Olympic Steel Reports 2005 Second Quarter Results
CLEVELAND, July 28 /PRNewswire-FirstCall/ — Olympic Steel, Inc., , a national steel service center, today announced its financial results for the second quarter and six months ended June 30, 2005.
Net sales for the second quarter of 2005 increased 8.4% to $241.5 million from $222.8 million for the second quarter a year ago. Second quarter 2005 net income totaled $3.0 million, or $0.29 per diluted share, compared to net income of $18.5 million, or $1.82 per diluted share for last year’s second quarter. Unfortunately, second quarter results included a $1.7 million, or $0.10 per diluted share, bad debt charge related to receivables from two customers that filed for bankruptcy protection in June 2005. Tons sold decreased 7.4% to 319 thousand from 344 thousand in the second quarter of 2004.
For the first half of 2005, net sales increased 28.4% to $526.0 million from $409.8 million. Net income for the first half of 2005 was $12.6 million, or $1.21 per share, compared to net income of $29.3 million, or $2.90 per share in the first half of 2004. Tons sold decreased 7.0% to 678 thousand from 729 thousand in the first half of 2004.
“While the second quarter was challenging from a carbon flat rolled pricing and customer credit perspective, we are pleased with the results of our balance sheet and expense control management. During the last three months, we accelerated our receivable and inventory turnover rates, allowing us to reduce inventory by $37.3 million and debt by $37.3 million, a 21% decline in inventory and a 31% decline in debt. We also reduced our second quarter operating expenses by $8.7 million or 22.5% as compared to the second quarter of 2004. At June 30, 2005, our debt totaled $82.6 million, or 43% of equity, both lows for Olympic Steel since our IPO in 1994. We expect that our focus on balance sheet and expense management will continue the trends that we have seen so far this year,” stated Michael D. Siegal, Chairman and Chief Executive Officer.
“We anticipate some softness to persist in carbon flat rolled pricing during the seasonally slower third quarter. However, we are encouraged to finally see a meaningful drop in the service center industry’s June inventory levels, and we anticipate further reductions through July. We believe that the continuation of the inventory correction may allow pricing pressures on carbon steel to subside later this year. We also believe that the currency adjustment by China is a positive development for many of our exporting customers,” concluded Mr. Siegal.
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 12 facilities and participates in two joint ventures. For further information, visit the Company’s web site at http://www.olysteel.com/ .
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. Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 that speak only as of the date hereof.
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; 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 turns, and reduce costs; the successes of the Company’s joint ventures; the adequacy of our information technology and business system software; and customer, supplier, and competitor consolidation or insolvency. Please refer to the Company’s Securities and Exchange Commission filings for further information.
OLYMPICSTEEL SELECTED FINANCIAL INFORMATION (in thousands, except per share data and ratios) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 SUMMARY RESULTS OF OPERATIONS: (unaudited) (unaudited) Net sales $241,482 $222,773 $526,040 $409,806 Operating income 5,937 31,747 22,770 50,582 Income before income taxes 4,757 30,814 20,525 48,309 Net income $3,004 $18,500 $12,623 $29,347 Earnings per share: Net income per share – basic $0.30 $1.89 $1.25 $3.01 Net income per share – diluted $0.29 $1.82 $1.21 $2.90 June 30, December 31, 2005 2004 2004 SUMMARY BALANCE SHEET DATA: (unaudited) Accounts receivable, net $104,940 $97,606 $93,336 Inventories 143,862 132,510 186,124 Net property and equipment 80,426 86,669 83,571 Total assets 340,710 327,358 374,146 Current liabilities 61,679 89,505 95,688 Total debt 82,630 90,387 96,022 Shareholders’ equity 190,834 143,106 176,525 Shareholders’ equity per share 18.80 14.51 17.58 Debt-to-equity ratio .43 to 1 .63 to 1 .54 to 1 Six Months Ended June 30, 2005 2004 OTHER DATA: (unaudited) Capital expenditures 906 1,065 EBITDA (a) 26,818 55,216 (a) Defined as operating income plus depreciation plus asset impairment charge. 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. OLYMPICSTEEL RESULTS OF OPERATIONS (in thousands, except per share and tonnage data) Three Months Ended June 30, 2005 2004 (unaudited) Tons sold Direct 270,628 292,973 Toll 48,018 51,096 318,646 344,069 % change (7.4%) 23.4% Net sales $241,482 $222,773 % change 8.4% 96.4% Cost of materials sold 205,483 152,247 Gross profit 35,999 14.9% 70,526 31.7% Operating expenses Warehouse and processing 10,064 4.2% 11,425 5.1% Administrative and general 7,044 2.9% 13,360 6.0% Distribution 5,024 2.1% 4,711 2.1% Selling 4,761 2.0% 5,764 2.6% Occupancy 1,139 0.5% 1,256 0.6% Depreciation 2,030 0.8% 2,076 0.9% Asset impairment charge – 0.0% 187 0.1% Total operating expenses 30,062 12.4% 38,779 17.4% Operating income 5,937 2.5% 31,747 14.3% Income from joint ventures 200 94 Income before financing costs and income taxes 6,137 31,841 Interest and other expense on debt 1,380 0.6% 1,027 0.5% Income before income taxes 4,757 2.0% 30,814 13.8% Income tax provision 1,753 36.9% 12,314 40.0% Net income $3,004 $18,500 Earnings per share: Net income per share – basic $0.30 $1.89 Weighted average shares outstanding – basic 10,148 9,794 Net income per share – diluted $0.29 $1.82 Weighted average shares outstanding – diluted 10,436 10,182 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. OLYMPICSTEEL RESULTS OF OPERATIONS (in thousands, except per share and tonnage data) Six Months Ended June 30, 2005 2004 (unaudited) Tons sold Direct 584,516 623,068 Toll 93,983 106,145 678,499 729,213 % change (7.0%) 33.2% Net sales $526,040 $409,806 % change 28.4% 79.5% Cost of materials sold 440,618 285,793 Gross profit 85,422 16.2% 124,013 30.3% Operating expenses Warehouse and processing 20,692 3.9% 22,309 5.4% Administrative and general 16,317 3.1% 23,037 5.6% Distribution 10,159 1.9% 9,782 2.4% Selling 8,798 1.7% 11,080 2.7% Occupancy 2,638 0.5% 2,589 0.6% Depreciation 4,048 0.8% 4,147 1.0% Asset impairment charge – 0.0% 487 0.1% Total operating expenses 62,652 11.9% 73,431 17.9% Operating income 22,770 4.3% 50,582 12.3% Income from joint ventures 443 172 Income before financing costs and income taxes 23,213 50,754 Interest and other expense on debt 2,688 0.5% 2,445 0.6% Income before income taxes 20,525 3.9% 48,309 11.8% Income tax provision 7,902 38.5% 18,962 39.3% Net income $12,623 $29,347 Earnings per share: Net income per share – basic $1.25 $3.01 Weighted average shares outstanding – basic 10,114 9,734 Net income per share – diluted $1.21 $2.90 Weighted average shares outstanding – diluted 10,447 10,108 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.
Olympic Steel, Inc.
CONTACT: Richard T. Marabito, Chief Financial Officer, of Olympic Steel,Inc., +1-216-292-3800, or fax, +1-216-292-3974
Web site: http://www.olysteel.com/