UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
For the transition period from __________ to ____________
Commission File Number
OLYMPIC STEEL, INC.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | The |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | ||
| Non-accelerated filer ☐ | Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares of each of the issuer's classes of common stock, as of the latest practicable date:
| Class | Outstanding as of November 5, 2021 | |||
| Common stock, without par value |
Olympic Steel, Inc.
Index to Form 10-Q
| Page No. | |
| Part I. FINANCIAL INFORMATION |
3 |
| Item 1. Financial Statements |
3 |
| Consolidated Balance Sheets – September 30, 2021 and December 31, 2020 (unaudited) |
3 |
| Consolidated Statements of Comprehensive Income – for the three and nine months ended September 30, 2021 and 2020 (unaudited) |
4 |
| Consolidated Statements of Cash Flows – for the nine months ended September 30, 2021 and 2020 (unaudited) |
5 |
| Supplemental Disclosures of Cash Flow Information – for the nine months ended September 30, 2021 and 2020 (unaudited) |
6 |
| Consolidated Statements of Shareholders’ Equity – for the three and nine months ended September 30, 2021 and 2020 (unaudited) |
7 |
| Notes to Unaudited Consolidated Financial Statements |
8 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
33 |
| Item 4. Controls and Procedures |
34 |
| Part II. OTHER INFORMATION |
34 |
| Item 6. Exhibits |
35 |
| SIGNATURES |
36 |
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Olympic Steel, Inc.
Consolidated Balance Sheets
(in thousands)
| As of | ||||||||
| September 30, 2021 | December 31, 2020 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net (includes LIFO credit of $ and LIFO debit of $ as of September 30, 2021 and December 31, 2020, respectively) | ||||||||
| Prepaid expenses and other | ||||||||
| Total current assets | ||||||||
| Property and equipment, at cost | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Net property and equipment | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Other long-term assets | ||||||||
| Right of use assets, net | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued payroll | ||||||||
| Other accrued liabilities | ||||||||
| Current portion of lease liabilities | ||||||||
| Total current liabilities | ||||||||
| Credit facility revolver | ||||||||
| Other long-term liabilities | ||||||||
| Deferred income taxes | ||||||||
| Lease liabilities | ||||||||
| Total liabilities | ||||||||
| Shareholders' Equity | ||||||||
| Preferred stock | ||||||||
| Common stock | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Retained earnings | ||||||||
| Total shareholders' equity | ||||||||
| Total liabilities and shareholders' equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated statements.
Olympic Steel, Inc.
Consolidated Statements of Comprehensive Income (Loss)
For the Three and Nine Months Ended September 30,
(in thousands, except per share data)
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Costs and expenses | ||||||||||||||||
| Cost of materials sold (excludes items shown separately below) | ||||||||||||||||
| Warehouse and processing | ||||||||||||||||
| Administrative and general | ||||||||||||||||
| Distribution | ||||||||||||||||
| Selling | ||||||||||||||||
| Occupancy | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Amortization | ||||||||||||||||
| Total costs and expenses | ||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||||||||||
| Other loss, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) before interest and income taxes | ( | ) | ( | ) | ||||||||||||
| Interest and other expense on debt | ||||||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||
| Income tax provision (benefit) | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Gain (loss) on cash flow hedge | ( | ) | ||||||||||||||
| Tax effect on cash flow hedge | ( | ) | ( | ) | ( | ) | ||||||||||
| Total comprehensive income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Earnings per share: | ||||||||||||||||
| Net income (loss) per share - basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average shares outstanding - basic | ||||||||||||||||
| Net income (loss) per share - diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average shares outstanding - diluted | ||||||||||||||||
| Dividends declared per share of common stock | $ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these consolidated statements.
Olympic Steel, Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30,
(in thousands)
| 2021 | 2020 | |||||||
| Cash flows from (used for) operating activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash from (used for) operating activities - | ||||||||
| Depreciation and amortization | ||||||||
| (Gain) loss on disposition of property and equipment | ( | ) | ||||||
| Gain on disposition of Detroit operation (before expenses of $) | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Other long-term assets | ( | ) | ||||||
| Other long-term liabilities | ( | ) | ||||||
| Changes in working capital: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Change in outstanding checks | ( | ) | ( | ) | ||||
| Accrued payroll and other accrued liabilities | ( | ) | ||||||
| ( | ) | |||||||
| Net cash from (used for) operating activities | ( | ) | ||||||
| Cash flows from (used for) investing activities: | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Proceeds from disposition of property and equipment | ||||||||
| Proceeds from sale of Detroit property and equipment | ||||||||
| Net cash from (used for) investing activities | ( | ) | ||||||
| Cash flows from (used for) financing activities: | ||||||||
| Credit facility revolver borrowings | ||||||||
| Credit facility revolver repayments | ( | ) | ( | ) | ||||
| Principal payment under capital lease obligation | ( | ) | ||||||
| Credit facility fees and expenses | ( | ) | ||||||
| Repurchase of common stock | ( | ) | ||||||
| Dividends paid | ( | ) | ( | ) | ||||
| Net cash from (used for) financing activities | ( | ) | ||||||
| Cash and cash equivalents: | ||||||||
| Net change | ( | ) | ||||||
| Beginning balance | ||||||||
| Ending balance | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated statements.
Olympic Steel, Inc.
Supplemental Disclosures of Cash Flow Information
For the Nine Months Ended September 30,
(in thousands)
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
The Company incurred financing lease obligations of $1.0 million during the nine months ended September 30, 2020. There were no new financing lease obligations during the nine months ended September 30, 2021. This non-cash transaction has been excluded from the Consolidated Statements of Cash Flows for the nine months ended September 30, 2020.
The accompanying notes are an integral part of these consolidated statements.
Olympic Steel, Inc.
Consolidated Statements of Shareholders’ Equity
(in thousands)
| For the Three Months Ended September 30, 2021 | ||||||||||||||||
| Accumulated | ||||||||||||||||
| Other | ||||||||||||||||
| Common | Comprehensive | Retained | Total | |||||||||||||
| Stock | Loss | Earnings | Equity | |||||||||||||
| Balance at June 30, 2021 | $ | $ | ( | ) | $ | $ | ||||||||||
| Net income | ||||||||||||||||
| Payment of dividends | ( | ) | ( | ) | ||||||||||||
| Stock-based compensation | ||||||||||||||||
| Changes in fair value of hedges, net of tax | ||||||||||||||||
| Balance at September 30, 2021 | $ | $ | ( | ) | $ | $ | ||||||||||
| For the Nine Months Ended September 30, 2021 | ||||||||||||||||
| Accumulated | ||||||||||||||||
| Other | ||||||||||||||||
| Common | Comprehensive | Retained | Total | |||||||||||||
| Stock | Loss | Earnings | Equity | |||||||||||||
| Balance at December 31, 2020 | $ | $ | ( | ) | $ | $ | ||||||||||
| Net income | ||||||||||||||||
| Payment of dividends | ( | ) | ( | ) | ||||||||||||
| Stock-based compensation | ||||||||||||||||
| Changes in fair value of hedges, net of tax | ||||||||||||||||
| Balance at September 30, 2021 | $ | $ | ( | ) | $ | $ | ||||||||||
| For the Three Months Ended September 30, 2020 | ||||||||||||||||||||
| Accumulated | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Common | Treasury | Comprehensive | Retained | Total | ||||||||||||||||
| Stock | Stock | Loss | Earnings | Equity | ||||||||||||||||
| Balance at June 30, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Payment of dividends | ( | ) | ( | ) | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Changes in fair value of hedges, net of tax | ||||||||||||||||||||
| Other | ( | ) | ||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| For the Nine Months Ended September 30, 2020 | ||||||||||||||||||||
| Accumulated | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Common | Treasury | Comprehensive | Retained | Total | ||||||||||||||||
| Stock | Stock | Loss | Earnings | Equity | ||||||||||||||||
| Balance at December 31, 2019 | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Payment of dividends | ( | ) | ( | ) | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Restricted stock units converted to stock | ( | ) | ||||||||||||||||||
| Changes in fair value of hedges, net of tax | ( | ) | ( | ) | ||||||||||||||||
| Repurchase of common stock | ( | ) | ( | ) | ||||||||||||||||
| Other | ||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
The accompanying notes are an integral part of these consolidated statements.
Olympic Steel, Inc.
Notes to Unaudited Consolidated Financial Statements
September 30, 2021
| 1. | Basis of Presentation: |
The accompanying consolidated financial statements have been prepared from the financial records of Olympic Steel, Inc. and its wholly-owned subsidiaries (collectively, Olympic or the Company), without audit and reflect all normal and recurring adjustments which are, in the opinion of management, necessary to fairly state the results of the interim periods covered by this report. Year-to-date results are not necessarily indicative of 2021 annual results and these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. All intercompany transactions and balances have been eliminated in consolidation.
The Company operates in three reportable segments: carbon flat products, specialty metals flat products, and tubular and pipe products. The specialty metals flat products segment and the carbon flat products segment are at times consolidated and referred to as the flat products segments. Certain of the flat products segments’ assets and resources are shared by the specialty metals and carbon flat products segments, and both segments’ products are stored in the shared facilities and, in some locations, processed on shared equipment. Due to the shared assets and resources, certain of the flat products segment expenses are allocated between the specialty metals flat products segment and the carbon flat products segment based upon an established allocation methodology. The specialty metals flat products segment sells and distributes processed aluminum and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. Through the acquisition of Action Stainless & Alloys, Inc. (Action Stainless) on December 14, 2020, the specialty metals flat products segment expanded its geographic footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe. Action Stainless offers a range of processing capabilities, including plasma, laser and waterjet cutting and computer numerical control (CNC) machining. On October 1, 2021, the Company acquired all of the net assets of Shaw Stainless & Alloy, Inc. (Shaw), based in Powder Springs, Georgia. Shaw is a full-line distributor of stainless steel sheet, pipe, tube, bar and angles. Shaw also manufactures and distributes stainless steel bollards and water treatment systems. The acquisition includes Shaw's stainless-steel distribution and fabrication businesses as well as its architectural and barrier defense businesses. The carbon flat products segment sells and distributes large volumes of processed carbon and coated flat-rolled sheet, coil and plate products, and fabricated parts. Through the acquisitions of McCullough Industries (McCullough) and certain assets related to the manufacturing of the EZ Dumper® hydraulic dump inserts (EZ Dumper) in 2019, the carbon flat products segment expanded its product offerings to include self-dumping metal hoppers and steel and stainless-steel dump inserts for pickup truck and service truck beds. On September 17, 2021, the Company sold substantially all of the assets related to its Detroit operation. The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers. The tubular and pipe products segment, which consists of the Chicago Tube and Iron subsidiary (CTI), distributes metal tubing, pipe, bar, valves and fittings and fabricates pressure parts supplied to various industrial markets.
Corporate expenses are reported as a separate line item for segment reporting purposes. Corporate expenses include the unallocated expenses related to managing the entire Company (i.e., all three segments), including payroll expenses for certain personnel, expenses related to being a publicly traded entity such as board of directors’ expenses, audit expenses, and various other professional fees.
On March 11, 2020, the World Health Organization classified the novel coronavirus (COVID-19) outbreak as a pandemic. The Company is an essential business and remains open in all locations, adhering to all health guidelines to operate safely provided by the Center for Disease Control and Prevention and local authorities. The Company has implemented actions to maintain its financial health and liquidity. The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business. However, as a result of the many uncertainties surrounding the COVID-19 pandemic, the Company is unable to predict the impact that it ultimately will have on its financial condition, results of operations, comprehensive income (loss), and cash flows.
Impact of Recently Issued Accounting Pronouncements
There were no recently issued accounting pronouncements that would have a material impact on the Company’s Consolidated Financial Statements.
| 2. | Revenue Recognition: |
The Company provides metals processing, distribution and delivery of large volumes of processed carbon, coated flat-rolled sheet, coil and plate products, aluminum, and stainless flat-rolled products, prime tin mill products, flat bar products, metal tubing, pipe, bar, valves, fittings, and fabricated parts. The Company's contracts with customers are comprised of purchase orders with standard terms and conditions. Occasionally the Company may also have longer-term agreements with customers. Substantially all of the contracts with customers require the delivery of metals, which represent single performance obligations that are satisfied at a point in time upon transfer of control of the product to the customer.
Transfer of control is assessed based on the use of the product distributed and rights to payment for performance under the contract terms. Transfer of control and revenue recognition for substantially all of the Company’s sales occur upon shipment or delivery of the product, which is when title, ownership and risk of loss pass to the customer and is based on the applicable shipping terms. The shipping terms depend on the customer contract. An invoice for payment is issued at time of shipment and terms are generally net 30 days. The Company has certain fabrication contracts in one business unit for which revenue is recognized over time as performance obligations are achieved. This fabrication business is not material to the Company's consolidated results.
Within the metals industry, revenue is frequently disaggregated by products sold. The table below disaggregates the Company’s revenues by segment and products sold.
| Disaggregated Revenue by Products Sold | ||||||||||||||||
| For the Three Months Ended September 30, 2021 | ||||||||||||||||
| Carbon flat products | Specialty metals flat products | Tubular and pipe products | Total | |||||||||||||
| Hot Rolled | % | % | ||||||||||||||
| Plate | % | % | ||||||||||||||
| Cold Rolled | % | % | ||||||||||||||
| Coated | % | % | ||||||||||||||
| Specialty | % | % | ||||||||||||||
| Tube | % | % | ||||||||||||||
| Other | % | % | % | |||||||||||||
| Total | % | % | % | % | ||||||||||||
| Disaggregated Revenue by Products Sold | ||||||||||||||||
| For the Nine Months Ended September 30, 2021 | ||||||||||||||||
| Carbon flat products | Specialty metals flat products | Tubular and pipe products | Total | |||||||||||||
| Hot Rolled | % | % | ||||||||||||||
| Plate | % | % | ||||||||||||||
| Cold Rolled | % | % | ||||||||||||||
| Coated | % | % | ||||||||||||||
| Specialty | % | % | ||||||||||||||
| Tube | % | % | ||||||||||||||
| Other | % | % | % | |||||||||||||
| Total | % | % | % | % | ||||||||||||
| Disaggregated Revenue by Products Sold | ||||||||||||||||
| For the Three Months Ended September 30, 2020 | ||||||||||||||||
| Carbon flat products | Specialty metals flat products | Tubular and pipe products | Total | |||||||||||||
| Hot Rolled | % | % | ||||||||||||||
| Plate | % | % | ||||||||||||||
| Cold Rolled | % | % | ||||||||||||||
| Coated | % | % | ||||||||||||||
| Specialty | % | % | ||||||||||||||
| Tube | % | % | ||||||||||||||
| Other | % | % | % | |||||||||||||
| Total | % | % | % | % | ||||||||||||
| Disaggregated Revenue by Products Sold | ||||||||||||||||
| For the Nine Months Ended September 30, 2020 | ||||||||||||||||
| Carbon flat products | Specialty metals flat products | Tubular and pipe products | Total | |||||||||||||
| Hot Rolled | % | % | ||||||||||||||
| Plate | % | % | ||||||||||||||
| Cold Rolled | % | % | ||||||||||||||
| Coated | % | % | ||||||||||||||
| Specialty | % | % | ||||||||||||||
| Tube | % | % | ||||||||||||||
| Other | % | % | % | |||||||||||||
| Total | % | % | % | % | ||||||||||||
| 3. | Accounts Receivable: |
Accounts receivable are presented net of allowances for credit losses and unissued credits of $
| 4. | Inventories: |
Inventories consisted of the following:
| Inventory as of | ||||||||
| (in thousands) | September 30, 2021 | December 31, 2020 | ||||||
| Unprocessed | $ | $ | ||||||
| Processed and finished | ||||||||
| Totals | $ | $ | ||||||
The Company values certain of its tubular and pipe products inventory at the last-in, first-out (LIFO) method. At September 30, 2021 and December 31, 2020, approximately $
During the three and nine months ended September 30, 2021, the Company recorded $
If the FIFO method had been in use, inventories would have been $
| 5. | Goodwill and Intangible Assets: |
The Company’s intangible assets were recorded in connection with its acquisitions that occurred between 2011 and 2020. The intangible assets were evaluated on the premise of highest and best use to a market participant, primarily utilizing the income approach valuation methodology. The useful life of the customer relationships was determined to be years, based primarily on the consistent and predictable revenue source associated with the existing customer base, the present value of which extends through the -year amortization period. The useful life of the non-compete agreements was determined to be the length of the non-compete agreements, which range from to years. The useful life of the trade names was determined to be indefinite primarily due to their history and reputation in the marketplace, the Company’s expectation that the trade names will continue to be used, and the conclusion that there are currently no other factors identified that would limit their useful life. The Company will continue to evaluate the useful life assigned to its amortizable customer relationships and noncompete agreements in future periods.
