Olympic Steel(ZEUS) - 2021 Q1 - Quarterly Report

Part I. FINANCIAL INFORMATION Financial Statements Unaudited Q1 2021 statements show significant growth in net income and total assets year-over-year Consolidated Balance Sheets Total assets grew to $738.4 million and total liabilities rose to $414.6 million as of March 31, 2021 Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 (unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total current assets | $508,118 | $402,204 | | Accounts receivable, net | $210,695 | $151,601 | | Inventories, net | $278,174 | $240,001 | | Total assets | $738,359 | $640,605 | | Total current liabilities | $173,412 | $126,725 | | Credit facility revolver | $191,903 | $160,609 | | Total liabilities | $414,584 | $339,595 | | Total shareholders' equity | $323,775 | $301,010 | Consolidated Statements of Comprehensive Income Q1 2021 net sales grew 30.7% to $463.1 million, with net income surging to $22.0 million Q1 2021 vs Q1 2020 Performance (in thousands, except per share data) | Metric | Q1 2021 (unaudited) | Q1 2020 (unaudited) | Change | | :--- | :--- | :--- | :--- | | Net sales | $463,124 | $354,380 | +30.7% | | Operating income | $31,590 | $3,051 | +935.4% | | Net income | $22,008 | $593 | +3611.3% | | Net income per share - diluted | $1.91 | $0.05 | +3720.0% | Consolidated Statements of Cash Flows Net cash used for operating activities increased to $25.7 million in Q1 2021 due to working capital needs Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used for operating activities | $(25,720) | $(11,985) | | Net cash used for investing activities | $(2,286) | $(4,235) | | Net cash from financing activities | $30,782 | $15,762 | | Net change in cash | $2,776 | $(458) | Notes to Unaudited Consolidated Financial Statements Notes detail accounting policies, segment performance, revenue sources, and inventory valuation methods - The company operates in three reportable segments: carbon flat products, specialty metals flat products, and tubular and pipe products[24] Disaggregated Revenue by Segment (Q1 2021) | Segment | % of Total Revenue | | :--- | :--- | | Carbon flat products | 53.2% | | Specialty metals flat products | 27.3% | | Tubular and pipe products | 19.5% | - The company recorded $1.0 million of LIFO expense in Q1 2021, compared to $0.5 million of LIFO income in Q1 2020, due to rising metals prices[35] Segment Operating Income (in thousands) | Segment | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Specialty metals flat products | $8,022 | $2,735 | | Carbon flat products | $21,200 | $(1,346) | | Tubular and pipe products | $6,320 | $4,305 | | Total Operating Income | $31,590 | $3,051 | Management's Discussion and Analysis of Financial Condition and Results of Operations Record-high metal prices in Q1 2021 drove significant growth in net sales and profitability Results of Operations Q1 2021 net sales rose 30.7% due to a 32.1% increase in average selling prices, boosting gross margin - Record-level metals prices were the primary driver of performance in Q1 2021, with hot rolled coil index prices 133% higher than in Q1 2020[92] Consolidated Operations Summary (in thousands) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net sales | $463,124 | $354,380 | | Gross profit | $108,459 | $71,858 | | Gross profit % | 23.4% | 20.3% | | Operating income | $31,590 | $3,051 | - The increase in net sales was due to a 32.1% increase in average selling prices, offset by a 1.0% decrease in consolidated volume[97] Segment Operations All three segments reported higher operating income, led by a strong turnaround in Carbon Flat Products Specialty Metals Flat Products Performance (Q1 2021 vs Q1 2020) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Sales | $126,320K | $88,488K | | Total tons sold | 41,887 | 34,570 | | Operating Income | $8,022K | $2,735K | Carbon Flat Products Performance (Q1 2021 vs Q1 2020) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Sales | $246,373K | $202,967K | | Total tons sold | 239,848 | 263,110 | | Operating Income (Loss) | $21,200K | $(1,346)K | Tubular and Pipe Products Performance (Q1 2021 vs Q1 2020) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Sales | $90,431K | $62,925K | | Operating Income | $6,320K | $4,305K | Liquidity, Capital Resources and Cash Flows Cash used for operations was $25.7 million due to increased working capital, with $162 million available credit - Net cash used for operations was $25.7 million in Q1 2021, compared to $12.0 million in Q1 2020[130] - Working capital increased by $59.2 million from year-end 2020, primarily due to a $59.1 million increase in accounts receivable and a $38.2 million increase in inventories[132] - The company had approximately $162 million of availability under its ABL Credit Facility as of March 31, 2021[46][140] Quantitative and Qualitative Disclosures About Market Risk Primary market risks include volatile metals pricing and interest rate fluctuations on variable-rate debt - The metals industry is cyclical, and the pricing and availability of metals can be volatile, significantly affecting the company's cost of raw materials[145] - When metals prices decline, the company faces pressure on sale prices, potentially leading to lower gross profits and inventory write-downs[146] - The company is exposed to interest rate risk from its variable-rate debt, partially managed through a $75 million interest rate swap fixing the rate at 2.57%[151] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2021 - Management, including the Chief Executive Officer and Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[153] - No material changes in internal control over financial reporting occurred during Q1 2021[154] Part II. OTHER INFORMATION Exhibits This section lists filed exhibits, including SOX certifications and Inline XBRL financial data - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[157] - Financial statements and notes are formatted in Inline XBRL as part of the filing[157]