10q10k10q10k.net

What changed in OLYMPIC STEEL INC's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of OLYMPIC STEEL INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+260 added−260 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in OLYMPIC STEEL INC's 2023 10-K

260 paragraphs added · 260 removed · 219 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

56 edited+19 added−12 removed53 unchanged
Biggest changeSuch 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, those set forth in Item 1A (Risk Factors) below and the following: ● risks of falling metals prices and inventory devaluation; ● supply disruptions and inflationary pressures, including the availability and rising costs of transportation, energy, logistical services and labor; ● risks associated with shortages of skilled labor, increased labor costs and our ability to attract and retain qualified personnel; ● rising interest rates and their impacts on our variable interest rate debt; ● 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, including additional shutdowns in large markets, such as China, and other factors; ● supplier consolidation or addition of new capacity; ● risks associated with the invasion of Ukraine, including economic sanctions, or additional war or military conflict, could adversely affect global metals supply and pricing; ● general and global business, economic, financial and political conditions, including, but not limited to, recessionary conditions and legislation passed under the current administration; ● 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, 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; ● 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; ● 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 last-in, first-out, or LIFO, inventory valuation; ● 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; ● 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; ● customer, supplier and competitor consolidation, bankruptcy or insolvency; ● the timing and outcomes of inventory lower of cost or net realizable value adjustments and LIFO income or expense; ● reduced production schedules, layoffs or work stoppages by our own, our suppliers’ or customers’ personnel; ● cyclicality and volatility within the metals industry; ● 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; ● 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 generate free cash flow through operations and repay debt; 14 ● our ability to successfully integrate recent acquisitions into our business and risks inherent with the acquisitions in the achievement of expected results, including whether the acquisition will be accretive and within the expected timeframe; ● 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; ● events or circumstances that could adversely impact the successful operation of our processing equipment and operations; ● 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; ● 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; ● our ability to sell shares of our common stock under the at-the-market equity program; 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.
Biggest changeSuch 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, those set forth in Item 1A (Risk Factors) below and the following: ● risks of falling metals prices and inventory devaluation; ● supply disruptions and inflationary pressures, including the availability and rising costs of labor and energy; ● risks associated with shortages of skilled labor, increased labor costs and our ability to attract and retain qualified personnel; ● rising interest rates and their impacts on our variable interest rate debt; ● supplier consolidation or addition of new capacity; ● risks associated with the invasion of Ukraine, including economic sanctions, and the conflicts in the Middle East, or additional war, military conflict, or hostilities could adversely affect global metals supply and pricing; ● general and global business, economic, financial and political conditions, including, but not limited to, recessionary conditions and legislation passed under the current administration; ● reduced production schedules, layoffs or work stoppages by our own, our suppliers’ or customers’ personnel; ● risks associated with supply chain disruption resulting from the imbalance of metal supply and end-user demands, including additional shutdowns as a result of infectious disease outbreaks in large markets, such as China and other factors; ● our ability to successfully integrate recent acquisitions, including CTB and Metal-Fab, into our business and risks inherent with the acquisitions in the achievement of expected results, including whether the acquisition will be accretive and within the expected timeframe; ● the adequacy of our existing information technology and business system software, including duplication and security processes; ● 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; ● 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 last-in, first-out, or LIFO, inventory valuation; ● risks associated with the infectious disease outbreaks, 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, negative impacts on our liquidity position, inability to access our traditional financing sources 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; ● 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; ● 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; ● customer, supplier and competitor consolidation, bankruptcy or insolvency; ● the timing and outcomes of inventory lower of cost or net realizable value adjustments and LIFO income or expense; ● cyclicality and volatility within the metals industry; ● 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; ● 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; 14 Table of Contents ● risks and uncertainties associated with intangible assets, including impairment charges related to indefinite lived intangible assets; ● our ability to generate free cash flow through operations and repay debt; ● the amounts, successes and our ability to continue our capital investments and strategic growth initiatives, including acquisitions and our business information system implementations; ● events or circumstances that could adversely impact the successful operation of our processing equipment and operations; ● 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; ● 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; ● our ability to sell shares of our common stock under the at-the-market equity program; 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.
Products, Processing Services and Quality Standards We carry a wide selection of metals products and grades, ranging from commercial quality to ultra-high strength steel and specialty metals including; ● Stainless steel and aluminum coil and sheet products, angles, rounds and flat bar; ● Alloy, heat treated and abrasion resistant coil, sheet and plate; ● Coated metals including galvanized, galvannealed, electro galvanized, advanced high strength steels, aluminized, and automotive grades of steel; ● Cold rolled carbon including commercial quality, advanced high strength steel, drawing steel and automotive grades cold rolled steel coil and sheet products; ● Hot rolled carbon including hot rolled coil, sheet and plate steel products including pickled and oiled, automotive grades, advanced high strength steels, and high strength low alloys; ● Tube, pipe & bar products including round, square, and rectangular mechanical and structural tubing; hydraulic and stainless tubing; boiler tubing; carbon, stainless, and aluminum pipe; and valves and fittings; and ● Tin mill products including electrolytic tinplate, electrolytic chromium coated steel and black plate.
Products, Processing Services and Quality Standards We carry a wide selection of metals products and grades, ranging from commercial quality to ultra-high strength steel and specialty metals including; ● Stainless steel and aluminum coil and sheet products, angles, rounds and flat bar; ● Alloy, heat treated and abrasion resistant coil, sheet and plate; ● Tin mill products including electrolytic tinplate, electrolytic chromium coated steel and black plate; ● Coated metals including galvanized, galvannealed, electro galvanized, advanced high strength steels, aluminized, and automotive grades of steel; ● Cold rolled carbon including commercial quality, advanced high strength steel, drawing steel and automotive grades, cold rolled steel coil and sheet products; ● Hot rolled carbon including hot rolled coil, sheet and plate steel products including pickled and oiled, automotive grades, advanced high strength steels, and high strength low alloys; and ● Tube, pipe & bar products including round, square, and rectangular mechanical and structural tubing; hydraulic and stainless tubing; boiler tubing; carbon, stainless, and aluminum pipe; and valves and fittings.
The flat products segment is separated into two reportable segments; specialty metals flat products and carbon flat products. The flat products segments’ assets and resources are shared by the specialty metals and carbon flat products segments and both segments’ products are, in some instances, stored in the shared facilities and processed on the shared equipment.
The flat products segment is separated into two reportable segments; specialty metals flat products and carbon flat products. The flat products segments’ assets and resources are shared by the specialty metals and carbon flat products segments and both segments’ products are, in some instances, stored in shared facilities and processed on shared equipment.
The swaps are settled with the brokers at maturity and the economic benefit or loss arising from the changes in fair value of the swaps is contractually passed through to the customer. 9 We have some fixed priced purchase agreements that support fixed priced sales agreements; however, in general we have no long-term, fixed-price metals purchase contracts, except for commodity hedges.
The swaps are settled with the brokers at maturity and the economic benefit or loss arising from the changes in fair value of the swaps is contractually passed through to the customer. We have some fixed-priced purchase agreements that support fixed-priced sales agreements; however, in general we have no long-term, fixed-price metals purchase contracts, except for commodity hedges.
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 acquisitions, our 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.
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 acquisitions, our carbon flat products segment has expanded its product offerings to include self-dumping metal hoppers and steel and stainless-steel dump inserts for pickup truck and service truck beds.
This information is essential to optimize inventory management. Differentiated Services To Customers . Our information systems support value-added services to customers, including quality control and on-time delivery monitoring and reporting, just-in-time inventory management and shipping services. 10 E-Commerce and Advanced Customer Interaction . We are actively participating in electronic commerce initiatives to reduce processing cost and time.
This information is essential to optimize inventory management. Differentiated Services To Customers . Our information systems support value-added services to customers, including quality control and on-time delivery monitoring and reporting, just-in-time inventory management and shipping services. E-Commerce and Advanced Customer Interaction . We are actively participating in electronic commerce initiatives to reduce processing cost and time.
We are not including the information on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. 13 Forward-Looking Information This Annual Report on Form 10-K and other documents we file with the SEC contain various forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, business, our beliefs and our management’s assumptions.
We are not including the information on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. 13 Table of Contents Forward-Looking Information This Annual Report on Form 10-K and other documents we file with the SEC contain various forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, business, our beliefs and our management’s assumptions.
Our Flawless execution, or Fe, program is a commitment to provide superior customer service while striving to exceed customer expectations. This program includes tracking on-time delivery and quality performance against objectives, and recognition of employee initiatives to improve efficiencies, streamline processes or reduce operating expenses at each operation. We believe our large and experienced sales force provides strategic advantages.
Our Fe program is a commitment to provide superior customer service while striving to exceed customer expectations. This program includes tracking on-time delivery and quality performance against objectives, and recognition of employee initiatives to improve efficiencies, streamline processes or reduce operating expenses at each operation. We believe our large and experienced sales force provides strategic advantages.
We comply with all applicable state, local and international laws governing nondiscrimination in employment in every location in which we operate. All applicants and employees are treated with the same high level of respect regardless of their gender, ethnicity, religion, national origin, age, marital status, political affiliation, sexual orientation, gender identity, disability, veteran or other protected status.
We strive to comply with all applicable state, local and international laws governing nondiscrimination in employment in every location in which we operate. All applicants and employees are treated with the same high level of respect regardless of their gender, ethnicity, religion, national origin, age, marital status, political affiliation, sexual orientation, gender identity, disability, veteran or other protected status.
The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers. 6 Sales and Marketing . We believe that our commitments to quality, service, just-in-time delivery and field sales personnel have enabled us to build and maintain strong customer relationships.
The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers. 6 Table of Contents Sales and Marketing . We believe that our commitments to quality, service, just-in-time delivery and field sales personnel have enabled us to build and maintain strong customer relationships.
We believe that customers’ demands for just-in-time delivery of have made the value-added inventory, processing and delivery functions performed by metals service centers increasingly important. 4 Corporate History Our company was founded in 1954 as a general steel service center.
We believe that customers’ demands for just-in-time delivery have made the value-added inventory, processing and delivery functions performed by metals service centers increasingly important. 4 Table of Contents Corporate History Our company was founded in 1954 as a general steel service center.
In such states, we have registered under different names, including “Oly Steel” and “Olympia Steel.” Our wholly-owned subsidiary, Olympic Steel Iowa, Inc., does business in certain states under the name “Oly Steel Iowa, Inc.” Our Integrity Stainless operation conducts business under the name “Integrity Stainless.” Our CTI operation conducts business under the name “CTI Power.” Our operation in Monterrey, Mexico operates under the name “Metales de Olympic S. de R.L. de C.V.” Our wholly owned subsidiary, B Metals, Inc., does business under the name “Berlin Metals.” Our wholly owned subsidiary, MCI, Inc., does business under the name “McCullough Industries” and we conduct business under the name “EZ Dumper” for certain of our products.
