Diversification strategy and operational discipline drive strong financial performance through shifting market conditions

Olympic Steel, Inc. (NASDAQ:ZEUS), a leading national metals service center, today announced financial results for the three months ended September 30, 2022.

Net income for the third quarter totaled $12.0 million, or $1.04 per diluted share, compared with net income of $44.5 million, or $3.87 per diluted share, in the third quarter of 2021. The results include $1.5 million of LIFO pretax expense ($0.10 per share impact) in the third quarter of 2022, compared with $7.0 million ($0.45 per share impact) of LIFO pretax expense in the same period a year ago. Adjusted EBITDA for the third quarter of 2022 was $25.3 million, compared with $70.5 million in the third quarter of 2021.

The Company reported sales totaling $634 million in the third quarter of 2022, compared with $668 million in the third quarter of 2021.

"Our third-quarter performance is further evidence that our strategy to diversify into higher-return, value-added products and services through acquisitions and organic growth has strengthened Olympic Steel," said Richard T. Marabito, Chief Executive Officer. "As expected, metals pricing significantly declined during the quarter and macroeconomic uncertainty caused by ongoing supply chain constraints, labor shortages and inflation continued. The additional resilience built into our business, combined with our team's hard work and sustained operating discipline, enabled Olympic Steel to withstand these challenges to deliver $25.3 million of Adjusted EBITDA for the third quarter. We simultaneously strengthened our balance sheet by reducing debt by $84 million, or 26%, so far this year."

Marabito continued, "While we expect metals pricing to decline further and pressure profit margins in the fourth quarter, we are confident that we have reduced the impact of market cyclicality on our business. We anticipate strong cash flows and further debt reduction in the fourth quarter. We have significant capital to continue our diversification strategy by investing in additional acquisitions, new capacity, and efficiency through automation to deliver value to our shareholders."

The Board of Directors approved a regular quarterly cash dividend of $0.09 per share, which is payable on December 15, 2022, to shareholders of record on December 1, 2022. The Company has paid a regular quarterly dividend since March 2006.

The table that follows provides a reconciliation of non-GAAP measures to the most directly comparable measures prepared in accordance with GAAP.

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					Nine months ended
	September 30,					September 30,
		2022		2021			2022			2021

Net income per diluted share	$	1.04	$	3.87		$	7.53		$	8.36

Excluding the following items:
LIFO Expense		0.10		0.45			0.10			0.77
Gain on Sale of Detroit Operation		-		(0.23	)		-			(0.23	)
Gain on Sale of Milan Warehouse		-		-			(0.13	)		-

Adjusted net income per diluted share (non-GAAP)	$	1.14	$	4.09		$	7.49		$	8.90

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					Nine Months Ended
	9/30/2022		9/30/2021			9/30/2022			9/30/2021

Net income (GAAP):	$	12,046	$	44,533		$	86,972		$	96,190
Excluding the following items:
Foreign exchange loss included in net income		17		15			38			24
Interest and other expense on debt		3,007		1,947			7,276			5,618
Income tax provision		4,016		15,665			31,787			34,354
Depreciation and amortization		4,666		4,813			14,594			15,321

Earnings before interest, taxes, depreciation and
amortization (EBITDA)		23,752		66,973			140,667			151,507

LIFO Expense		1,500		7,000			1,500			12,000
Gain on Sale of Detroit Operation		-		(3,499	)		-			(3,499	)
Gain on Sale of Milan Warehouse		-		-			(2,083	)		-

Adjusted EBITDA (non-GAAP)	$	25,252	$	70,474		$	140,084		$	160,008

Conference Call and Webcast

A simulcast of Olympic Steel's 2022 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. ET on November 4, 2022, 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 supply chain disruption resulting from the imbalance of metal supply and end-user demands related to the novel coronavirus, or COVID-19, including additional shutdowns in large markets, such as China, and other factors; risks associated with shortages of skilled labor, increased labor costs and our ability to attract and retain qualified personnel; risks associated with the invasion of Ukraine, including economic sanctions, or additional war or military conflict, could adversely affect global metals supply and pricing; rising interest rates and their impacts on our variable interest rate debt; supplier consolidation or addition of additional capacity; risks associated with the COVID-19 pandemic, 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, 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, negative impacts on our liquidity position, inability to access our traditional financing sources on the same or reasonably similar terms as were available before the COVID-19 pandemic 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; 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; general and global business, economic, financial and political conditions, including, but not limited to, recessionary conditions and legislation passed under the current administration; 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; the adequacy of our efforts to mitigate cyber security risks and threats, especially with employees working remotely due to the COVID-19 pandemic; 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 adequacy of our existing information technology and business system software, including duplication and security processes; 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 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 and adjusted EBITDA, which are non-GAAP financial measures. Management's view of the Company's performance includes adjusted earnings per share and 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 42 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				Nine months ended
	September 30				September 30
		2022		2021		2022		2021

