Olympic Steel Reports Second-Quarter 2023 Results

Company performance continues to reflect the benefits of its diversification strategy and investments in enhanced capabilities

Carbon segment delivers strong profitability, while Tubular and Pipe Products segment further capitalizes on growing demand for value-added offerings

Olympic Steel, Inc. (Nasdaq: ZEUS), a leading national metals service center, today announced financial results for the three months ended June 30, 2023.

Net income for the second quarter totaled $15.0 million, or $1.30 per diluted share, compared with net income of $37.6 million, or $3.26 per diluted share, in the second quarter of 2022. The results include $1.0 million of LIFO pre-tax income in the second quarter of 2023, compared to no LIFO adjustment in the second quarter of 2022. Adjusted EBITDA for the second quarter of 2023 was $31.2 million, compared with $58.8 million in the second quarter of 2022.

The Company reported sales of $569 million in the second quarter of 2023, compared with $709 million in the second quarter of 2022. Distribution shipping volumes increased 2.4% year-over-year, while average selling prices decreased.

“Olympic Steel continued to deliver strong performance in the second quarter,” said Richard T. Marabito, Chief Executive Officer. “The consistency of our results, despite lower metals prices and challenges in the overall economy, is directly attributable to our efforts to diversify our product offerings and invest capital in higher-return opportunities. Our Carbon and Tubular and Pipe segments led the way, while our Specialty Metals business remained steady in the face of industry-wide white metals headwinds.”

Marabito said, “Our Carbon segment earned $18.4 million of Adjusted EBITDA for the quarter, while our Tubular and Pipe Products segment posted its fourth-strongest quarter of profitability ever with $10.1 million of Adjusted EBITDA by capitalizing on growing demand for our enhanced value-added processing capabilities.”

Marabito continued, “Our second-quarter results include the full earnings effect of Metal-Fab, our second largest acquisition in Company history, which was added to our family of companies in January 2023. Metal-Fab was a strong contributor to our second-quarter earnings and we will further benefit from Olympic Steel’s supply chain synergies during the second half of 2023. Several of our fabrication and automation projects also became operational during the quarter, including our new specialty metals and carbon fabricating facility in the Chicago market, further enhancing our capabilities and production efficiency. With a strong balance sheet and more than $340 million of borrowing availability, we are actively evaluating acquisitions and capital investments to advance our diversification strategy and foster additional profitable growth.”

Marabito concluded, “As we move into the third quarter, we expect overall demand to remain steady while reflecting normal seasonal trends. While the near-term economic outlook is somewhat unsettled, we remain optimistic about the long-term outlook for the steel market and we are confident that the steps we have taken position Olympic Steel to deliver more consistent results in all environments.”

The Board of Directors approved a regular quarterly cash dividend of $0.125 per share, which is payable on September 15, 2023, to shareholders of record on September 1, 2023. The Company has paid a regular quarterly dividend since March 2006.

The table that follows provides a reconciliation of certain non-GAAP measures to the most directly comparable measures prepared in accordance with GAAP. Additional reconciliations can be found in the Segment Financial Information table which also follows.

Olympic Steel, Inc.

Reconciliation of Net Income Per Diluted Share to Adjusted Net Income Per Diluted Share

(Figures may not foot due to rounding.)

The following table reconciles adjusted net income per diluted share to the most directly comparable GAAP

financial measure:

Three months ended Six months ended June 30, June 30,

2023

2022

2023

2022

Net income per diluted share

1.30

3.26

2.15

6.49

Excluding the following items LIFO income

(0.06

)

(0.06

)

Metal-Fab inventory fair market value adjustment

0.13

Acquisition related expenses

0.16

Gain on sale of Milan, IA warehouse

(0.13

)

Adjusted net income per diluted share (non-GAAP)

1.24

3.26

2.38

6.36

Reconciliation of Net Income to Adjusted EBITDA

(in thousands)

The following table reconciles Adjusted EBITDA to the most directly comparable GAAP financial measure:

Three Months Ended Six Months Ended 6/30/2023 6/30/2022 6/30/2023 6/30/2022 Net income (GAAP):

15,019

37,624

24,891

74,926

Excluding the following items: Foreign exchange loss included in net income

Interest and other expense on debt

4,203

2,271

8,426

4,269

Income tax provision

6,522

13,955

10,139

27,771

Depreciation and amortization

6,473

4,946

12,674

9,928

Earnings before interest, taxes, depreciation and amortization (EBITDA)