Goodwill, by reportable unit, was as follows as of September 30, 2021 and December 31, 2020, respectively. The goodwill is deductible for tax purposes. The change in goodwill during 2021 is related to adjustments to the preliminary purchase price allocation of the fair market values of the assets acquired and liabilities assumed for Action Stainless.
| (in thousands) | Carbon Flat Products | Specialty Metals Flat Products | Tubular and Pipe Products | Total | ||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | $ | ||||||||||||
| Acquisitions | ||||||||||||||||
| Impairments | ||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | $ | ||||||||||||
Intangible assets consisted of the following as of September 30, 2021 and December 31, 2020, respectively:
| As of September 30, 2021 | ||||||||||||
| (in thousands) | Gross Carrying Amount | Accumulated Amortization | Intangible Assets, Net | |||||||||
| Customer relationships - subject to amortization | $ | $ | ( | ) | $ | |||||||
| Covenant not to compete - subject to amortization | ( | ) | ||||||||||
| Trade name - not subject to amortization | - | |||||||||||
| $ | $ | ( | ) | $ | ||||||||
| As of December 31, 2020 | ||||||||||||
| (in thousands) | Gross Carrying Amount | Accumulated Amortization | Intangible Assets, Net | |||||||||
| Customer relationships - subject to amortization | $ | $ | ( | ) | $ | |||||||
| Covenant not to compete - subject to amortization | ( | ) | ||||||||||
| Trade name - not subject to amortization | - | |||||||||||
| $ | $ | ( | ) | $ | ||||||||
The Company estimates that amortization expense for its intangible assets subject to amortization will be approximately $
| 6. | Leases: |
The components of lease expense were as follows:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Operating lease cost | $ | $ | $ | $ | ||||||||||||
| Finance lease cost: | ||||||||||||||||
| Amortization of right-of-use assets | $ | $ | $ | $ | ||||||||||||
| Interest on lease liabilities | ||||||||||||||||
| Total finance lease cost | $ | $ | $ | $ | ||||||||||||
Supplemental cash flow information related to leases was as follows:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Cash paid for lease liabilities: | ||||||||||||||||
| Operating cash flows from operating leases | $ | $ | $ | $ | ||||||||||||
| Operating cash flows from finance leases | ||||||||||||||||
| Financing cash flows from finance leases | ||||||||||||||||
| Total cash paid for lease liabilities | $ | $ | $ | $ | ||||||||||||
Supplemental balance sheet information related to leases was as follows:
| September 30, | December 31, | |||||||
| (in thousands) | 2021 | 2020 | ||||||
| Operating Leases | ||||||||
| Operating lease | $ | $ | ||||||
| Operating lease accumulated amortization | ( | ) | ( | ) | ||||
| Operating lease right-of-use asset, net | ||||||||
| Operating lease current liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Finance Leases | ||||||||
| Finance lease | $ | $ | ||||||
| Finance lease accumulated depreciation | ( | ) | ( | ) | ||||
| Finance lease, net | ||||||||
| Finance lease current liabilities | ||||||||
| Finance lease liabilities | ||||||||
| Total finance lease liabilities | $ | $ | ||||||
| September 30, | December 31, | |||||||
|
| 2021 | 2020 | ||||||
| Weighted Average Remaining Lease Term | ||||||||
| Operating leases (in years) | ||||||||
| Finance leases (in years) | ||||||||
| Weighted Average Discount Rate | ||||||||
| Operating leases | % | % | ||||||
| Finance leases | % | % | ||||||
Maturities of lease liabilities were as follows:
| Operating | Finance | |||||||
| (in thousands) | Leases | Leases | ||||||
| Year Ending December 31, | ||||||||
| 2021 | $ | $ | ||||||
| 2022 | ||||||||
| 2023 | ||||||||
| 2024 | ||||||||
| 2025 | ||||||||
| Thereafter | ||||||||
| Total future minimum lease payments | $ | $ | ||||||
| Less remaining imputed interest | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
| 7. | Debt: |
The Company’s debt is comprised of the following components:
| As of | ||||||||
| September 30, | December 31, | |||||||
| (in thousands) | 2021 | 2020 | ||||||
| Asset-based revolving credit facility due June 16, 2026 | $ | $ | ||||||
| Total debt | $ | $ | ||||||
On June 16, 2021, the Company entered into a Fourth Amendment to Third Amended and Restated Loan and Security Agreement (the “ABL Credit Facility”), which amended and extended the Company’s existing ABL Credit Facility. The $
The ABL Credit Facility contains customary representations and warranties and certain covenants that limit the ability of the Company to, among other things: (i) incur or guarantee additional indebtedness; (ii) pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt; (iii) make investments; (iv) sell assets; (v) enter into agreements that restrict distributions or other payments from restricted subsidiaries to the Company; (vi) incur or suffer to exist liens securing indebtedness; (vii) consolidate, merge or transfer all or substantially all of their assets; and (viii) engage in transactions with affiliates. In addition, the ABL Credit Facility contains a financial covenant which provides that: (i) if any commitments or obligations are outstanding and the Company’s availability is less than the greater of $
The Company has the option to borrow under its revolver based on the agent’s base rate plus a premium ranging from
On January 10, 2019, the Company entered into a -year forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $
As of September 30, 2021, the Company was in compliance with its covenants and had approximately $
As of September 30, 2021, and December 31, 2020, $
| 8. | Derivative Instruments: |
Metals swaps and embedded customer derivatives
During 2021 and 2020, the Company entered into nickel swaps indexed to the London Metal Exchange (LME) price of nickel with third-party brokers. The nickel swaps are accounted for as derivatives for accounting purposes. The Company entered into them to mitigate its customers’ risk of volatility in the price of metals. The outstanding nickel swaps mature in 2021. The swaps are settled with the brokers at maturity. The economic benefit or loss arising from the changes in fair value of the swaps is contractually passed through to the customer. The primary risk associated with the metals swaps is the ability of customers or third-party brokers to honor their agreements with the Company related to derivative instruments. If the customer or third-party brokers are unable to honor their agreements, the Company’s risk of loss is the fair value of the metals swaps.
These derivatives have not been designated as hedging instruments. The periodic changes in fair value of the metals and embedded customer derivative instruments are included in “Cost of materials sold” in the Consolidated Statements of Comprehensive Income (Loss). The Company recognizes derivative positions with both the customer and the third party for the derivatives and classifies cash settlement amounts associated with them as part of “Cost of materials sold” in the Consolidated Statements of Comprehensive Income (Loss). The cumulative change in fair value of the metals swaps that had not yet settled as of September 30, 2021 are included in “Other accrued liabilities”, and the embedded customer derivatives are included in “Accounts receivable, net” on the Consolidated Balance Sheets as of September 30, 2021. There were no outstanding metals swaps or embedded customer derivatives as of December 31, 2020.
Fixed rate interest rate hedge
On January 10, 2019, the Company entered into a -year forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $
The table below shows the total impact to the Company’s Consolidated Statements of Comprehensive Income (Loss) through net income of the derivatives for the three and nine months ended September 30, 2021 and 2020, respectively.
| Net Gain (Loss) Recognized | ||||||||||||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Fixed interest rate hedge | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Metals swaps | ( | ) | ||||||||||||||
| Embedded customer derivatives | ( | ) | ( | ) | ( | ) | ||||||||||
| Total loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 9. | Fair Value of Assets and Liabilities: |
During the nine months ended September 30, 2021, there were no transfers of financial assets between Levels 1, 2 or 3 fair value measurements. There have been no changes in the methodologies used at September 30, 2021 since December 31, 2020.
The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized by the Company:
| Value of Items Recorded at Fair Value | ||||||||||||||||
| As of September 30, 2021 | ||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets: | ||||||||||||||||
| Embedded customer derivative | $ | $ | $ | $ | ||||||||||||
| Total assets at fair value | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Metal Swaps | $ | $ | $ | $ | ||||||||||||
| Fixed interest rate hedge | ||||||||||||||||
| Total liabilities recorded at fair value | $ | $ | $ | $ | ||||||||||||
| Value of Items Recorded at Fair Value | ||||||||||||||||
| As of December 31, 2020 | ||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Liabilities: | ||||||||||||||||
| Fixed interest rate hedge | $ | $ | $ | $ | ||||||||||||
| Total liabilities recorded at fair value | $ | $ | $ | $ | ||||||||||||
The value of the items not recorded at fair value represent the carrying value of the liabilities.
The carrying value of the ABL Credit Facility was $
| 10. | Accumulated Other Comprehensive Loss: |
On January 10, 2019, the Company entered into a -year forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $
| 11. | Equity Plans: |
Restricted Stock Units and Performance Share Units
Pursuant to the Amended and Restated Olympic Steel 2007 Omnibus Incentive Plan (the Incentive Plan), the Company may grant stock options, stock appreciation rights, restricted shares, restricted share units (RSUs), performance shares, and other stock- and cash-based awards to employees and directors of, and consultants to, the Company and its affiliates. Since adoption of the Incentive Plan,
On an annual basis, the compensation committee of the Company’s Board of Directors awards RSUs to each non-employee director as part of their annual compensation. The annual awards for 2021 and 2020 per director were $
Prior to 2021, under the Incentive Plan, each eligible participant was awarded RSUs with a dollar value equal to
Under the Incentive Plan, the Company awards RSUs to newly-appointed executive officers, based upon a percentage of their base salary. Upon Mr. Greiff’s promotion to President and Chief Operating Officer on January 1, 2020, he received
Stock-based compensation expense recognized on RSUs for the three and nine months ended September 30, 2021 and 2020, respectively, is summarized in the following table:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (in thousands, except per share data) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| RSU expense before taxes | $ | $ | $ | $ | ||||||||||||
| RSU expense after taxes | $ | $ | $ | $ | ||||||||||||
All pre-tax charges related to RSUs were included in the caption “Administrative and general” on the accompanying Consolidated Statements of Comprehensive Income (Loss).
The following table summarizes the activity related to RSUs for the nine months ended September 30, 2021 and 2020, respectively:
| As of September 30, 2021 | As of September 30, 2020 | |||||||||||||||
| Number of | Weighted Average | Number of | Weighted Average | |||||||||||||
| Shares | Granted Price | Shares | Granted Price | |||||||||||||
| Outstanding at December 31 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Converted into shares | ( | ) | ( | ) | ||||||||||||
| Forfeited | ( | ) | ( | ) | ||||||||||||
| Outstanding at September 30 | $ | $ | ||||||||||||||
| Vested at September 30 | $ | $ | ||||||||||||||
| 12. | Income Taxes: |
For the three months ended September 30, 2021, the Company recorded an income tax provision of $
For the three and nine months ended September 30, 2021, the tax provision or benefit for the interim period is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items that are taken into account in the relevant period. Each quarter the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, the Company makes a cumulative adjustment. Due to the COVID-19 pandemic and the uncertainty around forecasting an annual effective tax rate, the tax provision was recorded based on the actual effective tax rate including discrete items for the three and nine months ended September 30, 2020.
The quarterly tax provision and the quarterly estimate of the annual effective tax rate is subject to significant volatility due to several factors, including variability in accurately predicting the Company’s pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, changes in law and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, the effective tax rate can be more or less volatile based on the amount of pre-tax income. For example, the impact of discrete items and non-deductible expenses on the effective tax rate is lower when the pre-tax income is higher.
| 13. | Shares Outstanding and Earnings Per Share: |
Earnings per share have been calculated based on the weighted average number of shares outstanding as set forth below:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (in thousands, except per share data) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Weighted average basic shares outstanding | ||||||||||||||||
| Assumed exercise of stock options and issuance of stock awards | ||||||||||||||||
| Weighted average diluted shares outstanding | ||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Basic earnings per share | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Diluted earnings per share | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Unvested RSUs | ||||||||||||||||
| 14. | Equity Programs: |
Stock Repurchase Program
On October 2, 2015, the Company announced that its Board of Directors authorized a stock repurchase program of up to
There were
At-the-Market Equity Program
On September 3, 2021, the Company commenced an at-the-market ("ATM") equity program under its shelf registration statement, which allows it to sell and issue up to $
| 15. | Segment Information: |
The Company follows the accounting guidance that requires the utilization of a “management approach” to define and report the financial results of operating segments. The management approach defines operating segments along the lines used by the Company’s chief operating decision maker (CODM) to assess performance and make operating and resource allocation decisions. The CODM evaluates performance and allocates resources based primarily on operating income (loss). The operating segments are based primarily on internal management reporting.
The Company operates in reportable segments: specialty metals flat products, carbon flat products, and tubular and pipe products. The specialty metals flat products segment and the carbon flat products segment are at times consolidated and referred to as the flat products segments, as certain of the flat products segments’ assets and resources are shared by the specialty metals and carbon flat products segments and both segments’ products are stored in the shared facilities and, in some locations, processed on shared equipment.
Corporate expenses are reported as a separate line item for segment reporting purposes. Corporate expenses include the unallocated expenses related to managing the entire Company (i.e., all three segments), including compensation for certain personnel, expenses related to being a publicly traded entity such as board of directors’ expenses, audit expenses, and various other professional fees.
The following table provides financial information by segment and reconciles the Company’s operating income by segment to the consolidated income before income taxes for the three and six months ended June 30, 2021 and 2020, respectively.
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Net sales | ||||||||||||||||
| Specialty metals flat products | $ | $ | $ | $ | ||||||||||||
| Carbon flat products | ||||||||||||||||
| Tubular and pipe products | ||||||||||||||||
| Total net sales | $ | $ | $ | $ | ||||||||||||
| Restructuring and other charges | ||||||||||||||||
| Specialty metals flat products | $ | $ | $ | $ | ||||||||||||
| Carbon flat products | ||||||||||||||||
| Tubular and pipe products | ||||||||||||||||
| Corporate | ||||||||||||||||
| Total restructuring and other charges | $ | $ | $ | $ | ||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Specialty metals flat products | $ | $ | $ | $ | ||||||||||||
| Carbon flat products | ||||||||||||||||
| Tubular and pipe products | ||||||||||||||||
| Corporate | ||||||||||||||||
| Total depreciation and amortization | $ | $ | $ | $ | ||||||||||||
| Operating income (loss) | ||||||||||||||||
| Specialty metals flat products | $ | $ | $ | $ | ||||||||||||
| Carbon flat products | ( | ) | ( | ) | ||||||||||||
| Tubular and pipe products | ||||||||||||||||
| Corporate expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Other income (loss), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) before interest and income taxes | ( | ) | ( | ) | ||||||||||||
| Interest and other expense on debt | ||||||||||||||||
| Income (loss) before income taxes | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| (in thousands) | 2021 | 2020 | ||||||
| Capital expenditures | ||||||||
| Flat products segments | $ | $ | ||||||
| Tubular and pipe products | ||||||||
| Corporate | ||||||||
| Total capital expenditures | $ | $ | ||||||
| As of | ||||||||
| September 30, | December 31, | |||||||
| (in thouands) | 2021 | 2020 | ||||||
| Assets | ||||||||
| Flat products segments | $ | $ | ||||||
| Tubular and pipe products | ||||||||
| Corporate | ||||||||
| Total assets | $ | $ | ||||||
There were no material revenue transactions between the specialty metals products, carbon flat products and tubular and pipe products segments. On September 17, 2021, the Company sold substantially all of the assets related to its Detroit operation. The Detroit operation was primarily included in the carbon flat-rolled segment.
The Company sells certain products internationally, primarily in Canada and Mexico. International sales are immaterial to the consolidated financial results and to the individual segments’ results.
| 16. | Disposition of Assets: |
On September 17, 2021, the Company sold substantially all of the assets related to its Detroit operation to Venture Steel (U.S.), Inc. for $
| 17. | Subsequent Event: |
On October 1, 2021, the Company acquired all of the net assets of Shaw Stainless & Alloy, Inc. (Shaw), based in Powder Springs, Georgia for $
The acquisition will be accounted for as a business combination and the assets acquired and liabilities assumed valued at fair market value. The acquisition is not considered significant and Shaw’s results will be included in the Company’s specialty metals flat products segment beginning in the Company’s fourth quarter of 2021 financial results. Upon the acquisition, the Company entered into an amendment to include the eligible assets of Shaw in its ABL Credit Facility.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and accompanying notes contained herein and our consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2020. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed under Item 1A (Risk Factors) in our Annual Report on Form 10-K for the year ended December 31, 2020, and in Part II, Item 1A (Risk Factors) in this Quarterly Report on Form 10-Q. The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appear elsewhere in this Quarterly Report on Form 10-Q.
