Olympic Steel(US:ZEUS)2022-08-05 20:06Business Segments - The company operates in three reportable segments: specialty metals flat products, carbon flat products, and tubular and pipe products[83]. - The specialty metals flat products segment expanded its geographic footprint through acquisitions of Shaw Stainless & Alloy and Action Stainless & Alloys, enhancing product offerings in stainless steel and aluminum[83]. - The company sold substantially all assets related to its Detroit operation, which primarily focused on distributing carbon flat-rolled steel to domestic automotive manufacturers[83]. Financial Performance - Net sales increased by 27.5% to $709.2 million in Q2 2022 from $556.1 million in Q2 2021, driven by a 45.0% increase in average selling prices[101]. - Cost of materials sold rose by 30.8% to $560.5 million in Q2 2022 from $428.7 million in Q2 2021, reflecting increased metals pricing[103]. - Gross profit as a percentage of net sales decreased to 21.0% in Q2 2022 from 22.9% in Q2 2021, due to rising inventory costs outpacing selling prices[104]. - Operating expenses increased by 11.6% to $94.8 million in Q2 2022 from $84.9 million in Q2 2021, but as a percentage of net sales, they decreased to 13.4% from 15.3%[105]. - Net income for Q2 2022 totaled $37.6 million, or $3.26 per share, compared to $29.6 million, or $2.58 per share, in Q2 2021[110]. Segment Performance - Specialty metals flat products net sales accounted for 32.0% of total net sales in Q2 2022, up from 24.8% in Q2 2021[101]. - Total tons sold in the specialty metals flat products segment decreased by 4.5% to 38,386 tons in Q2 2022 from 40,188 tons in Q2 2021[113]. - Net sales in the specialty metals flat products segment increased by $88.9 million, or 64.4%, to $227.0 million in Q2 2022 compared to Q2 2021, driven by a 72.1% increase in average selling prices[114]. - Average selling prices in the specialty metals flat products segment rose to $5,913 per ton in Q2 2022 from $3,435 per ton in Q2 2021, reflecting increased industry metals pricing[114]. - Gross profit as a percentage of net sales for the specialty metals flat products segment increased to 27.5% in Q2 2022 from 22.1% in Q2 2021, attributed to higher average selling prices[117]. - Operating income in the specialty metals flat products segment totaled $36.5 million, or 16.1% of net sales, in Q2 2022, compared to $13.7 million, or 9.9% of net sales, in Q2 2021[119]. - Net sales in the carbon flat products segment increased by $45.2 million, or 13.9%, to $370.7 million in Q2 2022 from $325.5 million in Q2 2021, due to a 32.1% increase in average selling prices[123]. - Average selling prices in the carbon flat products segment increased to $1,760 per ton in Q2 2022 from $1,332 per ton in Q2 2021[123]. - Operating income in the carbon flat products segment decreased to $15.6 million, or 4.2% of net sales, in Q2 2022 from $30.4 million, or 9.3% of net sales, in Q2 2021[128]. - Net sales in the tubular and pipe products segment increased by $19.0 million, or 20.6%, to $111.5 million in Q2 2022 from $92.5 million in Q2 2021, driven by a 30.2% increase in average selling prices[131]. - Gross profit as a percentage of net sales for the tubular and pipe products segment increased to 23.4% in Q2 2022 from 23.1% in Q2 2021[133]. - Operating income for Q2 2022 was $7.3 million, representing 6.5% of net sales, an increase from $3.0 million or 3.3% in Q2 2021[135]. Operational Metrics - The company has 34 strategically located processing and distribution facilities in the U.S. and one in Monterrey, Mexico, allowing it to focus on regional and national accounts[94]. - The company maintains substantial inventories of metals to meet customer demands, with no long-term fixed-price metals purchase contracts in place[85]. - The company faces risks from falling metals prices, supply chain disruptions, and inflationary pressures, which could adversely affect its financial performance[81]. - The company has undertaken capital investments and strategic growth initiatives, including acquisitions and business information system implementations[90]. - The company’s ability to generate free cash flow and repay debt is critical for its financial health and operational strategies[90]. Cash Flow and Financing - Net cash from operations for the first six months of 2022 was $47.7 million, up from a net cash usage of $95.7 million in the same period of 2021[139]. - Working capital as of June 30, 2022, was $610.3 million, reflecting a $45.2 million increase from December 31, 2021[141]. - Net cash used for investing activities was $6.7 million in the first half of 2022, compared to $4.6 million in the same period of 2021[142]. - Cash used for financing activities in the first six months of 2022 totaled $42.3 million, primarily due to $39.9 million in net repayments under the ABL Credit Facility[143]. - Dividends paid increased to $2.0 million in the first half of 2022 from $0.4 million in the same period of 2021[144]. - The ABL Credit Facility has a total revolving credit limit of $445 million, with a maturity date of June 16, 2026[148]. - As of June 30, 2022, the company had approximately $183 million of availability under the ABL Credit Facility[150].