In such states, we have registered under different names, including “Oly Steel” and “Olympia Steel.” Our wholly-owned subsidiary, Olympic Steel Iowa, Inc., does business in certain states under the name “Oly Steel Iowa, Inc.” Our wholly owned subsidiary, IS Acquisition, Inc., does business under the name “Integrity Stainless.” Our CTI operation conducts business under the name “CTI Power.” Our operation in Monterrey, Mexico operates under the name “Metales de Olympic S. de R.L. de C.V.” Our wholly owned subsidiary, B Metals, Inc., does business under the name “Berlin Metals.” Our wholly owned subsidiary, MCI, Inc., does business under the name “McCullough Industries” and we conduct business under the name “EZ Dumper” for certain of our products.
We believe that we are in material compliance with all environmental laws, do not anticipate any material expenditures to meet environmental requirements and do not believe that compliance with such laws and regulations will have a material adverse effect on our business, financial condition, results of operations and cash flows.
We believe that we are in material compliance with all environmental laws, do not anticipate any material expenditure to meet environmental requirements and do not believe that compliance with such laws and regulations will have a material adverse effect on our business, financial condition, results of operations and cash flows.
In addition to our executive officers, members of our senior management team have a diversity of backgrounds within the metals industry, including management positions at metals producers and other metals service centers. They average 29 years of experience in the metals industry and 20 years with our company.
In addition to our executive officers, members of our senior management team have a diversity of backgrounds within the metals industry, including management positions at metals producers and other metals service centers. They average 29 years of experience in the metals industry and 21 years with our company.
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. 15
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. 15 Table of Contents
We hold a trademark for our stainless steel sheet and plate product “OLY-FLATBRITE,” which has a unique combination of surface finish and flatness and for our “WRIGHT” self-dumping metal hoppers produced by McCullough. The registered trademark “ACTION STAINLESS” was acquired in conjunction with the asset acquisition of Action Stainless.
We hold a trademark for our stainless steel sheet and plate product “OLY-FLATBRITE”, which has a unique combination of surface finish and flatness and for our “WRIGHT” self-dumping metal hoppers produced by McCullough. The registered trademark “ACTION STAINLESS” was acquired in conjunction with the asset acquisition of Action Stainless.
In addition to the acquisitions noted above, our capital investments during the past three years have primarily consisted of additional processing equipment for all three of our segments.
In addition to the acquisitions noted above, our capital investments during the past three years have primarily consisted of additional processing and automation equipment for all three of our segments.
Although general inflation, excluding increases in the price of metals and increased labor and distribution expense, has increased during 2022, it has not had a material effect on our financial results during the past three years, but may have a significant impact in future years. 12 Available Information We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission, or SEC, under the Securities Exchange Act of 1934.
Although general inflation, excluding increases in the price of metals and increased labor expense, has increased during 2023, it has not had a material effect on our financial results during the past three years, but may have a significant impact in future years. 12 Table of Contents Available Information We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission, or SEC, under the Securities Exchange Act of 1934.
With the acquisition of Metal-Fab, we manufacture venting, micro air and clean air products for residential, commercial and industrial applications beginning in 2023. 7 Customer orders are entered or electronically transmitted into computerized order entry systems, and appropriate inventory is selected and scheduled for processing in accordance with the customer’s specified delivery date.
With the acquisition of Metal-Fab, we manufacture venting, micro air and clean air products for residential, commercial and industrial applications. 7 Table of Contents Customer orders are entered or electronically transmitted into computerized order entry systems, and appropriate inventory is selected and scheduled for processing in accordance with the customer’s specified delivery date.
The metals producing supply base has experienced significant consolidation, with a few suppliers accounting for a majority of the domestic carbon flat-rolled steel market. We purchased approximately 39% and 51% of our total metals requirements from our three largest suppliers in 2022 and 2021, respectively.
The metals producing supply base has experienced significant consolidation, with a few suppliers accounting for a majority of the domestic carbon flat-rolled steel market. We purchased approximately 40% and 39% of our total metals requirements from our three largest suppliers in 2023 and 2022, respectively.
To support the growth of our fabrication services, the new Bartlett facility will initially house two lasers and four press brakes. On October 1, 2021, we acquired substantially all of the net assets of Shaw, based outside of Atlanta, Georgia. Shaw is a full-line distributor of stainless steel sheet, pipe, tube, bar and angles.
To support the growth of our fabrication services, the new Bartlett facility initially houses two lasers and three press brakes. On October 1, 2021, we acquired substantially all of the net assets of Shaw, based outside of Atlanta, Georgia. Shaw is a full-line distributor of stainless steel sheet, pipe, tube, bar and angles.
In recognition of these industry trends, our focus has been on achieving profitable geographic and product growth through the start-up and acquisition of service centers, processors, fabricators and related businesses, and investments in people, information systems, higher value-added processing equipment and services, while continuing our commitment to expanding and improving our operating efficiencies, sales and servicing efforts.
In recognition of these industry trends, our focus has been on achieving profitable geographic and product growth through the start-up and acquisition of service centers, processors, fabricators and related businesses, increased diversification in higher-return opportunities to reduce the cyclicality inherent in our industry and investments in people, information systems, higher value-added processing equipment and services, while continuing our commitment to expanding and improving our operating efficiencies, sales and servicing efforts.
Our core values (Accountability, Corporate Citizenship, Customer Satisfaction, Employee Development, Financial Stability, Integrity, Respect, Safety and Teamwork) guide our decisions and behavior and set a standard of excellence that rewards our employees. At December 31, 2022, we employed approximately 1,668 people. Approximately 179 of the hourly plant personnel are represented by seven separate collective bargaining units.
Our core values (Accountability, Corporate Citizenship, Customer Satisfaction, Employee Development, Financial Stability, Integrity, Respect, Safety and Teamwork) guide our decisions and behavior and set a standard of excellence that rewards our employees. At December 31, 2023, we employed approximately 2,168 people. Approximately 244 of the hourly plant personnel are represented by seven separate collective bargaining units.
These operating objectives are supported by: ● A set of core values, which are communicated, practiced, measured and rewarded throughout the Company. ● Our commitment to providing a safe work environment and promoting employee health and well-being through continuous improvement activities, education and communication. ● An internal communications program designed to engage and motivate employees to support our strategy, values and culture. ● Our “flawless execution” program, or Fe program, an internal continuous improvement program that rewards employees who achieve profitable growth by delivering superior customer service and exceeding customer expectations. ● Operational initiatives designed to improve efficiencies and reduce costs by improving and automating processes and creating an environment to facilitate change and improve the way we work and create value. ● Information systems and key metric reporting to focus managers on achieving specific operating objectives. 5 ● Alignment of compensation with the financial objectives and performance of the Company and the achievement of specific financial and operating objectives.
These operating objectives are supported by: ● A set of core values, which are communicated, practiced, measured and rewarded throughout the Company. ● Our commitment to providing a safe work environment and promoting employee health and well-being through continuous improvement activities, education and communication. ● An internal communications program designed to engage and motivate employees to support our strategy, values and culture. ● Our “flawless execution” program, or Fe program, an internal continuous improvement program that rewards employees who achieve profitable growth by delivering superior customer service and exceeding customer expectations. ● Operational initiatives designed to improve efficiencies and reduce costs by improving and automating processes and creating an environment to facilitate change and improve the way we work and create value. ● Information systems and key metric reporting to focus managers on achieving specific operating objectives. ● Alignment of compensation with the financial objectives and performance of the Company and the achievement of specific financial and operating objectives. 5 Table of Contents We believe our depth of management experiences, facilities, locations, processing capabilities, inventory, focus on safety, quality and customer service, extensive and experienced sales force, and the strength of our customer and supplier relationships provide a strong foundation for implementation of our strategy and achievement of our objectives.
Greiff has served as our President and Chief Operating Officer since January 2020. Mr. Greiff joined us in 2009 to lead our specialty metals business and has previously served as our Executive Vice President and Chief Operating Officer.
Manson has served in various capacities at our company since 1996, and previously served as our Vice President and Treasurer. Andrew S. Greiff has served as our President and Chief Operating Officer since January 2020. Mr. Greiff joined us in 2009 to lead our specialty metals business and has previously served as our Executive Vice President and Chief Operating Officer.
We collaborate across the metal supply chain, working with metals producers, service providers, customers, and industry-sponsored organizations to develop industry processing standards to drive cost out of the supply chain. Information security and continuous availability of information processing are of highest priority.
Our business analysts work with our quality team to identify opportunities for efficiency and improved customer service. We collaborate across the metal supply chain, working with metals producers, service providers, customers, and industry-sponsored organizations to develop industry processing standards to drive cost out of the supply chain. Information security and continuous availability of information processing are of highest priority.
Seasonality Seasonal factors may cause demand fluctuations within the year, which could impact our results of operations. Typically, demand in the first half of the year is stronger than the second half of the year, as it contains more ship days and is not impacted by the seasonal customer shut-downs in July, November and December due to holidays.
Typically, demand in the first half of the year is stronger than the second half of the year, as it contains more ship days and is not impacted by the seasonal customer shut-downs in July, November and December due to holidays.
Industry 2022 2021 2020 Industrial machinery and equipment manufacturers and their fabricators 52% 47% 47% Metals service centers 9% 11% 11% Residential and commercial construction 7% 8% 8% Automobile manufacturers and their suppliers 2% 7% 7% Transportation equipment manufacturers 8% 6% 6% All others 22% 21% 21% While we ship products throughout the United States, most of our customers are located in the midwestern, eastern and southern regions of the United States.
Industry 2023 2022 2021 Industrial machinery and equipment manufacturers and their fabricators 48 % 52 % 47 % Metals service centers 9 % 9 % 11 % Transportation equipment manufacturers 8 % 8 % 6 % Residential and commercial construction 6 % 7 % 8 % Agricultural and farm equipment 6 % 5 % 4 % End use products 6 % 1 % 1 % All others 17 % 18 % 23 % While we ship products throughout the United States, most of our customers are located in the midwestern, eastern and southern regions of the United States.
Our Romeoville, Illinois and Locust, North Carolina facilities have earned the American Society of Mechanical Engineers S Certification and our Locust, North Carolina facility has earned the National Board of Boiler & Pressure Vessel Inspectors R and U Certifications. 8 Our office building in Winder, Georgia has received Leadership in Energy and Environmental Design (LEED) certification.
Our Romeoville, Illinois and Locust, North Carolina facilities have earned the American Society of Mechanical Engineers S Certification and our Locust, North Carolina facility has earned the National Board of Boiler & Pressure Vessel Inspectors R and U Certifications.