Forward-Looking Information
This Quarterly Report on Form 10-Q and other documents we file with the Securities and Exchange Commission, or SEC, contain various forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, business, our beliefs and management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, conferences, webcasts, phone calls and conference calls. Words such as “may,” “will,” “anticipate,” “should,” “intend,” “expect,” “believe,” “estimate,” “project,” “plan,” “potential,” and “continue,” as well as the negative of these terms or similar expressions, are intended to identify forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those implied by such statements including, but not limited to:
| ● |
risks of falling metals prices and inventory devaluation; |
| ● |
risks associated with supply chain disruption resulting from the imbalance of metal supply and end-user demands related to the novel coronavirus, or COVID-19, and other factors; |
| ● | supply disruptions and inflationary pressures, including the availability and rising costs of transportation and logistical services and labor; |
|
| ● |
increased customer demand without corresponding increase in metal supply could lead to an inability to meet customer demand and result in lower sales and profits; |
| ● |
risks associated with the COVID-19 pandemic, including, but not limited to customer closures, reduced sales and profit levels, slower payment of accounts receivable and potential increases in uncollectible accounts receivable, falling metals prices that could lead to lower of cost or net realizable value inventory adjustments and the impairment of intangible and long-lived assets, reduced availability and productivity of our employees, increased operational risks as a result of remote work arrangements, including the potential effects on internal controls, as well as cybersecurity risks and increased vulnerability to security breaches, information technology disruptions and other similar events, negative impacts on our liquidity position, inability to access our traditional financing sources on the same or reasonably similar terms as were available before the COVID-19 pandemic and increased costs associated with and less ability to access funds under our asset-based credit facility, or ABL Credit Facility, and the capital markets; |
| ● |
general and global business, economic, financial and political conditions, including legislation passed under the new administration; |
| ● |
competitive factors such as the availability, and global pricing of metals and production levels, industry shipping and inventory levels and rapid fluctuations in customer demand and metals pricing; |
| ● |
supplier consolidation or addition of additional capacity; |
| ● |
customer, supplier and competitor consolidation, bankruptcy or insolvency; |
| ● |
reduced production schedules, layoffs or work stoppages by our own, our suppliers’ or customers’ personnel; |
| ● |
the levels of imported steel in the United States and the tariffs initiated by the U.S. government in 2018 under Section 232 of the Trade Expansion Act of 1962 and imposed tariffs and duties on exported steel or other products, U.S. trade policy and its impact on the U.S. manufacturing industry; |
| ● |
cyclicality and volatility within the metals industry; |
| ● |
the adequacy of our efforts to mitigate cyber security risks and threats, especially with employees working remotely due to the COVID-19 pandemic; |
| ● |
fluctuations in the value of the U.S. dollar and the related impact on foreign steel pricing, U.S. exports, and foreign imports to the United States; |
| ● |
the successes of our efforts and initiatives to improve working capital turnover and cash flows, and achieve cost savings; |
| ● |
our ability to further diversify our business, deliver consistent profitability and enhance shareholder value, including, without limitation, our ability to successfully redeploy the proceeds from the sale of our Detroit operation and other capital; |
| ● |
our ability to generate free cash flow through operations and repay debt; |
| ● |
our ability to sell shares of our common stock under the at-the-market equity program; |
| ● |
the adequacy of our existing information technology and business system software, including duplication and security processes; |
| ● |
the amounts, successes and our ability to continue our capital investments and strategic growth initiatives, including acquisitions and our business information system implementations; |
| ● |
our ability to successfully integrate recent acquisitions into our business and risks inherent with the acquisitions in the achievement of expected results, including whether an acquisition will be accretive and within the expected timeframe; |
| ● |
events or circumstances that could adversely impact the successful operation of our processing equipment and operations; |
| ● |
rising interest rates and their impacts on our variable interest rate debt; |
| ● |
the impacts of union organizing activities and the success of union contract renewals; |
| ● |
changes in laws or regulations or the manner of their interpretation or enforcement could impact our financial performance and restrict our ability to operate our business or execute our strategies; |
| ● |
events or circumstances that could impair or adversely impact the carrying value of any of our assets; |
| ● |
risks and uncertainties associated with intangible assets, including impairment charges related to indefinite lived intangible assets; |
| ● |
the timing and outcomes of inventory lower of cost or net realizable value adjustments and last-in, first-out, or LIFO, income or expense; |
| ● |
the inflation or deflation existing within the metals industry, as well as product mix and inventory levels on hand, which can impact our cost of materials sold as a result of the fluctuations in the LIFO inventory valuation; |
| ● |
our ability to pay regular quarterly cash dividends and the amounts and timing of any future dividends; |
| ● |
our ability to repurchase shares of our common stock and the amounts and timing of repurchases, if any; and |
| ● |
unanticipated developments that could occur with respect to contingencies such as litigation, arbitration and environmental matters, including any developments that would require any increase in our costs for such contingencies. |
Should one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, intended, expected, believed, estimated, projected or planned. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to republish revised forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date hereof, except as otherwise required by law.
Overview
We are a leading metals service center that operates in three reportable segments; carbon flat products, specialty metals flat products, and tubular and pipe products. We provide metals processing and distribution services for a wide range of customers. Our specialty metals flat products segment’s focus is on the direct sale and distribution of processed aluminum and stainless flat-rolled sheet and coil products, flat bar products, prime tin mill products and fabricated parts. Through the acquisition of Action Stainless & Alloys, Inc., or Action Stainless, on December 14, 2020, our specialty metals flat products segment expanded its geographic footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe. Action Stainless offers a range of processing, including plasma, laser and waterjet cutting and machining. Our carbon flat products segment’s focus is on the direct sale and distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products and fabricated parts. Through the acquisitions of McCullough Industries, or McCullough, and the EZ Dumper® hydraulic dump inserts, or EZ Dumper, in 2019, our carbon flat products segment expanded its product offerings to include self-dumping metal hoppers and carbon and stainless-steel dump inserts for pickup truck and service truck beds. On September 17, 2021, the Company sold substantially all of the assets related to its Detroit operation. The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers and primarily included in the carbon flat-rolled segment. In addition, we distribute metal tubing, pipe, bar, valves and fittings and fabricate pressure parts supplied to various industrial markets through our tubular and pipe products segment. Products that require more value-added processing generally have a higher gross profit. Accordingly, our overall gross profit is affected by, among other things, product mix, the amount of processing performed, the demand for and availability of metals, and volatility in selling prices and material purchase costs. We also perform toll processing of customer-owned metals. We sell certain products internationally, primarily in Canada and Mexico. International sales are immaterial to our consolidated financial results and to the individual segments’ results.
Our results of operations are affected by numerous external factors including, but not limited to: general and global business, economic, financial, banking and political conditions; fluctuations in the value of the U.S. dollar to foreign currencies, competition; metals pricing, demand and availability; transportation and energy costs; pricing and availability of raw materials used in the production of metals; global supply, the level of metals imported into the United States, tariffs, and inventory held in the supply chain; the availability, and increased costs of labor; customers’ ability to manage their credit line availability; and layoffs or work stoppages by our own, our suppliers’ or our customers’ personnel. The metals industry also continues to be affected by the global consolidation of our suppliers, competitors and end-use customers.
Like other metals service centers, we maintain substantial inventories of metals to accommodate the short lead times and just-in-time delivery requirements of our customers. Accordingly, we purchase metals in an effort to maintain our inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon customer forecasts, historic buying practices, supply agreements with customers and market conditions. Our commitments to purchase metals are generally at prevailing market prices in effect at the time we place our orders. From time to time, we have entered into nickel swaps at the request of our customers in order to mitigate our customers’ risk of volatility in the price of metals, and we have entered into metals hedges to mitigate our risk of volatility in the price of metals. We have no long-term, fixed-price metals purchase contracts. When metals prices decline, customer demands for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently, lower gross profits and earnings as we use existing metals inventory. When metals prices increase, competitive conditions will influence how much of the price increase we can pass on to our customers. To the extent we are unable to pass on future price increases in our raw materials to our customers, the net sales and gross profits of our business could be adversely affected.
At September 30, 2021, we employed approximately 1,600 people. Approximately 195 of the hourly plant personnel at the facilities listed below are represented by seven separate collective bargaining units. The table below shows the expiration dates of the collective bargaining agreements.
| Facility |
Expiration date |
| Minneapolis (plate), Minnesota |
March 31, 2022 |
| Hammond, Indiana |
November 30, 2024 |
| Locust, North Carolina |
March 4, 2025 |
| St. Paul, Minnesota |
May 25, 2025 |
| Romeoville, Illinois |
May 31, 2025 |
| Minneapolis (coil), Minnesota |
September 30, 2025 |
| Indianapolis, Indiana |
January 29, 2026 |
We have never experienced a work stoppage and we believe that our relationship with employees is good. However, any prolonged work stoppages by our personnel represented by collective bargaining units could have a material adverse impact on our business, financial condition, results of operations and cash flows.
Reportable Segments
We operate in three reportable segments: carbon flat products, specialty metals flat products and tubular and pipe products. The carbon flat products segment and the specialty metals flat products segment are at times consolidated and referred to as the flat products segment. Some of the flat products segments’ assets and resources are shared by the carbon and specialty metals segments and both segments’ products are stored in the shared facilities and, in some locations, processed on shared equipment. As such, total assets and capital expenditures are reported in the aggregate for the flat products segments. Due to the shared assets and resources, certain of the flat products segment expenses are allocated between the carbon flat products segment and the specialty metals flat products segment based upon an established allocation methodology.
We follow the accounting guidance that requires the utilization of a “management approach” to define and report the financial results of operating segments. The management approach defines operating segments along the lines used by the chief operating decision maker, or CODM, to assess performance and make operating and resource allocation decisions. Our CODM evaluates performance and allocates resources based primarily on operating income. Our operating segments are based primarily on internal management reporting.
Due to the nature of the products sold in each segment, there are significant differences in the segments’ average selling price and the cost of materials sold. The tubular and pipe products segment generally has the highest average selling price among the three segments followed by the specialty metals flat products and carbon flat products segments. Due to the nature of the tubular and pipe products, we do not report tons sold or per ton information. Gross profit per ton is generally higher in the specialty metals flat products segment than the carbon flat products segment. Gross profit as a percentage of net sales is generally highest in the tubular and pipe products segment, followed by the carbon and specialty metals flat products segments. Due to the differences in average selling prices, gross profit and gross profit percentage among the segments, a change in the mix of sales could impact total net sales, gross profit, and gross profit percentage. In addition, certain inventory in the tubular and pipe products segment is valued under the LIFO method. Adjustments to the LIFO inventory value are recorded to cost of materials sold and may impact the gross margin and gross margin percentage at the consolidated Company and tubular and pipe products segment levels.
Specialty metals flat products
The primary focus of our specialty metals flat products segment is on the direct sale and distribution of processed stainless and aluminum flat-rolled sheet and coil products, flat bar products and fabricated parts. Through the acquisition of Action Stainless on December 14, 2020, our specialty metals flat products segment expanded its geographic footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe. Through its acquisition of Berlin Metals, LLC, or Berlin Metals, on April 2, 2018, our specialty metals flat products segment expanded its product offerings to include differing types of stainless flat-rolled sheet and coil and prime tin mill products. We act as an intermediary between metals producers and manufacturers that require processed metals for their operations. We serve customers in various industries, including manufacturers of food service and commercial appliances, agriculture equipment, transportation and automotive equipment. We distribute these products primarily through a direct sales force.
Carbon flat products
The primary focus of our carbon flat products segment is on the direct sale and distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products and fabricated parts. We act as an intermediary between metals producers and manufacturers that require processed metals for their operations. We serve customers in most metals consuming industries, including manufacturers and fabricators of transportation and material handling equipment, construction and farm machinery, storage tanks, environmental and energy generation equipment, automobiles, military vehicles and equipment, as well as general and plate fabricators and metals service centers. We distribute these products primarily through a direct sales force.
Combined, the carbon and specialty metals flat products segments have 26 strategically-located processing and distribution facilities in the United States and one in Monterrey, Mexico. Many of our facilities service both the carbon and the specialty metals flat products segments, and certain assets and resources are shared by the segments. Our geographic footprint allows us to focus on regional customers and larger national and multi-national accounts, primarily located throughout the midwestern, eastern and southern United States.
Tubular and pipe products
The tubular and pipe products segment consists of the Chicago Tube and Iron, or CTI, business. Through our tubular and pipe products segment, we distribute metal tubing, pipe, bar, valve and fittings and fabricate pressure parts supplied to various industrial markets. Founded in 1914, CTI operates from seven locations in the Midwestern and southeastern United States. The tubular and pipe products segment distributes its products primarily through a direct sales force.
Corporate expenses
Corporate expenses are reported as a separate line item for segment reporting purposes. Corporate expenses include the unallocated expenses related to managing the entire Company (i.e., all three segments), including compensation for certain personnel, expenses related to being a publicly traded entity such as board of directors’ expenses, audit expenses, and various other professional fees.
Results of Operations
Our results of operations are impacted by the market price of metals. Metals prices fluctuate significantly and changes to our net sales, cost of materials sold, gross profit, cost of inventory and profitability, are all impacted by industry metals pricing. Since August 2020, metals prices have continuously increased and metals pricing in the third quarter of 2021 reached record levels. Hot rolled coil index prices were 226% higher in the third quarter of 2021 compared to the third quarter of 2020. The increased industry metals pricing is primarily caused by disruptions in the domestic and global supply chains; increased raw material pricing; supply shortages, including increased lead times and delivery delays; increased transportations costs; and increased domestic demand as the economy recovers from the COVID-19 pandemic.
Transactional or “spot” selling prices generally move in tandem with market price changes, while fixed selling prices typically lag and reset quarterly. Similarly, inventory costs (and, therefore, cost of materials sold) tend to move slower than market selling price changes due to mill lead times and inventory turnover impacting the rate of change in average cost. When average selling prices increase, and net sales increase, gross profit and operating expenses as a percentage of net sales will generally decrease. During the third quarter and first nine months of 2021, our sales volumes were negatively impacted by supply chain disruptions, however, our net sales were positively impacted by the price increases experienced in the first nine months of 2021, in particular for carbon flat products, which increased our profitability during the third quarter and first nine months of 2021.
Consolidated Operations
The following table presents consolidated operating results for the periods indicated (dollars are shown in thousands):
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
| 2021 |
2020 |
2021 |
2020 |
|||||||||||||||||||||||||||||
| $ | % of net sales |
$ | % of net sales |
$ | % of net sales |
$ | % of net sales |
|||||||||||||||||||||||||
| Net sales |
$ | 668,466 | 100.0 | $ | 299,921 | 100.0 | $ | 1,687,667 | 100.0 | $ | 902,597 | 100.0 | ||||||||||||||||||||
| Cost of materials sold (a) |
520,866 | 77.9 | 239,967 | 80.0 | 1,304,234 | 77.3 | 718,726 | 79.6 | ||||||||||||||||||||||||
| Gross profit (b) |
147,600 | 22.1 | 59,954 | 20.0 | 383,433 | 22.7 | 183,871 | 20.4 | ||||||||||||||||||||||||
| Operating expenses (c) |
85,440 | 12.8 | 60,317 | 20.1 | 247,247 | 14.7 | 188,668 | 20.9 | ||||||||||||||||||||||||
| Operating income (loss) |
62,160 | 9.3 | (363 | ) | (0.1 | ) | 136,186 | 8.0 | (4,797 | ) | (0.5 | ) | ||||||||||||||||||||
| Other income (loss), net |
(15 | ) | (0.0 | ) | (25 | ) | (0.0 | ) | (24 | ) | (0.0 | ) | (68 | ) | (0.0 | ) | ||||||||||||||||
| Interest and other expense on debt |
1,947 | 0.3 | 1,693 | 0.6 | 5,618 | 0.3 | 5,823 | 0.6 | ||||||||||||||||||||||||
| Income (loss) before income taxes |
60,198 | 9.0 | (2,081 | ) | (0.7 | ) | 130,544 | 7.7 | (10,688 | ) | (1.2 | ) | ||||||||||||||||||||
| Income taxes |
15,665 | 2.3 | (561 | ) | (0.2 | ) | 34,354 | 2.0 | (3,307 | ) | (0.4 | ) | ||||||||||||||||||||
| Net income (loss) |
$ | 44,533 | 6.7 | $ | (1,520 | ) | (0.5 | ) | $ | 96,190 | 5.7 | $ | (7,381 | ) | (0.8 | ) | ||||||||||||||||
| (a) |
Includes $7,000 and $12,000 of LIFO expense for the three and nine months ended September 30, 2021, respectively. Includes $100 and $1,100 of LIFO income for the three and nine months ended September 30, 2020, respectively. |
| (b) |
Gross profit is calculated as net sales less the cost of materials sold. |
| (c) |
Operating expenses are calculated as total costs and expenses less the cost of materials sold. Operating expenses for the nine months ended September 30, 2020 includes $3.6 million of restructuring and other charges. |
Net sales increased 122.9% to $668.5 million in the third quarter of 2021 from $299.9 million in the third quarter of 2020. Specialty metals flat products net sales were 24.6% of total net sales in the third quarter of 2021 compared to 27.0% of total net sales in the third quarter of 2020. Carbon flat products net sales were 60.5% of total net sales in the third quarter of 2021 compared to 56.0% of total net sales in the third quarter of 2020. Tubular and pipe products net sales were 14.9% of total net sales in the third quarter of 2021 compared to 17.0% of total net sales in the third quarter of 2020. The increase in net sales was due to a 98.9% increase in consolidated average selling prices during the third quarter of 2021 compared to the third quarter of 2020, and a 12.0% increase in consolidated volume.
