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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
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( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-23320
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OLYMPIC STEEL, INC.
(Exact name of registrant as specified in its charter)
OHIO 34-1245650
- ------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5096 RICHMOND ROAD, BEDFORD HEIGHTS, OHIO 44146
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 292-3800
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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. Yes (X) No ( )
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 AUGUST 1, 1997
------------------------------------- --------------------------------
Common stock, without par value 10,692,000
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OLYMPIC STEEL, INC.
INDEX TO FORM 10-Q
PAGE NO.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
Consolidated Balance Sheets - June 30, 1997 and 3
December 31, 1996
Consolidated Statements of Income - for the three and six
months ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows - for the six months
ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS 10-15
-----------------------------------
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 16
ITEM 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
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PART I. FINANCIAL INFORMATION
OLYMPIC STEEL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, DECEMBER 31,
1997 1996
----------- -----------
(UNAUDITED)
ASSETS
CASH $ 1,000 $ 2,018
ACCOUNTS RECEIVABLE 17,309 9,483
INVENTORIES 144,700 138,238
PREPAID EXPENSES AND OTHER 2,657 2,516
----------- -----------
TOTAL CURRENT ASSETS 165,666 152,255
----------- -----------
PROPERTY AND EQUIPMENT 112,896 93,954
ACCUMULATED DEPRECIATION (17,388) (14,954)
----------- -----------
NET PROPERTY AND EQUIPMENT 95,508 79,000
----------- -----------
GOODWILL 13,454 9,875
INVESTMENTS IN JOINT VENTURES 6,187 --
----------- -----------
TOTAL ASSETS $ 280,815 $ 241,130
=========== ===========
LIABILITIES
CURRENT PORTION OF LONG-TERM DEBT $ 3,721 $ 1,869
ACCOUNTS PAYABLE 33,063 25,267
ACCRUED PAYROLL 3,450 4,610
OTHER ACCRUED LIABILITIES 4,836 4,521
----------- -----------
TOTAL CURRENT LIABILITIES 45,070 36,267
----------- -----------
REVOLVING CREDIT AGREEMENT 63,467 46,457
INDUSTRIAL REVENUE BONDS 11,100 8,405
TERM LOANS 13,344 7,851
----------- -----------
TOTAL LONG-TERM DEBT 87,911 62,713
----------- -----------
DEFERRED INCOME TAXES 5,373 4,823
----------- -----------
TOTAL LIABILITIES 138,354 103,803
----------- -----------
SHAREHOLDERS' EQUITY
PREFERRED STOCK -- --
COMMON STOCK 106,319 106,319
RETAINED EARNINGS 36,142 31,008
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 142,461 137,327
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 280,815 $ 241,130
=========== ===========
The accompanying notes are an integral part of these balance sheets.
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OLYMPIC STEEL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AND TONNAGE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
(UNAUDITED)
TONS SOLD
DIRECT 291,097 268,318 564,434 525,529
TOLL 47,665 40,543 90,152 77,763
-------- -------- -------- --------
338,762 308,861 654,586 603,292
-------- -------- -------- --------
NET SALES $157,595 $146,697 $307,068 $289,286
COST OF SALES 125,203 113,882 244,033 225,545
-------- -------- -------- --------
GROSS MARGIN 32,392 32,815 63,035 63,741
OPERATING EXPENSES
WAREHOUSE AND PROCESSING 8,588 6,937 16,854 14,341
ADMINISTRATIVE AND GENERAL 6,671 6,286 13,274 12,377
DISTRIBUTION 4,783 4,505 9,268 8,748
SELLING 3,614 3,571 6,949 7,037
OCCUPANCY 1,043 944 2,182 1,953
DEPRECIATION AND AMORTIZATION 1,466 1,027 2,755 2,021
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 26,165 23,270 51,282 46,477
-------- -------- -------- --------
OPERATING INCOME 6,227 9,545 11,753 17,264
INCOME FROM JOINT VENTURES 62 -- 163 --
-------- -------- -------- --------
6,289 9,545 11,916 17,264
INTEREST EXPENSE 981 1,447 1,898 2,923
RECEIVABLE SECURITIZATION EXPENSE 1,004 879 1,803 1,695
-------- -------- -------- --------
INCOME BEFORE TAXES 4,304 7,219 8,215 12,646
INCOME TAXES 1,615 2,888 3,081 5,059
-------- -------- -------- --------
NET INCOME $ 2,689 $ 4,331 $ 5,134 $ 7,587
======== ======== ======== ========
NET INCOME PER SHARE $ 0.25 $ 0.50 $ 0.48 $ 0.88
======== ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 10,692 8,600 10,692 8,600
======== ======== ======== ========
The accompanying notes are an integral part of these statements.