We believe that we are in material compliance with these laws and regulations and do not believe that future compliance with such laws and regulations will have a material adverse effect on our business, financial condition, results of operations and cash flows.
We believe that we are in material compliance with these laws and regulations and do not believe that future compliance with such laws and regulations will have a material adverse effect on our business, financial condition, results of operations and cash flows. Seasonality Seasonal factors may cause demand fluctuations within the year, which could impact our results of operations.
The following table sets forth, as of December 31, 2022, the major pieces of processing equipment in operation by segment: Processing Equipment Consolidated Flat Products Tubular and Pipe Products Total Cut-to-length 18 14 32 Slitting 12 - 12 Shearing 9 - 9 Blanking 2 - 2 Tempering 3 - 3 Stretcher-leveling 2 - 2 Plate processing 26 - 26 Laser processing 30 10 40 Forming 24 - 24 Machining 41 82 123 Tube processing 2 35 37 Finishing 31 3 34 Painting 1 1 2 Total 201 145 346 Our quality assurance system, led by certified specialists and engineers, establishes controls and procedures covering all aspects of our products from the time the material is ordered through receipt, processing and shipment to the customer.
The following table sets forth, as of December 31, 2023, the major pieces of processing equipment in operation by segment: Processing Equipment Consolidated Flat Products Tubular and Pipe Products Total Cut-to-length 22 15 37 Slitting 12 - 12 Shearing 10 - 10 Blanking 3 - 3 Tempering 3 - 3 Stretcher-leveling 2 - 2 Plate processing 29 - 29 Laser processing 31 20 51 Forming 31 - 31 Machining 36 67 103 Tube processing - 40 40 Finishing 38 5 43 Painting 3 1 4 Total 220 148 368 Our quality assurance system, led by certified specialists and engineers, establishes controls and procedures covering all aspects of our products from the time the material is ordered through receipt, processing and shipment to the customer.
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.
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.
ITEM 1. BUSINESS The Company We are a leading metals service center that operates in three reportable segments; specialty metals flat products, carbon flat products, and tubular and pipe products. We provide metals processing and distribution services for a wide range of customers.
We provide metals processing and distribution services for a wide range of customers. We operate in three reportable segments: specialty metals flat products, carbon flat products, and tubular and pipe products.
Marabito joined us in 1994 and served as our Chief Financial Officer from 2000 through 2018. Richard A. Manson has served as our Chief Financial Officer since January 2019. Mr. Manson has served in various capacities at our company since 1996, and previously served as our Vice President and Treasurer. Andrew S.
Richard T. Marabito has served as our Chief Executive Officer since January 2019. Mr. Marabito joined us in 1994 and served as our Chief Financial Officer from 2000 through 2018. Richard A. Manson has served as our Chief Financial Officer since January 2019. Mr.
This new facility is expected to be operational by the second quarter of 2023 and will be fabrication focused with an emphasis on specialty metals flat-rolled products and downstream value-added services. The transfer of the fabrication business to Bartlett, Illinois also supports our growth plans for the cut-to-length business out of the Schaumburg, Illinois facility.
On June 1, 2022, we began leasing an 81,400 square-foot metal fabrication facility, located in Bartlett, Illinois. This new facility is fabrication focused with an emphasis on specialty metals flat-rolled products and downstream value-added services. The transfer of the fabrication business to Bartlett, Illinois also supports our growth plans for the cut-to-length business out of the Schaumburg, Illinois facility.
Olympic Committee. The U.S. Supreme Court has recognized, however, that certain users may continue to use the word based on long-term and continuous use. We have used the name Olympic Steel since 1954, but are prevented from registering the name “Olympic” and from being qualified to do business as a foreign corporation under that name in certain states.
We have used the name Olympic Steel since 1954, but are prevented from registering the name “Olympic” and from being qualified to do business as a foreign corporation under that name in certain states.
Shaw also manufactures and distributes stainless steel bollards and water treatment systems. The acquisition expanded our stainless-steel distribution and fabrication capabilities, as well as our entry into architectural and barrier defense bollards. On December 14, 2020, we acquired substantially all of the net assets of Action Stainless, based outside of Dallas, Texas.
Shaw also manufactures and distributes stainless steel bollards and water treatment systems. The acquisition expanded our stainless-steel distribution and fabrication capabilities, as well as our entry into architectural and barrier defense bollards.
Michael D. Siegal began his career with us in the early 1970s and serves as our Executive Chairman of the Board of Directors. Mr. Siegal served as our Chief Executive Officer from 1984 through 2018. Richard T. Marabito has served as our Chief Executive Officer since January 2019. Mr.
Our tubular and pipe products segment was established in 2011 and has expanded since its creation, most recently with the acquisition of CTB in 2023. Michael D. Siegal began his career with us in the early 1970s and serves as our Executive Chairman of the Board of Directors. Mr. Siegal served as our Chief Executive Officer from 1984 through 2018.
Our specialty metals flat products segment was established in 2015 and has expanded since its creation, most recently with the acquisitions of Shaw in 2021, Action Stainless in 2020 and, Berlin Metals, LLC in 2018, and our carbon flat products segment expanded into manufacturing metal intensive branded products with the acquisitions of McCullough Industries, or McCullough, and certain assets related to the manufacturing of the EZ Dumper® hydraulic dump inserts, or EZ Dumper, in 2019.
Our carbon flat products segment expanded into manufacturing metal intensive branded products with the acquisitions of Metal-Fab in 2023 McCullough Industries, or McCullough, and certain assets related to the manufacturing of the EZ Dumper® hydraulic dump inserts, or EZ Dumper, in 2019.
Metal-Fab is a manufacturer of venting, micro air and clean air products for residential, commercial and industrial applications. The acquisition intends to expand our portfolio of metal-intensive end-use products and widen our product offerings, manufacturing capabilities and geographic reach.
On January 3, 2023, we purchased all of the outstanding shares of capital stock of Metal-Fab, headquartered in Wichita, Kansas. Metal-Fab is a manufacturer of venting, micro air and clean air products for residential, commercial and industrial applications. The acquisition expanded our portfolio of metal-intensive end-use products and widened our product offerings, manufacturing capabilities and geographic reach.
With the recent acquisition of Metal-Fab, Inc., or Metal-Fab, on January 3, 2023, our carbon flat products segment will further expand our product offerings to include the manufacture of venting, micro air and clean air products for residential, commercial and industrial applications. Metal-Fab’s operational results are not included in this Annual Report on Form 10-K.
Through the acquisition of Metal-Fab, Inc., or Metal-Fab, on January 3, 2023, the carbon flat products segment further expanded its product offerings to include venting, micro air and clean air products for residential, commercial and industrial applications.
We are an important customer of flat-rolled coil and plate, pipe and tube for many of our principal suppliers, but we are not dependent on any one supplier. We purchase in bulk from metals producers in quantities that are efficient for such producers. This enables us to maintain a continued source of supply that we believe is competitively priced.
We purchase in bulk from metals producers in quantities that are efficient for such producers. This enables us to maintain a continued source of supply that we believe is competitively priced.
Automation Initiatives We believe that investing in processing automation solutions is an important component in realizing our profitable growth strategy. We have made investments in automated packaging, material handling and welding, among other solutions, to gain production efficiencies, decrease production costs, improve safety conditions for our employees and to ease labor shortage risks.
We have made investments in automated packaging, material handling and welding, among other solutions, to gain production efficiencies, decrease production costs, improve safety conditions for our employees and to ease labor shortage risks. Human Capital Management Our employees are our most valued resource. The unique insights and experiences of our diverse team are what fuel our safe, profitable growth.
We hold patents for certain bollard coverings and methods of manufacturing and use thereof which were acquired in conjunction with the asset acquisition of Shaw Stainless. Government Regulation Our operations are governed by many laws and regulations, including those relating to workplace safety and worker health, principally the Occupational Safety and Health Act and regulations thereunder.
Government Regulation Our operations are governed by many laws and regulations, including those relating to workplace safety and worker health, principally the Occupational Safety and Health Act and regulations thereunder.
Customers and Distribution We have a diverse customer and geographic base, which helps to reduce the inherent risk and cyclicality of our business. Net sales to our top three customers, in the aggregate, approximated 7%, 6% and 6% of our consolidated net sales in 2022, 2021 and 2020, respectively.
Net sales to our top three customers, in the aggregate, approximated 8%, 7% and 6% of our consolidated net sales in 2023, 2022 and 2021, respectively.
Through the acquisition of Shaw Stainless & Alloy, Inc., or Shaw, on October 1, 2021 and 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.
Through acquisitions, our specialty metals flat products segment has expanded its geographical footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tube and pipe and the manufacturing and distribution of stainless steel bollards and water treatment systems.
These controls and procedures encompass periodic supplier and customer audits, workshops with customers, inspection equipment and criteria, preventative actions, material traceability and certification. We have quality testing labs at several of our facilities, including at our facilities in Cleveland, Ohio; Minneapolis, Minnesota; Buford, Georgia and Bettendorf, Iowa.
These controls and procedures encompass periodic supplier and customer audits, workshops with customers, inspection equipment and criteria, preventative actions, material traceability and certification.
Suppliers We concentrate on developing supply relationships with reliable high-quality domestic and international metals producers, using a coordinated effort to be the customer of choice for business critical suppliers. We employ sourcing strategies that maximize the quality, production lead times and transportation economies of a global supply base.
When metals prices increase, competitive conditions will influence how much of the price increase we can pass on to our customers. 9 Table of Contents Suppliers We concentrate on developing supply relationships with reliable high-quality domestic and international metals producers, using a coordinated effort to be the customer of choice for business critical suppliers.
In addition to full electronic data interchange, or EDI, capabilities with our customers and vendors, we also have implemented extranet sites for specific customers. System and Process Enhancements. We have completed development of business system solutions to replace our legacy information systems and have successfully implemented new ERP systems at most of our locations.
In addition to full electronic data interchange, or EDI, capabilities with our customers and vendors, we also have implemented extranet sites for specific customers. System and Process Enhancements. We continue to implement ERP systems to provide standardized business processes, enhanced inventory management, production cost, sales administrative controls and reduced technical support requirements.
Human Capital Management Our employees are our most valued resource. We work to attract a diverse, qualified workforce through an inclusive and accessible recruiting process that utilizes online recruiting, campus outreach, internships and job fairs. We seek to retain and develop employees by offering competitive wages, benefits and training opportunities, as well as promoting a safe and healthy workplace culture.
We work to attract a diverse, qualified workforce through an inclusive and accessible recruiting process that utilizes online recruiting, campus outreach, internships and job fairs.
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. 11 Service Marks, Trade Names and Patents We conduct our business under the name “Olympic Steel.” A provision of federal law grants exclusive rights to the word “Olympic” to the U.S.
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. 11 Table of Contents Environmental Olympic Steel is a metals service center. We warehouse, process, and distribute metal products; however, we are not a metals producer (steel mill).
