Olympic Steel Reports Improved 2017 Full-Year and Fourth-Quarter Results |
March 02, 2018 06:05 AM Eastern Time |
Full-Year Net Sales Climb 26% in 2017 and by 21% in Fourth-Quarter,
Versus 2016 Full-Year 2017 Operating Income of $24 Million, Highest in Six Years Company Achieves Record High Market Share in All Three Operating
Segments in 2017 Olympic Steel Inc., (Nasdaq: ZEUS), a national metals service
center, today announced improved financial results for the full year and
three months ended Dec. 31, 2017.
Full-Year 2017 Results
Full-year 2017 net sales climbed 26%, reaching $1.3 billion, compared
with $1.1 billion in 2016. Increased year-over-year shipping volume and
higher average selling prices throughout 2017 contributed to the net
sales increase. Full-year 2017 net income (GAAP) improved to $19.0
million, or $1.67 per diluted share, compared with a net loss of $1.1
million, or $0.10 per share in 2016.
"Demand for metals improved during 2017, driven by stronger GDP growth
in the U.S. and abroad," said Chairman and Chief Executive Officer
Michael Siegal. "Olympic Steel was, and remains, ideally positioned to
support this rebound in U.S. industrial activity. The determined
execution by our operations and sales teams resulted in our most
profitable year since 2011."
Strong pricing dynamics for metals and healthy demand have continued in
early 2018, he added.
"Improving economic conditions have revitalized the U.S. manufacturing
sector. Our customers are currently benefiting from recent tax
legislation and higher capital equipment spending, and stand to gain
further from potential infrastructure investments," Siegal said. "We
enter 2018 primed for growth and expect to prosper in this environment.
With diversified products and superior customer service, combined with a
strong balance sheet and an energized management team, we are poised for
continued success."
Fourth-Quarter 2017 Results
Fourth-quarter net sales increased 21% in 2017, to $308 million, which
was up from $255 million in the same quarter of 2016. GAAP net income
rose to $4.2 million in the fourth quarter of 2017, or $0.37 per diluted
share, compared with a net loss of $2.1 million, or $0.19 per share in
2016's fourth quarter.
In addition to increased shipping volume and higher sales prices, 2017
net income also benefited from a fourth-quarter $6.2 million deferred
tax liability revaluation related to the Tax Cuts and Jobs Act. This was
partially offset in the 2017 fourth quarter by $2.7 million in LIFO
expense, a $1.0 million commercial settlement, and a write-off of $0.2
million in deferred financing expenses related to the Company's new
5-year $400 million credit facility.
After adjusting for unusual items in 2017, and LIFO income in 2016, the
adjusted net loss narrowed to $0.04 per share in 2017's fourth quarter,
compared with an adjusted net loss of $0.23 per share in the same
quarter of 2016. Similarly, full-year 2017 adjusted net income increased
to $1.18 per diluted share, up from an adjusted loss of $0.18 per share
in 2016.
| | | |
| | | |
| | | |
| | | | Olympic Steel, Inc. | Reconciliation of Net Income (Loss) Per Diluted Share | to Adjusted Net Income (Loss) Per Diluted Share |
The following table reconciles adjusted net income (loss) per
diluted share to the most directly comparable GAAP financial
measure:
| | | | | | | | | | | | | | | |
| |
Three Months Ended
| |
Twelve Months Ended
| |
Dec. 31,
| |
Dec. 31,
| |
2017
| |
2016
| |
2017
| |
2016
| | (unaudited) | | (unaudited) | | Net income (loss) per diluted share (GAAP): | $ | 0.37 | | | $ | (0.19 | ) | | $ | 1.67 | | | $ | (0.10 | ) |
Excluding the following items:
| | | | | | | | | | | | | | | |
Tax adjustment on retirement plan
| |
-
| | | |
-
| | | |
0.16
| | | |
-
| |
Deferred tax liability adjustment from Tax Cuts and Jobs Act
| |
0.54
| | | |
-
| | | |
0.54
| | | |
-
| |
LIFO (expense) income
| |
(0.07
|
)
| | |
0.04
| | | |
(0.15
|
)
| | |
0.08
| |
Commercial settlement cost
| |
(0.06
|
)
| | |
-
| | | |
(0.06
|
)
| | |
-
| |
Deferred financing fee write-off
|
|
(0.01
|
)
| |
|
-
|
| |
|
(0.01
|
)
| |
|
-
|
| Adjusted net income (loss) per diluted share (non-GAAP): | $ | (0.04 | ) | | $ | (0.23 | ) | | $ | 1.18 |
| | $ | (0.18 | ) | | | | | | | | | | | | | | | |
|
Conference Call and Webcast
A simulcast of Olympic Steel's 2017 fourth-quarter and full-year
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. EST on March 2, 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; 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
levels of imported steel in the United States and any associated and
threatened tariffs and duties; the availability and rising costs of
transportation and logistical services; the successes of our efforts and
initiatives to increase sales and earnings, maintain or improve working
capital turnover and free cash flows, improve our customer service, and
achieve cost savings; 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
acquisitions and 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 inventory 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.
