Olympic Steel Reports Record Fourth-Quarter and Full-Year 2018 Net Sales |
February 15, 2019 06:30 AM Eastern Time |
Full-Year Net Sales Increased 29%, Versus 2017, to Record-High $1.7
Billion in 2018 Full-Year Operating Income Grew 138% to $57 Million in 2018 Olympic Steel Inc. (Nasdaq: ZEUS), a leading national metals
service center, today announced financial results for the three and
twelve months ended Dec. 31, 2018.
Full-Year 2018 Results
Net sales rose 29% in 2018, reaching $1.7 billion, compared with $1.3
billion in 2017. Increased year-over-year shipping volume, combined with
higher average prices in all three of the Company's operating segments,
drove the net sales increase. Operating income more than doubled in
2018, to $57.1 million, up from $24.0 million in the prior year.
Full-year 2018 (GAAP) net income improved 78% to $33.8 million, or $2.95
per diluted share, compared with net income of $19.0 million, or $1.67
per diluted share in 2017.
"All three operating segments achieved record net sales in 2018," said
Chief Executive Officer Richard T. Marabito. "Building on the strong
results generated in 2017, our 2018 results marked the third-most
profitable year in our Company's history."
In 2018, LIFO expense totaled $8.4 million, or $0.56 per diluted share,
compared with LIFO expense of $2.7 million, or $0.15 per diluted share,
in the prior year. In 2017, results were also impacted by a $6.2 million
deferred tax liability revaluation benefit, partially offset by a $1.0
million commercial settlement, and a write-off of $0.2 million in
deferred financing expenses, which were realized in the fourth quarter
of 2017.
"On Jan. 2, 2019, we announced our acquisition of McCullough Industries.
This is our first acquisition of a manufacturer of metal-intensive
branded products," Marabito said. "The vertical downstream advantages of
the McCullough acquisition and capital expenditures in all three of our
operating segments in 2018 advance our long-term growth strategy to
deploy capital for higher financial returns while reducing volatility.
We continue to seek additional manufacturers of branded products where
we can deploy our purchasing, logistics and processing expertise to
achieve synergies."
Fourth-Quarter 2018 Results
The Company achieved record fourth quarter sales of $430 million in
2018, up 39% from $308 million in sales during the fourth quarter of
2017. Fourth quarter 2018 operating income totaled $1.8 million,
compared to an operating loss of $2.0 million in 2017. The current
quarter results include $3.7 million of LIFO expense. The impacts of
higher LIFO expense in 2018, and the aforementioned fourth quarter 2017
tax benefit and other unusual items, resulted in a (GAAP) net loss of
$1.3 million, or $0.11 per share in 2018, compared to net income of $4.2
million or $0.37 per share last year. Adjusting for the LIFO expenses in
both periods, and for the 2017 tax income and other unusual items,
adjusted (non-GAAP) earnings per share improved to $0.14 in the fourth
quarter of 2018, versus an adjusted (non-GAAP) net loss per share of
$0.04 in last year's fourth quarter. The table that follows provides a
reconciliation of non-GAAP measured 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