Environmental We are committed to responsible environmental management practices and commit to the prevention of pollution by continually identifying opportunities and improving environmental performance in all aspects of our business. Our facilities are subject to certain federal, state and local requirements relating to the protection of the environment.
Our facilities are subject to certain federal, state and local requirements relating to the protection of the environment.
Our wholly owned subsidiary, ACT Acquisition, Inc., does business under the name “Action Stainless & Alloys.” Our wholly-owned subsidiary, SHAQ, Inc., does business under the name “Shaw Stainless & Alloys”.
Our wholly owned subsidiary, ACT Acquisition, Inc., does business under the name “Action Stainless & Alloys.” Our wholly-owned subsidiary, SHAQ, Inc., does business under the name “Shaw Stainless & Alloys”. The registered trademarks “DYNAGUARD”, “DG”, “MF”, “METAL-FAB”, “METAL-FAB INC.”, “TEMP/GUARD”, “MICRO AIR”, “CORR/GUARD”, “SURELOCK”, “ROTO-PULSE”, “MISTMAX” and “FORCE” were acquired in conjunction with the acquisition of Metal-Fab.
Our information professionals employ proven security and monitoring practices, controls, education and tools to mitigate cyber-security risks and threats. In case of physical emergency or threat, our ERP systems, accounting systems, internet and communications systems are duplicated at a secure off-site computing facility or through secure, multi-site cloud providers.
In case of physical emergency or threat, our ERP systems, accounting systems, internet and communications systems are duplicated at an off-site computing facility or through , multi-site cloud providers. 10 Table of Contents Automation Initiatives We believe that investing in processing automation solutions is an important component in realizing our profitable growth strategy.
In addition, we distribute metal tubing, pipe, bar, valves and fittings and fabricate 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.
Our tubular and pipe products segment's focus is on the distribution of metal tubing, pipe, bar, valves and fittings and the fabrication of parts supplied to various industrial markets.
Investments and Acquisitions . During the past three years, we have accelerated our growth through acquisitions and capital investments in facilities and processing equipment. Our Vice President of Strategic Development focuses on profitable growth opportunities, including acquisitions. On January 3, 2023, we purchased all of the outstanding shares of capital stock of Metal-Fab, headquartered in Wichita, Kansas.
Certain elements of our strategy are set forth in more detail below. Investments and Acquisitions . During the past three years, we have accelerated our growth through acquisitions and capital investments in facilities and processing equipment. On October 2, 2023, we acquired all membership interest of CTB, headquartered in Conway, Arkansas with operations also located in Tulsa, Oklahoma.
Removed
Shaw also manufactures and distributes stainless steel bollards and water treatment systems. Action Stainless offers a range of processing capabilities, including plasma, laser and waterjet cutting and computer numerical control, or CNC, machining.
Added
ITEM 1. BUSINESS The Company We are a leading metals service center focused on the direct sale and value-added processing of carbon and coated sheet, plate and coil products; stainless steel sheet, plate, bar and coil; aluminum sheet, plate and coil; pipe, tube bar, valves and fittings, tin plate and metal-intensive end-use products.
Removed
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.
Added
Through the acquisition of Central Tube and Bar, or CTB, on October 2, 2023, the tubular and pipe products segment further expanded its geographic footprint and extended its value-added contract manufacturing capabilities. We also perform toll processing of customer-owned metals. We sell certain products internationally, primarily in Canada and Mexico.
Removed
Our tubular and pipe products segment was established in 2011 after the acquisition of Chicago Tube and Iron, or CTI, a private leading distributor of tubing, pipe, bar, valves, and fittings.
Added
Our specialty metals flat products segment was established in 2015 and has expanded since its creation, with the acquisitions of Shaw Stainless & Alloy, Inc., or Shaw, in 2021, Action Stainless & Alloys, Inc., or Action Stainless, in 2020 and, Berlin Metals, LLC in 2018.
Removed
We believe our depth of management experiences, facilities, locations, processing capabilities, inventory, focus on safety, quality and customer service, extensive and experienced sales force, and the strength of our customer and supplier relationships provide a strong foundation for implementation of our strategy and achievement of our objectives. Certain elements of our strategy are set forth in more detail below.
Added
CTB offers a range of value-added fabrication services, including tube laser cutting, tube bending, robotic welding, flat laser burning and brake press forming. The acquisition expanded our tubular and pipe products segment's fabrication capabilities for the transportation, agricultural, commercial furniture and data center construction industries.
Removed
Metal-Fab’s operational results are not included in this Annual Report on Form 10-K but will be included starting in the first quarter of 2023. On June 1, 2022, we began leasing an 81,400-square-foot metal fabrication facility, located in Bartlett, Illinois.
Added
We have quality labs for tensile testing at several of our facilities, including at our facilities in Cleveland, Ohio, Minneapolis, Minnesota, Buford, Georgia and Bettendorf, Iowa and an Underwriters Laboratory (UL) for electrical products testing at our facility in Wichita, Kansas. In addition, 31 of our facilities have earned International Organization for Standardization (ISO) 9001:2015 certifications.
Removed
Action Stainless is a full-line distributor of stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe and offers a range of processing capabilities, including plasma, laser and waterjet cutting and CNC machining. The acquisition expanded the geographic footprint of our specialty metals flat products segment with locations in Texas, Arkansas, South Carolina and Missouri.
Added
Our office building in Winder, Georgia has received the Leadership in Energy and Environmental Design (LEED) certification. 8 Table of Contents Customers and Distribution We have a diverse customer and geographic base, which helps to reduce the inherent risk and cyclicality of our business.
Removed
On June 1, 2020, we opened a 120,000-square-foot metal processing facility, located in Buford, Georgia. The location expanded our southeastern region footprint, which also includes facilities in Locust, North Carolina; Winder, Georgia; and Hanceville, Alabama.
Added
We employ sourcing strategies that maximize the quality, production lead times and transportation economies of a global supply base. We are an important customer of flat-rolled coil and plate, pipe and tube for many of our principal suppliers, but we are not dependent on any one supplier.
Removed
The Buford facility acts as the region’s primary flat-rolled fabrication hub, with first-stage metal processing anchored in the Winder facility, metal distribution in both the Winder, Georgia and Hanceville, Alabama locations, and pipe and tube laser fabrication and bending and welding at the Locust, North Carolina location.
Added
Our information professionals employ security and monitoring practices, controls, education and tools to mitigate cybersecurity risks and threats.
Removed
As part of the expansion, we added a new Mitsubishi fiber optic laser, a new Eagle 20kw laser system, a 600-ton Verson stamping press with a COE coil feed system and 2 Lincoln robotic welding cells.
Added
We want our teams to reflect the diverse communities where we live and work. We have a focus on inclusion committed to building a culture that strives to acknowledge and overcome bias and cultivates leaders who value, support and celebrate diversity of thought and perspective.
Removed
The additional equipment and processing capacity complement the region’s existing value-added fabrication capabilities and support the Company’s commitment to automotive original equipment manufacturers, or OEMs, and their tier 1 and 2 parts makers, as well as responds to increasing demand from other OEM customers.
Added
Olympic Steel's Diversity, Equity and Inclusion, or DEI, work started as a women's development initiative several years ago and the scope has since broadened to build a sustainable program, working with industry peers and other outside partners to gather insights and best practices that will help shape the future of our organization.
Removed
In addition, 28 of our facilities have earned International Organization for Standardization (ISO) 9001:2015 certifications.
Added
We seek to retain and develop employees by offering competitive wages, benefits and training opportunities, as well as promoting a safe and healthy workplace culture. Our safety motto is, "Safety first. Always. And, it starts with me!". We are relentlessly focused on safety.
Removed
We continue to implement these systems to provide standardized business processes, enhanced inventory management, production cost, sales administrative controls and reduced technical support requirements. Our business analysts work with our quality team to identify opportunities for efficiency and improved customer service.
Added
Through best practice sharing and an emphasis on leading indicators, we are strengthening our safety culture of learning and building a safer work environment. We believe that engagement from every employee is critical. Our Safety Committees at each division help us increase engagement, while emphasizing our proactive commitment to safety.

… 7 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

47 edited+3 added−9 removed80 unchanged
Biggest changeImpairment in the carrying value of intangible assets could result in the incurrence of impairment charges and negatively impact our results of operations. The net carrying value of intangibles represents non-amortizable goodwill and trade names, covenant not to compete and customer relationships, net of accumulated amortization, related to recent acquisitions.
Biggest changeThe net carrying value of intangibles represents non-amortizable goodwill and trade names, covenant not to compete, technology and know-how and customer relationships, net of accumulated amortization, related to recent acquisitions. Indefinitely lived assets are evaluated for impairment annually or whenever events or changes in circumstance indicate that the carrying amounts of these assets may not be recoverable.
Expectations relating to environmental, social and governance considerations expose us to potential liabilities, increased costs, reputational harm and other adverse effects on our business. Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance (ESG) considerations relating to businesses, including climate change and greenhouse gas emissions, human capital and diversity, equity and inclusion.
Expectations relating to environmental, social and governance considerations expose us to potential liabilities, increased costs, reputational harm and other adverse effects on our business. Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on ESG considerations relating to businesses, including climate change and greenhouse gas emissions, human capital and diversity, equity and inclusion.
Although it is not possible to predict the ultimate impact of the COVID-19 pandemic or future worldwide health emergencies, including on our business, financial position or liquidity, such impacts that may be material include, but are not limited to: (i) reduced sales and profit levels, (ii) the slower payment of accounts receivable and potential increases in uncollectible accounts receivable, (iii) falling metals prices that could lead to lower of cost or market inventory adjustments and the impairment of intangible and long-lived assets, (v) reduced availability and productivity of our employees, (vi) 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, (vii) negative impacts on our liquidity position, (viii) inability to access our traditional financing sources on the same or reasonably similar terms as were available before the a pandemic, and (ix) increased costs and less ability to access funds under our ABL Credit Facility and the capital markets.
Although it is not possible to predict the ultimate impact of the pandemic or future worldwide health emergencies, including on our business, financial position or liquidity, such impacts that may be material include, but are not limited to: (i) reduced sales and profit levels, (ii) the slower payment of accounts receivable and potential increases in uncollectible accounts receivable, (iii) falling metals prices that could lead to lower of cost or market inventory adjustments and the impairment of intangible and long-lived assets, (v) reduced availability and productivity of our employees, (vi) 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, (vii) negative impacts on our liquidity position, (viii) inability to access our traditional financing sources on the same or reasonably similar terms as were available before the a pandemic, and (ix) increased costs and less ability to access funds under our ABL Credit Facility and the capital markets.
