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Olympic Steel Reports 2006 Fourth Quarter and Annual Sales and Earnings Results

Posted on: Thursday, 15 February 2007, 09:00 CST

Olympic Steel, Inc., (Nasdaq:ZEUS), a national steel service center, today announced its financial results for the fourth quarter and year ended December 31, 2006.

Net sales for the fourth quarter of 2006 totaled $226.1 million, a 10.4% increase from the $204.8 million for the fourth quarter a year ago. Fourth quarter 2006 net income totaled $3.8 million, or $0.35 per diluted share, compared to net income of $7.3 million, or $0.70 per diluted share for last year's fourth quarter. Tons sold decreased 7.9% to 272 thousand from 295 thousand in the fourth quarter of 2005.

Net sales for the full year 2006 increased 4.4% to $981.0 million from $939.2 million. Net income for 2006 was $31.0 million, or $2.92 per diluted share, compared to net income of $22.1 million, or $2.11 per diluted share for 2005. Tons sold totaled 1.27 million in 2006 compared to 1.28 million in 2005.

Olympic Steel's Board of Directors approved a regular quarterly cash dividend of $.03 per share to be paid to shareholders of record as of March 1, 2007, and distributed on March 15, 2007.

Commenting on the results, Chairman and Chief Executive Officer Michael D. Siegal, stated, "We are pleased to report strong 2006 sales and earnings performance, as we realized record annual sales and our second most profitable year in the 52 year history of Olympic Steel. In 2006, we also began paying regular quarterly cash dividends, purchased and equipped a second Olympic facility in Chambersburg, Pennsylvania to expand our value-add processing capabilities, added six new laser lines, and acquired a fabrication company in North Carolina."

"High fourth quarter service center inventories, as reflected by the Metals Service Center Institute, clearly caused a deteriorating market at yearend. We believe that situation will be remediated by the end of the first quarter of 2007, as demand is increasing, imports are being significantly reduced, input costs (such as scrap) are on the rise again, and domestic steel production appears in control. We also have begun increased capital spending in new equipment, facilities and technology solutions. We anticipate to continue to do so in 2007, as we position ourselves for margin growth and value creation in the markets we choose to serve," concluded Mr. Siegal.

A simulcast of Olympic Steel's 2006 fourth quarter and annual conference call may be accessed via the Investor Relations section of the Company's website at www.olysteel.com. The simulcast will begin at 10:00 a.m. Eastern Time today and a replay of the call will be available for 14 days thereafter.

Founded in 1954, Olympic Steel is a leading U.S. steel service center focused on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel products. Headquartered in Cleveland, Ohio, the Company operates 16 facilities. For further information, visit the Company's web site at http://www.olysteel.com.

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,""should,""expect,""anticipate,""intend,""plan,""believe,""estimate,""potential," or "continue," as well as the negative of these terms or other similar expressions. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements.

Such risks and uncertainties include, but are not limited to: general and global business, economic and political conditions; competitive factors such as the availability and pricing of steel, industry inventory levels, and rapid fluctuations in customer demand and pricing; the cyclicality and volatility within the steel industry; the ability of customers (especially in the automotive industry) to maintain their credit availability; layoffs or work stoppages by the Company's, suppliers' or customers' personnel; the availability and cost of transportation and logistical services; equipment installation delays or malfunctions; the successes of the Company's efforts and initiatives to increase sales volumes, improve cash flows and reduce debt, maintain or improve inventory turnover, and reduce costs; the timing and outcome of efforts and ability to liquidate OLP's remaining assets; the adequacy of our existing information technology and business system software and the success of implementing our new information system; customer, supplier, and competitor consolidation or insolvency; the post-acquisition integration of PS&W and the Company's ability to pay regular quarterly cash dividends. Further information on these and other risks and uncertainties is provided under Item 1A "Risk Factors" of the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which disclosure is incorporated herein by reference, and elsewhere in reports that the Company files or furnishes with the SEC. This release speaks only as of its date and the Company undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law. You are advised, however, to consult any further disclosures the Company makes on related subjects in its reports filed with or furnished to the SEC.

