Olympic Steel Reports Strong 2018 First-Quarter Results |
May 03, 2018 05:50 AM Eastern Time |
Quarterly Net Sales and Operating Income Grow 12% Versus 2017's First
Quarter Board Declares Regular Quarterly Cash Dividend Olympic Steel Inc., (Nasdaq: ZEUS), a leading national metals
service center, today announced financial results for the first quarter
ended March 31, 2018.
First-quarter 2018 net sales increased 12% to $376 million, compared
with $335 million in last year's same quarter. Consolidated gross margin
expanded to 21.5% of net sales in the first quarter of 2018, up from
19.4% of net sales in the fourth quarter of 2017, and up from 20.7% of
net sales in the 2017 full-year period. Operating income in 2018's first
quarter grew 12% to $12.3 million, versus $11.1 million in last year's
comparable quarter.
Net income in the 2018 first quarter was $7.6 million, or $0.67 per
diluted share, compared with net income of $7.7 million, or $0.68 per
diluted share, in the first quarter of 2017. Last year's first-quarter
results included an out-of-period income tax adjustment that increased
2017 first-quarter net income by $1.9 million, or $0.17 per diluted
share. The Company recorded $0.5 million of LIFO expense in the first
quarter of 2018, compared with $0.4 million of LIFO expense in the first
quarter of 2017.
After adjusting for the tax impact in the first quarter of 2017 and LIFO
expense recorded in both first-quarter periods, adjusted net income
increased 30% to $0.70 per diluted share in the first quarter of 2018,
compared with adjusted net income of $0.54 per diluted share in 2017's
comparable period. Please see the table that follows for a
reconciliation of non-GAAP measures to measures prepared in accordance
with GAAP.
"First-quarter 2018 net sales grew in all three operating segments
versus the fourth quarter and compared with the first quarter of last
year," said Chairman and Chief Executive Officer Michael D. Siegal.
"Accelerating shipments and rising prices throughout the first quarter
resulted in our highest operating income in any quarter since 2011."
"After quarter end, we acquired Berlin Metals, a distributor of prime
tin mill products with a growing stainless steel business. In addition
to diversifying into new complementary products, this acquisition, which
we believe will be accretive, also adds new customers and markets,
providing us with cross-selling growth opportunities. We continue to
seek potential acquisition candidates that align with our long-term
objectives, as well as undertake internal growth initiatives in key
strategic areas."
"As we move through a busy spring season, shipping volumes and metal
prices remain elevated, setting the stage for a strong first half,"
Siegal said.
The Company's Board of Directors also approved a regular quarterly cash
dividend of $0.02 per share, which is payable on June 15, 2018, to
shareholders of record on June 1, 2018.
|
| | 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,
| | |
2018
|
|
2017
| | | | |
| | | (unaudited) | Net income per diluted share (GAAP): | |
$
|
0.67
| |
$
|
0.68
| |
Excluding the following items:
| | | | |
Tax adjustment on retirement plan
| | |
-
| | |
(0.17
|
)
|
LIFO expense
| |
|
0.03
| |
|
0.03
|
| Adjusted net income per diluted share (non-GAAP): | |
$
|
0.70
| |
$
|
0.54
|
| | | | | | | |
|
Conference Call and Webcast
A simulcast of Olympic Steel's 2018 first-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 9 a.m. EDT today, May 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; 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 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; our ability to successfully
integrate Berlin Metals, LLC, or Berlin Metals, into our business and
risks inherent with the Berlin Metals acquisition in the achievement of
expected results, including whether the acquisition will be accretive
and within the expected timeframe; the success 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, aluminum, and tin 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 31
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 Comprehensive Income |
(in thousands, except per-share data)
| | |
| | | Three Months Ended Mar. 31, | | | 2018 |
| 2017 | | | (unaudited) | Net sales | | $ | 375,598 | | | | $ | 334,893 | | | | | | |
|
Costs and expenses
| | | | | | | | | | |
|
Cost of materials sold (excludes items shown separately below)
| | |
294,777
| | | | |
258,454
| |
Warehouse and processing
| | |
23,436
| | | | |
23,501
| |
Administrative and general
| | |
18,872
| | | | |
18,165
| |
Distribution
| | |
12,139
| | | | |
10,365
| |
Selling
| | |
7,228
| | | | |
6,511
| |
Occupancy
| | |
2,555
| | | | |
2,310
| |
Depreciation
| | |
4,024
| | | | |
4,314
| |
Amortization
| |
|
222
|
| | |
|
222
|
| | | | | |
|
Total costs and expenses
| |
|
363,253
|
| | |
|
323,842
|
| | | | | |
| Operating income | | | 12,345 | | | | | 11,051 | | | | | | |
|
Other loss, net
| |
|
(46
|
)
| | |
|
(26
|
)