Net sales increased 87.0% to $1.7 billion in the first nine months of 2021 from $902.6 million in the first nine months of 2020. Specialty metals flat products net sales were 25.4% of total net sales in the first nine months of 2021 compared to 24.8% of total net sales in the first nine months of 2020. Carbon flat products net sales were 57.9% of total net sales in the first nine months of 2021 compared to 56.7% of total net sales in the first nine months of 2020. Tubular and pipe products net sales were 16.7% of total net sales in the first nine months of 2021 compared to 18.5% of total net sales in the first nine months of 2020. The increase in net sales was due to a 64.2% increase in consolidated average selling prices during the first nine months of 2021 compared to the first nine months of 2020, and a 13.8% increase in consolidated volume. We expect carbon metals market prices to decrease in the fourth quarter of 2021.
Cost of materials sold increased 117.1% to $520.9 million in the third quarter of 2021 from $240.0 million in the third quarter of 2020. Cost of materials sold increased 81.5% to $1.3 billion in the first nine months of 2021 from $718.7 million in the first nine months of 2020. The increase in cost of materials sold in the third quarter and first nine months of 2021 is related to the increased metals pricing discussed above in Results of Operations and increased sales volumes.
As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) increased to 22.1% in the third quarter of 2021 from 20.0% in the third quarter of 2020. As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) increased to 22.7% in the first nine months of 2021 from 20.4% in the first nine months of 2020. The increase in the gross profit as a percentage of net sales is due to the impact of the rapidly increasing average selling prices discussed above in Results of Operations, while the average costs of inventory did not increase as quickly as the average selling price.
Operating expenses in the third quarter of 2021 increased $25.1 million, or 41.6%, to $85.4 million from $60.3 million in the third quarter of 2020. As a percentage of net sales, operating expenses decreased to 12.8% in the third quarter of 2021 from 20.1% in the third quarter of 2020. Operating expenses in the specialty metals flat products segment increased $10.6 million, operating expenses in the carbon flat products segment increased $11.7 million, operating expenses in the tubular and pipe products segment increased $2.7 million and Corporate expenses increased $70 thousand in the third quarter of 2021 compared to the third quarter of 2020. Operating expenses increased during the third quarter of 2021 as a result of increased variable expenses related to increased sales volume, increased labor hours, and increased variable performance-based incentive compensation; the inclusion of operating expenses related to the December 2020 acquisition of Action Stainless; and inflationary impacts on labor, transportation and other product support costs.
Operating expenses in the first nine months of 2021 increased $58.5 million, or 31.0%, to $247.2 million from $188.7 million in the first nine months of 2020. As a percentage of net sales, operating expenses decreased to 14.7% in the first nine months of 2021 from 20.9% in the first nine months of 2020. Operating expenses in the specialty metals flat products segment increased $25.2 million, operating expenses in the carbon flat products segment increased $21.4 million, operating expenses in the tubular and pipe products segment increased $8.2 million and Corporate expenses increased $3.8 million in the first nine months of 2021 compared to the first nine months of 2020. Operating expenses increased during the first nine months of 2021 as a result of increased variable expenses related to increased sales volume, increased labor hours, and increased variable performance-based incentive compensation; the inclusion of operating expenses related to the December 2020 acquisition of Action Stainless; and inflationary impacts on labor, transportation and other product support costs compared to the first nine months of 2020.
Interest and other expense on debt totaled $1.9 million, or 0.3% of net sales, in the third quarter of 2021 compared to $1.7 million, or 0.6% of net sales, in the third quarter of 2020. The increase was primarily due to increased average borrowings in the third quarter of 2021 compared to the third quarter of 2020. Interest and other expense on debt totaled $5.6 million, or 0.3% of net sales, in the first nine months of 2021 compared to $5.8 million, or 0.6% of net sales, in the first nine months of 2020. The decrease was due to lower interest rates in the first nine months of 2021 compared to the first nine months of 2020. Our effective borrowing rate, exclusive of deferred financing fees and commitment fees, was 2.6% for the first nine months of 2021 compared to 3.3% for the first nine months of 2020.
In the third quarter of 2021, income before income taxes totaled $60.2 million compared to a loss before income taxes of $2.1 million in the third quarter of 2020. In the first nine months of 2021, income before income taxes totaled $130.5 million compared to a loss before income taxes of $10.7 million in the first nine months of 2020.
An income tax provision of 26.0% was recorded for the third quarter of 2021, compared to an income tax benefit of 27.0% for the third quarter of 2020. An income tax provision of 26.3% was recorded for the first nine months of 2021, compared to an income tax benefit of 30.9% for the first nine months of 2020. Our tax provision or benefit for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items that are considered in the relevant period. Each quarter, we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment. During the third quarter of 2020, due to the COVID-19 pandemic and our inability to accurately forecast the impact of the pandemic, we recorded the tax provision using an actual effective tax rate as of September 30, 2020.
Net income for the third quarter of 2021 totaled $44.5 million or $3.88 per basic share and $3.87 per diluted share, compared to a net loss of $1.5 million or $0.13 per basic and diluted share for the third quarter of 2020. Net income for the first nine months of 2021 totaled $96.2 million or $8.37 per basic share and $8.36 per diluted share, compared to a net loss of $7.4 million or $0.64 per basic and diluted share for the first nine months of 2020.
Segment Operations
Specialty metals flat products
The following table presents selected operating results for our specialty metals flat products segment for the periods indicated (dollars are shown in thousands, except for per ton information):
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
| 2021 |
2020 |
2021 |
2020 |
|||||||||||||||||||||||||||||
| % of net sales |
% of net sales |
% of net sales |
% of net sales |
|||||||||||||||||||||||||||||
| Direct tons sold |
39,579 | 30,400 | 117,374 | 83,853 | ||||||||||||||||||||||||||||
| Toll tons sold |
1,624 | 3,335 | 5,904 | 8,789 | ||||||||||||||||||||||||||||
| Total tons sold |
41,203 | 33,735 | 123,278 | 92,642 | ||||||||||||||||||||||||||||
| Net sales |
$ | 164,179 | 100.0 | $ | 80,904 | 100.0 | $ | 428,533 | 100.0 | $ | 223,887 | 100.0 | ||||||||||||||||||||
| Average selling price per ton |
3,985 | 2,398 | 3,476 | 2,417 | ||||||||||||||||||||||||||||
| Cost of materials sold |
120,227 | 73.2 | 69,790 | 86.3 | 331,348 | 77.3 | 191,108 | 85.4 | ||||||||||||||||||||||||
| Gross profit (a) |
43,952 | 26.8 | 11,114 | 13.7 | 97,185 | 22.7 | 32,779 | 14.6 | ||||||||||||||||||||||||
| Operating expenses (b) |
19,289 | 11.8 | 8,666 | 10.7 | 50,798 | 11.9 | 25,605 | 11.4 | ||||||||||||||||||||||||
| Operating income |
$ | 24,663 | 15.0 | $ | 2,448 | 3.0 | $ | 46,387 | 10.8 | $ | 7,174 | 3.2 | ||||||||||||||||||||
| (a) | Gross profit is calculated as net sales less the cost of materials sold. |
| (b) | Operating expenses are calculated as total costs and expenses less the cost of materials sold. |
Tons sold by our specialty metals flat products segment increased 7 thousand, or 22.1%, to 41 thousand in the third quarter of 2021 from 34 thousand in the third quarter of 2020. Tons sold by our specialty metals flat products segment increased 30 thousand, or 33.1%, to 123 thousand in the first nine months of 2021 from 93 thousand in the first nine months of 2020. The increase in tons sold was due to the acquisition of Action Stainless as well as customer demand returning to more normalized levels, compared to suppressed sales in 2020 caused by the COVID-19 pandemic.
Net sales in our specialty metals flat products segment increased $83.3 million, or 102.9%, to $164.2 million in the third quarter of 2021 from $80.9 million in the third quarter of 2020. The increase in sales was due to a 66.1% increase in average selling prices and a 22.1% increase in sales volume during the third quarter of 2021 compared to the third quarter of 2020. Sales volumes in the third quarter of 2020 were adversely impacted by the COVID-19 pandemic. Average selling prices in the third quarter of 2021 were $3,985 per ton, compared with $2,398 per ton in the third quarter of 2020, and $3,435 per ton in the second quarter of 2021. The increase in the year over year average selling price per ton is a result of the increased industry metals pricing discussed above. We expect specialty metals prices to remain elevated in the fourth quarter of 2021.
Net sales in our specialty metals flat products segment increased $204.6 million, or 91.4%, to $428.5 million in the first nine months of 2021 from $223.9 million in the first nine months of 2020. The increase in sales was due to a 43.8% increase in average selling prices and a 33.1% increase in sales volume during the first nine months of 2021 compared to the first nine months of 2020. Average selling prices in the first nine months of 2021 were $3,476 per ton, compared with $2,417 per ton in the first nine months of 2020. The increase in the year over year average selling price per ton is a result of the increased industry metals pricing discussed above in Results of Operations.
Cost of materials sold in our specialty metals flat products segment increased $50.4 million, or 72.3%, to $120.2 million in the third quarter of 2021 from $69.8 million in the third quarter of 2020. Cost of materials sold in our specialty metals flat products segment increased $140.2 million, or 73.4%, to $331.3 million in the first nine months of 2021 from $191.1 million in the first nine months of 2020. The increase in cost of materials sold was due to the increase in sales volume and increased industry metals pricing discussed above in Results of Operations.
As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) increased to 26.8% in the third quarter of 2021 from 13.7% in the third quarter of 2020. As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) increased to 22.7% in the first nine months of 2021 from 14.6% in the first nine months of 2020. The increase in the gross profit as a percentage of net sales is due to the impact of the rapidly increasing average selling prices discussed above in Results of Operations, while the average costs of inventory did not increase as quickly as the average selling price.
Operating expenses increased $10.6 million, or 122.6%, to $19.3 million in the third quarter of 2021 from $8.7 million in the third quarter of 2020. As a percentage of net sales, operating expenses increased to 11.8% in the third quarter of 2021 compared to 10.7% in the third quarter of 2020. Operating expenses increased $25.2 million, or 98.4%, to $50.8 million in the first nine months of 2021 from $25.6 million in the first nine months of 2020. As a percentage of net sales, operating expenses increased to 11.9% in the first nine months of 2021 compared to 11.4% in the first nine months of 2020. The increase in operating expenses was primarily attributable to the inclusion of operating expenses related to the December 2020 acquisition of Action Stainless; increased variable expenses related to increased sales volume, increased labor hours and increased variable performance-based incentive compensation; and inflationary impacts on labor, transportation and other product support costs.
Operating income in the third quarter of 2021 totaled $24.7 million, or 15.0% of net sales, compared to $2.4 million, or 3.0% of net sales, in the third quarter of 2020. Operating income in the first nine months of 2021 totaled $46.4 million, or 10.8% of net sales, compared to $7.2 million, or 3.2% of net sales, in the first nine months of 2020.
Carbon flat products
The following table presents selected operating results for our carbon flat products segment for the periods indicated (dollars are shown in thousands, except for per ton information):
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
| 2021 |
2020 |
2021 |
2020 |
|||||||||||||||||||||||||||||
| % of net sales |
% of net sales |
% of net sales |
% of net sales |
|||||||||||||||||||||||||||||
| Direct tons sold |
229,013 | 212,408 | 682,657 | 636,240 | ||||||||||||||||||||||||||||
| Toll tons sold |
15,506 | 11,791 | 46,093 | 35,893 | ||||||||||||||||||||||||||||
| Total tons sold |
244,519 | 224,199 | 728,750 | 672,133 | ||||||||||||||||||||||||||||
| Net sales |
$ | 404,596 | 100.0 | $ | 167,948 | 100.0 | $ | 976,480 | 100.0 | $ | 511,726 | 100.0 | ||||||||||||||||||||
| Average selling price per ton |
1,655 | 749 | 1,340 | 761 | ||||||||||||||||||||||||||||
| Cost of materials sold |
321,005 | 79.3 | 134,845 | 80.3 | 755,111 | 77.3 | 412,907 | 80.7 | ||||||||||||||||||||||||
| Gross profit (a) |
83,591 | 20.7 | 33,103 | 19.7 | 221,369 | 22.7 | 98,819 | 19.3 | ||||||||||||||||||||||||
| Operating expenses (b) |
46,427 | 11.5 | 34,707 | 20.7 | 132,572 | 13.6 | 111,197 | 21.7 | ||||||||||||||||||||||||
| Operating income (loss) |
$ | 37,164 | 9.2 | $ | (1,604 | ) | (1.0 | ) | $ | 88,797 | 9.1 | $ | (12,378 | ) | (2.4 | ) | ||||||||||||||||
| (a) | Gross profit is calculated as net sales less the cost of materials sold. |
| (b) | Operating expenses are calculated as total costs and expenses less the cost of materials sold. Operating expenses for the nine months ended September 30, 2020 includes $3.6 million of restructuring and other charges. |
Tons sold by our carbon flat products segment increased 20 thousand, or 9.1%, to 245 thousand in the third quarter of 2021 from 224 thousand in the third quarter of 2020. Tons sold by our carbon flat products segment increased 57 thousand, or 8.4% to 729 thousand in the first nine months of 2021 from 672 thousand in the first nine months of 2020. The increase in tons sold is due to customer demand returning to more normalized levels, compared to suppressed sales in 2020 caused by the COVID-19 pandemic; however, our ability to ship is still limited due to supply chain disruptions experienced by our customers. In addition, tons sold by the carbon flat products segment was negatively impacted by the sale of our Detroit operation on September 17, 2021.
Net sales in our carbon flat products segment increased $236.6 million, or 140.9%, to $404.6 million in the third quarter of 2021 from $167.9 million in the third quarter of 2020. The increase in sales was attributable to a 120.9% increase in average selling prices in the third quarter of 2021 compared to the third quarter of 2020, and a 9.1% increase in tons sold. Net sales were negatively impacted by the sale of our Detroit operation on September 17, 2021. Average selling prices in the third quarter of 2021 increased to $1,655 per ton, compared with $749 per ton in the third quarter of 2020 and $1,332 per ton in the second quarter of 2021. We expect carbon metals prices to decrease in the fourth quarter of 2021.
Net sales in our carbon flat products segment increased $464.8 million, or 90.8%, to $976.5 million in the first nine months of 2021 from $511.7 million in the first nine months of 2020. The increase in sales was attributable to a 76.0% increase in average selling prices in the first nine months of 2021 compared to the first nine months of 2020, and an 8.4% increase in tons sold. Average selling prices in the first nine months of 2021 increased to $1,340 per ton, compared with $761 per ton in the first nine months of 2020.