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 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 -Financial Tables Follow- |
| |
|
| | Olympic Steel, Inc. | Consolidated Statements of Operations |
(in thousands, except per-share data)
| | | | | |
| | | Three Months Ended Dec. 31, | | | Twelve Months Ended Dec. 31, | | | 2017 |
| 2016 | | | 2017 |
| 2016 | | | (unaudited) | | | (audited) | Net sales | | $ | 308,166 | | | $ | 254,904 | | | | $ | 1,330,696 | | | $ | 1,055,116 | | | | | | | | | | |
|
Costs and expenses
| | | | | | | | | |
Cost of materials sold (excludes items shown separately below)
| | |
248,366
| | | |
203,494
| | | | |
1,055,212
| | | |
820,040
| |
Warehouse and processing
| | |
21,555
| | | |
17,960
| | | | |
87,425
| | | |
79,521
| |
Administrative and general
| | |
16,960
| | | |
15,001
| | | | |
69,659
| | | |
63,054
| |
Distribution
| | |
10,282
| | | |
8,728
| | | | |
41,789
| | | |
36,490
| |
Selling
| | |
6,481
| | | |
5,699
| | | | |
26,285
| | | |
23,060
| |
Occupancy
| | |
2,211
| | | |
2,088
| | | | |
8,862
| | | |
8,718
| |
Depreciation
| | |
4,073
| | | |
4,365
| | | | |
16,589
| | | |
17,596
| |
Amortization
| |
|
222
|
| |
|
222
|
| | |
|
889
|
| |
|
889
|
| | | | | | | | | |
|
Total costs and expenses
| |
|
310,150
|
| |
|
257,557
|
| | |
|
1,306,710
|
| |
|
1,049,368
|
| | | | | | | | | |
| Operating income (loss) | | | (1,984 | ) | | | (2,653 | ) | | | | 23,986 | | | | 5,748 | | | | | | | | | | |
|
Other income (loss), net
| |
|
(42
|
)
| |
|
(13
|
)
| | |
|
(118
|
)
| |
|
(55
|
)
| | | | | | | | | |
|
Income (loss) before interest and income taxes
| | |
(2,026
|
)
| | |
(2,666
|
)
| | | |
23,868
| | | |
5,693
| |
Interest and other expense on debt
| |
|
2,138
|
| |
|
1,378
|
| | |
|
7,518
|
| |
|
5,273
|
|
Income (loss) before income taxes
| | |
(4,164
|
)
| | |
(4,044
|
)
| | | |
16,350
| | | |
420
| |
Income tax provision (benefit)
| |
|
(8,351
|
)
| |
|
(1,940
|
)
| | |
|
(2,613
|
)
| |
|
1,498
|
| | | | | | | | | |
| Net income (loss) | | $ | 4,187 |
| | $ | (2,104 | ) | | | $ | 18,963 |
| | $ | (1,078 | ) | | | | | | | | | |
|
Earnings per share:
| | | | | | | | | | | | | | | | | | |
|
Net income (loss) per share - basic
| |
$
|
0.37
|
| |
$
|
(0.19
|
)
| | |
$
|
1.67
|
| |
$
|
(0.10
|
)
| | | | | | | | | |
|
Weighted average shares outstanding - basic
| |
|
11,389
|
| |
|
11,221
|
| | |
|
11,381
|
| |
|
11,210
|
| | | | | | | | | |
| Net income (loss) per share - diluted | | $ | 0.37 |
| | $ | (0.19 | ) | | | $ | 1.67 |
| | $ | (0.10 | ) | | | | | | | | | |
|
Weighted average shares outstanding - diluted
| |
|
11,391
|
| |
|
11,221
|
| | |
|
11,381
|
| |
|
11,210
|
| | | | | | | | | | | | | | | | | |
|
|
| | Olympic Steel, Inc. | Consolidated Balance Sheets |
(in thousands)
| | |
