Olympic Steel Reports Record Third Quarter and Nine Month Net Sales |
November 08, 2018 06:00 AM Eastern Time |
Third-Quarter Net Income Surges Five-Fold Over Third Quarter 2017,
and by 137% for Nine-Month Period Board Declares Regular Quarterly Cash Dividend Olympic Steel Inc. (Nasdaq: ZEUS), a leading national metals
service center, today announced significantly improved financial results
for the third quarter and nine-month period ended Sept. 30, 2018.
Third-quarter 2018 net sales increased 38%, to $457 million, which is
the highest quarterly sales posted in the Company's history. This is up
from $331 million in net sales during the third quarter of 2017.
Year-to-date net sales grew 26% over the prior year's same period,
reaching a record $1.3 billion, versus $1.0 billion in 2017. Higher
year-over-year shipping volume and higher average prices drove the sales
increase in both periods.
Net income rose to $11.6 million, or $1.01 per diluted share, in the
third quarter, up from $2.3 million or $0.20 per diluted share, in the
same quarter of 2017. This year's third-quarter net income was
negatively impacted by $2.7 million in LIFO expense, which reduced
quarterly earnings by $0.18 per diluted share. In last year's same
quarter, LIFO expense reduced net income by $0.7 million, or $0.04 per
diluted share. Adjusting for LIFO impacts in both periods, third-quarter
net income improved to $1.19 per diluted share in 2018, up from $0.24
per diluted share in 2017. The table that follows provides a
reconciliation of non-GAAP measures, to measures prepared in accordance
with GAAP.
"Robust demand for metals and active shipping volume continued in the
third quarter," said Chairman and Chief Executive Officer Michael D.
Siegal. "Our diversification strategies and strong balance sheet,
combined with record sales and higher margins, drove significant
earnings improvement in all three of our operating segments for the
third quarter and nine months of 2018."
For the 2018 nine-month period, net income grew to $35.1 million, or
$3.07 per diluted share. This more than doubled net income of $14.8
million, or $1.30 per diluted share, reported for the same period in
2017. Year-to-date LIFO expense totaled $4.7 million, or $0.30 per
diluted share, in 2018, compared with $1.5 million, or $0.08 per diluted
share, in the same period last year.
"End-market demand is expected to remain strong in all industries that
we serve," Siegal said. "Our customers anticipate year-over-year growth
will continue in this year's final quarter, and into 2019."
The Company's Board of Directors also approved a regular quarterly cash
dividend of $0.02 per share, which is payable on Dec. 17, 2018, to
shareholders of record on Dec. 3, 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
| |
Nine Months Ended
| | |
Sept. 30,
| |
Sept. 30,
| | |
2018
|
|
2017
| |
2018
|
|
2017
| | | | | | | | |
| | | (unaudited) | | (unaudited) | Net income per diluted share (GAAP): | | $ | 1.01 | | $ | 0.20 | | $ | 3.07 | | $ 1.30 | |
Excluding the following items:
| | | | | | | | |
Tax adjustment on retirement plan
| | |
-
| | |
-
| | |
-
| |
(0.17
|
)
|
LIFO expense
| |
|
0.18
| |
|
0.04
| |
|
0.30
| |
0.08
|
| Adjusted net income per diluted share (non-GAAP): | | $ | 1.19 | | $ | 0.24 | | $ | 3.37 | | $ 1.21 |
| | | | | | | | | | | | |
|
Conference Call and Webcast
A simulcast of Olympic Steel's 2018 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. EST on Nov. 8, 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: the recent fluctuations in metals pricing provides 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; 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 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, U.S. trade policy and its impact on the
U.S. manufacturing industry; the availability, and increased costs, of
labor related to tighter employment markets; the availability and rising
costs of transportation and logistical services; rising interest rates
and their impacts on our variable interest debt; 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 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 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; the ability of our customers (especially those
