Olympic Steel(ZEUS) - 2025 Q3 - Quarterly Report

Business Segments - The company operates in three reportable segments: specialty metals flat products, carbon flat products, and tubular and pipe products[87]. - The specialty metals flat products segment has expanded its geographical footprint and product offerings through acquisitions, including stainless steel and aluminum products[87]. - The carbon flat products segment has increased its product offerings to include service station canopies and other fabricated parts following the acquisition of MetalWorks on November 11, 2024[87]. Financial Performance - Net sales increased by $20.7 million, or 4.4%, to $490.7 million in Q3 2025 compared to $470.0 million in Q3 2024[110]. - Specialty metals flat products accounted for 28.7% of total net sales in Q3 2025, up from 26.7% in Q3 2024[110]. - Gross profit as a percentage of net sales increased to 24.0% in Q3 2025 from 22.7% in Q3 2024, driven by higher average selling prices[114]. - Operating expenses rose by $11.3 million, or 11.4%, to $110.4 million in Q3 2025, increasing as a percentage of net sales to 22.5% from 21.0%[115]. - Net income for Q3 2025 was $2.2 million, or $0.18 per share, compared to $2.7 million, or $0.23 per share, in Q3 2024[121]. - Net sales decreased by $42.8 million, or 2.8%, to $1.48 billion in the first nine months of 2025 compared to $1.52 billion in the same period of 2024[111]. - Operating income for Q3 2025 was $7.3 million, down from $7.8 million in Q3 2024[118]. - Operating income in the first nine months of 2025 totaled $12.0 million, or 5.0% of net sales, down from $20.6 million, or 7.8% of net sales, in the first nine months of 2024[145]. Costs and Expenses - Cost of materials sold increased by $9.9 million, or 2.7%, to $373.0 million in Q3 2025 from $363.1 million in Q3 2024[112]. - Corporate expenses increased by $1.1 million, or 8.7%, to $14.0 million in the first nine months of 2025 from $12.9 million in the same period of 2024, primarily due to higher payroll and professional service fees[146]. - Gross profit as a percentage of net sales decreased to 30.9% in Q3 2025 from 35.1% in Q3 2024, attributed to average inventory costs increasing more than average selling prices[143]. Inventory and Supply Chain - The company maintains substantial inventories of metals to meet customer demands, which are influenced by market conditions and pricing fluctuations[90]. - The company maintains substantial inventories of metals to meet customer demands, with no long-term fixed-price purchase contracts[168]. Risks and Challenges - The company faces risks related to supply disruptions, inflationary pressures, and the impact of tariffs on imported steel[83]. - Significant declines in metals prices could impact compliance with financial covenants in the ABL Credit Facility[168]. - Inflation has not materially affected operations during the first nine months of 2025, but may have a significant impact in future years[171]. - The company is exposed to fluctuating metals prices and interest rate changes, entering into metals swaps at customer requests[172]. Cash Flow and Financing - Net cash from operating activities was $59.5 million for the nine months ended September 30, 2025, compared to $19.1 million for the same period in 2024[150]. - Net cash used for investing activities was $24.9 million during the nine months ended September 30, 2025, compared to $22.3 million in the same period of 2024, primarily for capital expenditures[153]. - During the first nine months of 2025, $39.0 million of cash was used for financing activities, including $31.5 million of net repayments under the ABL Credit Facility[154]. - As of September 30, 2025, the company had approximately $312 million of availability under the ABL Credit Facility[161]. Market Trends - Rising metals prices have generally favorably affected net sales and net income, while declining prices have adversely affected them[169]. - Rising metals prices result in higher working capital requirements for both the company and its customers[169]. - Approximately 43% of consolidated net sales during the first nine months of 2025 were related to industrial machinery and equipment manufacturers[170]. - Approximately 48% of consolidated net sales during the first nine months of 2024 were also related to industrial machinery and equipment manufacturers[170]. Employee Relations - As of September 30, 2025, the company employed approximately 2,181 people, with 229 hourly plant personnel represented by collective bargaining units[91]. - The company has not experienced a work stoppage and maintains good relationships with employees, although prolonged stoppages could adversely affect operations[92].