| | | At Dec. 31, | | | 2017 |
|
| 2016 | | | (audited) | Assets | | | | | | | | | | |
|
Cash and cash equivalents
| |
$
|
3,009
| | | |
$
|
2,315
| |
Accounts receivable, net
| | |
132,737
| | | | |
101,902
| |
Inventories, net (includes LIFO debit of $5,337 and $8,045 as of
Dec. 31, 2017, and 2016, respectively)
| | |
275,307
| | | | |
254,526
| |
Prepaid expenses and other
| | |
8,333
| | | | |
6,197
| |
Assets held for sale
| |
|
750
|
| | |
|
-
|
|
Total current assets
| |
|
420,136
|
| | |
|
364,940
|
| | | | | |
|
Property and equipment, at cost
| | |
376,710
| | | | |
374,242
| |
Accumulated depreciation
| |
|
(229,062
|
)
| | |
|
(218,476
|
)
|
Net property and equipment
| |
|
147,648
|
| | |
|
155,766
|
| | | | | |
|
Intangible assets, net
| | |
22,980
| | | | |
23,869
| |
Other long-term assets
| |
|
13,394
|
| | |
|
11,493
|
| Total assets | | $ | 604,158 |
| | | $ | 556,068 |
| | | | | |
| Liabilities | | | | | | | | | | |
|
Current portion of long-term debt
| |
$
|
930
| | | |
$
|
1,825
| |
Accounts payable
| | |
84,034
| | | | |
79,458
| |
Accrued payroll
| | |
11,999
| | | | |
8,445
| |
Other accrued liabilities
| |
|
14,184
|
| | |
|
15,170
|
|
Total current liabilities
| |
|
111,147
|
| | |
|
104,898
|
|
Credit facility revolver
| | |
196,235
| | | | |
164,599
| |
Other long-term liabilities
| | |
12,048
| | | | |
10,062
| |
Deferred income taxes
| |
|
12,145
|
| | |
|
23,119
|
| Total liabilities | |
| 331,575 |
| | |
| 302,678 |
| | | | | |
| Shareholders' Equity | | | | | | | | | | |
|
Preferred stock
| | |
-
| | | | |
-
| |
Common stock
| | |
129,453
| | | | |
128,619
| |
Treasury stock
| | |
(337
|
)
| | | |
(609
|
)
|
Retained earnings
| |
|
143,467
|
| | |
|
125,380
|
| Total shareholders' equity | |
| 272,583 |
| | |
| 253,390 |
| Total liabilities and shareholders' equity | | $ | 604,158 |
| | | $ | 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 Dec. 31: | | |
(unaudited)
| | | Carbon Flat |
| Specialty Metals Flat |
| Tubular and Pipe | | | Products | | Products | | Products(1) | | | 2017 |
| 2016 | | 2017 |
| 2016 | | 2017 |
| 2016 |
Tons sold1 | |
|
258,074
|
| |
|
244,938
|
| |
|
21,175
| |
|
19,012
| |
NA
|
| |
NA
| | | | | | | | | | | | | |
|
Net sales
| |
$
|
199,811
| | |
$
|
167,055
| | |
$
|
53,411
| |
$
|
45,032
| |
$
|
54,944
| | |
$
|
42,817
|
Average selling price per ton
| | |
774
| | | |
682
| | | |
2,522
| | |
2,369
| |
NA
| | |
NA
|
Cost of materials sold2 | |
|
161,359
|
| |
|
136,979
|
| |
|
45,786
| |
|
37,452
| |
|
41,221
|
| |
|
29,063
|
Gross profit3 | | |
38,452
| | | |
30,076
| | | |
7,625
| | |
7,580
| | |
13,723
| | | |
13,754
|
Operating expenses4 | |
|
38,878
|
| |
|
34,327
|
| |
|
5,303
| |
|
5,065
| |
|
15,594
|
| |
|
13,189
|
Operating income (loss)
| |
$
|
(426
|
)
