Olympic Steel(ZEUS) - 2025 Q2 - Quarterly Report

Part I. FINANCIAL INFORMATION This section provides unaudited consolidated financial statements, management's discussion, market risk disclosures, and controls and procedures Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets, income, cash flows, and equity, with detailed accounting notes Consolidated Balance Sheets This section details the company's financial position, presenting assets, liabilities, and shareholders' equity as of June 30, 2025 Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $596,765 | $580,591 | | Total Assets | $1,074,910 | $1,044,496 | | Total Current Liabilities | $194,338 | $132,638 | | Credit facility revolver | $233,198 | $272,456 | | Total Liabilities | $496,707 | $470,572 | | Total Shareholders' Equity | $578,203 | $573,924 | - Total assets increased to $1.07 billion as of June 30, 2025, from $1.04 billion at year-end 2024, primarily driven by an increase in accounts receivable[9] - Total liabilities rose to $496.7 million, mainly due to a significant increase in accounts payable, while borrowings under the credit facility revolver decreased[9] Consolidated Statements of Comprehensive Income This section presents the company's financial performance, detailing net sales, operating income, net income, and diluted EPS Financial Performance Summary (in thousands, except per share data) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Six Months 2025 (in thousands) | Six Months 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $496,483 | $526,250 | $989,424 | $1,052,892 | | Operating Income | $11,373 | $15,110 | $19,166 | $31,048 | | Net Income | $5,237 | $7,660 | $7,746 | $16,357 | | Diluted EPS | $0.45 | $0.66 | $0.66 | $1.40 | - Net sales and net income declined year-over-year for both the second quarter and the first six months of 2025, with Q2 2025 net income at $5.2 million, down from $7.7 million in Q2 2024[11] - Dividends declared per share increased to $0.16 in Q2 2025 from $0.15 in Q2 2024[11] Consolidated Statements of Cash Flows This section outlines the company's cash generation and usage across operating, investing, and financing activities Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $64,925 | $(5,512) | | Net cash used for investing activities | $(17,460) | $(13,206) | | Net cash provided by (used for) financing activities | $(44,562) | $14,937 | - The company generated $64.9 million in cash from operations in the first six months of 2025, a significant improvement from a $5.5 million use of cash in the same period of 2024, primarily due to favorable changes in working capital, especially a large increase in accounts payable[14] - Cash used for financing activities was $44.6 million, driven by net repayments on the credit facility revolver, compared to cash provided by financing of $14.9 million in the prior year period[14] Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations of accounting policies, revenue recognition, and segment information supporting the financial statements - The company operates in three reportable segments: specialty metals flat products, carbon flat products, and tubular and pipe products[23] Disaggregated Revenue by Segment (Six Months Ended June 30, 2025) | Segment | % of Total Revenue | | :--- | :--- | | Carbon flat products | 57.5% | | Specialty metals flat products | 26.7% | | Tubular and pipe products | 15.8% | Segment Operating Income (Six Months Ended June 30, 2025, in thousands) | Segment | Operating Income (in thousands) | | :--- | :--- | | Carbon flat products | $13,218 | | Tubular and pipe products | $8,010 | | Specialty metals flat products | $7,556 | | Corporate (Other) | $(9,618) | | Total | $19,166 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses declining sales and net income, improved gross margin, increased operating expenses, segment performance, and strong liquidity Results of Operations This section analyzes consolidated net sales, gross profit margin, and operating expenses for the second quarter and first half of 2025 - Consolidated net sales for Q2 2025 decreased 5.7% YoY to $496.5 million, driven by a 5.3% decrease in sales volume[100] - For the first six months of 2025, net sales decreased 6.0% YoY to $1.0 billion, due to a 5.1% decrease in average selling prices[101] - Gross profit margin increased to 24.5% in Q2 2025 from 22.7% in Q2 2024, as the average cost of inventory decreased more than average selling prices[103] - Operating expenses increased 5.6% in Q2 2025, primarily due to the inclusion of operating expenses from the MetalWorks acquisition[104] Segment Operations This section analyzes the operating income and gross profit margins for the Specialty Metals, Carbon Flat, and Tubular and Pipe segments - Specialty Metals Flat Products: Q2 2025 operating income fell to $4.9 million from $7.9 million YoY, as gross profit margin contracted from 19.8% to 17.8%[111][115][118] - Carbon Flat Products: Q2 2025 operating income increased to $7.4 million from $5.4 million YoY, driven by a significant gross profit margin expansion to 25.8% from 20.7%[119][124][127] - Tubular and Pipe Products: Q2 2025 operating income decreased to $3.9 million from $6.5 million YoY, impacted by a 9.3% drop in shipping volume and lower gross margins[128][129][135] Liquidity, Capital Resources and Cash Flows This section reviews cash flow generation, the amended ABL Credit Facility, available liquidity, and dividend declarations - Generated $64.9 million in cash from operations in the first six months of 2025, a significant improvement from a $5.5 million use of cash in the prior-year period[140] - On April 17, 2025, the company amended its ABL Credit Facility, extending the maturity date to April 17, 2030[43][148] - As of June 30, 2025, the company had approximately $305 million of availability under its ABL Credit Facility and was in compliance with all covenants[45][151] - The Board of Directors approved a regular quarterly dividend of $0.16 per share, payable in September 2025[145] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from volatile metals prices and interest rate fluctuations, mitigated by metals swaps and interest rate hedges - The company is exposed to cyclical and volatile metals pricing, which affects raw material costs, sales prices, and inventory valuation[157][158] - To manage interest rate risk on its variable-rate ABL Credit Facility, the company entered into a two-year forward starting interest rate hedge on $75 million of its debt, fixing the rate at 3.82%[163] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during Q2 2025 - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[164] - No material changes were made to the internal control over financial reporting during the second quarter of 2025[165] Part II. OTHER INFORMATION This section includes other required disclosures, such as director and officer trading arrangements and a list of exhibits Other Information This section confirms no director or officer adopted or terminated Rule 10b5-1 trading arrangements during Q2 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025[168] Exhibits This section lists key exhibits filed with the Form 10-Q, including the amended Loan and Security Agreement and SOX certifications - Key exhibits filed include the Ninth Amendment to the company's Loan and Security Agreement and Sarbanes-Oxley Act certifications from the Principal Executive Officer and Principal Financial Officer[169]