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OLYMPIC STEEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(IN THOUSANDS)
1997 1996
-------- --------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 5,134 $ 7,587
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH FROM (USED FOR) OPERATING ACTIVITIES-
DEPRECIATION AND AMORTIZATION 2,755 2,021
INCOME FROM JOINT VENTURES (163) --
LONG-TERM DEFERRED INCOME TAXES 550 --
-------- --------
8,276 9,608
CHANGES IN WORKING CAPITAL:
ACCOUNTS RECEIVABLE (7,020) (8,726)
INVENTORIES (6,462) (3,628)
PREPAID EXPENSES AND OTHER 66 (494)
ACCOUNTS PAYABLE 7,632 11,741
ACCRUED PAYROLL AND OTHER ACCRUED LIABILITIES (978) 405
-------- --------
(6,762) (702)
-------- --------
NET CASH FROM OPERATING ACTIVITIES 1,514 8,906
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
ACQUISITION OF SOUTHEASTERN (NET OF WORKING CAPITAL OF $422) (13,734) --
INVESTMENTS IN JOINT VENTURES (6,091) --
IOWA FACILITY EQUIPMENT DEPOSITS (2,367) --
LAFAYETTE PLANT EXPANSION (1,417) (430)
TUBE MILL EQUIPMENT DEPOSITS (1,630) --
TEMPER MILL FACILITY AND EQUIPMENT (68) (893)
OTHER CAPITAL EXPENDITURES, NET (1,175) (3,323)
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES (26,482) (4,646)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
REVOLVING CREDIT AGREEMENT 17,010 333
BORROWINGS (REPAYMENTS) OF LONG-TERM DEBT 6,940 (2,959)
-------- --------
NET CASH FROM (USED FOR) FINANCING ACTIVITIES 23,950 (2,626)
-------- --------
CASH:
NET INCREASE (DECREASE) (1,018) 1,634
BEGINNING BALANCE 2,018 1,884
-------- --------
ENDING BALANCE $ 1,000 $ 3,518
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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OLYMPIC STEEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
The accompanying consolidated financial statements have been prepared from the
financial records of Olympic Steel, Inc. (Olympic or the Company) and its
wholly-owned subsidiaries, without audit and reflect all adjustments which are,
in the opinion of management, necessary to fairly present the results of the
interim periods covered by this report. All significant intercompany
transactions and balances have been eliminated in consolidation. Certain amounts
in the 1996 consolidated financial statements have been reclassified to conform
with the 1997 presentation.
(1) EARNINGS PER SHARE:
Earnings per share have been calculated based on the weighted average shares
outstanding during each of the periods presented. Shares outstanding increased
from 8.6 million to 10.7 million in August 1996 as of result of the Company's
follow-on stock offering of 2.1 million shares. Primary and fully diluted
earnings per share are the same as the effect of dilutive outstanding stock
options is immaterial.
(2) INVESTMENTS IN JOINT VENTURES:
In January 1997, the Company completed the formation of Olympic Continental
Resources LLC (OCR), a joint venture with Atlas Iron Processors, Inc. (Atlas)
and Uwe T. Schmidt, OCR's Chief Executive Officer. OCR buys, sells and trades
ferrous and non-ferrous metals and alternate iron products to steel mills and
scrap processors. The venture acquired the business activities previously
conducted by Thyssen Continental Resources LLC, a profitable joint venture
between Thyssen Inc. and Atlas. The Company made a $4 million cash investment
for its 45% ownership share in OCR and guarantees up to $10 million of
outstanding debt under OCR's $35 million revolving bank credit facility.
Olympic's investment in OCR is accounted for under the equity method.
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In April 1997, the Company and the U.S. Steel Group of USX Corporation (USS)
formed Olympic Laser Processing, LLC (OLP), a joint venture to process laser
welded sheet steel blanks for the automotive industry. OLP is owned 50% by each
of the companies. OLP is constructing a new facility to be initially equipped
with two laser welding lines. Production is expected to begin in 1998. The
Company and USS each contributed $2 million in cash to OLP during the first half
of 1997 and each guarantees up to $10 million of outstanding debt under OLP's
$20 million bank loan agreement. The investment in OLP is accounted for under
the equity method.
