ZEUS - Earnings call transcript Q1 2019

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Operator

Good morning, and welcome to the Olympic Steel 2019 First Quarter Financial Results Conference Call. At this time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions] Some statements made on today's call will be predictive and are intended to be made as forward-looking within the safe harbor protection of the Private Securities Litigation Reform Act of 1995 and may not reflect actual results. The Company does not undertake to update such statements, changes in assumptions or changes in other factors affecting the forward-looking statements. XX-Q and materially that the Exchange are on XX-K uncertainties results cause Company's Commission. risks, filed Forms differ releases to set and assumptions, other Securities could factors actual reports with Important the press and and forth in

Marabito. can is release be these GAAP to website. Marabito. website. During Today's which on press will non-GAAP Executive for in was the broadcast directly may comparable Please At available measures measure live morning, Rick diluted we Olympic measure. is your which Steel's introduce the financial discussion, and for go found adjusted on call, ahead, net Olympic to non-GAAP today's like our be per issued this A Chief financial provided income today's that reference archived share, Mr. a reconciliation I'd host of this time Steel's replay Officer, most

Rick Marabito

and discuss first for operator. you joining Good you, to results. morning quarter us Thank XXXX thank Steel's Olympic

Joining Greiff; me Andrew Wolfort; Don President Officer, morning Operating Iron Steel's on Tube our and Chief and Executive Olympic this Rich Chicago Manson; CFO, business, the President Vice of call and McNeeley. President, David are

sales Metals delivered our up and During higher from selling XXXX, first and of was due growing million. which over volumes primarily the top X% Pipe prices higher Specialty nearly to nearly average $XXX we Tube quarter performance, line net XX% the over year and to That's strong and last segments. fourth quarter,

that with trends steel industry. carbon quarter, saw of pricing the our uncertainty the consistent service shipment the of the and products year-over-year, the flat we throughout center fuel throughout market seen decline Given was

outperform execution both continued Specialty benefiting growth and Tube successful initiatives. in recent and Pipe capital to our Metals of shipments and respective our our from markets, businesses investments of their However,

began areas Illinois; with efforts first growing or in in quarters in Our the new cut-to-length the new quarter, with and less volatility of XXXX. diluted focused $X.X business and higher million CTI become improving are on and as our see in income Schaumburg, Streetsboro, our at line $X.X $X.XX line benefits same with be and efficiencies. recognized the in along slitting with our to that's laser benefits the to in We our share fully of per Ohio; new diluted returns fixed-axis or quarter quarter operational. operating those was first million share $X.XX compared future results Net lines in additional these per

branded to the McCullough similar early to manufacturer We're integration use business the able products Next to This What's benefit been in McCullough to I'd exciting recent an that in center process. we pleased we're has the about our is the like are progressing. capabilities portfolio. metal-intensive most excellent we've is companies to to of McCullough January start, our add McCullough addition. McCullough's XXXX. are looking our synergies highlight a how added acquired And manufacturing We real The future. we're with Industries. acquisition, off seeing. service and strong first is

of we're later, successful the that opportunity the excited discuss will come about combining from our David As expertise growth will companies. X

remainder remain our Looking inventory this operating expect ahead, case during will of we be the is than seasonally year. our first year. this and improving quarter, our quarter the expenses second stronger usually We the on and turnover focused the controlling

our This per a that payable of on holders of to regular which we cash XXth paid $X.XX XXXX cash share X. June on marks Board of our June a quarter consecutive declared Directors dividend. dividend Lastly, record is XX,

his for to over like call I'd comments. turn the Now David to

David Wolfort

Thank you, Rick.

diversify. to its on Now Olympic grow continues quest and Steel

from we are integration in just metal-intensive the branded considerably has our Industries, well, return McCullough profit center that manufacturer first XXXX, January mentioned of products, realizing moment and Rick multiples acquired service and As a higher of by service our in ago, efficiency, gone are center profitability expertise we enhanced materials than very trucking and scrap supplying due raw benefits location a using yield improved We've in pricing we've while as Cleveland fleet. generated combination. utilizing to our and We've returns. laser-cutting our our own