| |
Twelve Months Ended
| | |
Dec. 31,
| |
Dec. 31,
| | |
2018
| |
2017
| |
2018
| |
2017
| | | (unaudited) | | (unaudited) | | | | | | | | |
| Net income (loss) per diluted share (GAAP): | | $ | (0.11 | ) | | $ | 0.37 | | | $ | 2.95 | | | $ | 1.67 | |
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
| | |
(0.25
|
)
| | |
(0.07
|
)
| | |
(0.56
|
)
| | |
(0.15
|
)
|
Commercial settlement cost
| | |
-
| | | |
(0.06
|
)
| | |
-
| | | |
(0.06
|
)
|
Deferred financing fee write-off
| |
|
-
|
| |
|
(0.01
|
)
| |
|
-
|
| |
|
(0.01
|
)
| Adjusted net income per diluted share (non-GAAP): | | $ | 0.14 |
| | $ | (0.04 | ) | | $ | 3.51 |
| | $ | 1.18 |
| | | | | | | | | | | | | | | | |
|
Conference Call and Webcast
A simulcast of Olympic Steel's 2018 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 live simulcast will begin at 10 a.m. EST on Feb. 15, 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 market fluctuations create 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, as well as any changes to
tariffs and duties on exported steel, 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; 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; 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; the success of our operational
initiatives to improve our operating and management systems and reduce
our costs; the ability of our customers (especially those that may be
highly leveraged, and those with inadequate liquidity) to maintain their
credit availability; access to capital and global credit markets; our
ability to generate free cash flow through operations and repay debt
within anticipated time frames; the ability to comply with the terms of
our asset-based credit facility; rising interest rates and their impacts
on our variable interest rate debt; the effectiveness of our recently
initiated interest rate swap; the ability of our customers and third
parties to honor their agreements related to derivative instruments; 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 32
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 Dec. 31, | | Twelve Months Ended Dec. 31, | | | 2018 |
| 2017 | | 2018 |
| 2017 | | | | |
| Net sales | | $ | 429,590 | | | $ | 308,166 | | | $ | 1,715,081 | | | $ | 1,330,696 | | | | | | | | | |
|
Costs and expenses
| | | | | | | | |
Cost of materials sold (excludes items shown separately below)
| | |
356,754
| | | |
248,366
| | | |
1,372,954
| | | |
1,055,212
| |
Warehouse and processing
| | |
24,986
| | | |
21,555
| | | |
97,565
| | | |
87,425
| |
Administrative and general
| | |
19,515
| | | |
16,960
| | | |
81,107
| | | |
69,659
| |
Distribution
| | |
12,270
| | | |
10,282
| | | |
50,347
| | | |
41,789
| |
Selling
| | |
7,312
| | | |
6,481
| | | |
29,020
| | | |
26,285
| |
Occupancy
| | |
2,228
| | | |
2,211
| | | |
9,428
| | | |
8,862
| |
Depreciation
| | |
4,504
| | | |
4,073
| | | |
16,645
| | | |
16,589
| |
Amortization
| |
|
247
|
| |
|
222
|
| |
|
963
|
| |
|
889
|
| | | | | | | | |
|
Total costs and expenses
| |
|
427,816
|
| |
|
310,150
|
| |
|
1,658,029
|
| |
|
1,306,710
|
| | | | | | | | |
| Operating income (loss) | | | 1,774 | | | | (1,984 | ) | | | 57,052 | | | | 23,986 | | | | | | | | | |
|
Other income (loss), net
| |
|
(185
|
)
| |
|
(42
|