OLYMPIC STEEL

SELECTED FINANCIAL INFORMATION

(in thousands, except per share data and ratios)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2006 

2005 

2006 

2005 

SUMMARY RESULTS OF OPERATIONS:

(unaudited)

Net sales

$

226,061 

$

204,812 

$

981,004 

$

939,210 

Operating income

6,593 

16,426 

54,220 

44,021 

Income before income taxes

5,313 

12,149 

49,406 

36,193 

Net income

$

3,761 

$

7,305 

$

31,048 

$

22,092 

Earnings per share:

Net income per share - basic

$

0.36 

$

0.72 

$

2.99 

$

2.18 

Net income per share - diluted

$

0.35 

$

0.70 

$

2.92 

$

2.11 

December 31,

2006 

2005 

SUMMARY BALANCE SHEET DATA:

Accounts receivable, net

$

85,883 

$

80,131 

Inventories

210,738 

134,236 

Net property and equipment

87,359 

77,751 

Total assets

405,320 

305,606 

Current liabilities

92,340 

94,603 

Total debt

68,328 

- 

Shareholders' equity

234,237 

200,321 

Shareholders' equity per share

22.46 

19.73 

Debt-to-equity ratio

0.29 

n/a 

Twelve Months Ended

December 31,

2006 

2005 

OTHER DATA:

Capital expenditures

12,303 

2,230 

OLYMPIC STEEL

RESULTS OF OPERATIONS

(in thousands, except per share and tonnage data)

Three Months Ended December 31,

Twelve Months Ended December 31,

2006 

2005 

2006 

2005 

(unaudited)

Tons sold

Direct

230,852 

249,797 

1,064,559 

1,090,524 

Toll

41,165 

45,663 

201,656 

189,013 

272,017 

295,460 

1,266,215 

1,279,537 

 % change 

(7.9%)

(2.3%)

(1.0%)

(5.6%)

Net sales

$226,061 

$204,812 

$ 981,004 

$ 939,210 

 % change 

10.4%

(14.7%)

4.4%

5.0%

Costs and expenses

Cost of materials sold (exclusive of depreciation shown below)

184,246 

81.5%

157,065 

76.7%

780,305 

79.5%

772,739 

82.3%

Warehouse and processing

13,863 

6.1%

10,503 

5.1%

55,407 

5.6%

41,461 

4.4%

Administrative and general

8,465 

3.7%

8,962 

4.4%

38,143 

3.9%

32,229 

3.4%

Distribution

5,790 

2.6%

5,733 

2.8%

25,384 

2.6%

21,171 

2.3%

Selling

3,443 

1.5%

3,008 

1.5%

13,485 

1.4%

14,838 

1.6%

Occupancy

1,501 

0.7%

1,100 

0.5%

5,704 

0.6%

4,728 

0.5%

Depreciation

2,160 

1.0%

2,015 

1.0%

8,356 

0.9%

8,023 

0.9%

Total costs and expenses

219,468 

97.1%

188,386 

92.0%

926,784 

94.5%

895,189 

95.3%

Operating income

6,593 

2.9%

16,426 

8.0%

54,220 

5.5%

44,021 

4.7%

Income (loss) from joint ventures

- 

(504)

(137)

(625)

Loss from disposition of joint venture

- 

(3,500)

(2,000)

(3,500)

Income before financing costs and income taxes

6,593 

12,422 

52,083 

39,896 

Interest and other expense on debt

1,280 

0.6%

273 

0.1%

2,677 

0.3%

3,703 

0.4%

Income before income taxes

5,313 

2.4%

12,149 

5.9%

49,406 

5.0%

36,193 

3.9%

Income tax provision

1,552 

29.2%

4,844 

39.9%

18,358 

37.2%

14,101 

39.0%

Net income

$ 3,761 

$ 7,305 

$ 31,048 

$ 22,092 

Earnings per share:

Net income per share - basic

$ 0.36 

$ 0.72 

$ 2.99 

$ 2.18 

Weighted average shares outstanding - basic

10,429 

10,153 

10,383 

10,134 

Net income per share - diluted

$ 0.35 

$ 0.70 

$ 2.92 

$ 2.11 

Weighted average shares outstanding - diluted

10,651 

10,479 

10,633 

10,457 

It is the Company's policy not to make quarterly or annual sales or earnings projections for external use and not to endorse any analyst's sales or earnings estimates.

Source: Business Wire

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