Our experience we bring center process. by that as business continue model to McCullough diversify proves our the innovations Steel a by that manufacturing service following delivering strategic can can the Olympic to

recently without Manager began continue a this We ways innovative additional assets. lead Price the At Hannah offerings look Southeast. place. expand have in third-party We Alabama products expand sheeted our just distribution our investment leadership outside to we project. space Metals, Berlin in General to to requiring in Birmingham, promoted utilizing to to at new of plate significant new We new

retired areas. General April its we Berlin to appointed Andy business, and value-added XX% in Metals under Andy As leadership, specialists will be Berlin over grow are Specialty help significantly expand salespeople XX on representing we've past segment In product Specialty grown momentum Tobias now his existing positive new that years, leadership. confident was our And and Manager. business stainless total continued adding X, sales. Metals our our continue Roy the to steel experienced Under has Metals the of Markowitz's by business successful

and are second up our cut-to-length All new line and we year, Streetsboro to slitter in last running the a in profitability. added in operation of metals our specialty XX our Specialty expenditures a and Metals capital Schaumburg Late past during contributing facility. months

lines pricing have second we've and This last of several be and over spending the respect in the value Tube, business both the investments unique to a provide dividends. been years operating overall, have paid full and in terms to quarter. CapEx our diligent capacity to continuing made refine expect added at processing proposition Pipe environment customers. strong and With to have to we demand we continues We

initiatives, year I and been sales seeing to Pipe of Now distribution, including that a customers tube of growth by of will for in the the segment the our well we are reported Rich Tube financial review. in focus turn quarter to which redirection first some our call record over full that, result our earnings. the The benefit Southeast the has received With both is region. and

Rich Manson

morning to you, everyone. David, and Thank good

want Before I Berlin first which own of results, through quarter not and the our operations quarter to of both go we results remind XXXX did first McCullough everyone of in our include Metals Industries, that the XXXX. I

due As year's $XXX grew to the Rick last quarter. net higher segments. of All XXXX first average volumes strong sales net Pipe mentioned, Specialty XX% our operating and quarter. increased Tube of first in and of our our Metals prices selling an their over line segments quarter. compared That and results X in remained sales increase the top We with recorded was first million,

well in mix to on Tube, XX% with strategies. and virtually Our was for XX% put in fourth in Specialty Flat, our sales Metals climb The XX% quarter steel particularly growth XXXX Carbon that and Products. pressure Pipe the identical pricing continued margins, Carbon started July our aligned and Flat in mix

our As for year. gross last the compared dollars a result, consolidated down margin quarter were with

grew both quarter the and and on gross raised Specialty The segments first Tube However, per with quarter year-over-year. margin in when emphasis margin their Metals XXXX. the more our ton dollars XXXX dollars Pipe compared products our first gross value-added

in primarily and or higher Specialty million that for of Pipe our expenses resulted which shipping Berlin were operating expenses first McCullough, is quarter expenses XXXX, due of which million, Metals operating Tube over from to the results $X the up year, higher operating and last not the X% quarter Our segments in $XX.X and included and were year-over-year and volumes.

or our For that reported million In share in a to we the per $X.XX calculating recorded quarter net XXXX. million rate the compared per XX.X% in income, with and quarter or XX% compares net first of $X.X first the the of $X.XX an same quarter ago. XXXX, tax of XXXX, first of we effective $X.X income of share in quarter year

report the We XX% the did between expense. quarter effective XXXX any of in our We rate the included results first quarter the expect XX% be of in to XXXX. LIFO our LIFO adjustments of for $XXX,XXX of year. balance And first not and

strong. of increase balance XX, assets, assets increase over XX, At a attributable remains March We The lease December of the to is the accounts cash. of and efficiently XXXX. our into converting the acquisition million McCullough asset the had standard. inventory on new total recognition was $XX focused XXXX, under Our $XX we which and of million $XXX million sheet accounting primarily remain a receivable Industries in right-of-use

