIFO expense for the Tubular and Pipe Products segment for the three and six months ended June 30, 2017, respectively.

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.
 

             
Olympic Steel, Inc.
Segment Financial Information Cont.

(In thousands, unaudited)

 
 

At June 30,
2017

At Dec. 31,
2016

Assets
Flat products $ 422,259 $ 363,626
Tubular and pipe products 195,647 192,088
Corporate   303     354
Total assets $ 618,209   $ 556,068
 
 

Other Information:

(audited, in thousands, except per-share data)

At June 30,
2017

At Dec. 31,
2016

 
Shareholders' equity per share $ 24.28 $ 23.11
 
Debt-to-equity ratio 0.79 to 1 0.66 to 1
 
 

Six Months Ended

June 30,
2017 2016
 
Net cash from (used for) operating activities $ (38,483 ) $ 10,533
 
Cash dividends per share $ 0.04 $ 0.04

Contacts

IR Contact:
Olympic Steel Investor Relations
Matthew J. Dennis, CFA, 216-672-0522

Release Summary

Olympic Steel Reports Better Than Expected Second-Quarter Results

Contacts

IR Contact:
Olympic Steel Investor Relations
Matthew J. Dennis, CFA, 216-672-0522