Olympic Steel CEO Discusses Q4 2010 Results - Earnings Call Transcript

Olympic Steel Inc., ( ZEUS)

Q4 2010 Earnings Call

February 24, 2011 10:00 AM ET

Executives

Michael Siegal – CEO

David Wolfort – President and COO

Rick Marabito – CFO

Analysts

Martin Englert – Longbow Research

Richard Garchitorena – Credit Suisse

Sandeep SM – Goldman Sachs

Tim Hayes – Davenport & Company

Aldo Mazzaferro – Burke and Quick

Presentation

Operator

Good day ladies and gentlemen, and welcome to the Olympic Steel Inc. fourth quarter results conference call. (Operator Instructions)

I’d now like to turn the conference over to your host Mr. Michael Siegal, Chief Executive Officer. Please go ahead.

Michael Siegal

Thank you. Good morning and welcome to our call. On the call with me this morning is David Wolfort, our President and Chief Operating Officer, and Rick Marabito, our Chief Financial Officer. I want to thank all of you for your participation and your interest in Olympic Steel.

Again, before we begin our discussion, I want to remind everyone that during this call we will provide forward-looking statements, that we do not undertake to update, or that may not reflect actual results, changes in assumptions or charges in other factors affecting such forward-looking statements, important assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those set forth in the forward-looking statements can be found in our filings with the Securities and Exchange Commission including our 2010 Annual Report on Form 10-K, which will be filed later today.

And so, earlier today, we reported our financial results for the fourth quarter and the yearend December 31 st, 2010. Net sales for the full year ended December 31 st 2010 increased by 53.8% 805 million compared 523.4 million for 2009. Our shipments in 2010 increased 34.3% to 969,000 from 721,000 tons in 2009. Net income for the full year 2010 was 2.1 million or $0.20 per diluted share compared a 2009 that was up $61.2 million or $5.62 per diluted share, which included the 81.1 million are lower of costs for market pretax charges to right down the value of inventory in the first half of 2009.

In addition, our 2010 results included a third quarter 2.1 million pretax bad debt charge of related to an abrupt and unannounced closure of a private equity own direct manufacturing customers. Net sales from fourth quarter of 2010 increased 55.4% to 215.2 million or 138.5 million for the fourth quarter of 2009. Our shipment in the fourth quarter of 2010 increased 31% to 254,000 from 194,000 in the fourth quarter of 2009. Fourth quarter 2010 net was totaled $1.6 million or $0.15 per diluted share compared to a net loss of 2.6 million or $0.24 per diluted share for last year’s fourth quarter.

2010 fourth quarter results included a non-favorable tax rate impacting earnings negatively by approximately $0.02 per share and Rick will discuss this further in his remarks.

We are pleased obviously to our return to profitability in 2010. Strategically growing our geographic footprint increasing our market share adding logistics capabilities and well positioning our yearend inventory position us to accelerate our market share penetration, and overall profitability in the improving North American Economy.

Our 2010 shipments increased by 34% over 2009, which is significantly greater than the total industry growth and steel shipments of 21% as reported in the Metal Service Center Institute’s Market Activity Report.

Throughout 2010, we continued to earn new business awards from large OEM customers seeking financially strong, quality oriented suppliers like Olympic Steel. Our continued commitment to capital investment in geography equipment and (inaudible) Olympic Steel when customers are choosing long-term supply relationships.

Our strong balance sheet along with our new 125 million five-year asset-based loan facility and the $200 million three-year self-registration statement filed with the SEC in 2010, provides us with access the funds for increase working capital leads in our capital investment programs.

We strategically invested in growth initiatives streams in 2010 including ordering a new temper mill and cut-to-length line to be located on the United States Steel Corporation, Gary Works site Indiana. We also invested in stainless steel and aluminum product lines, which experience growth and accretive to our results in 2010. In additional equipments and geographic expansion with our new location in Mount Sterling, Kentucky, which is currently being equipped and is expected to begin operating in March 2011 and our relocation to Moses Lake, Washington.

In addition to (inaudible), we also continue to explore growth via acquisition opportunities in 2011. These time the investments, which David will expand later in the call, will provide both tonnage and revenue growth and real value creation in recovering economic involvement in North America. Also today, we reported that Olympic Steel’s Board of Directors approved a regular quarterly cash dividend of $0.2 per share to be paid on March 15, 2011 to shareholders of record on March 1st, 2011.

And now I’d like to turn the call over to Rick to comment in detail on some of the financial results.

Rick Marabito

Thank you, Michael, and good morning everyone. Michael spent some time on our tonnage and sales growth, so I’ll start my comments related to gross margins.

As a percentage of net sales, gross margins totaled 17.9% in the fourth quarter of 2010 compared to 19.3% in the fourth quarter last year. For the full year of 2010, the gross margins totaled 19.2% compared to 4.1% last year. And again, as Michael just reminded us, last year’s gross margins included $81.1 million of the inventory lower cost to market adjustment that were recorded in the first half of 2009.

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