that may be highly leveraged, and those with inadequate liquidity) to
maintain their credit availability; 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 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 Sept. 30, | | Nine Months Ended Sept. 30, | | | 2018 |
| 2017 | | 2018 |
| 2017 | | | (unaudited) | | (unaudited) | Net sales | | $ | 456,976 | | $ | 331,442 | | | $ | 1,285,491 | | | $ | 1,022,530 | | | | | | | | | |
|
Costs and expenses
| | | | | | | | |
Cost of materials sold (excludes items shown separately below)
| | |
365,362
| | |
265,351
| | | |
1,016,200
| | | |
806,846
| |
Warehouse and processing
| | |
25,330
| | |
20,531
| | | |
72,579
| | | |
65,870
| |
Administrative and general
| | |
21,197
| | |
16,647
| | | |
61,592
| | | |
52,699
| |
Distribution
| | |
12,552
| | |
10,574
| | | |
38,077
| | | |
31,507
| |
Selling
| | |
7,373
| | |
6,797
| | | |
21,708
| | | |
19,804
| |
Occupancy
| | |
2,348
| | |
2,150
| | | |
7,200
| | | |
6,651
| |
Depreciation
| | |
3,953
| | |
3,883
| | | |
12,141
| | | |
12,516
| |
Amortization
| |
|
247
| |
|
223
|
| |
|
716
|
| |
|
667
|
| | | | | | | | |
|
Total costs and expenses
| |
|
438,362
| |
|
326,156
|
| |
|
1,230,213
|
| |
|
996,560
|
| | | | | | | | |
| Operating income | | | 18,614 | | | 5,286 | | | | 55,278 | | | | 25,970 | | | | | | | | | |
|
Other income (loss), net
| |
|
17
| |
|
(22
|
)
| |
|
(122
|
)
| |
|
(76
|
)
| | | | | | | | |
|
Income before interest and income taxes
| | |
18,631
| | |
5,264
| | | |
55,156
| | | |
25,894
| |
Interest and other expense on debt
| |
|
2,923
| |
|
1,966
|
| |
|
7,579
|
| |
|
5,380
|
|
Income before income taxes
| | |
15,708
| | |
3,298
| | | |
47,577
| | | |
20,514
| |
Income tax provision
| |
|
4,109
| |
|
1,018
|
| |
|
12,501
|
| |
|
5,738
|
| | | | | | | | |
| Net income | | $ | 11,599 | | $ | 2,280 |
| | $ | 35,076 |
| | $ | 14,776 |
| | | | | | | | |
|
Earnings per share:
| | | | | | | | | | | | | | | | |
|
Net income per share - basic
| |
$
|
1.01
| |
$
|
0.20
|
| |
$
|
3.07
|
| |
$
|
1.30
|
| | | | | | | | |
|
Weighted average shares outstanding - basic
| |
|
11,444
| |
|
11,386
|
| |
|
11,427
|
| |
|
11,384
|
| | | | | | | | |
| Net income per share - diluted | | $ | 1.01 | | $ | 0.20 |
| | $ | 3.07 |
| | $ | 1.30 |
| | | | | | | | |
|
Weighted average shares outstanding - diluted
| |
|
11,446
| |
|
11,386
|
| |
|
11,427
|
| |
|
11,384
|
| | | | | | | | | | | | | | | |
|
|
|
| |
|
| | Olympic Steel, Inc. | Consolidated Balance Sheets |
(in thousands)
| | | | | | |
| | | | At Sept. 30, 2018 | | | At Dec. 31 2017 | | | | (unaudited) | Assets | | | | | | | | | | | | |
|
Cash and cash equivalents
| | |
$
|
4,267
| | | |
$
|
3,009
| |
Accounts receivable, net
| | | |
213,422
| | | | |
132,737
| |
Inventories, net (includes LIFO debit of $662 as of Sept. 30, 2018
and $5,337 as of Dec. 31, 2017)
| | | |
366,198
| | | | |
275,307
| |
Prepaid expenses and other
| | | |
5,219
| | | | |
8,333
| |
Assets held for sale
| | |
|
-
|
| | |
|
750
|
|
Total current assets
| | |
|
589,106
|
| | |
|
420,136
|
| | | | | | |
|
Property and equipment, at cost
| | | |
398,524
| | | | |
376,710
| |
Accumulated depreciation
| | |
|
(239,862
|
)
| | |
|
(229,062
|
)
|
Net property and equipment
| | |
|
158,662
|
| | |
|
147,648
|
| | | | | | |
|
Intangible assets, net
| | | |
27,519
| | | | |
22,980
| |
Other long-term assets
| | |
|
13,980
|
| | |
|
13,394
|
| Total assets | | | $ | 789,267 |
| | | $ | 604,158 |
| | | | | | |
| Liabilities | | | | | | | | | | | | |
|
Current portion of long-term debt
| | |
$
|
-
| | | |
$
|
930
| |
Accounts payable
| | | |
118,134
| | | | |
84,034
| |
Accrued payroll
| | | |
19,265
| | | | |
11,999
| |
Other accrued liabilities
| | |
|
11,595
|
| | |
|
14,184
|
|
Total current liabilities
| | |
|
148,994
|
| | |
|
111,147
|
|
Credit facility revolver
| | | |
304,484
| | | | |
196,235
| |
Other long-term liabilities
| | | |
12,724
| | | | |
12,048
| |
Deferred income taxes
| | |
|
14,718
|
| | |
|
12,145
|
| Total liabilities | | |
| 480,920 |
| | |
| 331,575 |
| | | | | | |
| Shareholders' Equity | | | | | | | | | | | | |