We are also subject to Section 1701.831 of the Ohio Revised Code, which provides that certain notice and informational filings and special shareholder meeting and voting procedures must be followed prior to consummation of a proposed “control share acquisition.” Assuming compliance with the notice and information filings prescribed by the statute, a proposed control share acquisition may be made only if the acquisition is approved by a majority of the voting power of the issuer represented at the meeting and at least a majority of the voting power remaining after excluding the combined voting power of the “interested shares.” 24 Certain provisions contained in our Amended and Restated Articles of Incorporation and Amended and Restated Code of Regulations and Ohio law could delay or prevent the removal of directors and other management and could make a merger, tender offer or proxy contest involving us that you may consider to be in your best interest more difficult.
We are also subject to Section 1701.831 of the Ohio Revised Code, which provides that certain notice and informational filings and special shareholder meeting and voting procedures must be followed prior to consummation of a proposed “control share acquisition.” Assuming compliance with the notice and information filings prescribed by the statute, a proposed control share acquisition may be made only if the acquisition is approved by a majority of the voting power of the issuer represented at the meeting and at least a majority of the voting power remaining after excluding the combined voting power of the “interested shares.” 24 Table of Contents Certain provisions contained in our Amended and Restated Articles of Incorporation and Amended and Restated Code of Regulations and Ohio law could delay or prevent the removal of directors and other management and could make a merger, tender offer or proxy contest involving us that you may consider to be in your best interest more difficult.
Increases in the cost or availability of transportation or labor could adversely affect our business and operations, as we may be unable to pass cost increases on to our customers. We ship products throughout the United States via our owned truck fleet, our dedicated carrier fleet or by third-party trucking firms.
Increases in the cost or availability of transportation or labor could adversely affect our business and operations, as we may be unable to pass cost increases on to our customers. We ship products throughout the United States via our truck fleet, our dedicated carrier fleet or by third-party trucking firms.
Our operating results may be below the expectations of our investors or stock market analysts as a result of a variety of factors, including the impact of LIFO expense estimates, many of which are outside of our control. Factors that may affect our quarterly operating results include, but are not limited to, the risk factors listed above.
Our operating results may be below the expectations of our investors or stock market analysts as a result of a variety of factors, including the impact of LIFO estimates, many of which are outside of our control. Factors that may affect our quarterly operating results include, but are not limited to, the risk factors listed above.
It may be difficult for us in the future to obtain the necessary funds and liquidity on terms acceptable to us, or at all, to run and expand our business. 21 The borrowings under our ABL Credit Facility are primarily at variable interest rates.
It may be difficult for us in the future to obtain the necessary funds and liquidity on terms acceptable to us, or at all, to run and expand our business. The borrowings under our ABL Credit Facility are primarily at variable interest rates.
Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, comply with federal, state or international ESG laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition and stock price. 23 Risks Related to Our Common Stock The market price for our common stock may be volatile.
Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, comply with federal, state or international ESG laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition and stock price. 23 Table of Contents Risks Related to Our Common Stock The market price for our common stock may be volatile.
Numerous factors, such as general economic conditions, fluctuations in the U.S. dollar, government stimulus or regulation, availability of adequate credit and financing, consumer confidence, significant business interruptions, labor shortages or work stoppages, energy prices, seasonality, customer inventory levels and other factors beyond our control, may cause significant demand fluctuations from one or more of these industries.
Numerous factors, such as general economic conditions, fluctuations in the U.S. dollar, government stimulus or regulation, availability of adequate credit and financing, interest rates, consumer confidence, significant business interruptions, labor shortages or work stoppages, energy prices, seasonality, customer inventory levels and other factors beyond our control, may cause significant demand fluctuations from one or more of these industries.
Any such increase could result in lower net income or cause the need to reduce our insurance coverage. In addition, a future claim may be brought against us that could have a material adverse effect on us. In some circumstances, we may be entitled to certain legal protections or indemnifications from our customers through contractual provisions, laws, regulations or otherwise.
Any such increase could result in lower net income or cause the need to reduce our insurance coverage. In addition, a future claim may be brought against us that could have a material adverse impact on us. In some circumstances, we may be entitled to certain legal protections or indemnifications from our customers through contractual provisions, laws, regulations or otherwise.
Fewer available suppliers increases the risk of supply disruption through both scheduled and unscheduled supplier outages. Conversely, the addition of new mill sources and decreased domestic demand could lead to domestic over capacity, which could lead to a decrease in steel prices, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Fewer available suppliers increases the risk of supply disruption through both scheduled and unscheduled supplier outages. Conversely, the addition of new mill production and decreased domestic demand could lead to domestic over capacity, which could lead to a decrease in steel prices, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
During 2021 and 2022, we experienced increased supply chain disruptions resulting from the imbalance of metal supply and end-user demands as customer demand increased without a corresponding increase in metal supply, as businesses reopened after the COVID-19 pandemic. Our inability to meet customer demand as a result of supply disruptions and inflationary pressures could result in lower sales and profits.
During 2021 and 2022, we experienced increased supply chain disruptions resulting from the imbalance of metal supply and end-user demands as customer demand increased without a corresponding increase in metal supply, as businesses reopened after the pandemic. Our inability to meet customer demand as a result of supply disruptions and inflationary pressures could result in lower sales and profits.
If the U.S. presidential administration materially modifies U.S. laws and regulations and international trade agreements, our business, financial condition, and results of operations could be affected. 22 We are subject to significant environmental, health and safety laws and regulations and related compliance expenditures and liabilities.
If the U.S. presidential administration materially modifies U.S. laws and regulations and international trade agreements, our business, financial condition, and results of operations could be affected. 22 Table of Contents We are subject to significant environmental, health and safety laws and regulations and related compliance expenditures and liabilities.
Although we have secure back-up systems off-site, the destruction or failure of any one of our computer-based systems for any significant period of time could materially adversely affect our business, financial condition, results of operations and cash flows. Our implementation of information systems could adversely affect our results of operations and cash flows.
Although we have secure back-up systems off-site, the destruction or failure of any one of our computer-based systems for any significant period of time could materially adversely affect our business, financial condition, results of operations and cash flows.
The continued demand for skilled labor has resulted in the need to increase pay rates in certain markets. In addition, we have seen a decline in the skilled labor applicant pool since the start of the COVID-19 pandemic and increased competition for skilled labor.
The continued demand for skilled labor has resulted in the need to increase pay rates in certain markets. In addition, we have seen a decline in the skilled labor applicant pool since the start of the pandemic and increased competition for skilled labor.
Examples include: ● changes in commodity prices, especially metals; ● changes in financial estimates or recommendations by stock market analysts regarding us or our competitors; ● the operating and stock performance of other companies that investors may deem comparable; ● developments affecting us, our customers or our suppliers; ● press releases, earnings releases or publicity relating to us or our competitors or relating to trends in the metals service center industry; ● inability to meet securities analysts’ and investors’ quarterly or annual estimates or targets of our performance; ● sales of our common stock by large shareholders; ● the amount of shares acquired for short-term investments; ● general domestic or international economic, market and political conditions; ● fluctuations in the value of the U.S. dollar; ● changes in the legal or regulatory environment affecting our business; and ● announcements by us or our competitors of significant acquisitions, dispositions or joint ventures, or other material events impacting the domestic or global metals industry.
Examples include: ● changes in commodity prices, especially metals; ● changes in financial estimates or recommendations by stock market analysts regarding us or our competitors; ● the operating and stock performance of other companies that investors may deem comparable; ● developments affecting us, our customers or our suppliers; ● press releases, earnings releases or publicity relating to us or our competitors or relating to trends in the metals service center industry; ● inability to meet securities analysts’ and investors’ quarterly or annual estimates or targets of our performance; ● sales of our common stock by large shareholders; ● the amount of shares acquired for short-term investments; ● general domestic or international economic, market and political conditions; ● fluctuations in the value of the U.S. dollar; ● changes in (or changes in expectation) related to interest rates and the Federal Funds Rates; ● changes in the legal or regulatory environment affecting our business; and ● announcements by us or our competitors of significant acquisitions, dispositions or joint ventures, or other material events impacting the domestic or global metals industry.
Siegal, our Executive Chairman of the Board and one of our largest shareholders, owned approximately 10.9% of our outstanding common stock as of December 31, 2022. Mr. Siegal may have the ability to significantly influence matters requiring shareholder approval. In deciding how to vote on such matters, Mr. Siegal may be influenced by interests that conflict with yours.
Siegal, our Executive Chairman of the Board and one of our largest shareholders, owned approximately 9.9% of our outstanding common stock as of December 31, 2023. Mr. Siegal may have the ability to significantly influence matters requiring shareholder approval. In deciding how to vote on such matters, Mr. Siegal may be influenced by interests that conflict with yours.
We have employment agreements, which include non-competition provisions, with our Chief Executive Officer, our President and Chief Operating Officer, and our Chief Financial Officer that expire on January 1, 2024, January 1, 2025, and January 1, 2027, respectively. 20 Participation in multiemployer pension plans carry withdrawal liability risks, which could impact our results of operations and financial condition.
We have employment agreements, which include non-competition provisions, with our President and Chief Operating Officer, and our Chief Financial Officer that expire on January 1, 2025 and January 1, 2027, respectively. Participation in multiemployer pension plans carry withdrawal liability risks, which could impact our results of operations and financial condition.
Any future withdrawal liability could adversely affect our business, financial condition, results of operations and cash flows. Our insurance coverage, customer indemnifications or other liability protections may be unavailable or inadequate to cover all of our significant risks, which could have a material adverse effect on our results of operations.
Any future withdrawal liability could adversely affect our business, financial condition, results of operations and cash flows. 20 Table of Contents Our insurance coverage, customer indemnifications or other liability protections may be unavailable or inadequate to cover all of our significant risks, which could have a material adverse effect on our results of operations.
Increased global information technology security requirements, vulnerabilities, threats and a rise in sophisticated and targeted cybercrime pose a risk to the security of our systems, networks and the confidentiality, availability and integrity of our data. The risk has been further enhanced with an increased remote workforce post COVID-19 pandemic.
Increased global information technology security requirements, vulnerabilities, threats and a rise in sophisticated and targeted cybercrime pose a risk to the security of our systems, networks and the confidentiality, availability and integrity of our data and systems. The risk has been further enhanced with an increased remote workforce.
Indefinitely lived assets are evaluated for impairment annually or whenever events or changes in circumstance indicate that the carrying amounts of these assets may not be recoverable. Amortizable intangible assets are evaluated for impairment whenever events or changes in circumstance indicate that the carrying amounts of these assets may not be recoverable.
Amortizable intangible assets are evaluated for impairment whenever events or changes in circumstance indicate that the carrying amounts of these assets may not be recoverable.
Impairments to intangible assets may be caused by factors outside our control, such as increased competitive pricing pressures, lower than expected revenue and profit growth rates, changes in discount rates based on changes in the cost of capital (interest rates, etc.), or the loss of a significant customer and could result in the incurrence of impairment charges and negatively impact our results of operations. 19 Our information technology systems could be negatively affected by cyber security threats.