| | | | | |
|
Income before interest and income taxes
| | |
12,299
| | | | |
11,025
| |
Interest and other expense on debt
| |
|
1,986
|
| | |
|
1,626
|
| | | | | |
|
Income before income taxes
| | |
10,313
| | | | |
9,399
| |
Income tax provision
| |
|
2,684
|
| | |
|
1,700
|
| | | | | |
| Net income | | $ | 7,629 |
| | | $ | 7,699 |
| | | | | |
|
Earnings per share:
| | | | | | | | | | |
|
Net income per share - basic
| |
$
|
0.67
|
| | |
$
|
0.68
|
| | | | | |
|
Weighted average shares outstanding - basic
| |
|
11,418
|
| | |
|
11,369
|
| | | | | |
| Net income per share - diluted | | $ | 0.67 |
| | | $ | 0.68 |
| | | | | |
|
Weighted average shares outstanding - diluted
| |
|
11,418
|
| | |
|
11,369
|
| | | | | |
|
|
| |
| | Olympic Steel, Inc. | Consolidated Balance Sheets |
(in thousands)
| | | | |
| | | At Mar. 31, 2018 | | At Dec. 31, 2017 | | |
(unaudited)
| Assets | | | | | | | | |
|
Cash and cash equivalents
| |
$
|
3,412
| | |
$
|
3,009
| |
Accounts receivable, net
| | |
174,813
| | | |
132,737
| |
Inventories, net (includes LIFO debit of $4,837 as of Mar. 31,
2018, and $5,337 as of Dec. 31, 2017)
| | |
319,024
| | | |
275,307
| |
Prepaid expenses and other
| | |
5,698
| | | |
8,333
| |
Assets held for sale
| |
|
750
|
| |
|
750
|
|
Total current assets
| |
|
503,697
|
| |
|
420,136
|
| | | | |
|
Property and equipment, at cost
| | |
384,218
| | | |
376,710
| |
Accumulated depreciation
| |
|
(232,908
|
)
| |
|
(229,062
|
)
|
Net property and equipment
| |
|
151,310
|
| |
|
147,648
|
| | | | |
|
Intangible assets, net
| | |
22,758
| | | |
22,980
| |
Other long-term assets
| |
|
13,114
|
| |
|
13,394
|
| Total assets | | $ | 690,879 |
| | $ | 604,158 |
| | | | |
| Liabilities | | | | | | | | |
|
Current portion of long-term debt
| |
$
|
-
| | |
$
|
930
| |
Accounts payable
| | |
112,518
| | | |
84,034
| |
Accrued payroll
| | |
9,782
| | | |
11,999
| |
Other accrued liabilities
| |
|
14,567
|
| |
|
14,184
|
|
Total current liabilities
| |
|
136,867
|
| |
|
111,147
|
|
Credit facility revolver
| | |
248,955
| | | |
196,235
| |
Other long-term liabilities
| | |
11,215
| | | |
12,048
| |
Deferred income taxes
| |
|
12,827
|
| |
|
12,145
|
| Total liabilities | |
| 409,864 |
| |
| 331,575 |
| | | | |
| Shareholders' Equity | | | | | | | | |
|
Preferred stock
| | |
-
| | | |
-
| |
Common stock
| | |
130,379
| | | |
129,453
| |
Treasury stock
| | |
(239
|
)
| | |
(337
|
)
|
Retained earnings
| |
|
150,875
|
| |
|
143,467
|
| Total shareholders' equity | |
| 281,015 |
| |
| 272,583 |
| Total liabilities and shareholders' equity | | $ | 690,879 |
| | $ | 604,158 |
| | | | | | | | |
|
|
| | 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: |
| | |
(unaudited)
| | | Carbon Flat |
| Specialty Metals Flat |
| Tubular and Pipe | | | Products | | Products | | Products1 | | | 2018 |
| 2017 | | 2018 |
| 2017 | | 2018 |
| 2017 |
Tons Sold1 | |
|
297,604
| |
|
303,792
| |
24,863
| |
|
23,193
| |
NA
| |
NA
| | | | | | | | | | | | |
|
Net Sales
| |
$
|
240,894
| |
$
|
216,916
| |
$ 65,529
| |
$
|
57,955
| |
$ 69,175
| |
$
|
60,022
|
Average selling price per ton
| | |
809
| | |
714
| |
2,636
| | |
2,499
| |
NA
| |
NA
|
Cost of materials sold2 | |
|
189,775
| |
|
169,173
| |
56,131
| |
|
48,284
| |
48,871
| |
|
40,997
|
Gross profit3 | | |
51,119
| | |
47,743
| |
9,398
| | |
9,671
| |
20,304
| | |
19,025
|
Operating expenses4 | |
|
43,013
| |
|
40,368
| |
6,387
| |
|
5,686
| |
16,037
| |
|
16,538
|
Operating income
| |
$
|
8,106
| |
$
|
7,375
| |
$ 3,011
| |
$
|
3,985
| |
$ 4,267
| |
$
|
2,487
| | | | | | | | | | | | |
|
Depreciation and Amortization
| |
|
2,560
| |
|
2,889
| |
204
| |
|
226
| |
1,456
| |
|
1,396
|
| | | | | | | | |
| | | |
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | At March 31, 2018 | | At Dec. 31, 2017 |
Assets
| | | | | | | | |
(unaudited)
|
Flat products
| | | | | | | | |
$
|
490,622
| |
$
|
409,116
|
Tubular and pipe products
| | | | | | | | | |
199,938
| | |
194,787
|
Corporate
| | | | | | | | |
|
319
| |
|
255
| | | | | | | | | | | | | |
|
Total assets
| | | | | | | | |
$
|
690,879
| |
$
|
604,158
|
|
| Other Information: | |
| |
| |
(In thousands, except per-share data)
| | At March 31, 2018 | | At Dec. 31, 2017 | | |
(unaudited)
|
Shareholders' equity per share
| |
$
|
25.55
| | |
$
|
24.80
| | | | | |
|
Debt-to-equity ratio
| |
0.89 to 1
| |
0.72 to 1
| | | | |
| | | Three Months Ended March 31, | | | 2018 | | 2017 | | |
(unaudited)
| | | | |
|
Net cash used for operating activities
| |
$
|
(43,455
|
)
| |
$
|
(25,692
|
)
| | | | |
|
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 and $0.4 million of LIFO expense in the
three months ended March 31, 2018 and 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 from the Consolidated Statements
of Comprehensive Income. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20180503005225/en/ Olympic Steel Inc. Olympic Steel Investor Relations Matthew
J. Dennis, CFA, 216-672-0522
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