UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549



 
FORM 8-K

 

CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): February 21, 2020
 


Olympic Steel, Inc.
(Exact name of registrant as specified in its charter)

Ohio
000-23320
34-1245650
(State or other jurisdiction
of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

5096 Richmond Road, Bedford Heights, Ohio
44146
(Address of principal executive offices)
(Zip Code)
 
Registrant's telephone number, including area code:   (216) 292-3800
 
________________________________________________________________________________
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

   
[   ]  
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
[   ]  
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
[   ]  
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
[   ]  
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, without par value
ZEUS
The NASDAQ Stock Market, LLC.


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company [  ]
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]


Item 2.02. Results of Operations and Financial Condition.
 
On February 21, 2020, Olympic Steel, Inc. issued a press release reporting its operating results for the fourth quarter and twelve months of 2019 ended December 31, 2019. The press release is attached hereto as Exhibit 99.1.
 
The information included in this report, including exhibit 99.1, is furnished pursuant to Item 2.02 of Form 8-K, is not to be considered "filed" under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and shall not be incorporated by reference into any of Olympic Steel, Inc.'s previous or future filings under the Securities Act of 1933, as amended, or the Exchange Act except as otherwise expressly stated in such filing.
 
 
Item 9.01. Financial Statements and Exhibits.
 
 
(d) Exhibits.
 
Exhibit No.
 
99.1 Press release dated February 21, 2020.



SIGNATURE
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
Olympic Steel, Inc.
 
(Registrant)

February 21, 2020
 

/s/   RICHARD A. MANSON

(Date)
Richard A. Manson
Chief Financial Officer
(Principal Financial and Accounting Officer)



 
Exhibit Index
 
99.1 Press Release dated February 21, 2020
 
Exhibit 99.1


Olympic Steel Reports Fourth-Quarter and Full-Year 2019 Results

Strong cash flow during the year enabled company to invest in the business, execute on acquisition strategy and reduce debt by over $100 million

CLEVELAND--(BUSINESS WIRE)--February 21, 2020--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

 

 

 

 

 

 

 

Contacts

Richard A. Manson
Chief Financial Officer
(216) 672-0522
ir@olysteel.com