Strong cash flow during the year enabled
company to invest in the business, execute on acquisition strategy
and reduce debt by over $100 million
Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national
metals service center, today announced financial results for the
three and 12 months ended December 31, 2019.
Fourth-Quarter Results
The net loss for the quarter totaled $890,000, or $0.08 per
diluted share, compared to a net loss of $1.3 million, or $0.11 per
diluted share, in the fourth quarter of 2018. The results include
$2.4 million of LIFO income in the fourth quarter of 2019, compared
with $3.7 million of LIFO expense in the fourth quarter of 2018.
The fourth-quarter earnings impact of LIFO is noted in the
reconciliation below. Sales for the fourth quarter of 2019 totaled
$320 million, compared with $430 million in the fourth quarter of
2018.
Full-Year 2019 Results
Net income for 2019 totaled $3.9 million, or $0.34 per diluted
share, compared to net income of $33.8 million, or $2.95 per
diluted share, in 2018. The results include $3.7 million of LIFO
income in 2019, compared with $8.4 million of LIFO expense in 2018.
The full-year earnings impact of LIFO is noted in the
reconciliation below. Sales for 2019 totaled $1.6 billion, compared
with $1.7 billion in 2018.
“As we reflect on 2019, we are encouraged by the progress we
made to further our diversification strategy and strengthen our
financial position,” said Chief Executive Officer Richard T.
Marabito. “Our specialty metals business recorded its second most
profitable year ever, and our pipe and tube business delivered
solid profitability at a time when the industry was facing
challenging market conditions. In addition, we acquired two
downstream metal-intensive branded companies – McCullough
Industries and EZ-Dumper – in our carbon products portfolio that
had an immediate positive impact on our profitability.”
Marabito continued, “Our continued discipline on operating
expenses and inventory management resulted in strong cash flow,
which was used to invest in our business, execute on our
acquisition strategy and reduce debt by $110 million, or 36%, in
2019.”
“As we start the new year, we will remain diligent in managing
our operating expenses and strengthening our balance sheet to
provide us with the flexibility to swiftly execute on further
growth and business diversification opportunities,” Marabito
concluded.
The table that follows provides a reconciliation of non-GAAP
measures 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 December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
Net income (loss) per diluted
share:
$
(0.08
)
$
(0.11
)
$
0.34
$
2.95
Excluding the following item:
LIFO (income) / expense
(0.15
)
0.25
(0.23
)
0.56
Adjusted net income (loss) per diluted
share (non-GAAP):
$
(0.23
)
$
0.14
$
0.11
$
3.51
Conference Call and Webcast
A simulcast of Olympic Steel’s 2019 fourth-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 February 21, 2020, 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: risks of falling metals prices and inventory
devaluation; general and global business, economic, financial and
political conditions, including the 2020 U.S. election; competitive
factors such as the availability, global pricing of metals and
production levels (including the increased U.S. capacity), 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 and
imposed tariffs and duties on exported steel or other products,
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 successes of our efforts and initiatives to
improve working capital turnover and cash flows, and achieve cost
savings; our ability to generate free cash flow through operations
and repay debt; the availability, and increased costs, of labor
related to tighter employment markets; the availability and rising
costs of transportation and logistical services; 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; rising interest rates and their impacts on our variable
interest rate debt; 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 30 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 Net
Income
(in thousands, except per-share
data)
Three months ended
Twelve months ended
December 31
December 31
2019
2018
2019
2018
Net sales
$
319,740
$
429,590
$
1,579,040
$
1,715,081
Costs and expenses
Cost of materials sold (excludes items
shown separately below)
251,130
356,754
1,280,110
1,372,954
Warehouse and processing
23,519
24,986
99,457
97,565
Administrative and general
18,786
19,515
76,863
81,107
Distribution
10,989
12,270
48,159
50,347
Selling
7,080
7,312
28,839
29,020
Occupancy
2,400
2,228
9,972
9,428
Depreciation
4,475
4,504
17,686
16,645
Amortization
346
247
1,344
963
Total costs and expenses
318,725
427,816
1,562,430
1,658,029
Operating income
1,015
1,774
16,610
57,052
Other income (loss), net
1
(185
)
(32
)
(307
)
Income before financing costs and income
taxes
1,016
1,589
16,578
56,745
Interest and other expense on debt
2,304
3,101
11,289
10,681
Income (loss) before income taxes
(1,288
)
(1,512
)
5,289
46,064
Income tax provision (benefit)
(398
)
(196
)
1,433
12,305
Net income (loss)
$
(890
)
$
(1,316
)
$
3,856
$
33,759
Earnings per share:
Net income (loss) per share - basic
$
(0.08
)
$
(0.11
)
$
0.34
$
2.95
Weighted average shares outstanding -
basic
11,416
11,444
11,509
11,432
Net income (loss) per share -
diluted
$
(0.08
)
$
(0.11
)
$
0.34
$
2.95
Weighted average shares outstanding -
diluted
11,416
11,444
11,509
11,440
Olympic Steel, Inc.