32,245

58,811

56,169

116,915

LIFO income

(1,000

)

(1,000

)

Metal-Fab inventory fair market value adjustment

2,079

Acquisition related expenses

2,556

Gain on sale of Milan, IA warehouse

(2,083

)

Adjusted EBITDA (non-GAAP)

31,245

58,811

59,804

114,832

Conference Call and Webcast

A simulcast of Olympic Steel’s 2023 second-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. ET on August 4, 2023, 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; supply disruptions and inflationary pressures, including the availability and rising costs of transportation, energy, logistical services and labor; risks associated with shortages of skilled labor, increased labor costs and our ability to attract and retain qualified personnel; rising interest rates and their impacts on our variable interest rate debt; risks associated with supply chain disruption resulting from the imbalance of metal supply and end-user demands, including additional shutdowns as a result of infectious disease outbreaks in large markets, such as China, and other factors; risks associated with the invasion of Ukraine, including economic sanctions, or additional war or military conflict, could adversely affect global metals supply and pricing; general and global business, economic, financial and political conditions, including, but not limited to, recessionary conditions and legislation passed under the current administration; supplier consolidation or addition of new capacity; risks associated with infectious disease outbreaks, including, but not limited to customer closures, reduced sales and profit levels, slower payment of accounts receivable and potential increases in uncollectible accounts receivable, falling metals prices that could lead to lower of cost or net realizable value inventory adjustments and the impairment of intangible and long-lived assets, negative impacts on our liquidity position, inability to access our traditional financing sources and increased costs associated with and less ability to access funds under our asset-based credit facility, or ABL Credit Facility, and the capital markets; 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; the adequacy of our existing information technology and business system software, including duplication and security processes; 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; 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 last-in, first-out, or LIFO, inventory valuation; increased customer demand without corresponding increase in metal supply could lead to an inability to meet customer demand and result in lower sales and profits; competitive factors such as the availability, and global pricing of metals and production levels, industry shipping and inventory levels and rapid fluctuations in customer demand and metals pricing; customer, supplier and competitor consolidation, bankruptcy or insolvency; the timing and outcomes of inventory lower of cost or net realizable value adjustments and LIFO income or expense; reduced production schedules, layoffs or work stoppages by our own, our suppliers’ or customers’ personnel; cyclicality and volatility within the metals industry; reduced availability and productivity of our employees, increased operational risks as a result of remote work arrangements, including the potential effects on internal controls, as well as cybersecurity risks and increased vulnerability to security breaches, information technology disruptions and other similar events; 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 amounts, successes and our ability to continue our capital investments and strategic growth initiatives, including acquisitions and our business information system implementations; events or circumstances that could adversely impact the successful operation of our processing equipment and operations; 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; 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; our ability to sell shares of our common stock under the at-the-market equity program; 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, adjusted EBITDA and segment adjusted EBITDA, which are non-GAAP financial measures. Management’s view of the Company’s performance includes adjusted earnings per share, adjusted EBITDA and segment adjusted EBITDA, and management uses these non-GAAP financial measures internally for planning and forecasting purposes and to measure the performance of the Company. We believe these non-GAAP financial measures provide useful and meaningful information to us and investors because they enhance investors’ understanding of the continuing operating performance of our business and facilitate the comparison of performance between past and future periods. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. Additionally, the presentation of these measures may be different from non-GAAP financial measures used by other companies. A reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures 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 fabricator of value-added parts and components. Headquartered in Cleveland, Ohio, Olympic Steel operates from 44 facilities in North America.

For additional information, please visit the Company’s website at www.olysteel.com.

Olympic Steel, Inc.

Consolidated Statements of Net Income

(in thousands, except per-share data)

Three months ended

Six months ended

June 30

2023

2022

2023

2022

Net sales

569,268

709,176

1,142,344

1,405,509

Costs and expenses Cost of materials sold (excludes items shown separately below)

441,872

560,546

894,508

1,115,653

Warehouse and processing

31,522

27,624

62,171

51,672

Administrative and general

31,681

31,969

64,866

61,591

Distribution

17,448

16,441

35,189

31,482

Selling

10,389

10,494

20,786

21,316

Occupancy

4,111

3,291

8,655

6,880

Depreciation

5,245

4,354

10,322

8,704

Amortization

1,228

592

2,352

1,224

Total costs and expenses

543,496

655,311

1,098,849

1,298,522

Operating income

25,772

53,865

43,495

106,987

Other loss, net

Income before interest and income taxes

25,744

53,850

43,456

106,966

Interest and other expense on debt

4,203

2,271

8,426

4,269

Income before income taxes

21,541

51,579

35,030

102,697

Income tax provision

6,522

13,955

10,139

27,771

Net income

15,019

37,624

24,891

74,926

Earnings per share: Net income per share - basic

1.30

3.26

2.15

6.49

Weighted average shares outstanding - basic

11,569

11,538

11,570

11,536

Net income per share - diluted

1.30

3.26

2.15

6.49

Weighted average shares outstanding - diluted

11,572

11,545

11,572

11,540

Olympic Steel, Inc.