Cost of materials sold increased $186.2 million, or 138.1%, to $321.0 million in the third quarter of 2021 from $134.8 million in the third quarter of 2020. Cost of materials sold increased $342.2 million, or 82.9%, to $755.1 million in the first nine months of 2021 from $412.9 million in the first nine months of 2020. The increase was due to the increased market price for metals discussed above in Results of Operations.
As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) increased to 20.7% in the third quarter of 2021 compared to 19.7% in the third quarter of 2020. As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) increased to 22.7% in the first nine months of 2021 compared to 19.3% in the first nine months of 2020. The increase in the gross profit as a percentage of net sales is due to the impact of the rapidly increasing average selling prices discussed above in Results of Operations, while the average costs of inventory did not increase as quickly as the average selling price.
Operating expenses in the third quarter of 2021 increased $11.7 million, or 33.8%, to $46.4 million from $34.7 million in the third quarter of 2020. Operating expenses in the first nine months of 2021 increased $21.4 million, or 19.2%, to $132.3 million from $111.2 million in the first nine months of 2020. Operating expenses increased as a result of increased variable expenses related to increased sales volume, increased labor hours and increased variable performance-based incentive compensation and inflationary impacts on labor, transportation and other product support costs.
Operating income in the third quarter of 2021 totaled $37.2 million, or 9.2% of net sales, compared to operating loss of $1.6 million, or 1.0% of net sales, in the third quarter of 2020. Operating income in the first nine months of 2021 totaled $88.8 million, or 9.1% of net sales, compared to operating loss of $12.4 million, or 2.4% of net sales, in the first nine months of 2020.
Tubular and pipe products
The following table presents selected operating results for our tubular and pipe products segment for the periods indicated (dollars are shown in thousands):
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
| 2021 |
2020 |
2021 |
2020 |
|||||||||||||||||||||||||||||
| $ | % of net sales |
$ | % of net sales |
$ | % of net sales |
$ | % of net sales |
|||||||||||||||||||||||||
| Net sales |
$ | 99,691 | 100.0 | $ | 51,069 | 100.0 | $ | 282,654 | 100.0 | $ | 166,984 | 100.0 | ||||||||||||||||||||
| Cost of materials sold (a) |
79,634 | 79.9 | 35,332 | 69.2 | 217,775 | 77.0 | 114,711 | 68.7 | ||||||||||||||||||||||||
| Gross profit (b) |
20,057 | 20.1 | 15,737 | 30.8 | 64,879 | 23.0 | 52,273 | 31.3 | ||||||||||||||||||||||||
| Operating expenses (c) |
17,703 | 17.8 | 14,993 | 29.4 | 53,166 | 18.8 | 44,999 | 26.9 | ||||||||||||||||||||||||
| Operating income |
$ | 2,354 | 2.4 | $ | 744 | 1.5 | $ | 11,713 | 4.2 | $ | 7,274 | 4.5 | ||||||||||||||||||||
| (a) | Includes $7,000 and $12,000 of LIFO expense for the three and nine months ended September 30, 2021, respectively. Includes $100 and $1,100 of LIFO income for the three and nine months ended September 30, 2020, respectively. |
| (b) | Gross profit is calculated as net sales less the cost of materials sold. |
| (c) | Operating expenses are calculated as total costs and expenses less the cost of materials sold. |
Net sales increased $48.6 million, or 95.2%, to $99.7 million in the third quarter of 2021 from $51.1 million in the third quarter of 2020. The increase is a result of a 51.9% increase in average selling prices and a 28.5% increase in sales volume during the third quarter of 2021 compared to the third quarter of 2020. Net sales increased $115.7 million, or 69.3%, to $282.7 million in the first nine months of 2021 from $167.0 million in the first nine months of 2020. The increase is a result of a 51.9% increase in average selling prices and a 28.5% increase in sales volume during the third quarter of 2021 compared to the third quarter of 2020. We expect tubular and pipe metals prices to remain elevated in the fourth quarter of 2021.
Cost of materials sold increased $44.3 million, or 125.4%, to $79.6 million in the third quarter of 2021 from $35.3 million in the third quarter of 2020. Cost of materials sold increased $103.1 million, or 89.8%, to $217.8 million in the first nine months of 2021 from $114.7 million in the first nine months of 2020. The increase in cost of materials sold is primarily a result of the increased market price for metals discussed above in Results of Operations. As a result of rapidly increasing prices, during the third quarter of 2021, our tubular and pipe products segment recorded $7.0 million of LIFO expense, compared to $0.1 million of LIFO income recorded in the third quarter of 2020. During the first nine months of 2021, our tubular and pipe products segment recorded $12.0 million of LIFO expense, compared to $1.1 million of LIFO income during the first nine months of 2020.
As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) decreased to 20.1% in the third quarter of 2021 compared to 30.8% in the third quarter of 2020. As a percentage of net sales, the LIFO expense recorded in the third quarter of 2021 decreased gross profit by 12.0% compared to the LIFO income recorded in the third quarter of 2020, which increased gross profit by 0.2%. As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) decreased to 23.0% in the first nine months of 2021 compared to 31.3% in the first nine months of 2020. As a percentage of net sales, the LIFO expense recorded in the first nine months of 2021 decreased gross profit by 4.2% compared to the LIFO income recorded in the first nine months of 2020, which increased gross profit by 0.7%.
Operating expenses in the third quarter of 2021 increased $2.7 million, or 18.1%, to $17.7 million from $15.0 million in the third quarter of 2020. Operating expenses decreased to 17.8% of net sales in the third quarter of 2021 compared to 29.4% in the third quarter of 2020. Operating expenses in the first nine months of 2021 increased $8.2 million, or 18.1%, to $53.2 million from $45.0 million in the first nine months of 2020. Operating expenses decreased to 18.8% of net sales in the first nine months of 2021 compared to 26.9% in the first nine months of 2020. Operating expenses increased as a result of increased variable expenses related to increased sales volume and increased variable performance-based incentive compensation and inflationary impacts on labor, transportation and other product support costs.
Operating income in the third quarter 2021 totaled $2.4 million, or 2.4% of net sales, compared to $0.7 million, or 1.5% of net sales, in the third quarter of 2020. Operating income in the first nine months of 2021 totaled $11.7 million, or 4.2% of net sales, compared to $7.3 million, or 4.5% of net sales, in the first nine months of 2020.
Corporate expenses
Corporate expenses were $2.0 million in the third quarter of 2021 and 2020. Corporate expenses increased $3.8 million, or 56.0%, to $10.7 million in the first nine months of 2021 from $6.9 million in the first nine months of 2020. Corporate expense increased as a result of increased performance-based incentive compensation offset by the $3.5 million gain, net of expenses, on the sale of our Detroit operation on September 17, 2021.
Liquidity, Capital Resources and Cash Flows
Our principal capital requirements include funding working capital needs, purchasing, upgrading and acquiring processing equipment and facilities, making acquisitions and paying dividends. We use cash generated from operations and borrowings under our credit facility to fund these requirements.
We believe that funds available under our asset-based credit facility, or ABL Credit Facility, together with funds generated from operations, will be sufficient to provide us with the liquidity necessary to fund anticipated working capital requirements, capital expenditure requirements, our dividend payments and any share repurchases and business acquisitions over at least the next 12 months. In the future, we may as part of our business strategy, acquire and dispose of assets or other companies in the same or complementary lines of business, or enter into or exit strategic alliances and joint ventures. Accordingly, the timing and size of our capital requirements are subject to change as business conditions warrant and opportunities arise.
Operating Activities
For the nine months ended September 30, 2021, we used $126.9 million of net cash for operations, of which $107.8 million was generated from operating activities and $234.7 million was used for working capital. For the nine months ended September 30, 2020, we generated $28.7 million of net cash from operations, of which $9.2 million was generated from operating activities and $19.5 million was generated from working capital.
Net cash from operations totaled $107.8 million during the first nine months of 2021 and was mainly comprised of net income of $96.2 million, non-cash depreciation and amortization addback of $15.8 million, a decrease in other long-term assets of $5.6 million and stock-based compensation of $0.8 million, offset by gain on disposition of our Detroit operation of $6.1 million and changes in other long-term liabilities of $4.5 million. Net cash from operations totaled $9.2 million during the first nine months of 2020 and mainly consisted of non-cash depreciation and amortization of $15.0 million added back to the net loss of $7.4 million, loss on sale of fixed assets of $2.0 million, and stock-based compensation of $0.9 million, offset by changes in other long-term assets of $3.3 million.
Working capital at September 30, 2021 totaled $519.4 million, a $243.9 million increase from December 31, 2020. The increase was primarily attributable to a $178.0 million increase in inventories (resulting from increased metals prices and inventory tonnage during the first nine months of 2021), a $151.6 million increase in accounts receivable (resulting from higher sales and increased average selling prices in the first nine months of 2021 compared to the fourth quarter of 2020) and a $7.4 million increase in prepaid expenses and other, offset by a $72.7 million increase in accounts payable and outstanding checks and a $29.5 million increase in accrued payroll and other accrued liabilities.
Investing Activities
Net cash used for investing activities totaled $1.8 million during the nine months ended September 30, 2021, compared to cash used for investing activities of $6.8 million during the nine months ended September 30, 2020. Proceeds from the sale of our Detroit operation’s property and equipment on September 17, 2021 totaled $9.5 million. The capital expenditures in the nine months of 2021 and 2020 were primarily attributable to additional processing equipment at our existing facilities. During 2021, we expect our capital spending to be less than our annual depreciation expense.
Financing Activities
During the first nine months of 2021, $134.7 million of cash was generated from financing activities, which primarily consisted of $137.3 million of net borrowings under our ABL Credit Facility offset by $1.2 million of credit facility fees and expenses related to the amended ABL Credit Facility, $0.7 million of dividends paid and $0.7 million used for principal payments under capital lease obligations.
Dividends paid were $0.7 million for both the nine months ended September 30, 2021 and September 30, 2020. In November 2021, our Board of Directors approved a regular quarterly dividend of $0.02 per share, which will be paid on December 15, 2021 to shareholders of record as of December 1, 2021. Regular dividend distributions in the future are subject to the availability of cash, the $5.0 million annual limitation on cash dividends and common stock repurchases under our ABL Credit Facility and continuing determination by our Board of Directors that the payment of dividends remains in the best interest of our shareholders.
Stock Repurchase Program
In 2015, our Board of Directors authorized a stock repurchase program of up to 550,000 shares of our issued and outstanding common stock, which could include open market repurchases, negotiated block transactions, accelerated stock repurchases or open market solicitations for shares, all or some of which may be effected through Rule 10b5-1 plans. Repurchased shares will be held in our treasury, or canceled and retired as our Board of Directors may determine from time to time. Any repurchases of common stock are subject to the covenants contained in the ABL Credit Facility. Under the ABL Credit Facility, we may repurchase common stock and pay dividends up to $5.0 million in the aggregate during any trailing twelve months without restrictions. Purchases in excess of $5.0 million require us to (i) maintain availability in excess of 20% of the aggregate revolver commitments ($95.0 million at September 30, 2021) or (ii) to maintain availability equal to or greater than 15% of the aggregate revolver commitments ($71.3 million at September 30, 2021) and we must maintain a pro-forma ratio of earnings before interest, taxes, depreciation and amortization, or EBITDA, minus certain capital expenditures and cash taxes paid to fixed charges of at least 1.00 to 1.00. The timing and amount of any repurchases under the stock repurchase program will depend upon several factors, including market and business conditions, and limitations under the ABL Credit Facility, and repurchases may be discontinued at any time. As of September 30, 2021, 360,212 shares remain authorized for repurchase under the program.
There were no shares repurchased during the three or nine months ended September 30, 2021. There were no shares repurchased during the three months ended September 30, 2020. During the nine months ended September 30, 2020 we repurchased 15,000 shares, for an aggregate cost of $145 thousand.
At- the-Market Equity Program
On September 3, 2021, we commenced an at-the-market, or ATM, equity program under our shelf registration statement, which allows us to sell and issue up to $50 million in shares of our common stock from time to time. We entered into an Equity Distribution Agreement on September 3, 2021 with KeyBanc Capital Markets Inc., or KeyBanc, relating to the issuance and sale of shares of common stock pursuant to the program. KeyBanc is not required to sell any specific amount of securities but will act as our sales agent using commercially reasonable efforts consistent with its normal trading and sales practices, on mutually agreed terms between KeyBanc and us. KeyBanc will be entitled to compensation for shares sold pursuant to the program of 2.0% of the gross proceeds of any shares of common stock sold under the Equity Distribution Agreement. No shares were sold under the ATM program during the three months ended September 30, 2021.
Debt Arrangements
On June 16, 2021, we entered into a Fourth Amendment to Third Amended and Restated Loan and Security Agreement, which amended and extended our existing ABL Credit Facility. The $475 million ABL Credit Facility consists of: (i) a revolving credit facility of up to $445 million, including a $20 million sub-limit for letters of credit and (ii) a first in, last out revolving credit facility of up to $30 million. Under the terms of the ABL Credit Facility, we may, subject to the satisfaction of certain conditions, request additional commitments under the revolving credit facility in the aggregate principal amount of up to $200 million to the extent that existing or new lenders agree to provide such additional commitments and add real estate as collateral at our discretion. The ABL Credit Facility matures on June 16, 2026.
The ABL Credit Facility contains customary representations and warranties and certain covenants that limit our ability to, among other things: (i) incur or guarantee additional indebtedness; (ii) pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt; (iii) make investments; (iv) sell assets; (v) enter into agreements that restrict distributions or other payments from restricted subsidiaries to us; (vi) incur or suffer to exist liens securing indebtedness; (vii) consolidate, merge or transfer all or substantially all of their assets; and (viii) engage in transactions with affiliates. In addition, the ABL Credit Facility contains a financial covenant which provides that: (i) if any commitments or obligations are outstanding and our availability is less than the greater of $30 million or 10.0% of the aggregate amount of revolver commitments ($47.5 million at September 30, 2021) or 10.0% of the aggregate borrowing base ($47.5 million at September 30, 2021), then we must maintain a ratio of EBITDA minus certain capital expenditures and cash taxes paid to fixed charges of at least 1.00 to 1.00 for the most recent twelve fiscal month period.
We have the option to borrow under its revolver based on the agent’s base rate plus a premium ranging from 0.00% to 0.25% or the London Interbank Offered Rate, or LIBOR, plus a premium ranging from 1.25% to 2.75%.
As of September 30, 2021, we were in compliance with our covenants and had approximately $173 million of availability under our ABL Credit Facility.
As of September 30, 2021, $1.6 million of bank financing fees were included in “Prepaid expenses and other” and “Other long-term assets” on the accompanying Consolidated Balance Sheets. The financing fees are being amortized over the five-year term of the ABL Credit Facility and are included in “Interest and other expense on debt” on the accompanying Consolidated Statements of Comprehensive Income (Loss).
On January 10, 2019, we entered into a five-year forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $75 million of the outstanding LIBOR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at 2.57%.
Critical Accounting Policies
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on the consolidated financial statements included in this Quarterly Report on Form 10-Q, which have been prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements. We monitor and evaluate our estimates and assumptions, based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.
We review our financial reporting and disclosure practices and accounting practices quarterly to ensure they provide accurate and transparent information relative to the current economic and business environment. For further information regarding the accounting policies that we believe to be critical accounting policies that affect our more significant judgments and estimates used in preparing our consolidated financial statements, see Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our principal raw materials are carbon, coated and stainless steel, and aluminum, pipe and tube, flat rolled coil, sheet and plate that we typically purchase from multiple primary metals producers. The metals industry as a whole is cyclical and, at times, pricing and availability of metals can be volatile due to numerous factors beyond our control, including general domestic and international economic conditions, the levels of metals imported into the United States, labor costs, sales levels, competition, levels of inventory held by other metals service centers, consolidation of metals producers, new global capacity by metals producers, higher raw material costs for the producers of metals, import duties and tariffs and currency exchange rates. This volatility can significantly affect the availability and cost of raw materials for us.
We, like many other metals service centers, maintain substantial inventories of metals to accommodate the short lead times and just‑in‑time delivery requirements of our customers. Accordingly, we purchase metals in an effort to maintain our inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon historic buying practices, supply agreements with customers and market conditions. Our commitments to purchase metals are generally at prevailing market prices in effect at the time we place our orders. We have no long‑term, fixed‑price metals purchase contracts. When metals prices increase, competitive conditions will influence how much of the price increase we can pass on to our customers. To the extent we are unable to pass on future price increases in our raw materials to our customers, the net sales and profitability of our business could be adversely affected. When metals prices decline, customer demands for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently, lower gross profits and inventory lower of cost or market adjustments as we sell existing inventory. Significant or rapid declines in metals prices or reductions in sales volumes could adversely impact our ability to remain in compliance with certain financial covenants in our credit facility, as well as result in us incurring inventory or intangible asset impairment charges. Changing metals prices therefore could significantly impact our net sales, gross profits, operating income and net income.