(3) ACQUISITION:
Effective June 1, 1997, the Company completed the acquisition of substantially
all of the assets and assumed certain liabilities of Southeastern Metal
Processing, Inc. and Southeastern Transshipping Realty (SMP). SMP operated as a
metals toll processor and is located near Atlanta, Georgia.
The preliminary purchase price, which is subject to post-closing adjustments and
includes assumed liabilities, totaled $17.3 million. The adjusted cash portion
of the purchase price, including fees and expenses and the repayment of $2.5
million of SMP's bank debt, totaled $13.7 million. The acquisition has been
accounted for as a purchase and, accordingly, assets and liabilities are
reflected at estimated fair values. The preliminary purchase price allocation
resulted in goodwill of $3.7 million which is being amortized over 40 years.
(4) LONG-TERM DEBT:
The Company amended its revolving bank credit agreement on May 30, 1997 and July
14, 1997. The amendments added a fourth bank to the bank group, increased the
unsecured revolving credit availability from $60 million to $68 million, added a
secured $17 million term loan component to finance the construction and
equipping of a new temper mill facility in Iowa (the Iowa Term Loan), and
extended the agreement expiration date to June 30, 2000. The Iowa Term Loan
allows draws to be made through December 30, 1998 and requires annual principal
repayments of 10% of the amount borrowed to commence May 30, 1999. As of June
30, 1997, there were no Iowa Term Loan borrowings outstanding.
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On May 28, 1997, the Company entered into a $10 million loan agreement with a
domestic bank to finance a portion of the Southeastern acquisition. The loan
agreement includes a 10 year $3.5 million term loan component, and a seven year
$6.5 million term loan component. On July 14, 1997, a portion of the term loan
proceeds was used to refinance $3.1 million of Industrial Revenue Bonds (the
IRB's) assumed in the Southeastern acquisition. The accompanying consolidated
balance sheet classification of the IRB's reflects the repayment terms of the
new term loan. The term loans are secured by Southeastern's real estate and
equipment and are repayable in quarterly installments commencing September 1,
1997. Pricing was initially established at LIBOR plus 1.25% and was subsequently
reduced to LIBOR plus 1% effective June 30, 1997.
Interest rates under the Company's various credit agreements are generally based
on prime or LIBOR plus a premium determined quarterly, which varies with the
Company's operating performance and financial leverage. Borrowing rates in 1997
were prime plus 0% and LIBOR plus .75% through May 31, 1997. Commencing June 1,
1997, the LIBOR premium increased to 1.0%. The majority of the Company's
borrowings are based on the LIBOR option. The overall effective interest rate
for all debt for the three and six month periods ended June 30, 1997, amounted
to 6.7% and 6.8%, respectively, and 7.4% for the comparable periods in 1996.
Included in the revolving credit balances on the accompanying consolidated
balance sheets are $15.1 million and $5.5 million of checks issued that have not
cleared the bank as of June 30, 1997 and December 31, 1996, respectively.
(5) ACCOUNTS RECEIVABLE SECURITIZATION AGREEMENT:
In July 1997, the Company amended its accounts receivable securitization
agreement to increase the maximum amount of receivables available for sale from
$65 million to $70 million. The term of the agreement was also extended to July
31, 2000.
(6) STOCK OPTIONS:
During the second quarter of 1997, additional non-qualified options to purchase
8,000 shares of Common Stock were issued to the Company's outside directors at
an option price of $14.63, the market value of a share of Common Stock at the
grant date. Including the new grants, options to purchase 152,500 shares were
outstanding at June 30, 1997, of which 74,500 were exercisable.
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(7) SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid during the six months ended June 30, 1997 and 1996 totaled $1.9
million and $3.2 million, respectively. Income taxes paid during the six months
ended June 30, 1997 and 1996 totaled $3.2 million and $6.1 million,
respectively.
(8) IMPACT OF NEW ACCOUNTING STANDARDS:
The Financial Accounting Standards Board has issued SFAS No. 128, "Earnings per
Share," and SFAS No. 129, "Disclosure of Information about Capital Structure."
Both of these statements are effective for financial statements for periods
ending after December 15, 1997. Management does not anticipate that the
implementation of SFAS No. 128 will have any effect on the Company's historical
earnings per share data.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's results of operations are affected by numerous external
factors, such as general economic and political conditions, competition, and
steel pricing and availability.