Balance Sheets

(in thousands)

As of June 30, 2023 As of December 31, 2022 Assets Cash and cash equivalents

15,170

12,189

Accounts receivable, net

227,992

219,789

Inventories, net (includes LIFO reserves of $19,301 and $20,301 as of June 30, 2023 and December 31, 2022, respectively)

405,944

416,931

Prepaid expenses and other

11,510

9,197

Total current assets

660,616

658,106

Property and equipment, at cost

463,291

429,810

Accumulated depreciation

(288,300

)

(281,478

)

Net property and equipment

174,991

148,332

Goodwill

43,690

10,496

Intangible assets, net

84,944

32,035

Other long-term assets

15,958

14,434

Right of use asset, net

33,783

28,224

Total assets

1,013,982

891,627

Liabilities Accounts payable

124,087

101,446

Accrued payroll

25,180

40,334

Other accrued liabilities

22,647

16,824

Current portion of lease liabilities

6,878

6,098

Total current liabilities

178,792

164,702

Credit facility revolver

238,240

165,658

Other long-term liabilities

17,334

12,619

Deferred income taxes

13,611

10,025

Lease liabilities

27,542

22,655

Total liabilities

475,519

375,659

Shareholders' Equity Preferred stock

Common stock

135,566

134,724

Accumulated other comprehensive income

856

1,311

Retained earnings

402,041

379,933

Total shareholders' equity

538,463

515,968

Total liabilities and shareholders' equity

1,013,982

891,627

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 June 30, Carbon Flat Products Specialty Metals Flat Products Tubular and Pipe Products

2023

2022

2023

2022

2023

2022

Tons sold 1

226,275

210,604

28,711

38,386

N/A

Net sales

326,629

370,665

147,000

226,964

95,639

111,547

Average selling price per ton

1,444

1,760

5,120

5,913

N/A

Cost of materials sold

253,072

310,633

122,600

164,441

66,200

85,472

Gross profit

73,557

60,032

24,400

62,523

29,439

26,075

Operating expenses

58,862

44,414

17,721

26,050

20,068

18,775

Operating income

14,695

15,618

6,679

36,473

9,371

7,300

Depreciation and amortization

3,716

2,698

1,023

1,008

1,716

1,222

LIFO income

(1,000

)

Adjusted EBITDA

18,411

18,316

7,702

37,481

10,087

8,522

Six months ended June 30, Carbon Flat Products Specialty Metals Flat Products Tubular and Pipe Products

2023

2022

2023

2022

2023

2022

Tons sold 1

444,613

416,687

61,227

76,830

N/A

Net sales

636,447

750,214

313,564

426,443

192,333

228,852

Average selling price per ton

1,431

1,800

5,121

5,550

N/A

Cost of materials sold

501,508

638,346

260,313

305,431

132,687

171,876

Gross profit

134,939

111,868

53,251

121,012

59,646

56,976

Operating expenses

114,298

86,375

37,313

50,455

40,534

35,094

Operating income

20,641

25,493

15,938

70,557

19,112

21,882

Depreciation and amortization

7,323

5,372

2,007

2,013

3,309

2,508

LIFO income

(1,000

)

Metal-Fab inventory fair market value adjustment

2,079

Gain on sale of Milan, IA warehouse

(2,083

)

Adjusted EBITDA

30,043

30,865

17,945

72,570

21,421

22,307

1 The Company does not report tons sold for McCullough Industries, EZ Dumper, or Metal-Fab in the Carbon Flat Products Segment, Shaw Stainless in the Specialty Metals Flat Products Segment or the Tubular and Pipe Products Segment.

Other Information

(in thousands, except per-share and ratio data)

As ofJune 30,2023 As ofDecember 31,2022 Assets Flat-products

737,819

631,607

Tubular and pipe products

274,562

258,412

Corporate

1,601

1,608

Total assets