Rising metals prices result in higher working capital requirements for us and our customers. Some customers may not have sufficient credit lines or liquidity to absorb significant increases in the price of metals. While we have generally been successful in the past in passing on producers’ price increases and surcharges to our customers, there is no guarantee that we will be able to pass on price increases to our customers in the future. Declining metals prices have generally adversely affected our net sales and net income, while increasing metals prices have generally favorably affected our net sales and net income.
Approximately 45% and 42% of our consolidated net sales during the first nine months of 2021 and 2020, respectively, were directly related to industrial machinery and equipment manufacturers and their fabricators.
Inflation generally affects us by increasing the cost of employee wages and benefits, transportation services, processing equipment, energy and borrowings under our credit facility. General inflation, excluding increases in the price of metals and increased distribution expense, has not had a material effect on our financial results during the past two years.
We are exposed to the impact of fluctuating metals prices and interest rate changes. During 2021 and 2020, we entered into metals swaps at the request of customers. These derivatives have not been designated as hedging instruments. For certain customers, we enter into contractual relationships that entitle us to pass-through the economic effect of trading positions that we take with other third parties on our customers’ behalf.
Our primary interest rate risk exposure results from variable rate debt. We have the option to enter into 30- to 180-day fixed base rate LIBOR loans under the ABL Credit Facility. On January 10, 2019, we entered into a five-year interest rate swap that locked the interest rate at 2.57% on $75 million of our revolving debt.
Item 4. Controls and Procedures
The evaluation required by Rule 13a-15(e) of the Securities Exchange Act of 1934 of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-Q has been carried out under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. These disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in reports that are filed with or submitted to the SEC is: (i) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (ii) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2021, our disclosure controls and procedures were effective.
There were no changes in our internal control over financial reporting that occurred during the third quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We are continually monitoring and assessing the COVID-19 pandemic’s impact on our internal controls to minimize the impact on their design and operating effectiveness.
Part II. OTHER INFORMATION
Items 1, 1A, 2, 3, 4 and 5 of this Part II are either inapplicable or are answered in the negative and are omitted pursuant to the instructions to Part II.
Item 6. Exhibits
| Exhibit |
Description of Document |
Reference |
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| 2.1 |
Incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K filed with the Commission on September 22, 2021 (Commission File No. 0-23320) |
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| 31.1 |
Filed herewith |
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| 31.2 |
Filed herewith |
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| 32.1 |
Furnished herewith |
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| 32.2 |
Furnished herewith |
| 101 |
The following materials from Olympic Steel’s Quarterly Report on Form 10-Q for the period ended September 30, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Comprehensive Income (Loss), (iii) the Consolidated Statements of Cash Flows, (iv) the Supplemental Disclosures of Cash Flow Information, (v) the Consolidated Statements of Shareholders’ Equity, (vi) Notes to Unaudited Consolidated Financial Statements and (vii) document and entity information. |
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| 104 |
Cover Pager Interactive Data File (embedded with the Inline XBRL document). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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OLYMPIC STEEL, INC. |
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(Registrant) |
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| Date: November 5, 2021 |
By: |
/s/ Richard T. Marabito |
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Richard T. Marabito |
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Chief Executive Officer |
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By: |
/s/ Richard A. Manson |
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Richard A. Manson |
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Chief Financial Officer |
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| (Principal Financial and Accounting Officer) | |||
Exhibit 31.1
Certification of the Principal Executive Officer
Pursuant to 15 U.S.C. 78m(a) or 78o(d)
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, Richard T. Marabito, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Olympic Steel, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a. |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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a. |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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b. |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By: /s/ Richard T. Marabito
Richard T. Marabito
Olympic Steel, Inc.
Chief Executive Officer
November 5, 2021
Exhibit 31.2
Certification of the Principal Financial Officer
Pursuant to 15 U.S.C. 78m(a) or 78o(d)
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, Richard A. Manson, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Olympic Steel, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a. |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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a. |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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b. |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By: /s/ Richard A. Manson
Richard A. Manson
Olympic Steel, Inc.
Chief Financial Officer
November 5, 2021
Exhibit 32.1
Certification of the Principal Executive Officer
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
I, Richard T. Marabito, the Chief Executive Officer of Olympic Steel, Inc. (the "Company"), certify that to the best of my knowledge, based upon a review of this report on Form 10-Q for the period ended September 30, 2021 of the Company (the “Report”):
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1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
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2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company, as of the dates and for the periods expressed in this Report. |
By: /s/ Richard T. Marabito
Richard T. Marabito
Olympic Steel, Inc.
Chief Executive Officer
November 5, 2021
Exhibit 32.2
Certification of the Principal Financial Officer
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
I, Richard A. Manson, the Chief Financial Officer of Olympic Steel, Inc. (the "Company"), certify that to the best of my knowledge, based upon a review of this report on Form 10-Q for the period ended September 30, 2021 of the Company (the “Report”):
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1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
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2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in this Report. |
By: /s/ Richard A. Manson
Richard A. Manson
Olympic Steel, Inc.
Chief Financial Officer
November 5, 2021
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Inventory, LIFO debit | $ 9,885 | $ 2,115 |
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
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| Net sales | $ 668,466 | $ 299,921 | $ 1,687,667 | $ 902,597 |
| Costs and expenses | ||||
| Cost of materials sold (excludes items shown separately below) | 520,866 | 239,967 | 1,304,234 | 718,726 |
| Warehouse and processing | 26,208 | 19,471 | 76,153 | 62,173 |
| Administrative and general | 24,811 | 16,507 | 74,328 | 52,577 |
| Distribution | 14,424 | 11,226 | 42,086 | 33,133 |
| Selling | 12,155 | 6,130 | 30,408 | 18,863 |
| Occupancy | 3,029 | 2,256 | 8,951 | 7,355 |
| Depreciation | 4,243 | 4,347 | 13,557 | 13,422 |
| Amortization | 570 | 380 | 1,764 | 1,145 |
| Total costs and expenses | 606,306 | 300,284 | 1,551,481 | 907,394 |
| Operating income (loss) | 62,160 | (363) | 136,186 | (4,797) |
| Other loss, net | (15) | (25) | (24) | (68) |
| Income (loss) before interest and income taxes | 62,145 | (388) | 136,162 | (4,865) |
| Interest and other expense on debt | 1,947 | 1,693 | 5,618 | 5,823 |
| Income (loss) before income taxes | 60,198 | (2,081) | 130,544 | (10,688) |
| Income tax provision (benefit) | 15,665 | (561) | 34,354 | (3,307) |
| Net income (loss) | 44,533 | (1,520) | 96,190 | (7,381) |
| Gain (loss) on cash flow hedge | 434 | 470 | 1,851 | (3,001) |
| Tax effect on cash flow hedge | (109) | (118) | (463) | 750 |
| Total comprehensive income (loss) | $ 44,858 | $ (1,168) | $ 97,578 | $ (9,632) |
| Earnings per share: | ||||
| Net income (loss) per share - basic (in dollars per share) | $ 3.88 | $ (0.13) | $ 8.37 | $ (0.64) |
| Weighted average shares outstanding - basic (in shares) | 11,492 | 11,452 | 11,491 | 11,447 |
| Net income (loss) per share - diluted (in dollars per share) | $ 3.87 | $ (0.13) | $ 8.36 | $ (0.64) |
| Weighted average shares outstanding - diluted (in shares) | 11,515 | 11,452 | 11,509 | 11,447 |
| Dividends declared per share of common stock (in dollars per share) | $ 0.02 | $ 0.02 | $ 0.06 | $ 0.06 |
Consolidated Statements of Cash Flows (Unaudited) (Parentheticals) - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
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| Amount of operating expense attributable to sale of operations | $ 2,569 | |
| Finance lease obligations incurred | $ 1,000 | |
Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands |
Common Stock [Member] |
AOCI Attributable to Parent [Member] |
Retained Earnings [Member] |
Treasury Stock [Member] |
Total |
|---|---|---|---|---|---|
| Balance at Dec. 31, 2019 | $ 131,647 | $ (2,281) | $ 179,321 | $ (335) | $ 308,352 |
| Net income (loss) | 0 | 0 | (7,381) | 0 | (7,381) |
| Payment of dividends | 0 | 0 | (663) | 0 | (663) |
| Stock-based compensation | 922 | 0 | 0 | 0 | 922 |
| Changes in fair value of hedges, net of tax | 0 | (2,251) | 0 | 0 | (2,251) |
| Other | 0 | 0 | 1 | 0 | 1 |
| Restricted stock units converted to stock | (480) | 0 | 0 | 480 | 0 |
| Repurchase of common stock | 0 | 0 | 0 | (145) | (145) |
| Balance at Sep. 30, 2020 | 132,089 | (4,532) | 171,278 | 0 | 298,835 |
| Balance at Jun. 30, 2020 | 131,803 | (4,885) | 173,020 | 0 | 299,938 |
| Net income (loss) | 0 | 0 | (1,520) | 0 | (1,520) |
| Payment of dividends | 0 | 0 | (221) | 0 | (221) |
| Stock-based compensation | 286 | 0 | 0 | 0 | 286 |
| Changes in fair value of hedges, net of tax | 0 | 352 | 0 | 0 | 352 |
| Other | 0 | 1 | (1) | 0 | 0 |
| Balance at Sep. 30, 2020 | 132,089 | (4,532) | 171,278 | $ 0 | 298,835 |
| Balance at Dec. 31, 2020 | 132,382 | (4,215) | 172,843 | 301,010 | |
| Net income (loss) | 0 | 0 | 96,190 | 96,190 | |
| Payment of dividends | 0 | 0 | (665) | (665) | |
| Stock-based compensation | 792 | 0 | 0 | 792 | |
| Changes in fair value of hedges, net of tax | 0 | 1,388 | 0 | 1,388 | |
| Balance at Sep. 30, 2021 | 133,174 | (2,827) | 268,368 | 398,715 | |
| Balance at Jun. 30, 2021 | 132,916 | (3,153) | 224,057 | 353,820 | |
| Net income (loss) | 0 | 0 | 44,533 | 44,533 | |
| Payment of dividends | 0 | 0 | (222) | (222) | |
| Stock-based compensation | 258 | 0 | 0 | 258 | |
| Changes in fair value of hedges, net of tax | 0 | 326 | 0 | 326 | |
| Balance at Sep. 30, 2021 | $ 133,174 | $ (2,827) | $ 268,368 | $ 398,715 |
Note 1 - Basis of Presentation |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 | |||
| Notes to Financial Statements | |||
| Significant Accounting Policies [Text Block] |
The accompanying consolidated financial statements have been prepared from the financial records of Olympic Steel, Inc. and its wholly-owned subsidiaries (collectively, Olympic or the Company), without audit and reflect all normal and recurring adjustments which are, in the opinion of management, necessary to fairly state the results of the interim periods covered by this report. Year-to-date results are not necessarily indicative of 2021 annual results and these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. All intercompany transactions and balances have been eliminated in consolidation.
The Company operates in three reportable segments: carbon flat products, specialty metals flat products, and tubular and pipe products. The specialty metals flat products segment and the carbon flat products segment are at times consolidated and referred to as the flat products segments. Certain of the flat products segments’ assets and resources are shared by the specialty metals and carbon flat products segments, and both segments’ products are stored in the shared facilities and, in some locations, processed on shared equipment. Due to the shared assets and resources, certain of the flat products segment expenses are allocated between the specialty metals flat products segment and the carbon flat products segment based upon an established allocation methodology. The specialty metals flat products segment sells and distributes processed aluminum and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. Through the acquisition of Action Stainless & Alloys, Inc. (Action Stainless) on December 14, 2020, the specialty metals flat products segment expanded its geographic footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe. Action Stainless offers a range of processing capabilities, including plasma, laser and waterjet cutting and computer numerical control (CNC) machining. On October 1, 2021, the Company acquired all of the net assets of Shaw Stainless & Alloy, Inc. (Shaw), based in Powder Springs, Georgia. Shaw is a full-line distributor of stainless steel sheet, pipe, tube, bar and angles. Shaw also manufactures and distributes stainless steel bollards and water treatment systems. The acquisition includes Shaw's stainless-steel distribution and fabrication businesses as well as its architectural and barrier defense businesses. The carbon flat products segment sells and distributes large volumes of processed carbon and coated flat-rolled sheet, coil and plate products, and fabricated parts. Through the acquisitions of McCullough Industries (McCullough) and certain assets related to the manufacturing of the EZ Dumper® hydraulic dump inserts (EZ Dumper) in 2019, the carbon flat products segment expanded its product offerings to include self-dumping metal hoppers and steel and stainless-steel dump inserts for pickup truck and service truck beds. On September 17, 2021, the Company sold substantially all of the assets related to its Detroit operation. The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers. The tubular and pipe products segment, which consists of the Chicago Tube and Iron subsidiary (CTI), distributes metal tubing, pipe, bar, valves and fittings and fabricates pressure parts supplied to various industrial markets.
Corporate expenses are reported as a separate line item for segment reporting purposes. Corporate expenses include the unallocated expenses related to managing the entire Company (i.e., all three segments), including payroll expenses for certain personnel, expenses related to being a publicly traded entity such as board of directors’ expenses, audit expenses, and various other professional fees.
On March 11, 2020, the World Health Organization classified the novel coronavirus (COVID-19) outbreak as a pandemic. The Company is an essential business and remains open in all locations, adhering to all health guidelines to operate safely provided by the Center for Disease Control and Prevention and local authorities. The Company has implemented actions to maintain its financial health and liquidity. The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business. However, as a result of the many uncertainties surrounding the COVID-19 pandemic, the Company is unable to predict the impact that it ultimately will have on its financial condition, results of operations, comprehensive income (loss), and cash flows.
Impact of Recently Issued Accounting Pronouncements
There were no recently issued accounting pronouncements that would have a material impact on the Company’s Consolidated Financial Statements. |
Note 2 - Revenue Recognition |
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| Revenue from Contract with Customer [Text Block] |
The Company provides metals processing, distribution and delivery of large volumes of processed carbon, coated flat-rolled sheet, coil and plate products, aluminum, and stainless flat-rolled products, prime tin mill products, flat bar products, metal tubing, pipe, bar, valves, fittings, and fabricated parts. The Company's contracts with customers are comprised of purchase orders with standard terms and conditions. Occasionally the Company may also have longer-term agreements with customers. Substantially all of the contracts with customers require the delivery of metals, which represent single performance obligations that are satisfied at a point in time upon transfer of control of the product to the customer.
Transfer of control is assessed based on the use of the product distributed and rights to payment for performance under the contract terms. Transfer of control and revenue recognition for substantially all of the Company’s sales occur upon shipment or delivery of the product, which is when title, ownership and risk of loss pass to the customer and is based on the applicable shipping terms. The shipping terms depend on the customer contract. An invoice for payment is issued at time of shipment and terms are generally net 30 days. The Company has certain fabrication contracts in one business unit for which revenue is recognized over time as performance obligations are achieved. This fabrication business is not material to the Company's consolidated results.
Within the metals industry, revenue is frequently disaggregated by products sold. The table below disaggregates the Company’s revenues by segment and products sold.
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Note 3 - Accounts Receivable |
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| Notes to Financial Statements | |||
| Financing Receivables [Text Block] |
Accounts receivable are presented net of allowances for credit losses and unissued credits of $4.4 million and $3.6 million as of September 30, 2021 and December 31, 2020, respectively. The allowance for credit losses is maintained at a level considered appropriate based on historical experience, specific customer collection issues that have been identified, current market conditions and estimates for supportable forecasts when appropriate. Estimations are based upon a calculated percentage of accounts receivable, and judgments about the probable effects of economic conditions on certain customers, which can fluctuate significantly from year to year. The Company cannot guarantee that the rate of future credit losses will be similar to past experience. The Company considers all available information when assessing the adequacy of its allowance for credit losses and unissued credits. |
Note 4 - Inventories |
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| Inventory Disclosure [Text Block] |
Inventories consisted of the following:
The Company values certain of its tubular and pipe products inventory at the last-in, first-out (LIFO) method. At September 30, 2021 and December 31, 2020, approximately $55.4 million, or 13.3% of consolidated inventory, and $50.3 million, or 21.0% of consolidated inventory, respectively, was reported under the LIFO method of accounting. The cost of the remainder of the tubular and pipe products inventory is determined using a weighted average rolling first-in, first-out (FIFO) method.