Impairments to intangible assets may be caused by factors outside our control, such as increased competitive pricing pressures, lower than expected revenue and profit growth rates, changes in discount rates based on changes in the cost of capital (interest rates, etc.), or the loss of a significant customer and could result in the incurrence of impairment charges and negatively impact our results of operations.
We purchased approximately 39% and 51% of our total metals requirements from our three largest suppliers in 2022 and 2021, respectively. Over the past years, supplier consolidation, decreased mill production due to the COVID-19 pandemic and import tariffs decreased steel availability and increased mill lead times and steel prices.
We purchased approximately 40% and 39% of our total metals requirements from our three largest suppliers in 2023 and 2022, respectively. Over the past years, supplier consolidation, decreased mill production due to the pandemic and import tariffs decreased steel availability and increased mill lead times and steel prices.
Supply chain disruptions and inflationary pressures caused by the COVID-19 pandemic, and other factors, has had, and could continue to have an adverse effect on our business, financial condition and liquidity. We are dependent on our suppliers to provide us with metal.
Supply chain disruptions and inflationary pressures, caused by the pandemic, increases in energy prices, and other factors, has had, and could continue to have an adverse effect on our business, financial condition and liquidity. We are dependent on our suppliers to provide us with metal.
At December 31, 2022, we employed approximately 1,668 people. Approximately 179 of the hourly plant personnel are represented by seven separate collective bargaining units. 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.
At December 31, 2023, we employed approximately 2,168 people. Approximately 244 of the hourly plant personnel are represented by seven separate collective bargaining units. 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.
Extreme weather conditions may increase our costs, temporarily impact our production capabilities or cause damage to our facilities. Severe weather may also adversely impact our suppliers and our customers and their ability to deliver and/or purchase and transport our products.
Extreme weather conditions may increase our costs, temporarily impact our production capabilities or cause damage to our facilities. Severe weather may also adversely impact our suppliers and our customers and their ability to deliver and/or purchase and transport our products. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We continue to pursue potential acquisition targets; however, we are unable to predict whether or when any prospective acquisition candidate will become available or the likelihood that any acquisition will be completed.
We continue to pursue potential acquisition targets; however, we are unable to predict whether or when any prospective acquisition candidate will become available, the likelihood that any acquisition will be completed or the ability to successfully integrate acquisitions into our business.
Declining metals prices, customer demand for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently, lower gross profits and potentially inventory lower of cost or net realizable value adjustments as we use existing inventory.
Declining metals prices, customer demand for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently, lower gross profits as we use existing inventory.
If we have misjudged our credit estimations and they result in future credit losses, lost sales or lost customers, there could be a material adverse effect on our business, financial condition, results of operations, cash flows and our allowance for credit losses.
If we have misjudged our credit estimations and they result in future credit losses, lost sales or lost customers, there could be a material adverse effect on our business, financial condition, results of operations, cash flows and our allowance for credit losses. 19 Table of Contents Our implementation of information systems and software as service could adversely affect our results of operations and cash flows.
We cannot predict the impact that the COVID-19 pandemic or future worldwide health emergencies ultimately will have on our customers, suppliers, vendors, and other business partners, and each of their financial conditions; however, any material effect on these parties could adversely impact us. The situation is changing rapidly and additional impacts may arise that we are not aware of currently.
We cannot predict the impact that the pandemic or future worldwide health emergencies ultimately will have on our customers, suppliers, vendors, and other business partners, and each of their financial conditions; however, any material effect on these parties could adversely impact us.
Despite our efforts to protect sensitive information and confidential and personal data, our facilities and systems and those of our third-party service providers may be vulnerable to security breaches.
Despite our efforts to protect sensitive information, our facilities and systems and those of our third-party service providers may be vulnerable to cybersecurity threats.
Approximately 52% and 47% of our consolidated net sales during 2022 and 2021, respectively, were directly related to industrial machinery and equipment manufacturers and their fabricators.
Approximately 48% and 52% of our 2023 and 2022 consolidated net sales, respectively, were to industrial machinery and equipment manufacturers and their fabricators.
Due to the concentration of customers in the industrial machinery and equipment industry, a decline in production levels in that industry could result in lower sales, gross profits and profitability.
Due to the concentration of customers in the industrial machinery and equipment industry, a decline in production levels in that industry could result in lower sales, gross profits and profitability. 16 Table of Contents Our business is dependent on transportation and labor.
We maintain separate regional legacy computer-based systems in the operation of our business and we depend on these systems to a significant degree, particularly for inventory management.
The failure of our key computer-based systems could have a material adverse effect on our business. We maintain ERP and legacy computer-based systems in the operation of our business and we depend on these systems to a significant degree, particularly for inventory management.
In periods of economic slowdown or recession in the United States, excess customer or service center inventory or a decrease in the prices that we can realize from sales of our products to customers in any of these industries could result in lower sales, gross profits and profitability. 17 Approximately 52% and 47% of our 2022 and 2021 consolidated net sales, respectively, were to industrial machinery and equipment manufacturers and their fabricators.
In periods of economic slowdown or recession in the United States, excess customer or service center inventory or a decrease in the prices that we can realize from sales of our products to customers in any of these industries could result in lower sales, gross profits and profitability.
Through our CTI subsidiary, we contribute to one multiemployer pension plan.
Through our Chicago Tube and Iron, or CTI, subsidiary, we contribute to one multiemployer pension plan.
This could lead to disclosure, modification or destruction of proprietary and other key information, ransom payments, production downtimes and operational disruptions, which in turn could adversely affect our business, financial condition, results of operations and cash flows. The failure of our key computer-based systems could have a material adverse effect on our business.
This could lead to disclosure, modification or destruction of proprietary and other key information, ransom payments, production downtimes, lost cash or other assets and operational disruptions, regulatory investigations, fines, and lawsuits, which in turn could adversely affect our business, financial condition, results of operations and cash flows.
The loss of any one of our major customers or decrease in demand by those customers or credit constraints placed on them could have a material adverse effect on our business, our results of operations and our cash flows. 18 Capital deployed for acquisitions and capital investments at our existing locations may be unable to achieve expected results, or sustain our growth and events or circumstances that could adversely impact operations could have a material adverse effect on our results of operations.
Capital deployed for acquisitions and capital investments at our existing locations may be unable to achieve expected results, or sustain our growth and events or circumstances that could adversely impact operations could have a material adverse effect on our results of operations.
Decreased availability of labor could harm our reputation, negatively affect our customer relationships and have a material adverse effect on our financial position and results of operations. 16 The availability of drivers and labor is integral to our operations, and increases in our cost of transportation or labor may have a material adverse effect on our financial position and results of operations.
The availability of drivers and labor is integral to our operations, and increases in our cost of transportation or labor may have a material adverse effect on our financial position and results of operations. Labor disruptions at any of our facilities or those of major customers could adversely affect our business, results of operations and financial condition.
Increases in energy and fuel prices will increase our operating costs and may reduce our profitability if we are unable to pass all of the increases on to our customers. Labor disruptions at any of our facilities or those of major customers could adversely affect our business, results of operations and financial condition.
Increases in energy and fuel prices will increase our operating costs and may reduce our profitability if we are unable to pass all of the increases on to our customers.
Changing metals prices therefore could significantly impact our net sales, gross profit, operating income and net income, and could impair or adversely impact the carrying value of any of our assets. Our business is dependent on transportation and labor.
Changing metals prices therefore could significantly impact our net sales, gross profit, operating income and net income, and could impair or adversely impact the carrying value of any of our assets. An interruption in the sources of our metals supply could have a material adverse effect on our results of operations.
If interest rates in the future, which may be highly volatile, were to increase 100 basis points (1.0%) from December 31, 2022 rates and, assuming no change in total debt from December 31, 2022 levels, the additional annual interest expense to us would be approximately $0.9 million.
If interest rates, which may be highly volatile, were to increase 100 basis points (1.0%) from December 31, 2023 rates and, assuming no change in total debt from December 31, 2023 levels, the additional annual interest expense to us would be approximately $1.9 million. 21 Table of Contents Regulatory and Environmental Risks Quotas and tariffs imposed or removed as a result of government actions can cause significant fluctuations in our operating results.
To the extent the duration of any of these conditions extends for a longer period of time, the impact will generally be a more severe adverse impact.
To the extent the duration of any of these conditions extends for a longer period of time, the impact will generally be a more severe adverse impact. If our energy costs increase disproportionately to our revenues, our earnings could be reduced. We use energy to process and transport our products.
Our success is dependent upon our relationships with certain key customers. We have derived and expect to continue to derive a significant portion of our revenues from a relatively limited number of customers. Collectively, our top three customers accounted for approximately 7% and 6% of our consolidated net sales in 2022 and 2021, respectively.
Any such reduction in the demand for our products could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our success is dependent upon our relationships with certain key customers. We have derived and expect to continue to derive a significant portion of our revenues from a relatively limited number of customers.
Our operations are dependent on the labor used to operate our equipment and deliver products to our customers.
Our operations are dependent on the labor used to operate our equipment and deliver products to our customers. Decreased availability of labor could harm our reputation, negatively affect our customer relationships and have a material adverse effect on our financial position and results of operations.
For example, starting in August 2020, metals prices increased significantly and reached record levels during 2021 before beginning to decline in October 2021. Metals prices for all segments continued to decrease through December 2022. This volatility can significantly affect the availability and cost of raw materials to us.
This volatility can significantly affect the availability and cost of raw materials to us. During 2022, metals prices decreased 57% throughout the year, whereas during 2023, metals prices decreased 45% from April to September and increased 66% from October to December.
We are in the process of implementing information systems and eliminating our legacy operating systems. The objective is to standardize and streamline business processes and improve support for our service center and fabrication business.
As we implement information systems and cloud-based software as a service agreements, the objective is to standardize and streamline business processes and improve support, reporting capabilities and functionality for our employees and sales and administrative management teams.
Removed
Increases in energy prices would increase our operating costs, and we may be unable to pass all these increases on to our customers in the form of higher prices. If our energy costs increase disproportionately to our revenues, our earnings could be reduced. We use energy to process and transport our products.
Added
Collectively, our top three customers accounted for approximately 8% and 7% of our consolidated net sales in 2023 and 2022, respectively. Approximately 48% and 52% of our consolidated net sales during 2023 and 2022, respectively, were directly related to industrial machinery and equipment manufacturers and their fabricators.
Removed
Any such reduction in the demand for our products could adversely affect our business, financial condition, results of operations and cash flows. An interruption in the sources of our metals supply could have a material adverse effect on our results of operations.