Net sales	$	634,437	$	668,466	$	2,039,946	$	1,687,667

Costs and expenses
Cost of materials sold (excludes items shown separately below)		527,466		520,866		1,643,119		1,304,234
Warehouse and processing		27,397		26,208		79,069		76,153
Administrative and general		26,929		24,811		88,520		74,328
Distribution		15,131		14,424		46,613		42,086
Selling		10,589		12,155		31,905		30,408
Occupancy		3,173		3,029		10,053		8,951
Depreciation		4,062		4,243		12,766		13,557
Amortization		604		570		1,828		1,764

Total costs and expenses		615,351		606,306		1,913,873		1,551,481

Operating income		19,086		62,160		126,073		136,186

Other loss, net		17		15		38		24

Income before interest and income taxes		19,069		62,145		126,035		136,162

Interest and other expense on debt		3,007		1,947		7,276		5,618

Income before income taxes		16,062		60,198		118,759		130,544

Income tax provision		4,016		15,665		31,787		34,354

Net income	$	12,046	$	44,533	$	86,972	$	96,190


Earnings per share:

Net income per share - basic	$	1.04	$	3.88	$	7.53	$	8.37

Weighted average shares outstanding - basic		11,548		11,492		11,543		11,491

Net income per share - diluted	$	1.04	$	3.87	$	7.53	$	8.36

Weighted average shares outstanding - diluted		11,557		11,515		11,548		11,509

Olympic Steel, Inc.
Balance Sheets
(in thousands)

	As of September 30, 2022			As of December 31, 2021
Assets

Cash and cash equivalents	$	10,232		$	9,812
Accounts receivable, net		279,344			284,570
Inventories, net (includes LIFO reserves of $21,236 and $19,736 as of September 30, 2022 and December 31, 2021 respectively)		508,103			485,029
Prepaid expenses and other		7,447			9,989

Total current assets		805,126			789,400

Property and equipment, at cost		424,051			413,396
Accumulated depreciation		(276,918	)		(266,340	)

Net property and equipment		147,133			147,056

Goodwill		10,496			10,496
Intangible assets, net		32,439			33,653
Other long-term assets		14,315			15,241
Right of use asset, net		27,475			27,726

Total assets	$	1,036,984		$	1,023,572

Liabilities

Accounts payable	$	167,081		$	148,649
Accrued payroll		38,071			44,352
Other accrued liabilities		19,441			25,395
Current portion of lease liabilities		6,124			5,940

Total current liabilities		230,717			224,336

Credit facility revolver		244,200			327,764
Other long-term liabilities		11,245			15,006
Deferred income taxes		16,317			9,890
Lease liabilities		21,850			22,137

Total liabilities		524,329			599,133


Shareholders' Equity

Preferred stock		-			-
Common stock		134,423			133,427
Accumulated other comprehensive income (loss)		1,256			(1,996	)
Retained earnings		376,976			293,008

Total shareholders' equity		512,655			424,439

Total liabilities and shareholders' equity	$	1,036,984		$	1,023,572

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 September 30,
	Carbon Flat Products				Specialty Metals Flat Products				Tubular and Pipe Products
		2022		2021		2022		2021		2022		2021

Tons sold		203,122		244,519		34,189		41,203		N/A		N/A

Net sales	$	336,259	$	404,596	$	188,301	$	164,179	$	109,877	$	99,691
Average selling price per ton		1,655		1,655		5,508		3,985		N/A		N/A
Cost of materials sold		293,498		321,005		150,546		120,227		83,422		79,634
Gross profit		42,761		83,591		37,755		43,952		26,455		20,057
Operating expenses		41,029		46,427		22,683		19,289		19,360		17,703
Operating income		1,732		37,164		15,072		24,663		7,095		2,354

Depreciation and amortization		2,513		2,698		1,024		858		1,112		1,239
LIFO expense		-		-		-		-		1,500		7,000

	Nine months ended September 30,
	Carbon Flat Products				Specialty Metals Flat Products				Tubular and Pipe Products
		2022		2021		2022		2021		2022		2021

Tons sold		619,809		728,750		111,019		123,278		N/A		N/A

Net sales	$	1,086,473	$	976,480	$	614,744	$	428,533	$	338,729	$	282,654
Average selling price per ton		1,753		1,340		5,537		3,476		N/A		N/A
Cost of materials sold		931,844		755,111		455,977		331,348		255,298		217,775
Gross profit		154,629		221,369		158,767		97,185		83,431		64,879
Operating expenses		127,404		132,572		73,138		50,798		54,454		53,166
Operating income		27,225		88,797		85,629		46,387		28,977		11,713

Depreciation and amortization		7,885		8,570		3,037		2,662		3,620		4,035
LIFO expense		-		-		-		-		1,500		12,000

	As of September 30, 2022		As of December 31, 2021
Assets
Flat-products	$	774,536	$	777,074
Tubular and pipe products		262,130		245,962
Corporate		318		536
Total assets	$	1,036,984	$	1,023,572

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

(in thousands except per share data)
	As of September 30, 2022		As of December 31, 2021
Shareholders' equity per share	$	46.06	$	38.31

Debt-to-equity ratio	0.48 to 1		0.77 to 1


	Nine Months Ended September 30,
		2022		2021

Net cash from (used for) operating activities	$	98,251	$	(126,938	)

Cash dividends per share	$	0.27	$	0.06

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Olympic Steel Reports Third-Quarter 2022 Results