|
Preferred stock
| | | |
-
| | | | |
-
| |
Common stock
| | | |
130,597
| | | | |
129,453
| |
Treasury stock
| | | |
(132
|
)
| | | |
(337
|
)
|
Retained earnings
| | |
|
177,882
|
| | |
|
143,467
|
| Total shareholders' equity | | |
| 308,347 |
| | |
| 272,583 |
| Total liabilities and shareholders' equity | | | $ | 789,267 |
| | | $ | 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 Sept. 30: | | | (unaudited) | | | Carbon Flat |
| Specialty Metals Flat |
| Tubular and Pipe | | | Products | | Products | | Products1 | | | 2018 |
| 2017 | | 2018 |
| 2017 | | 2018 |
| 2017 |
Tons Sold1 | |
|
281,225
| |
|
277,426
| |
|
36,606
| |
|
23,253
| |
NA
| |
NA
| | | | | | | | | | | | |
|
Net Sales
| |
$
|
282,810
| |
$
|
215,843
| |
$
|
92,153
| |
$
|
57,554
| |
$
|
82,013
| |
$
|
58,045
|
Average selling price per ton
| | |
1,006
| | |
778
| | |
2,517
| | |
2,475
| |
NA
| |
NA
|
Cost of materials sold2 | |
|
225,407
| |
|
173,560
| |
|
77,928
| |
|
50,083
| |
|
62,027
| |
|
41,708
|
Gross profit3 | | |
57,403
| | |
42,283
| | |
14,225
| | |
7,471
| | |
19,986
| | |
16,337
|
Operating expenses4 | |
|
42,910
| |
|
38,585
| |
|
9,271
| |
|
5,397
| |
|
16,884
| |
|
14,729
|
Operating income
| |
$
|
14,493
| |
$
|
3,698
| |
$
|
4,954
| |
$
|
2,074
| |
$
|
3,102
| |
$
|
1,608
| | | | | | | | | | | | |
|
Depreciation and Amortization
| | |
2,524
| | |
2,493
| | |
341
| | |
185
| | |
1,311
| | |
1,403
| | |
| | |
| | | Nine Months Ended Sept. 30: | | | (unaudited) | | | Carbon Flat | | Specialty Metals Flat | | Tubular and Pipe | | | Products | | Products | | Products1 | | | 2018 | | 2017 | | 2018 | | 2017 | | 2018 | | 2017 |
Tons Sold1 | |
|
883,190
| |
|
889,676
| |
|
100,275
| |
|
68,985
| |
NA
| |
NA
| | | | | | | | | | | | |
|
Net Sales
| |
$
|
802,995
| |
$
|
669,817
| |
$
|
255,037
| |
$
|
173,789
| |
$
|
227,459
| |
$
|
178,924
|
Average selling price per ton
| | |
909
| | |
753
| | |
2,543
| | |
2,519
| |
NA
| |
NA
|
Cost of materials sold2 | |
|
632,326
| |
|
532,383
| |
|
216,726
| |
|
148,413
| |
|
167,148
| |
|
126,050
|
Gross profit3 | | |
170,669
| | |
137,434
| | |
38,311
| | |
25,376
| | |
60,311
| | |
52,874
|
Operating expenses4 | |
|
129,768
| |
|
119,122
| |
|
24,818
| |
|
16,458
| |
|
48,394
| |
|
46,435
|
Operating income
| |
$
|
40,901
| |
$
|
18,312
| |
$
|
13,493
| |
$
|
8,918
| |
$
|
11,917
| |
$
|
6,439
| | | | | | | | | | | | |
|
Depreciation and Amortization
| | |
7,665
| | |
8,287
| | |
880
| | |
609
| | |
4,237
| | |
4,211
| | | | | | | | | | | | |
|
1 |
| Tonnage is less meaningful for the Tubular and Pipe Products
segment and therefore, is not reported. | 2 | | Includes LIFO expense for the Tubular and Pipe Products segment
of $2.7 million, and $4.7 million, for the three and nine months
ended Sep. 30, 2018; and $0.7 million, and $1.5 million for the
three and nine months ended Sept. 30, 2017. | 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 Sept. 30, | | | | At Dec. 31, | | | | 2018 | | | | 2017 |
Assets
| | | | | | | |
Flat products
| | |
$
|
579,602
| | | | |
$
|
409,116
| |
Tubular and pipe products
| | | |
209,007
| | | | | |
194,787
| |
Corporate
| | |
|
658
|
| | | |
|
255
|
|
Total assets
| | |
$
|
789,267
|
| | | |
$
|
604,158
|
| | | | | | | |
| | | | | | | |
| Other Information: | | | | | | | |
(audited, in thousands, except per-share data)
| | | | | | | | | | At Sep. 30, | | | | At Dec. 31, | | | | 2018 | | | | 2017 | | | | | | | |
|
Shareholders' equity per share
| | |
$
|
28.01
| | | | |
$
|
24.80
| | | | | | | | | | | | |
|
Debt-to-equity ratio
| | | |
0.99 to 1
| | | | | |
0.72 to 1
| | | | | | | | |
| | | | | | | |
| | | | Nine Months Ended | | | | June 30, | | | | 2018 | | | | 2017 | | | | | | | |
| | | | | | | |
|
Net cash from (used for) operating activities
| | |
$
|
(63,133
|
)
| | | |
$
|
(46,642
|
)
| | | | | | | |
|
Cash dividends per share
| | |
$
|
0.06
| | | | |
$
|
0.06
| |
View source version on businesswire.com: https://www.businesswire.com/news/home/20181108005098/en/ Investor and Media Contact: Olympic Steel Investor Relations Matthew
J. Dennis, CFA, 216-672-0522
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