Added
The loss of any one of our major customers or decrease in demand by those customers or credit constraints placed on them could have a material adverse effect on our business, our results of operations and our cash flows. 17 Table of Contents Our information technology systems and those of our third party providers, as well as our data, could be negatively affected by cybersecurity threats.
Removed
Approximately 2% and 7% of our 2022 and 2021 consolidated net sales, respectively, were to automotive manufacturers or manufacturers of automotive components and parts, whom we refer to as automotive customers.
Added
The situation is changing rapidly and additional impacts may arise that we are not aware of currently. 18 Table of Contents Impairment in the carrying value of intangible assets could result in the incurrence of impairment charges and negatively impact our results of operations.
Removed
Historically, due to the concentration of customers in the automotive industry, our gross profits on these sales have generally been less than our gross profits on sales to customers in other industries. On September 17, 2021, we sold substantially all of the assets related to our Detroit, Michigan operation.
Removed
The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers. After the sale, less than 3% of our sales were to automotive manufacturers or manufacturers of automotive components and parts.
Removed
The discontinuance of the London Interbank Offered Rate, or LIBOR, and adoption of the Secured Overnight Funding Rate, or SOFR, may adversely affected interest expense related to our outstanding debt, including amounts borrowed under the ABL Credit Facility. As of December 31, 2022, we had approximately $165.7 million of borrowings outstanding that was indexed to LIBOR.
Removed
On January 3, 2023, the Company entered into a Sixth Amendment to Third Amended and Restated Loan and Security Agreement, which amened our existing ABL Credit Facility. This amendment updated the refence rate on these borrowings from LIBOR to SOFR.
Removed
These changes may result in interest obligations that do not otherwise correlate exactly over time with the payments that would have been made on such debt if LIBOR had been used.
Removed
We cannot be sure that this change will be without any adverse impacts, but we believe there will be no material impact on our financial position or results of operations Regulatory and Environmental Risks Quotas and tariffs imposed or removed as a result of government actions can cause significant fluctuations in our operating results.

Item 2. Properties

Properties — owned and leased real estate

7 edited+1 added−1 removed3 unchanged
Biggest change(15) The lease on this facility expires on June 30, 2029. (16) The lease on this facility expires on January 1, 2029. In addition to the facilities listed above, our executive office is leased and located in Highland Hills, Ohio and we have leased offices located in Media, Pennsylvania; Bonita Springs, Florida; San Antonio, Texas and Monterrey, Mexico.
Biggest changeIn addition to the facilities listed above, our executive office is leased and located in Highland Hills, Ohio and we have leased offices located in Bonita Springs, Florida; San Antonio, Texas and Monterrey, Mexico. Management believes we will be able to accommodate our capacity needs for the immediate future at our existing facilities.
The following table sets forth certain information concerning our principal properties including which segment’s products are serviced out of each location: Segment Operation Location Square Feet Function Owned or Leased Carbon Flat Specialty Metals Flat Tube and Pipe Cleveland Bedford Heights, Ohio (1) 127,000 Corporate offices, coil processing and distribution center Owned ✔ ✔ Bedford Heights, Ohio (1) 121,500 Coil and plate processing, distribution center and offices Owned ✔ ✔ ✔ Bedford Heights, Ohio (1) 59,500 Plate processing, distribution center and offices Leased (2) ✔ Dover, Ohio 62,000 Plate processing, fabrication and distribution center Owned ✔ Minneapolis Plymouth, Minnesota 196,800 Coil and plate processing, distribution center and offices Owned ✔ ✔ Plymouth, Minnesota 112,200 Plate processing, fabrication, distribution center and offices Owned ✔ Chambersburg Chambersburg, Pennsylvania 157,000 Plate processing, distribution center and offices Owned ✔ Chambersburg, Pennsylvania 150,000 Plate processing, fabrication, manufacturing, distribution center and offices Owned ✔ Iowa Bettendorf, Iowa 244,000 Coil and plate processing, fabrication, distribution center and offices Owned ✔ ✔ Winder Winder, Georgia 285,000 Coil and plate processing, fabrication, distribution center and offices Owned ✔ ✔ ✔ Buford, Georgia 120,000 Coil and plate processing, fabrication, and distribution center Leased (3) ✔ ✔ Kentucky Mt.
The following table sets forth certain information concerning our principal properties including which segment’s products are serviced out of each location: Segment Operation Location Square Feet Function Owned or Leased Carbon Flat Specialty Metals Flat Tube and Pipe Cleveland Bedford Heights, Ohio (1) 127,000 Corporate offices, coil processing and distribution center Owned ✔ ✔ Bedford Heights, Ohio (1) 121,500 Coil and plate processing, distribution center and offices Owned ✔ ✔ ✔ Bedford Heights, Ohio (1) 59,500 Plate processing, distribution center and offices Leased (2) ✔ Dover, Ohio 62,000 Plate processing, fabrication and distribution center Owned ✔ Minneapolis Plymouth, Minnesota 196,800 Coil and plate processing, distribution center and offices Owned ✔ ✔ Plymouth, Minnesota 112,200 Plate processing, fabrication, distribution center and offices Owned ✔ Chambersburg Chambersburg, Pennsylvania 157,000 Plate processing, distribution center and offices Owned ✔ Chambersburg, Pennsylvania 150,000 Plate processing, fabrication, manufacturing, distribution center and offices Owned ✔ Iowa Bettendorf, Iowa 244,000 Coil and plate processing, fabrication, distribution center and offices Owned ✔ ✔ Winder Winder, Georgia 285,000 Coil and plate processing, fabrication, distribution center and offices Owned ✔ ✔ ✔ Buford, Georgia 120,000 Coil and plate processing, fabrication, and distribution center Leased (3) ✔ ✔ Hanceville Hanceville, Alabama 27,000 Distribution center Leased (4) ✔ Kentucky Mt.
Sterling, Kentucky 107,000 Distribution center and offices Owned ✔ ✔ Gary Gary, Indiana 183,000 Coil processing, distribution center and offices Owned ✔ ✔ Connecticut Milford, Connecticut 134,000 Coil processing, distribution center and offices Owned ✔ ✔ Chicago Schaumburg, Illinois 122,500 Coil and sheet processing, distribution center and offices Owned ✔ ✔ Bartlett Bartlett, Illinois 81,400 Coil and sheet processing, fabrication and distribution center Leased (4) ✔ ✔ Berlin Metals Hammond, Indiana 117,950 Coil processing, distribution center and offices Leased (5) ✔ McCullough Industries Kenton, Ohio 75,000 Manufacturing facility Owned ✔ ✔ Streetsboro Streetsboro, Ohio 66,200 Coil and sheet processing, distribution center and offices Owned ✔ Latrobe, Pennsylvania 43,200 Coil and sheet processing, distribution center Leased (6) ✔ Rock Hill Rock Hill, South Carolina 45,075 Distribution, processing center and offices Owned ✔ Dallas Carrollton, Texas 44,480 Distribution, processing center and offices Owned ✔ Houston Houston, Texas 30,000 Distribution, processing center and offices Leased (7) ✔ 26 Operation Location Square Feet Function Owned or Leased Carbon Flat Specialty Metals Flat Tube and Pipe Springdale Springdale, Arkansas 12,200 Distribution, processing center and offices Leased (8) ✔ Kansas City Riverside, Missouri 11,300 Distribution, processing center and offices Leased (9) ✔ Powder Springs Powder Springs, Georgia 11,275 Fabrication and offices Leased (10) ✔ Powder Springs, Georgia 17,766 Fabrication Leased (11) ✔ Powder Springs, Georgia 22,200 Fabrication Leased (12) ✔ Marietta Marietta, Georgia 11,300 Distribution and offices Leased (13) ✔ Marietta, Georgia 26,880 Distribution and offices Leased (14) ✔ Hiram Hiram, Georgia 16,000 Fabrication and offices Leased (15) ✔ Albany Albany, Georgia 12,000 Distribution Leased (16) ✔ Chicago Romeoville, Illinois 363,000 Corporate offices, fabrication and distribution center Owned ✔ St.
Sterling, Kentucky 107,000 Distribution center and offices Owned ✔ ✔ Gary Gary, Indiana 183,000 Coil processing, distribution center and offices Owned ✔ ✔ Connecticut Milford, Connecticut 134,000 Coil processing, distribution center and offices Owned ✔ ✔ Chicago Schaumburg, Illinois 122,500 Coil and sheet processing, distribution center and offices Owned ✔ ✔ Bartlett Bartlett, Illinois 81,400 Coil and sheet processing, fabrication and distribution center Leased (5) ✔ ✔ Berlin Metals Hammond, Indiana 117,950 Coil processing, distribution center and offices Leased (6) ✔ McCullough Industries Kenton, Ohio 75,000 Manufacturing facility Owned ✔ ✔ Streetsboro Streetsboro, Ohio 66,200 Coil and sheet processing, distribution center and offices Owned ✔ Latrobe, Pennsylvania 43,200 Coil and sheet processing, distribution center Leased (7) ✔ Rock Hill Rock Hill, South Carolina 45,075 Distribution, processing center and offices Owned ✔ Dallas Carrollton, Texas 44,480 Distribution, processing center and offices Owned ✔ Houston Houston, Texas 30,000 Distribution, processing center and offices Leased (8) ✔ 26 Table of Contents Operation Location Square Feet Function Owned or Leased Carbon Flat Specialty Metals Flat Tube and Pipe Springdale Springdale, Arkansas 12,200 Distribution, processing center and offices Leased (9) ✔ Kansas City Riverside, Missouri 11,300 Distribution, processing center and offices Leased (10) ✔ Powder Springs Powder Springs, Georgia 11,275 Fabrication and offices Leased (11) ✔ Powder Springs, Georgia 17,766 Fabrication Leased (12) ✔ Powder Springs, Georgia 22,200 Fabrication Leased (13) ✔ Marietta Marietta, Georgia 11,300 Distribution and offices Leased (14) ✔ Marietta, Georgia 26,880 Distribution and offices Leased (15) ✔ Hiram Hiram, Georgia 16,000 Fabrication and offices Leased (16) ✔ Albany Albany, Georgia 12,000 Distribution Leased (17) ✔ Wichita Wichita, KS 265,404 Manufacturing, distribution and offices Owned ✔ Wichita, KS 162,738 Manufacturing, distribution and offices Leased (18) ✔ Chicago Romeoville, Illinois 363,000 Corporate offices, fabrication and distribution center Owned ✔ St.
(10) The lease on this facility expires on June 30, 2029. (11) The lease on this facility expires on June 30, 2029. (12) The lease on this facility expires on June 30, 2029. (13) The lease on this facility expires on June 30, 2029. (14) The lease on this facility expires on June 30, 2029.