Olympic sells a broad range of products, many of which have different
gross margins. Moreover, products that have more value-added processing
generally have a greater gross margin. Accordingly, the Company's overall gross
margin is affected by product mix and the amount of processing performed, as
well as volatility in selling prices and material purchase costs. The Company
also performs toll processing of customer-owned steel, substantially all of
which is performed by its Lafayette Steel and Southeastern operations. Toll
processing generally results in lower selling prices and gross margin dollars
per ton but higher gross margin percentages than the Company's historical direct
sales.
During the first half of 1997, the Company invested in two joint
ventures, Olympic Continental Resources (OCR), which buys, sells and trades
ferrous and non-ferrous metals and alternate iron products to steel mills and
scrap processors, and Olympic Laser Processing (OLP), a company formed to
process laser welded sheet steel blanks for the automotive industry. The Company
guarantees up to $10 million of outstanding debt under each of OCR's $35 million
revolving bank credit facility and OLP's $20 million bank loan. The Company's
45% interest in OCR and 50% interest in OLP are accounted for under the equity
method.
The Company's 1997 results include the June results of the Company's
Southeastern operation (Southeastern), the net assets of which were acquired
effective June 1, 1997. Southeastern has historically operated as a metals toll
processor, and is located near Atlanta, Georgia.
Financing costs include interest expense on debt and costs associated
with the Company's accounts receivable securitization program (the Financing
Costs). Interest rates paid by the Company under its credit agreement are
generally based on prime or LIBOR plus a premium (the Premium) determined
quarterly, which varies based on the Company's operating performance and
financial leverage. Receivable securitization costs are based on commercial
paper rates calculated on the amount of receivables sold.
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In August 1996, the Company completed a follow-on stock offering of 2.1
million shares of common stock (the Offering). The net proceeds from the
Offering, which totaled $49.1 million, were used to repay outstanding bank debt.
The Company sells certain products internationally, primarily in Mexico
and Puerto Rico. All international sales and payments are made in United States
dollars. These sales historically involve the Company's direct representation of
steel producers and may be covered by letters of credit or trade receivable
insurance. Typically, international sales are more transactional in nature with
lower gross margins than domestic sales. Domestic steel producers generally
supply domestic customers before meeting foreign demand, particularly during
periods of supply constraints. As a result, domestic and international sales
tend to be countercyclical.
Because the Company conducts its operations generally on the basis of
short-term orders, backlog is not a meaningful indicator of future performance.
RESULTS OF OPERATIONS
Tons sold increased 9.7% to 339 thousand in the second quarter of 1997
from 309 thousand in the second quarter of 1996, and 8.5% in the first half of
1997 to 655 thousand from 603 thousand in the first half of 1996. Tons sold in
the second quarter of 1997 include 291 thousand from direct sales and 48
thousand from toll processing, compared with 268 thousand direct tons and 41
thousand tolling tons in the comparable period of last year. Tons sold in the
first half of 1997 include 565 thousand from direct sales and 90 thousand from
toll processing, compared with 526 thousand direct tons and 78 thousand tolling
tons in the comparable period of last year. Substantially all of increase in
second quarter tolling tons is attributable to Southeastern.
Net sales increased 7.4% to $147.6 million for the second quarter of
1997 from $146.7 million for the second quarter of 1996. For the first half, net
sales increased 6.1% to $307.1 million from $289.3 million in the 1996 period.
Average selling prices declined 2.1% and 2.2% between years for the three and
six month periods, respectively, with the largest decline related to stainless
steel products. International sales represented 3.6% and 4.2% of consolidated
net sales for the three and six month periods ended June 30, 1997, compared to
5.7% and 5.3%, respectively, for the 1996 periods.
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As a percentage of net sales, gross margin decreased to 20.6% for the
second quarter of 1997 from 22.4% for 1996. For the six month period, gross
margin decreased to 20.5% in 1997 from 22.0% in 1996. The decrease reflects the
impact of market pressures that have not allowed price increases for steel to be
fully passed on to customers.
As a percentage of net sales, operating expenses increased to 16.6% for
the second quarter of 1997 from 15.9% for 1996, and to 16.7% for the first six
months of 1997 from 16.1% in 1996. The increases as a percentage of net sales
are due partially to the impact of lower average selling prices in the current
year. On a per ton basis, operating expenses increased to $77.24 from $75.34 for
the second quarter and to $78.34 from $77.04 for the first half. Incremental
costs in 1997 relate to the additions of warehouse employees at the Cleveland
temper mill and Minneapolis coil facilities; expansion of plate processing
capabilities in the second half of 1996; completion of the Lafayette plant
expansion in the first quarter of 1997; and continued investment in management
information systems.
