Olympic Steel(US:ZEUS)2024-11-01 20:05Business Segments - The company operates in three reportable segments: specialty metals flat products, carbon flat products, and tubular and pipe products[97]. - The specialty metals flat products segment has expanded its geographical footprint and product offerings through acquisitions, including stainless steel and aluminum products[97]. - The carbon flat products segment acquired Metal-Fab on January 3, 2023, enhancing its product offerings to include venting and clean air products[108]. - The tubular and pipe products segment expanded its capabilities through the acquisition of Central Tube and Bar on October 2, 2023, increasing its geographic footprint[110]. Employment and Labor - As of September 30, 2024, the company employed approximately 2,148 people, with 239 hourly plant personnel represented by collective bargaining units[101]. - The company has never experienced a work stoppage, but prolonged stoppages could adversely affect business operations and financial condition[102]. Financial Performance - Net sales decreased by $56.4 million, or 10.7%, to $470.0 million in Q3 2024 from $526.4 million in Q3 2023[116]. - Cost of materials sold decreased by $51.3 million, or 12.4%, to $363.1 million in Q3 2024 from $414.5 million in Q3 2023[118]. - Gross profit as a percentage of net sales increased to 22.7% in Q3 2024 from 21.3% in Q3 2023[119]. - Operating expenses increased by $8.0 million, or 8.8%, to $99.0 million in Q3 2024 from $91.1 million in Q3 2023[120]. - Net income for Q3 2024 totaled $2.7 million, or $0.23 per share, compared to $12.2 million, or $1.06 per share, in Q3 2023[125]. - Net sales decreased by $145.9 million, or 8.7%, to $1.5 billion in the first nine months of 2024 from $1.7 billion in the first nine months of 2023[117]. - Operating expenses in the first nine months of 2024 increased by $11.4 million, or 3.9%, to $306.8 million from $295.4 million in the first nine months of 2023[121]. Segment Performance - Specialty metals flat products net sales decreased by $7.1 million, or 5.3%, to $125.7 million in Q3 2024 from $132.8 million in Q3 2023[127]. - Tons sold in the specialty metals flat products segment increased by 6.5% to 30 thousand in Q3 2024 from 28 thousand in Q3 2023[126]. - Net sales in the carbon flat products segment decreased by $39.6 million, or 13.0%, to $264.9 million in Q3 2024 from $304.5 million in Q3 2023, driven by an 11.8% decrease in average selling prices[138]. - Net sales in the tubular and pipe products segment decreased by $9.7 million, or 10.9%, to $79.5 million in Q3 2024 from $89.2 million in Q3 2023[147]. Pricing and Costs - Average selling prices in the specialty metals flat products segment decreased by 11.1% in Q3 2024 compared to Q3 2023[127]. - Average selling prices in the carbon flat products segment decreased to $1,297 per ton in Q3 2024 from $1,470 per ton in Q3 2023[138]. - Gross profit as a percentage of net sales increased to 21.4% in Q3 2024 from 20.3% in Q3 2023, attributed to a decrease in average cost of inventory[141]. - Cost of materials sold decreased by $34.4 million, or 14.2%, to $208.1 million in Q3 2024 from $242.5 million in Q3 2023[140]. Operating Income - Operating income in Q3 2024 totaled $4.9 million, or 3.9% of net sales, compared to $4.7 million, or 3.5% of net sales, in Q3 2023[134]. - Operating income in Q3 2024 was $6.5 million, or 8.2% of net sales, down from $10.0 million, or 11.3% in Q3 2023[153]. - Operating income in the first nine months of 2024 totaled $14.5 million, or 1.7% of net sales, compared to $30.6 million, or 3.3% of net sales, in the first nine months of 2023[145]. Cash Flow and Working Capital - Net cash from operating activities for the first nine months of 2024 was $44.8 million, compared to $67.2 million in the same period of 2023[159]. - Working capital as of September 30, 2024, totaled $445.5 million, an increase of $22.5 million from December 31, 2023[160]. - Net cash used for investing activities in the first nine months of 2024 was $22.3 million, primarily for capital expenditures[161]. - The company generated $1.0 million from financing activities in the first nine months of 2024, compared to $24.8 million in the same period of 2023[163]. - Dividends paid increased to $5.0 million in the first nine months of 2024 from $4.2 million in the same period of 2023[164]. Market Conditions and Risks - The company faces risks from global supply chain disruptions, labor costs, and fluctuating metals prices, which could materially impact financial performance[95]. - International sales are immaterial to the company's consolidated financial results, primarily occurring in Canada and Mexico[97]. - Rising metals prices have resulted in higher working capital requirements for the company and its customers, potentially affecting customer liquidity[178]. - The company has no long-term, fixed-price metals purchase contracts, exposing it to fluctuations in metals prices that could significantly impact net sales and profitability[177]. - Significant declines in metals prices could adversely impact the company's compliance with financial covenants in the ABL credit facility[177]. Financial Management - The company entered into a two-year forward starting fixed rate interest rate hedge on August 15, 2024, fixing the rate at 3.82% for $75 million of outstanding SOFR based borrowings[182]. - The company has been generally successful in passing on producers' price increases to customers, but future success is not guaranteed[178]. - The company is exposed to fluctuating metals prices and interest rate changes, having entered into metals swaps at the request of customers[181]. - General inflation, including increases in the price of metals, did not materially affect the company's operations during the third quarter of 2024[180]. - There were no changes in the internal control over financial reporting that materially affected the company's financial reporting during the third quarter of 2024[184].