During the three and nine months ended September 30, 2021, the Company recorded $7.0 million and $12.0 million of LIFO expense, respectively, as current projections anticipate increased metals prices by December 31, 2021 compared to December 31, 2020. During the three and nine months ended September 30, 2020, the Company recorded $0.1 million and $1.1 million of LIFO income, respectively.
If the FIFO method had been in use, inventories would have been $9.9 million higher and $2.1 million lower than reported at September 30, 2021 and December 31, 2020, respectively. |
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Note 5 - Goodwill and Intangible Assets |
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| Goodwill and Intangible Assets Disclosure [Text Block] |
The Company’s intangible assets were recorded in connection with its acquisitions that occurred between 2011 and 2020. The intangible assets were evaluated on the premise of highest and best use to a market participant, primarily utilizing the income approach valuation methodology. The useful life of the customer relationships was determined to be years, based primarily on the consistent and predictable revenue source associated with the existing customer base, the present value of which extends through the -year amortization period. The useful life of the non-compete agreements was determined to be the length of the non-compete agreements, which range from to years. The useful life of the trade names was determined to be indefinite primarily due to their history and reputation in the marketplace, the Company’s expectation that the trade names will continue to be used, and the conclusion that there are currently no other factors identified that would limit their useful life. The Company will continue to evaluate the useful life assigned to its amortizable customer relationships and noncompete agreements in future periods.
Goodwill, by reportable unit, was as follows as of September 30, 2021 and December 31, 2020, respectively. The goodwill is deductible for tax purposes. The change in goodwill during 2021 is related to adjustments to the preliminary purchase price allocation of the fair market values of the assets acquired and liabilities assumed for Action Stainless.
Intangible assets consisted of the following as of September 30, 2021 and December 31, 2020, respectively:
The Company estimates that amortization expense for its intangible assets subject to amortization will be approximately $1.5 million per year for the next two years and $1.4 million, $1.0 million and $0.5 million per year for the three years thereafter, respectively.
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Note 6 - Leases |
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| Lessee, Operating Leases [Text Block] |
The components of lease expense were as follows:
Supplemental cash flow information related to leases was as follows:
Supplemental balance sheet information related to leases was as follows:
Maturities of lease liabilities were as follows:
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Note 7 - Debt |
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| Debt Disclosure [Text Block] |
The Company’s debt is comprised of the following components:
On June 16, 2021, the Company entered into a Fourth Amendment to Third Amended and Restated Loan and Security Agreement (the “ABL Credit Facility”), which amended and extended the Company’s existing ABL Credit Facility. The $475 million ABL Credit Facility consists of: (i) a revolving credit facility of up to $445 million, including a $20 million sub-limit for letters of credit, and (ii) a first in, last out revolving credit facility of up to $30 million. Under the terms of the ABL Credit Facility, the Company may, subject to the satisfaction of certain conditions, request additional commitments under the revolving credit facility in the aggregate principal amount of up to $200 million to the extent that existing or new lenders agree to provide such additional commitments, and add real estate as collateral at the Company’s discretion. The ABL Credit Facility matures on June 16, 2026.
The ABL Credit Facility contains customary representations and warranties and certain covenants that limit the ability of the Company to, among other things: (i) incur or guarantee additional indebtedness; (ii) pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt; (iii) make investments; (iv) sell assets; (v) enter into agreements that restrict distributions or other payments from restricted subsidiaries to the Company; (vi) incur or suffer to exist liens securing indebtedness; (vii) consolidate, merge or transfer all or substantially all of their assets; and (viii) engage in transactions with affiliates. In addition, the ABL Credit Facility contains a financial covenant which provides that: (i) if any commitments or obligations are outstanding and the Company’s availability is less than the greater of $30 million or 10.0% of the aggregate amount of revolver commitments ($47.5 million at September 30, 2021) or 10.0% of the aggregate borrowing base ($47.5 million at September 30, 2021), then the Company must maintain a ratio of Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) minus certain capital expenditures and cash taxes paid to fixed charges of at least 1.00 to 1.00 for the most recent twelve fiscal month period.
The Company has the option to borrow under its revolver based on the agent’s base rate plus a premium ranging from 0.00% to 0.25% or the London Interbank Offered Rate (LIBOR) plus a premium ranging from 1.25% to 2.75%.
On January 10, 2019, the Company entered into a -year forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $75 million of the outstanding LIBOR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at 2.57%. Although the Company is exposed to credit loss in the event of nonperformance by the other party to the interest rate hedge agreement, the Company anticipates performance by the counterparty.
As of September 30, 2021, the Company was in compliance with its covenants and had approximately $173 million of availability under the ABL Credit Facility.
As of September 30, 2021, and December 31, 2020, $1.6 million and $0.9 million, respectively, of bank financing fees were included in “Prepaid expenses and other” and “Other long-term assets” on the accompanying Consolidated Balance Sheets. The financing fees are being amortized over the -year term of the ABL Credit Facility and are included in “Interest and other expense on debt” on the accompanying Consolidated Statements of Comprehensive Income (Loss). |
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Note 8 - Derivative Instruments |
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| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
Metals swaps and embedded customer derivatives
During 2021 and 2020, the Company entered into nickel swaps indexed to the London Metal Exchange (LME) price of nickel with third-party brokers. The nickel swaps are accounted for as derivatives for accounting purposes. The Company entered into them to mitigate its customers’ risk of volatility in the price of metals. The outstanding nickel swaps mature in 2021. The swaps are settled with the brokers at maturity. The economic benefit or loss arising from the changes in fair value of the swaps is contractually passed through to the customer. The primary risk associated with the metals swaps is the ability of customers or third-party brokers to honor their agreements with the Company related to derivative instruments. If the customer or third-party brokers are unable to honor their agreements, the Company’s risk of loss is the fair value of the metals swaps.
These derivatives have not been designated as hedging instruments. The periodic changes in fair value of the metals and embedded customer derivative instruments are included in “Cost of materials sold” in the Consolidated Statements of Comprehensive Income (Loss). The Company recognizes derivative positions with both the customer and the third party for the derivatives and classifies cash settlement amounts associated with them as part of “Cost of materials sold” in the Consolidated Statements of Comprehensive Income (Loss). The cumulative change in fair value of the metals swaps that had not yet settled as of September 30, 2021 are included in “Other accrued liabilities”, and the embedded customer derivatives are included in “Accounts receivable, net” on the Consolidated Balance Sheets as of September 30, 2021. There were no outstanding metals swaps or embedded customer derivatives as of December 31, 2020.
Fixed rate interest rate hedge
On January 10, 2019, the Company entered into a -year forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $75 million of the outstanding LIBOR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at 2.57%. The interest rate hedge is included in “Other long-term liabilities” on the Consolidated Balance Sheets as of September 30, 2021. Although the Company is exposed to credit loss in the event of nonperformance by the other party to the interest rate hedge agreement, the Company anticipates performance by the counterparty.
The table below shows the total impact to the Company’s Consolidated Statements of Comprehensive Income (Loss) through net income of the derivatives for the three and nine months ended September 30, 2021 and 2020, respectively.
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Note 9 - Fair Value of Assets and Liabilities |
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| Fair Value Disclosures [Text Block] |
During the nine months ended September 30, 2021, there were no transfers of financial assets between Levels 1, 2 or 3 fair value measurements. There have been no changes in the methodologies used at September 30, 2021 since December 31, 2020.
The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized by the Company:
The value of the items not recorded at fair value represent the carrying value of the liabilities.
The carrying value of the ABL Credit Facility was $297.9 million and $160.6 million at September 30, 2021 and December 31, 2020, respectively. As the ABL Credit Facility was amended on June 16, 2021, management believes that its carrying value approximates fair value. |
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Note 10 - Accumulated Other Comprehensive Loss |
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| Comprehensive Income (Loss) Note [Text Block] |
On January 10, 2019, the Company entered into a -year forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $75 million of the outstanding LIBOR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at 2.57%. The fair value of the interest rate hedge of $3.8 million, net of tax of $0.9 million is included in “Accumulated other comprehensive loss” on the Consolidated Balance Sheets at September 30, 2021.
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Note 11 - Equity Plans |
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| Share-based Payment Arrangement [Text Block] |
Restricted Stock Units and Performance Share Units
Pursuant to the Amended and Restated Olympic Steel 2007 Omnibus Incentive Plan (the Incentive Plan), the Company may grant stock options, stock appreciation rights, restricted shares, restricted share units (RSUs), performance shares, and other stock- and cash-based awards to employees and directors of, and consultants to, the Company and its affiliates. Since adoption of the Incentive Plan, 1,400,000 shares of common stock have been authorized for equity grants.
On an annual basis, the compensation committee of the Company’s Board of Directors awards RSUs to each non-employee director as part of their annual compensation. The annual awards for 2021 and 2020 per director were $80,000. Subject to the terms of the Incentive Plan and the RSU agreement, the RSUs vest after year of service (from the date of grant). The RSUs are not converted into shares of common stock until the director either resigns or is terminated from the board of directors.
Prior to 2021, under the Incentive Plan, each eligible participant was awarded RSUs with a dollar value equal to 10% of the participant’s base salary, up to an annual maximum of $17,500. The RSUs have a -year vesting period and the RSUs will convert into the right to receive shares of common stock upon a participant’s retirement, or earlier upon the participant’s death or disability or upon a change in control of the Company. Due to the COVID-19 pandemic, no awards were granted in 2020.
Under the Incentive Plan, the Company awards RSUs to newly-appointed executive officers, based upon a percentage of their base salary. Upon Mr. Greiff’s promotion to President and Chief Operating Officer on January 1, 2020, he received 15,694 RSUs. The RSUs will vest years from the grant date, or earlier upon death or disability or upon a change in control of the Company.
Stock-based compensation expense recognized on RSUs for the three and nine months ended September 30, 2021 and 2020, respectively, is summarized in the following table:
All pre-tax charges related to RSUs were included in the caption “Administrative and general” on the accompanying Consolidated Statements of Comprehensive Income (Loss).
The following table summarizes the activity related to RSUs for the nine months ended September 30, 2021 and 2020, respectively:
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Note 12 - Income Taxes |
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| Income Tax Disclosure [Text Block] |
For the three months ended September 30, 2021, the Company recorded an income tax provision of $15.7 million, or 26.0%, compared to an income tax benefit of $0.6 million, or 27.0%, for the three months ended September 30, 2020. For the nine months ended September 30, 2021, the Company recorded an income tax provision of $34.4 million, or 26.3%, compared to an income tax benefit of $3.3 million, or 30.9%, for the nine months ended September 30, 2020.
For the three and nine months ended September 30, 2021, the tax provision or benefit for the interim period is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items that are taken into account in the relevant period. Each quarter the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, the Company makes a cumulative adjustment. Due to the COVID-19 pandemic and the uncertainty around forecasting an annual effective tax rate, the tax provision was recorded based on the actual effective tax rate including discrete items for the three and nine months ended September 30, 2020.
The quarterly tax provision and the quarterly estimate of the annual effective tax rate is subject to significant volatility due to several factors, including variability in accurately predicting the Company’s pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, changes in law and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, the effective tax rate can be more or less volatile based on the amount of pre-tax income. For example, the impact of discrete items and non-deductible expenses on the effective tax rate is lower when the pre-tax income is higher. |
Note 13 - Shares Outstanding and Earnings Per Share |
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| Earnings Per Share [Text Block] |
Earnings per share have been calculated based on the weighted average number of shares outstanding as set forth below:
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Note 14 - Equity Programs |
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| Treasury Stock [Text Block] |
Stock Repurchase Program
On October 2, 2015, the Company announced that its Board of Directors authorized a stock repurchase program of up to 550,000 shares of the Company’s issued and outstanding common stock, which could include open market repurchases, negotiated block transactions, accelerated stock repurchases or open market solicitations for shares, all or some of which may be affected through Rule 10b5-1 plans. Any of the repurchased shares are held in the Company’s treasury, or canceled and retired as the Board of Directors may determine from time to time. Any repurchases of common stock are subject to the covenants contained in the ABL Credit Facility. Under the ABL Credit Facility, the Company may repurchase common stock and pay dividends up to $5.0 million in the aggregate during any trailing twelve months without restrictions. Purchases of common stock or dividend payments in excess of $5.0 million in the aggregate require the Company to (i) maintain availability in excess of 20.0% of the aggregate revolver commitments ($95.0 million at September 30, 2021) or (ii) to maintain availability equal to or greater than 15.0% of the aggregate revolver commitments ($71.3 million at September 30, 2021) and the Company must maintain a pro-forma ratio of EBITDA minus certain capital expenditures and cash taxes paid to fixed charges of at least 1.00 to 1.00.
There were no shares repurchased during the three and nine months ended September 30, 2021. There were no shares repurchased during the three months ended September 30, 2020. During the nine months ended September 30, 2020, the Company repurchased 15,000 shares for an aggregate cost of $145 thousand. As of September 30, 2021, 360,212 shares remain authorized for repurchase under the program.
At-the-Market Equity Program
On September 3, 2021, the Company commenced an at-the-market ("ATM") equity program under its shelf registration statement, which allows it to sell and issue up to $50 million in shares of its common stock from time to time. The Company entered into an Equity Distribution Agreement on September 3, 2021 with KeyBanc Capital Markets Inc. ("KeyBanc") relating to the issuance and sale of shares of common stock pursuant to the program. KeyBanc is not required to sell any specific amount of securities but will act as the Company’s sales agent using commercially reasonable efforts consistent with its normal trading and sales practices, on mutually agreed terms between KeyBanc and the Company. KeyBanc will be entitled to compensation for shares sold pursuant to the program of 2.0% of the gross proceeds of any shares of common stock sold under the Equity Distribution Agreement. No shares were sold under the ATM program during the three months ended September 30, 2021. |
Note 15 - Segment Information |
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| Segment Reporting Disclosure [Text Block] |
The Company follows the accounting guidance that requires the utilization of a “management approach” to define and report the financial results of operating segments. The management approach defines operating segments along the lines used by the Company’s chief operating decision maker (CODM) to assess performance and make operating and resource allocation decisions. The CODM evaluates performance and allocates resources based primarily on operating income (loss). The operating segments are based primarily on internal management reporting.
The Company operates in reportable segments: specialty metals flat products, carbon flat products, and tubular and pipe products. The specialty metals flat products segment and the carbon flat products segment are at times consolidated and referred to as the flat products segments, as certain of the flat products segments’ assets and resources are shared by the specialty metals and carbon flat products segments and both segments’ products are stored in the shared facilities and, in some locations, processed on shared equipment.
Corporate expenses are reported as a separate line item for segment reporting purposes. Corporate expenses include the unallocated expenses related to managing the entire Company (i.e., all three segments), including compensation for certain personnel, expenses related to being a publicly traded entity such as board of directors’ expenses, audit expenses, and various other professional fees.
The following table provides financial information by segment and reconciles the Company’s operating income by segment to the consolidated income before income taxes for the three and six months ended June 30, 2021 and 2020, respectively.
There were no material revenue transactions between the specialty metals products, carbon flat products and tubular and pipe products segments. On September 17, 2021, the Company sold substantially all of the assets related to its Detroit operation. The Detroit operation was primarily included in the carbon flat-rolled segment.
The Company sells certain products internationally, primarily in Canada and Mexico. International sales are immaterial to the consolidated financial results and to the individual segments’ results. |
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Note 16 - Disposition of Assets |
9 Months Ended | ||
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Sep. 30, 2021 | |||
| Notes to Financial Statements | |||
| Sale of Operation, Disclosure [Text Block] |
On September 17, 2021, the Company sold substantially all of the assets related to its Detroit operation to Venture Steel (U.S.), Inc. for $58.4 million plus a working capital adjustment, estimated at $13.5 million, to be settled in late 2021 or early 2022. The sale price included $9.5 million for property and equipment and the remaining assets and liabilities were sold at fair value. The proceeds of the sale will be used for working capital needs as well as future acquisitions and investments in organic growth opportunities. The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers. The sale of the Detroit operation does not indicate a strategic shift in the Company’s operations. The gain on the sale net of associated professional and legal fees totaled $3.5 million and are included in “Administrative and general” in the Corporate segment in the Consolidated Statements of Comprehensive Income (Loss). The operating results of the Detroit operation were included in the flat-products segments prior to the disposition.