Income from joint ventures totaled $62 thousand in the second quarter
and $163 thousand in the first half of 1997.
Financing Costs decreased to $2.0 million for the second quarter of
1997 from $2.3 million in 1996, and to $3.7 million for the first half of 1997
from $4.6 million in 1996. The decrease is attributable to lower average
borrowings outstanding primarily as a result of the Offering, and a decrease in
the Company's effective bank borrowing rate to 6.7% and 6.8% for the second
quarter and first half of 1997, compared to 7.4% for both periods of 1996.
Effective borrowing rates were favorably impacted in the current period by lower
Premiums as a result of the Company's 1996 financial performance and the
Offering. The Company's Premium will remain at 1% over LIBOR for the three
months commencing September 1.
Pretax income for the second quarter of 1997 decreased 40.4% to $4.3
million from $7.2 million for 1996. For the first six months of 1997, pretax
income decreased 35.0% to $8.2 million from $12.6 million for 1996. Income taxes
approximated 37.5% of pretax income in the 1997 periods compared to 40% in the
1996 periods. The decrease in income taxes as a percentage of pretax income is
attributable to the implementation of tax planning strategies in the second half
of 1996. Net income for the second quarter of 1997 decreased 37.9% to $2.7
million, or $.25 per share, from $4.3 million, or $.50 per share for 1996. Net
income for the first six months of 1997 decreased 32.3% to $5.1 million, or $.48
per share, from $7.6 million, or $.88 per share in the 1996 period. As a result
of the Offering, weighted average shares increased from 8.6 million in the first
half of 1996 to 10.7 million in the first half of 1997.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirement is to fund its growth,
including strategic acquisitions and joint ventures, the purchase and upgrading
of processing equipment and services, the construction and upgrading of related
facilities and additional working capital. The Company uses cash generated from
operations, long-term debt obligations, proceeds from the Company's accounts
receivable securitization program, equity offerings, and leasing transactions to
fund these requirements. Historically, the Company has used revolving credit
borrowings under its bank credit facility to finance its working capital
requirements.
Net cash from operating activities primarily represents net income plus
non-cash charges for depreciation, amortization and income from joint ventures,
and changes in working capital. During the first half of 1997, $1.5 million of
net cash was provided from operating activities, consisting of $8.3 million of
cash generated from net income and non-cash charges offset by $6.8 million of
cash used for working capital purposes.
Working capital at June 30, 1997 increased by $4.6 million or 4.0%
since December 31, 1996. The increase is primarily attributable to a $7.0
million increase in accounts receivable, a $6.5 million increase in inventory
and $422 thousand of net working capital acquired from Southeastern, partially
offset by a $7.6 million increase in accounts payable. The accounts receivable
increase is the result of strong June 1997 sales compared to sales in December,
which historically represent the lowest sales period of each year for the
Company.
As of June 30, 1997, $61 million of eligible receivables were sold
under the Company's accounts receivable securitization program, compared to $55
million at December 31, 1996. The amount of trade receivables sold by the
Company typically changes monthly depending upon the level of defined eligible
receivables available for sale at each month end. In July 1997, the Company
amended the receivable securitization agreement to increase the maximum amount
of receivables available for sale from $65 million to $70 million. The term of
the agreement was also extended to July 31, 2000.
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During the first half of 1997, net cash used for investing activities
totaled $26.5 million, consisting of $13.7 for the June 1 acquisition of
Southeastern, $6.1 million in capital contributions to the two joint ventures,
and $6.7 million in capital expenditures, including completion of a 71,000
square foot expansion of Lafayette Steel's existing facility, deposits made for
a new $3.5 million tube mill in Cleveland expected to become operational in
early 1998, and equipment deposits made for a new facility to be located in
Bettendorf, Iowa. The Company plans to invest more than $22 million for the
construction and equipping of a 170,000 square foot Iowa facility which will
house a second temper mill and cut-to-length line, a slitter, and multiple
pieces of plate burning equipment. The plate processing equipment and slitter
are expected to be operational by the end of the first half of 1998, while the
temper mill and cut-to-length line is expected to be operational by the end of
1998. The Company also made purchase commitments in excess of $3 million to
purchase a new cut-to-length line for its Lafayette operation, a used
cut-to-length line for the Minneapolis coil processing facility and a new plasma
burner for the Minneapolis plate processing facility. Each of these pieces of
equipment is anticipated to become operational within the next 12 months.