)
| |
|
(307
|
)
| |
|
(118
|
)
| | | | | | | | |
|
Income (loss) before interest and income taxes
| | |
1,589
| | | |
(2,026
|
)
| | |
56,745
| | | |
23,868
| |
Interest and other expense on debt
| |
|
3,101
|
| |
|
2,138
|
| |
|
10,681
|
| |
|
7,518
|
|
Income (loss) before income taxes
| | |
(1,512
|
)
| | |
(4,164
|
)
| | |
46,064
| | | |
16,350
| |
Income tax provision (benefit)
| |
|
(196
|
)
| |
|
(8,351
|
)
| |
|
12,305
|
| |
|
(2,613
|
)
| | | | | | | | |
| Net income (loss) | | $ | (1,316 | ) | | $ | 4,187 |
| | $ | 33,759 |
| | $ | 18,963 |
| | | | | | | | |
|
Earnings per share:
| | | | | | | | | | | | | | | | |
|
Net income (loss) per share - basic
| |
$
|
(0.11
|
)
| |
$
|
0.37
|
| |
$
|
2.95
|
| |
$
|
1.67
|
| | | | | | | | |
|
Weighted average shares outstanding - basic
| |
|
11,444
|
| |
|
11,389
|
| |
|
11,432
|
| |
|
11,381
|
| | | | | | | | |
| Net income (loss) per share - diluted | | $ | (0.11 | ) | | $ | 0.37 |
| | $ | 2.95 |
| | $ | 1.67 |
| | | | | | | | |
|
Weighted average shares outstanding - diluted
| |
|
11,444
|
| |
|
11,391
|
| |
|
11,440
|
| |
|
11,381
|
| | | | | | | | | | | | | | | | |
|
|
| |
| | Olympic Steel, Inc. | Consolidated Balance Sheets |
(in thousands)
| | | | |
| | | At Dec. 31, 2018 | | At Dec. 31, 2017 | | | | |
| Assets | | | | | | | | |
|
Cash and cash equivalents
| |
$
|
9,319
| | |
$
|
3,009
| |
Accounts receivable, net
| | |
175,252
| | | |
132,737
| |
Inventories, net (includes LIFO credit of $3,071 as of Dec. 31,
2018 and LIFO debit of $5,337 as of Dec. 31, 2017)
| | |
368,738
| | | |
275,307
| |
Prepaid expenses and other
| | |
9,460
| | | |
8,333
| |
Assets held for sale
| |
|
-
|
| |
|
750
|
|
Total current assets
| |
|
562,769
|
| |
|
420,136
|
| | | | |
|
Property and equipment, at cost
| | |
403,785
| | | |
376,710
| |
Accumulated depreciation
| |
|
(244,176
|
)
| |
|
(229,062
|
)
|
Net property and equipment
| |
|
159,609
|
| |
|
147,648
|
| | | | |
|
Intangible assets, net
| | |
27,272
| | | |
22,980
| |
Other long-term assets
| |
|
11,090
|
| |
|
13,394
|
| Total assets | | $ | 760,740 |
| | $ | 604,158 |
| | | | |
| Liabilities | | | | | | | | |
|
Current portion of long-term debt
| |
$
|
-
| | |
$
|
930
| |
Accounts payable
| | |
95,367
| | | |
84,034
| |
Accrued payroll
| | |
19,665
| | | |
11,999
| |
Other accrued liabilities
| |
|
13,395
|
| |
|
14,184
|
|
Total current liabilities
| |
|
128,427
|
| |
|
111,147
|
|
Credit facility revolver
| | |
302,530
| | | |
196,235
| |
Other long-term liabilities
| | |
9,327
| | | |
12,048
| |
Deferred income taxes
| |
|
13,465
|
| |
|
12,145
|
| Total liabilities | |
| 453,749 |
| |
| 331,575 |
| | | | |
| Shareholders' Equity | | | | | | | | |
|
Preferred stock
| | |
-
| | | |
-
| |
Common stock
| | |
130,778
| | | |
129,453
| |
Treasury stock
| | |
(132
|
)
| | |
(337
|
)
|
Retained earnings
| |
|
176,345
|
| |
|
143,467
|
| Total shareholders' equity | |
| 306,991 |
| |
| 272,583 |
| Total liabilities and shareholders' equity | | $ | 760,740 |
| | $ | 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 Dec. 31: | | | Carbon Flat |
| Specialty Metals Flat |
| Tubular and Pipe | | | Products | | Products | | Products1 | | | 2018 |
| 2017 | | 2018 |
| 2017 | | 2018 |
| 2017 |
Tons sold1 | |