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Note 17 - Subsequent Events |
9 Months Ended | ||
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Sep. 30, 2021 | |||
| Notes to Financial Statements | |||
| Subsequent Events [Text Block] |
On October 1, 2021, the Company acquired all of the net assets of Shaw Stainless & Alloy, Inc. (Shaw), based in Powder Springs, Georgia for $12.0 million. Shaw is a full-line distributor of stainless steel sheet, pipe, tube, bar and angles. Shaw also manufactures and distributes stainless steel bollards and water treatment systems. The acquisition includes Shaw's stainless-steel distribution and fabrication businesses as well as its architectural and barrier defense businesses.
The acquisition will be accounted for as a business combination and the assets acquired and liabilities assumed valued at fair market value. The acquisition is not considered significant and Shaw’s results will be included in the Company’s specialty metals flat products segment beginning in the Company’s fourth quarter of 2021 financial results. Upon the acquisition, the Company entered into an amendment to include the eligible assets of Shaw in its ABL Credit Facility. |
Significant Accounting Policies (Policies) |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Accounting Policies [Abstract] | |
| New Accounting Pronouncements, Policy [Policy Text Block] | Impact of Recently Issued Accounting Pronouncements
There were no recently issued accounting pronouncements that would have a material impact on the Company’s Consolidated Financial Statements. |
Note 2 - Revenue Recognition (Tables) |
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| Disaggregation of Revenue [Table Text Block] |
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Note 4 - Inventories (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventory, Current [Table Text Block] |
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Note 5 - Goodwill and Intangible Assets (Tables) |
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| Schedule of Goodwill [Table Text Block] |
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| Schedule of Finite and Indefinite Lived Intangible Assets [Table Text Block] |
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Note 6 - Leases (Tables) |
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Note 7 - Debt (Tables) |
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| Schedule of Debt [Table Text Block] |
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Note 8 - Derivative Instruments (Tables) |
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Note 9 - Fair Value of Assets and Liabilities (Tables) |
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Note 11 - Equity Plans (Tables) |
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Note 13 - Shares Outstanding and Earnings Per Share (Tables) |
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Note 15 - Segment Information (Tables) |
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| Reconciliation of Revenue from Segments to Consolidated [Table Text Block] |
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| Reconciliation of Other Significant Reconciling Items from Segments to Consolidated [Table Text Block] |
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Note 3 - Accounts Receivable (Details Textual) - USD ($) $ in Millions |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Accounts Receivable, Allowance for Credit Loss, Current | $ 4.4 | $ 3.6 |
Note 4 - Inventories (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
| LIFO Inventory Amount | $ 55.4 | $ 55.4 | $ 50.3 | ||
| Percentage of LIFO Inventory | 13.30% | 13.30% | 21.00% | ||
| Inventory, LIFO Reserve, Period Charge | $ 7.0 | $ 0.1 | $ 12.0 | $ 1.1 | |
| Inventory Difference Using FIFO Basis | $ (9.9) | $ (9.9) | $ (2.1) | ||
Note 4 - Inventories - Steel Inventories (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Unprocessed | $ 341,346 | $ 194,614 |
| Processed and finished | 76,633 | 45,387 |
| Totals | $ 417,979 | $ 240,001 |
Note 5 - Goodwill and Intangible Assets (Details Textual) $ in Millions |
9 Months Ended |
|---|---|
|
Sep. 30, 2021
USD ($)
| |
| Finite-Lived Intangible Asset, Expected Amortization, Year One | $ 1.5 |
| Finite-Lived Intangible Asset, Expected Amortization, Year Three | 1.4 |
| Finite-Lived Intangible Asset, Expected Amortization, Year Four | 1.0 |
| Finite-Lived Intangible Asset, Expected Amortization, Year Five | 0.5 |
| Finite-Lived Intangible Asset, Expected Amortization, Year Two | $ 1.5 |
| Customer Relationships [Member] | |
| Finite-Lived Intangible Asset, Useful Life (Year) | 15 years |
| Finite-Lived Intangible Assets, Remaining Amortization Period (Year) | 15 years |
| Noncompete Agreements [Member] | Minimum [Member] | |
| Finite-Lived Intangible Asset, Useful Life (Year) | 1 year |
| Noncompete Agreements [Member] | Maximum [Member] | |
| Finite-Lived Intangible Asset, Useful Life (Year) | 5 years |
Note 5 - Goodwill and Intangible Assets - Goodwill, by Reportable Segment (Details) $ in Thousands |
9 Months Ended |
|---|---|
|
Sep. 30, 2021
USD ($)
| |
| Balance | $ 5,123 |
| Acquisitions | 111 |
| Impairments | 0 |
| Balance | 5,234 |
| Carbon Flat Products [Member] | |
| Balance | 1,065 |
| Acquisitions | 0 |
| Impairments | 0 |
| Balance | 1,065 |
| Specialty Metals Flat Products [Member] | |
| Balance | 4,058 |
| Acquisitions | 111 |
| Impairments | 0 |
| Balance | 4,169 |
| Tubular and Pipe Products [Member] | |
| Balance | 0 |
| Acquisitions | 0 |
| Impairments | 0 |
| Balance | $ 0 |
Note 5 - Goodwill and Intangible Assets - Intangible Assets, Net (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Accumulated amortization | $ (10,379) | $ (9,287) |
| Intangible assets, gross | 41,686 | 41,880 |
| Intangible assets, net | 31,307 | 32,593 |
| Trade Names [Member] | ||
| Trade name - not subject to amortization | 20,168 | 20,179 |
| Customer Relationships [Member] | ||
| Finite-lived intangible assets, gross | 21,259 | 21,442 |
| Accumulated amortization | (10,166) | (9,101) |
| Finite-lived intangible assets, net | 11,093 | 12,341 |
| Noncompete Agreements [Member] | ||
| Finite-lived intangible assets, gross | 259 | 259 |
| Accumulated amortization | (213) | (186) |
| Finite-lived intangible assets, net | $ 46 | $ 73 |
Note 6 - Leases - Lease Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Operating lease cost | $ 1,733 | $ 1,767 | $ 5,148 | $ 5,322 |
| Finance lease cost: | ||||
| Amortization of right-of-use assets | 210 | 62 | 634 | 182 |
| Interest on lease liabilities | 23 | 13 | 76 | 39 |
| Total finance lease cost | $ 233 | $ 75 | $ 710 | $ 221 |
Note 6 - Leases - Lease Payments (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Operating cash flows from operating leases | $ 1,704 | $ 1,742 | $ 5,060 | $ 5,251 |
| Operating cash flows from finance leases | 23 | 13 | 76 | 39 |
| Financing cash flows from finance leases | 202 | 58 | 607 | 173 |
| Total cash paid for lease liabilities | $ 1,929 | $ 1,813 | $ 5,743 | $ 5,463 |
Note 6 - Leases - Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Operating lease | $ 36,916 | $ 36,060 |
| Operating lease accumulated amortization | (13,446) | (10,706) |
| Operating lease right-of-use asset, net | 23,470 | 25,354 |
| Current portion of lease liabilities | 5,457 | 5,580 |
| Operating lease, operating lease liabilities | 18,292 | 19,965 |
| Total operating lease liabilities | 23,749 | 25,545 |
| Property and equipment, at cost | 412,635 | 434,579 |
| Accumulated depreciation | (265,360) | (277,379) |
| Finance lease, net | 2,565 | 3,249 |
| Finance lease current liabilities | 811 | 815 |
| Finance lease liabilities | 1,797 | 2,453 |
| Total finance lease liabilities | $ 2,608 | $ 3,268 |
| Operating leases (in years) (Year) | 6 years | 7 years |
| Finance leases (in years) (Year) | 4 years | 6 years |
| Operating leases | 3.69% | 3.76% |
| Finance leases | 3.49% | 3.80% |
| Assets Held Under Finance Leases [Member] | ||
| Property and equipment, at cost | $ 3,511 | $ 3,582 |
| Accumulated depreciation | $ (946) | $ (333) |
Note 6 - Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Operating lease, 2021 | $ 1,661 | |
| Finance lease, 2021 | 226 | |
| Operating lease, 2022 | 5,947 | |
| Finance lease, 2022 | 840 | |
| Operating lease, 2023 | 4,857 | |
| Finance lease, 2023 | 568 | |
| Operating lease, 2024 | 4,152 | |
| Finance lease, 2024 | 481 | |
| Operating lease, 2025 | 2,875 | |
| Finance lease, 2025 | 315 | |
| Operating lease, Thereafter | 7,156 | |
| Finance lease, Thereafter | 374 | |
| Operating lease, Total future minimum lease payments | 26,648 | |
| Finance lease, Total future minimum lease payments | 2,804 | |
| Operating lease, Less remaining imputed interest | (2,899) | |
| Finance lease, Less remaining imputed interest | (196) | |
| Operating lease, Total | 23,749 | $ 25,545 |
| Finance lease, Total | 2,608 | $ 3,268 |
| Current Portion and Lease Liabilities [Member] | ||
| Operating lease, Total | $ 23,749 |
Note 7 - Debt - Summary of Debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Asset-based revolving credit facility | $ 297,880 | $ 160,609 |
| Total debt | 297,880 | 160,609 |
| Asset Based Revolving Credit Facility Due December 8, 2022 [Member] | ||
| Asset-based revolving credit facility | $ 297,880 | $ 160,609 |
Note 7 - Debt - Summary of Debt (Details) (Parentheticals) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Asset Based Revolving Credit Facility Due December 8, 2022 [Member] | ||
| Maturity date | Jun. 16, 2026 | Jun. 16, 2026 |
Note 8 - Derivative Instruments (Details Textual) - Interest Rate Swap [Member] $ in Millions |
Jan. 10, 2019
USD ($)
|
|---|---|
| Debt Instrument, Term (Year) | 5 years |
| Derivative, Notional Amount | $ 75 |
| Derivative, Fixed Interest Rate | 2.57% |
Note 8 - Derivative Instruments - Impact from Derivatives on Consolidated Statements of Comprehensive Income (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Net Gain (Loss) Recognized | $ (475) | $ (459) | $ (1,406) | $ (1,055) |
| Interest Rate Swap [Member] | ||||
| Net Gain (Loss) Recognized | (475) | (459) | (1,406) | (1,055) |
| Metal Swaps [Member] | ||||
| Net Gain (Loss) Recognized | (92) | 82 | 136 | 55 |
| Embedded Customer Derivatives [Member] | ||||
| Net Gain (Loss) Recognized | $ 92 | $ (82) | $ (136) | $ (55) |
Note 9 - Fair Value of Assets and Liabilities (Details Textual) - USD ($) $ in Millions |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Revolving Credit Facility [Member] | ||
| Long-term Debt, Fair Value | $ 297.9 | $ 160.6 |
Note 10 - Accumulated Other Comprehensive Loss (Details Textual) - USD ($) $ in Millions |
Jan. 10, 2019 |
Sep. 30, 2021 |
|---|---|---|
| AOCI, Cash Flow Hedge, Cumulative Gain (Loss), after Tax | $ 3.8 | |
| Accumulated Other Comprehensive Income (Loss), Tax | $ 0.9 | |
| Interest Rate Swap [Member] | ||
| Debt Instrument, Term (Year) | 5 years | |
| Derivative, Notional Amount | $ 75.0 | |
| Derivative, Fixed Interest Rate | 2.57% |
Note 11 - Equity Plans - Stock-based Compensation Expense Recognized on Restricted Stock Units (Details) - Restricted Stock Units (RSUs) [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| RSU expense before taxes | $ 258 | $ 286 | $ 778 | $ 973 |
| RSU expense after taxes | $ 191 | $ 204 | $ 573 | $ 672 |
Note 12 - Income Taxes (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Income Tax Expense (Benefit), Total | $ 15,665 | $ (561) | $ 34,354 | $ (3,307) |
| Effective Income Tax Rate Reconciliation, Percent, Total | 26.00% | 27.00% | 26.30% | 30.90% |
Note 13 - Shares Outstanding and Earnings Per Share - Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Weighted average basic shares outstanding (in shares) | 11,492 | 11,452 | 11,491 | 11,447 |
| Assumed exercise of stock options and issuance of stock awards (in shares) | 23 | 0 | 18 | 0 |
| Weighted average diluted shares outstanding (in shares) | 11,515 | 11,452 | 11,509 | 11,447 |
| Net income (loss) | $ 44,533 | $ (1,520) | $ 96,190 | $ (7,381) |
| Basic earnings per share (in dollars per share) | $ 3.88 | $ (0.13) | $ 8.37 | $ (0.64) |
| Diluted earnings per share (in dollars per share) | $ 3.87 | $ (0.13) | $ 8.36 | $ (0.64) |
| Unvested RSUs (in shares) | 209 | 234 | 209 | 234 |
Note 15 - Segment Information (Details Textual) |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Number of Reportable Segments | 3 |
Note 15 - Segment Information - Segment Reporting Information by Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Net sales | $ 668,466 | $ 299,921 | $ 1,687,667 | $ 902,597 |
| Restructuring and other charges | 0 | 0 | 0 | 3,586 |
| Depreciation and amortization | 4,813 | 4,727 | 15,321 | 14,567 |
| Operating income (loss) | 62,160 | (363) | 136,186 | (4,797) |
| Other loss, net | (15) | (25) | (24) | (68) |
| Income (loss) before interest and income taxes | 62,145 | (388) | 136,162 | (4,865) |
| Interest and other expense on debt | 1,947 | 1,693 | 5,618 | 5,823 |
| Income (loss) before income taxes | 60,198 | (2,081) | 130,544 | (10,688) |
| Specialty Metals Flat Products [Member] | ||||
| Net sales | 164,179 | 80,904 | 428,533 | 223,887 |
| Restructuring and other charges | 0 | 0 | 0 | 27 |
| Depreciation and amortization | 858 | 513 | 2,662 | 1,457 |
| Operating income (loss) | 24,663 | 2,448 | 46,387 | 7,174 |
| Carbon Flat Products [Member] | ||||
| Net sales | 404,596 | 167,948 | 976,480 | 511,726 |
| Restructuring and other charges | 0 | 0 | 0 | 3,559 |
| Depreciation and amortization | 2,698 | 2,852 | 8,570 | 8,932 |
| Operating income (loss) | 37,164 | (1,604) | 88,797 | (12,378) |
| Tubular and Pipe Products [Member] | ||||
| Net sales | 99,691 | 51,069 | 282,654 | 166,984 |
| Restructuring and other charges | 0 | 0 | 0 | 0 |
| Depreciation and amortization | 1,239 | 1,344 | 4,035 | 4,076 |
| Operating income (loss) | 2,354 | 744 | 11,713 | 7,274 |
| Corporate Segment [Member] | ||||
| Restructuring and other charges | 0 | 0 | 0 | 0 |
| Depreciation and amortization | 18 | 18 | 54 | 102 |
| Operating income (loss) | $ (2,021) | $ (1,951) | $ (10,711) | $ (6,867) |
Note 15 - Segment Information - Segment Reporting Information by Capital Expenditures and Assets (Details) - USD ($) $ in Thousands |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
| Capital expenditures | $ 7,738 | $ 7,968 | |
| Assets | 971,306 | $ 640,605 | |
| Flat Products Segment [Member] | |||
| Capital expenditures | 6,172 | 6,818 | |
| Assets | 721,133 | 404,269 | |
| Tubular and Pipe Products [Member] | |||
| Capital expenditures | 1,566 | 1,150 | |
| Assets | 249,566 | 235,516 | |
| Corporate Segment [Member] | |||
| Capital expenditures | 0 | $ 0 | |
| Assets | $ 607 | $ 820 | |
Note 16 - Disposition of Assets (Details Textual) $ in Millions |
Sep. 17, 2021
USD ($)
|
|---|---|
| Sale of Operations, Consideration Received or Receivable | $ 58.4 |
| Estimated Working Capital Adjustment | 13.5 |
| Sale of Operations, Property and Equipment | 9.5 |
| Sale of Operations, Gain (Loss) on Sale of Operations, Before Tax | $ 3.5 |
Note 17 - Subsequent Events (Details Textual) $ in Millions |
Oct. 01, 2021
USD ($)
|
|---|---|
| Subsequent Event [Member] | Shaw Stainless & Alloy, Inc [Member] | |
| Business Combination, Consideration Transferred, Total | $ 12 |