Cash flows used from financing activities primarily consists of net
borrowings under the Company's revolving credit agreement and proceeds from a
new $10 million secured bank term loan used to finance a portion of the
Southeastern acquisition, offset by scheduled payments under other existing
long-term agreements.
The Company amended its revolving bank credit agreement on May 30, 1997
and July 14, 1997. The amendments added a fourth bank to the bank group,
increased the unsecured revolving credit availability from $60 million to $68
million, added a secured $17 million term loan component to finance the
construction and equipping of the new Iowa facility, and extended the agreement
expiration date to June 30, 2000.
Approximately $8.5 million in unused availability existed under the
Company's revolving credit and accounts receivable securitization facilities at
June 30, 1997. The Company believes that funds available under its revolving
credit facility, other credit and financing agreements and funds generated from
operations will be sufficient to provide the Company with the liquidity
necessary to fund its anticipated working capital requirements and capital
expenditure requirements over the next 12 months. Capital requirements are
subject to change as business conditions warrant and opportunities arise. In
connection with its internal and external expansion strategies, the Company may
from time to time seek additional funds to finance other new facilities,
acquisitions and significant improvements to processing equipment to respond to
customers' demands.
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FORWARD-LOOKING INFORMATION
This document contains various forward-looking statements and
information that are based on management's beliefs as well as assumptions made
by and information currently available to management. When used in this
document, the words "expect," "believe," "anticipate," "plan" and 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 statements are subject to certain risks, uncertainties
and assumptions including, but not limited to, general business and economic
conditions; competitive factors such as the availability and pricing of steel
and fluctuations in demand, specifically in the automotive market; work
stoppages by automotive manufacturers; potential equipment malfunction;
equipment installation and facility construction delays, particularly for the
Iowa temper mill project; and the successes of its joint ventures and the
successful integration of Southeastern into the Company's operations. Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
expected, believed, anticipated or planned. Readers are cautioned not to place
undue reliance on these forward-looking statements which speak only as of the
date hereof. The Company undertakes no obligation to republish revised
forward-looking statements to reflect the occurrence of unanticipated events or
circumstances after the date hereof.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's annual meeting of shareholders was held on April 24,
1997.
(b) At the annual meeting, the Company's shareholders elected Michael
D. Siegal, David A. Wolfort, Thomas M. Forman and Janice M. Margheret
as Directors for a two-year term which expires at the annual meeting of
shareholders in 1999. The term of office of Bruce S. Adelstein, R.
Louis Schneeberger, and Martin H. Elrad, as Directors, continued after
the 1997 meeting; such term expires at the annual shareholders meeting
in 1998.
(c) At the annual meeting, the Company's shareholders ratified the
appointment of Arthur Andersen, LLP as auditors of the Company for
1997. The holders of 9,266,236 shares of Common Stock voted to ratify
the appointment, the holders of 2,155 shares voted against the
ratification, and the holders of 6,883 shares abstained.
The following tabulation represents voting for the Directors:
For Withheld Authority
--------------------- --------------------
Michael D. Siegal 9,264,012 11,391
David A. Wolfort 9,264,012 11,391
Thomas M. Forman 9,264,212 11,191
Janice M. Margheret 9,264,212 11,191
Item 6. Exhibits and Reports on Form 8-K
Exhibit 4.6 - Second Amendment to Credit Agreement, dated as of May 30,
1997
Exhibit 4.7 - Third Amendment to Credit Agreement, dated July 14, 1997
Exhibit 4.8 - Second Amendment to Receivables Purchase Agreement, dated
July 14, 1997
Exhibit 10.10 - Asset Purchase Agreement by and among Olympic Steel,
Inc. and Southeastern Metal Processing, Inc. and Southeastern
Transshipping Realty and Jerry O. Kirkland, Gene L. James, Orvin Flint,
and Michael Miniea, dated May 30, 1997
Exhibit 27 - Financial Data Schedule
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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 thereto duly authorized.
OLYMPIC STEEL, INC.
(Registrant)
Date: August 4, 1997 By: /s/ R. Louis Schneeberger
-------------------------
R. LOUIS SCHNEEBERGER
Chief Financial Officer
By: /s/ Richard T. Marabito
-------------------------
RICHARD T. MARABITO
Treasurer and Corporate Controller
(Principal Accounting Officer)
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