Consolidated Balance
Sheets
(in thousands)
At Dec. 31, 2019
At Dec. 31, 2018
Assets
Cash and cash equivalents
$
5,742
$
9,319
Accounts receivable, net
133,572
175,252
Inventories, net (includes LIFO debit of
$598 and a LIFO credit of $3,071 as of December 31, 2019 and
December 31, 2018, respectively)
273,531
368,738
Prepaid expenses and other
6,997
9,460
Total current assets
419,842
562,769
Property and equipment, at cost
416,511
403,785
Accumulated depreciation
(260,264
)
(244,176
)
Net property and equipment
156,247
159,609
Goodwill
3,423
2,358
Intangible assets, net
29,259
24,914
Other long-term assets
14,439
11,090
Right of use asset, net
26,345
-
Total assets
$
649,555
$
760,740
Liabilities
Accounts payable
$
69,452
$
95,367
Accrued payroll
13,196
19,665
Other accrued liabilities
12,850
13,395
Current portion of lease liabilities
5,589
-
Total current liabilities
101,087
128,427
Credit facility revolver
192,925
302,530
Other long-term liabilities
14,068
9,327
Deferred income taxes
12,262
13,465
Lease liabilities
20,861
-
Total liabilities
341,203
453,749
Shareholders' Equity
Preferred stock
-
-
Common stock
131,647
130,778
Treasury stock
(335
)
(132
)
Accumulated other comprehensive loss
(2,281
)
-
Retained earnings
179,321
176,345
Total shareholders' equity
308,352
306,991
Total liabilities and shareholders'
equity
$
649,555
$
760,740
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 December
31
Carbon Flat Products
Specialty Metals Flat
Products
Tubular and Pipe
Products
2019
2018
2019
2018
2019
2018
Tons sold1
221,446
259,181
30,439
35,312
N/A
N/A
Net sales
$
176,982
$
270,297
$
81,916
$
88,442
$
60,842
$
70,851
Average selling price per ton
799
1,043
2,691
2,505
N/A
N/A
Cost of materials sold2
141,172
223,616
68,795
77,827
41,163
55,311
Gross profit3
35,810
46,681
13,121
10,615
19,679
15,540
Operating expenses4
40,230
43,228
9,072
8,860
15,625
15,937
Operating income (loss)
$
(4,420
)
$
3,453
$
4,049
$
1,755
$
4,054
$
(397
)
Depreciation and amortization
3,000
2,956
427
371
1,352
1,364
Twelve months ended December
31
Carbon Flat Products
Specialty Metals Flat
Products
Tubular and Pipe
Products
2019
2018
2019
2018
2019
2018
Tons sold1
1,010,340
1,142,371
141,828
135,587
N/A
N/A
Net sales
$
926,903
$
1,073,292
$
363,634
$
343.479
$
288,503
$
298,310
Average selling price per ton
917
940
2,564
2,533
N/A
N/A
Cost of materials sold5
763,549
855,942
310,931
294,553
205,630
222,459
Gross profit3
163,354
217,350
52,703
48,926
82,873
75,851
Operating expenses4
168,377
172,996
38,382
33,678
64,266
64,331
Operating income (loss)
$
(5,023
)
$
44,354
$
14,321
$
15,248
$
18,607
$
11,520
Depreciation and amortization
11,624
10,621
1,830
1,251
5,408
5,601
At Dec. 31, 2019
At Dec. 31, 2018
Assets
Flat-products
$
432,566
$
560,116
Tubular and pipe products
215,841
200,016
Corporate
1,148
608
Total assets
$
649,555
$
760,740
1
Tonnage is less meaningful for
the Tubular and Pipe Products segment and, therefore, is not
reported.
2
Includes $2.4 million of LIFO
income and $3.7 million of LIFO expense for the three months ended
December 31, 2019 and December 31, 2018, 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 Net Income.
5
Includes $3.7 million of LIFO
income and $8.4 million of LIFO expense for the 12 months ended
December 31, 2019 and December 31, 2018, respectively.
Other Information
(In thousands except per-share data)
At Dec. 31, 2019
At Dec. 31, 2018
Shareholders' equity per share
$
28.04
$
27.89
Debt to equity ratio
0.63 to 1
0.99 to 1
Twelve Months Ended December
31,
2019
2018
Net cash from (used for) operating
activities
$
129,558
$
(50,501
)
Cash dividends per share
$
0.08
$
0.08
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200221005187/en/
Richard A. Manson Chief Financial Officer (216) 672-0522
ir@olysteel.com
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