$XX DSOs we XX.X the million X.Xx March declined And December quarter, at our X.Xx, the which XXXX. of XX had inventory turned inventory improvement by days. an the XX from For Also, in our flat-rolled we we over is levels. turned

year will rate. conditions, of of Our $X.X building specialty given were at the for new our or capital million, our XX% final we that of depreciation our the that the run expenditures houses metals And market primarily this Schaumburg quarter annual the expenditures anticipate capital cut-to-length line. expansion consisting less run capitalization

Our was primarily million increased the do early increase to million during attributable level quarter, in We by this debt McCullough to expect total January. throughout Form operating acquisition Industries of debt $XX the will our of $XXX to quarter our and details results XX-Q, to which additional as reduce inventory. the decrease we we plan file continue Later today, XXXX XXXX. on to provide for the

call the for let's operator, Now questions. open

Operator

and We’ll the question answer Martin Jefferies. Instructions] Englert, is you. The from begin question session. now Thank [Operator first

Martin Englert

Hi good morning everyone.

Rich Manson

Good morning.

Martin Englert

as sequentially, of that and typically prepared call, in brackets quarter anticipating? be type volumes far the as call is provide out may you the the within that your release did you So sequential that on remarks then in increase stronger can the also seasonally any you

Rick Marabito

We're Rick. steady a looking environment. It's pretty at demand Martin. Sure,

tick-up Specialty flat really in to pretty quarter. from see CTI. going we're think quarter I a second And the we're the of Metals side terms expecting business The another looks carbon solid quarter-to-quarter. in slight

Martin Englert

X% industry. shipment were we're do And you only that that what but it's the is lower you're volumes the think not Carbon And causing specific Flat from to year-on-year, Company, the this seeing, we're it think across what seeing seeing? I contraction Okay.

David Wolfort

'XX seeing of prices have the seeing in downward. customers. of David We're early market influenced The discomfort liked. larger that OEMs our We're a continuing carry would in inventory anticipation a here. Martin, our tightness to in deleveraging lot move than and Wolfort inventory to they the on of in of heavier a deleveraging lot

Martin Englert

Okay. users? any idea how persist downstream this amongst And potentially the could long destock

David Wolfort

they're see and see growth Well, on in still individual we -- overall all, large from our an first basis. we it's OEMs. from standpoint, an But second quarter the all quarter

double-digit And last that of ordering growth opposed steady single-digit the we're it's deleveraging think, I of as customers. to to a year. seeing so now, much with coming manifestation The inventory pattern pretty from And is a growth conclusion.

Rich Manson

market's And that market, down is spot Martin, the given I year-over-year other uncertainties, the been really as think well. the pricing thing the spot

Martin Englert

destocking the today? And correctly, starting abating I from comments what end user see we're so understand as to you see your

David Wolfort

true. That's

Martin Englert

margins last $XXX could, per if carbon one to in declined the Okay. one about I Got it, gross ton gross QX. profits

of the the may gross any and you some incremental discuss ahead prices seeing quickly more relief? Looking you puts takes quarter-to-quarter of ton? Are declining some can or QX, pressure than profits that per on cost inventory offer selling

Rich Manson

Yes.

we're So entering a on Flat pretty looking, at being into the lot second there. of quarter, looking the stable. movement that Carbon we're We're seeing not pretty, margins

and go the The inventory sell the side continues to from side price are You costs through to the also market April. We've seen erode right. down. continue

at So pretty, pretty stable Martin. we're and looking consistent market, margins,

Martin Englert

for Specialty similar different quarter-to-quarter? that's there Or as say the dynamics would [trend]? are growth there with well business your And

Andrew Greiff

would trend. this say to is would, the you I expect same Greiff. Martin, see you'd Andrew

Martin Englert

a lot good luck. thanks detail Okay and for

Operator

Gibbs, KeyBanc is Phil question Markets. Next Capital

Phil Gibbs

Good morning.