|
259,181
| |
|
258,074
|
| |
|
35,312
| |
|
21,175
| |
NA
| |
NA
| | | | | | | | | | | | |
|
Net sales
| |
$
|
270,297
| |
$
|
199,811
| | |
$
|
88,442
| |
$
|
53,411
| |
$
|
70,851
| | |
$
|
54,944
| |
Average selling price per ton
| | |
1,043
| | |
774
| | | |
2,505
| | |
2,522
| |
NA
| |
NA
|
Cost of materials sold2 | |
|
223,616
| |
|
161,359
|
| |
|
77,827
| |
|
45,786
| |
|
55,311
|
| |
|
41,221
|
|
Gross profit3 | | |
46,681
| | |
38,452
| | | |
10,615
| | |
7,625
| | |
15,540
| | | |
13,723
| |
Operating expenses4 | |
|
43,228
| |
|
38,878
|
| |
|
8,860
| |
|
5,303
| |
|
15,937
|
| |
|
15,594
|
|
Operating income (loss)
| |
$
|
3,453
| |
$
|
(426
|
)
| |
$
|
1,755
| |
$
|
2,322
| |
$
|
(397
|
)
| |
$
|
(1,871
|
)
| | | | | | | | | | | | |
|
Depreciation and amortization
| | |
2,956
| | |
2,619
| | | |
371
| | |
202
| | |
1,364
| | | |
1,448
| | | | | | | | | | | | | | | | | | | | | | |
| | | Twelve Months Ended Dec. 31: | | | Carbon Flat | | Specialty Metals Flat | | Tubular and Pipe | | | Products | | Products | | Products1 | | | 2018 | | 2017 | | 2018 | | 2017 | | 2018 | | 2017 |
Tons sold1 | |
|
1,142,371
| |
|
1,147,750
|
| |
|
135,587
| |
|
90,160
| |
NA
| |
NA
| | | | | | | | | | | | |
|
Net sales
| |
$
|
1,073,292
| |
$
|
869,628
| | |
$
|
343,479
| |
$
|
227,200
| |
$
|
298,310
| | |
$
|
233,868
| |
Average selling price per ton
| | |
940
| | |
758
| | | |
2,533
| | |
2,520
| |
NA
| |
NA
|
Cost of materials sold2 | |
|
855,942
| |
|
693,742
|
| |
|
294,553
| |
|
194,199
| |
|
222,459
|
| |
|
167,271
|
|
Gross profit3 | | |
217,350
| | |
175,886
| | | |
48,926
| | |
33,001
| | |
75,851
| | | |
66,597
| |
Operating expenses4 | |
|
172,996
| |
|
158,000
|
| |
|
33,678
| |
|
21,761
| |
|
64,331
|
| |
|
62,029
|
|
Operating income
| |
$
|
44,354
| |
$
|
17,886
|
| |
$
|
15,248
| |
$
|
11,240
| |
$
|
11,520
|
| |
$
|
4,568
|
| | | | | | | | | | | | |
|
Depreciation and amortization
| | |
10,621
| | |
10,906
| | | |
1,251
| | |
811
| | |
5,601
| | | |
5,659
| |
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 $3.7 million, and $8.4 million, for the three and twelve months
ended Dec. 31, 2018; and $1.2 million, and $2.7 million for the
three and twelve months ended Dec. 31, 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)
| | | | |
| | | | |
| At Dec. 31, 2018 | | At Dec. 31, 2017 |
Assets
| | | | |
Flat products
| |
$
|
560,116
| | |
$
|
409,116
| |
Tubular and pipe products
| | |
200,016
| | | |
194,787
| |
Corporate
| |
|
608
|
| |
|
255
|
|
Total assets
| |
$
|
760,740
|
| |
$
|
604,158
|
| | | | |
| Other Information: | | | | |
(audited, in thousands, except per-share data)
| | | | | | | At Dec. 31, 2018 | | At Dec. 31, 2017 | | | | |
|
Shareholders' equity per share
| |
$
|
27.89
| | |
$
|
24.80
| |
Debt-to-equity ratio
| |
0.99 to 1
| |
0.72 to 1
| | | | |
| | | Twelve Months Ended | | | Dec. 31, | | | 2018 | | 2017 | | | | |
|
Net cash from (used for) operating activities
| |
$
|
(50,501
|
)
| |
$
|
(19,041
|
)
|
Cash dividends per share
| |
$
|
0.08
| | |
$
|
0.08
| |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190215005049/en/
Richard A. Manson Chief Financial Officer (216) 672-0522 ir@olysteel.com |
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