| |
$
|
(4,251
|
)
| |
$
|
2,322
| |
$
|
2,515
| |
$
|
(1,871
|
)
| |
$
|
565
| | | | | | | | | | | | | |
|
Depreciation and Amortization
| | |
2,619
| | | |
2,953
| | | |
202
| | |
211
| | |
1,448
| | | |
1,398
| | | | |
| | | | |
| | | Twelve Months Ended Dec. 31: | | |
(audited)
| | | Carbon Flat | | Specialty Metals Flat | | Tubular and Pipe | | | Products | | Products | | Products(1) | | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
Tons sold1 | |
|
1,147,750
|
| |
|
1,026,768
|
| |
|
90,160
| |
|
82,285
| |
NA
|
| |
NA
| | | | | | | | | | | | | |
|
Net sales
| |
$
|
869,628
| | |
$
|
670,983
| | |
$
|
227,200
| |
$
|
189,930
| |
$
|
233,868
| | |
$
|
194,203
|
Average selling price per ton
| | |
758
| | | |
653
| | | |
2,520
| | |
2,308
| |
NA
| | |
NA
|
Cost of materials sold2 | |
|
693,742
|
| |
|
529,021
|
| |
|
194,199
| |
|
160,185
| |
|
167,271
|
| |
|
130,834
|
Gross profit3 | | |
175,886
| | | |
141,962
| | | |
33,001
| | |
29,745
| | |
66,597
| | | |
63,369
|
Operating expenses4 | |
|
158,000
|
| |
|
146,333
|
| |
|
21,761
| |
|
19,904
| |
|
62,029
|
| |
|
55,656
|
Operating income (loss)
| |
$
|
17,886
|
| |
$
|
(4,371
|
)
| |
$
|
11,240
| |
$
|
9,841
| |
$
|
4,568
|
| |
$
|
7,713
| | | | | | | | | | | | | |
|
Depreciation and amortization
| | |
10,906
| | | |
11,690
| | | |
811
| | |
797
| | |
5,659
| | | |
5,897
| | | | | | | | | | | | | |
|
1 |
|
Tonnage is less meaningful for the Tubular and Pipe Products segment
and therefore, is not reported.
| | 2 | |
Includes $1.2 million, and $2.7 million, of LIFO expense for the
three and twelve months ended Dec. 31, 2017, respectively; and $0.8
million, and $1.5 million, of LIFO income for the three and twelve
months ended Dec. 31, 2016, 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. |
(audited, in thousands, except per-share data)
| | |
| | | At Dec. 31, | | 2017 |
| 2016 |
Assets
| | | | |
Flat products
| |
$
|
409,116
| | |
$
|
363,626
| |
Tubular and pipe products
| | |
194,787
| | | |
192,088
| |
Corporate
| |
|
255
|
| |
|
354
|
|
Total assets
| |
$
|
604,158
|
| |
$
|
556,068
|
| | | | |
| | | | |
| Other Information: | | | | | | | At Dec. 31, | | | 2017 | | 2016 | | | | |
|
Shareholders' equity per share
| |
$
|
24.80
| | |
$
|
23.11
| | | | | |
|
Debt-to-equity ratio
| |
0.72 to 1
| |
0.66 to 1
| | | | |
| | | | |
| | | Twelve Months Ended | | | Dec. 31, | | | 2017 | | 2016 | | |
| | | | |
|
Net cash (used for) operating activities
| |
$
|
(19,041
|
)
| |
$
|
(9,813
|
)
| | | | |
|
Cash dividends per share
| |
$
|
0.08
| | |
$
|
0.08
| | | | | |
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20180302005043/en/ IR Contact: Olympic Steel Investor Relations Matthew J.
Dennis, CFA, 216-672-0522
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