Rick Marabito

morning. Good

Phil Gibbs

plate more curious to of come your what opportunities are and you're how free be way. the seeing integration, kind starts your expect if Rick, and McCullough the cash on flow to back just you'd as about

Rick Marabito

Yes.

talked we start. this is a off to morning, great McCullough as about So

mentioned to center we in of McCullough arena. it center, already like terms profitability we bring the returns terms in all things the see successful. We in we of highlighted service was Company return Company. expected, manufacturer. that are is a a synergies synergies we we As that higher the comments the as the a in the of service of really our about in we the very business. like What lot to The what We have than of center that service

flow remain to of area like focused low metal-intensive necessarily of McCullough part Industries' adding some manufacturers other to that McCullough, future of high-profile on hoppers, be cash the to see the the throughout in of using we'll generation do back additional but our companies you're hoppers in the strategy the McCullough-like and companies. on year. more certainly, we Company going is So coming profile rest And of products. forward buy not focused And right, cash positive

Phil Gibbs

Rick, tuck into? where did that you, you all

Rick Marabito

that Flat under So the is segment. Carbon

Phil Gibbs

been Okay. And a the either busy of question then It's I that one a releases your week. on came think yesterday before. newest day or out

the in products. behind up a that? the I maybe facility new was got You've other and South, some believe, opening for catalyst plate What

David Wolfort

a base. to trade occupancy just-in-time able significantly costs costs respond our continue making years over distribution but the to here. costs. on that to it The supply And to that behind for occupancy as where catalyst Birmingham, road efficient. rise distance in states costs Alabama, facilities, XX Georgia and more distribution again, which distribution distribute have current marketplace advantageous the from to to particularly lower a Alabama from currently to continue and physical location efficient is in those us a and in for this Wolfort facility, presence, We'll and case as and served it for we've David again, looking explore Winder, our is our full-on the basis material delivered more we trade a between Phil, outside to all and did, costs being customer options significantly be we of don't now longer be find

Rick Marabito

We like a think David model expand will us efficient very as and regions our real way. into low and because, it's low-cost that I service it at already to said, we allow sales cost,

Phil Gibbs

on was course going of wages of other of hit and there was is next it ask to head in about terms tight. the the and questioning, line here lot freight process? years. a freight a that the I David, in the some just markets Obviously, the think, and And mean I know you just you're remain Has in terms we're inflation. you in decline that seeing over consumables inflation on the of see to starting I can conversion there of last think Anything comment X.X labor I the of what I abated? baseline any tick. spot rates of

Rich Manson

what of it's in our is from we apart. of And What And in that sort from Rich. distribution in rates we quarter cases, first and distribution we true 'XX you're an expenses. decline did stable, full it's down freight it's markets, because in can quarter QX some the goes we're of tell think comparing and 'XX. sequentially, Phil, when you seeing of that year see fairly is, a some expenses, QX are Yes. first I on to XX, a increase, like

Rick Marabito

Yes.

So we agree with Phil. you,

or I think freight rates ago. quarter have peaked a X

Operator

question Sakai, Please have a ahead go Research. sir. We from Chris Singular

Chris Sakai

Hi good morning.

Rich Manson

Morning.

Chris Sakai

your will the about McCullough, acquisition add to McCullough, net Just how sales? this of possibly can disclose you the, much

Rick Marabito

later to McCullough. the the not, In out but Chris, no, will that not So, some will afternoon, there have breaking going a McCullough breaking separate disclosures we this we're not the forward. acquisition, XX-Q financial results be filed out McCullough going on be be as from entity footnote to relative we're

Chris Sakai

then as segment, Metals the main growth increase, as And Specialty there drivers what in sales? were the the the far Okay. the in

Andrew Greiff

equipment. Andrew is We've growth this Greiff. our seen continuation food a Well, of in

aluminum in in in part and customer a growth automotive, We've the Our growing industry. that And very been very base, strong was first participation our in seen Specialty Appliance was that both segment. quarter. stainless Metals us, of also it's strong. the for our

Operator

to I'd ahead, remarks. to over the this floor for closing sir. Rick Please There Marabito no time. further go questions turn like are at back

Rick Marabito

Olympic for interest Well, us you for look everybody our some great and to a thank at We this you and Steel. joining upcoming speaking your day. conferences. morning have with you, Thank forward of in

Operator

This teleconference. concludes today's

time. disconnect at this your now your participation. may You Thank you lines for

Olympic Steel (ZEUS) 4 May 192019 Q1 Earnings call transcript