(10) The lease on this facility expires on January 31, 2026. (11) The lease on this facility expires on June 30, 2029. (12) The lease on this facility expires on June 30, 2029. (13) The lease on this facility expires on June 30, 2029. (14) The lease on this facility expires on June 30, 2029.
(2) This facility is leased from a related party. The lease expires on December 31, 2023, with renewal options. (3) The lease on this facility expires on July 1, 2027. (4) The lease on this facility expires on June 30, 2027, with renewal options. (5) The lease on this facility expires on August 31, 2024, with renewal options.
(2) This facility is leased from a related party. The lease expires on December 31, 2028, with renewal options. (3) The lease on this facility expires on July 1, 2027. (4) The lease on this facility expires on November 30, 2025, with renewal options. (5) The lease on this facility expires on June 30, 2027, with renewal options.
Paul, Minnesota 132,000 Distribution center and offices Owned ✔ Charlotte Locust, North Carolina 127,600 Distribution center, fabrication and offices Owned ✔ Fond du Lac Fond du Lac, Wisconsin 117,000 Distribution center and offices Owned ✔ ✔ Indianapolis Indianapolis, Indiana 79,000 Distribution center and offices Owned ✔ Des Moines Ankeny, Iowa 50,000 Distribution center and offices Owned ✔ Owatonna Owatonna, Minnesota 23,000 Production cutting center Owned ✔ (1) The Bedford Heights facilities are all adjacent properties.
Paul, Minnesota 132,000 Distribution center and offices Owned ✔ Charlotte Locust, North Carolina 127,600 Distribution center, fabrication and offices Owned ✔ Fond du Lac Fond du Lac, Wisconsin 117,000 Distribution center and offices Owned ✔ ✔ Indianapolis Indianapolis, Indiana 79,000 Distribution center and offices Owned ✔ Des Moines Ankeny, Iowa 50,000 Distribution center and offices Owned ✔ Owatonna Owatonna, Minnesota 23,000 Production cutting center Owned ✔ Conway Conway, Arkansas 35,000 Manufacturing and offices Owned ✔ Conway, Arkansas 72,480 Manufacturing and fabrication Leased (19) ✔ Tulsa Tulsa, Oklahoma 50,000 Manufacturing and fabrication Owned ✔ (1) The Bedford Heights facilities are all adjacent properties.
(6) The lease on this facility expires on May 1, 2024. (7) The lease on this facility expires on October 31, 2025, with renewal options. (8) The lease on this facility expires on July 1, 2023, with renewal options. (9) The lease on this facility expires on January 31, 2026.
(6) The lease on this facility expires on August 31, 2024, with renewal options. (7) The lease on this facility expires on May 31, 2025, with renewal options. (8) The lease on this facility expires on October 31, 2025, with renewal options. (9) The lease on this facility expires on June 30, 2024, with renewal options.
Removed
Management believes we will be able to accommodate our capacity needs for the immediate future at our existing facilities.
Added
(15) The lease on this facility expires on June 30, 2029. (16) The lease on this facility expires on June 30, 2029. (17) The lease on this facility expires on January 1, 2029. (18) The lease on this facility expires on June 14, 2034. (19) The lease on this facility expires on August 31, 2026, with renewal options.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeIn the opinion of management, the outcome of the proceedings to which we are currently a party will not have a material adverse effect upon our results of operations, financial condition or cash flows. 27
Biggest changeIn the opinion of management, the outcome of the proceedings to which we are currently a party will not have a material adverse effect upon our results of operations, financial condition or cash flows. 27 Table of Contents

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

13 edited+2 added−1 removed0 unchanged
Biggest changeHe is currently on the Board of the Development Corporation for Israel and the immediate past Chair of the Board of Trustees of the Jewish Agency for Israel. Richard T. Marabito, age 59, has served as our Chief Executive Officer since January 2019. From March 2000 through December 2018, he served as our Chief Financial Officer.
Biggest changeMarabito, age 60, has served as our Chief Executive Officer since January 2019. From March 2000 through December 2018, he served as our Chief Financial Officer. He joined us in 1994 as Corporate Controller and served in this capacity until March 2000. He also served as Treasurer from 1994 through 2002 and again from 2010 through 2012.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 28 INFORMATION ABOUT OUR EXECUTIVE OFFICERS This information is included in this Annual Report on Form 10-K pursuant to Instruction 3 of Item 401(b) of Regulation S-K. The following is a list of our executive officers and a brief description of their business experience.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 28 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS This information is included in this Annual Report on Form 10-K pursuant to Instruction 3 of Item 401(b) of Regulation S-K. The following is a list of our executive officers and a brief description of their business experience.
Each executive officer will hold office until his or her successor is chosen and qualified. Michael D. Siegal, age 70, has served as the Executive Chairman of our Board of Directors since January 2019. He previously served as our Chief Executive Officer from 1984 until December 2018 and as Chairman of our Board of Directors from 1994 until December 2018.
Each executive officer will hold office until his or her successor is chosen and qualified. Michael D. Siegal, age 71, has served as the Executive Chairman of our Board of Directors since January 2019. He previously served as our Chief Executive Officer from 1984 until December 2018 and as Chairman of our Board of Directors from 1994 until December 2018.
Christen is a certified public accountant and member of the Ohio Society of Certified Public Accountants and the American Institute of Certified Public Accountants. 29 PART II
Christen is a certified public accountant and member of the Ohio Society of Certified Public Accountants and the American Institute of Certified Public Accountants. 29 Table of Contents PART II
From 1984 until January 2001, he also served as our President. He has been employed by us in a variety of capacities since 1974. Mr. Siegal serves on the Board of Directors of Twin City Fan Companies, Ltd.
From 1984 until January 2001, he also served as our President. He has been employed by us in a variety of capacities since 1974. Mr. Siegal serves on the Board of Directors of Twin City Fan Companies, Ltd. He currently serves as volunteer President of the World Maccabi Union and the Global Jewish Sports Movement. Richard T.
Mr. Marabito is the Chair of the Metals Service Center Institute (MSCI), a North American metals industry trade association. He serves on the Board of Trustees for the University of Mount Union and has been a Board and Audit Committee member of CBIZ (CBZ: NYSE), one of the nation’s top providers of accounting, tax and advisory services, since August 2021.
He serves on the Board of Trustees for the University of Mount Union and has been a Board Member of CBIZ, Inc. (CBZ: NYSE), one of the nation’s top providers of accounting, tax and advisory services, since August 2021 and currently serves as its Audit Committee Chair.
From March 2010 through December 2018, she served as our Corporate Controller. From 1999 through 2010 she served in various positions within the accounting department. Ms. Christen serves as the Treasurer and is a Board Member of Seton Catholic School in Hudson, Ohio and serves on the finance committee of Walsh Jesuit High School, in Cuyahoga Falls, Ohio. Ms.
Christen serves as the Treasurer and is a Board Member of Seton Catholic School in Hudson, Ohio and serves on the finance committee of Walsh Jesuit High School, in Cuyahoga Falls, Ohio. Ms.
From January 2013 through December 2018, he served as our Vice President and Treasurer. From March 2010 through December 2012, he served as our Vice President of Human Resources and Administration. From January 2003 through March 2010, he served as our Treasurer and Corporate Controller. From 1996 through 2002, he served as our Director of Taxes and Risk Management.
Manson, age 55, has served as our Chief Financial Officer since January 2019, and has been employed by us since 1996. From January 2013 through December 2018, he served as our Vice President and Treasurer. From March 2010 through December 2012, he served as our Vice President of Human Resources and Administration.
He joined us in 1994 as Corporate Controller and served in this capacity until March 2000. He also served as Treasurer from 1994 through 2002 and again from 2010 through 2012. Prior to joining us, Mr. Marabito served as Corporate Controller for a publicly traded wholesale distribution company and was employed by a national accounting firm in its audit department.
From January 2003 through March 2010, he served as our Treasurer and Corporate Controller. From 1996 through 2002, he served as our Director of Taxes and Risk Management. Prior to joining us, Mr. Manson was employed for seven years by a national accounting firm in its tax department. Mr.
He previously served as President, Specialty Metals from 2011 to 2016 after having joined us in 2009 as Vice President of Specialty Metals. Prior thereto, Mr. Greiff spent 24 years in various positions within the steel industry and served as the President and CEO of his own steel trading company. Mr.
Greiff, age 62, has served as our President and Chief Operating Officer since January 2020. From August 2016 through December 2019, he served as Executive Vice President and Chief Operating Officer. He previously served as President, Specialty Metals from 2011 to 2016 after having joined us in 2009 as Vice President of Specialty Metals. Prior thereto, Mr.
He served as a Board Member of the Make-A-Wish Foundation of Ohio, Kentucky and Indiana and was past Chair of its Northeast Ohio regional board. Richard A. Manson, age 54, has served as our Chief Financial Officer since January 2019, and has been employed by us since 1996.
He also serves on the Board of Directors for the Greater Cleveland Partnership, the largest metropolitan chamber of commerce in the United States. He served as a Board Member of the Make-A-Wish Foundation of Ohio, Kentucky and Indiana and was past Chair of its Northeast Ohio regional board. Richard A.
Greiff served as a Board Member of the MSCI and a past director of Jewish Big Brother Big Sister and the Anti-Defamation League. Lisa K. Christen, age 46, has served as our Vice President & Treasurer since January 2023. From January 2019 through December 2022, she served as our Corporate Controller & Treasurer.
Christen, age 47, has served as our Vice President & Treasurer since January 2023. From January 2019 through December 2022, she served as our Corporate Controller & Treasurer. From March 2010 through December 2018, she served as our Corporate Controller. From 1999 through 2010 she served in various positions within the accounting department. Ms.
Prior to joining us, Mr. Manson was employed for seven years by a national accounting firm in its tax department. Mr. Manson is a member of the Board of Directors of Catholic Charities, Diocese of Cleveland and the Advisory Board of Seeds for Liberty. Mr.
Prior to joining us, Mr. Marabito served as Corporate Controller for a publicly traded wholesale distribution company and was employed by a national accounting firm in its audit department. Mr. Marabito is a Board Member and the past Chair of the Metals Service Center Institute (MSCI), a North American metals industry trade association.
Removed
Manson is a certified public accountant and member of the Ohio Society of Certified Public Accountants and the American Institute of Certified Public Accountants. Andrew S. Greiff, age 61, has served as our President and Chief Operating Officer since January 2020. From August 2016 through December 2019, he served as Executive Vice President and Chief Operating Officer.
Added
Manson is a member of the Board of Directors of Catholic Charities, Diocese of Cleveland and the Advisory Board of Seeds of Literacy. Mr. Manson is a certified public accountant and member of the Ohio Society of Certified Public Accountants and the American Institute of Certified Public Accountants. Andrew S.
Added
Greiff spent 24 years in various positions within the steel industry and served as the President and CEO of his own steel trading company. Mr. Greiff served as a Board Member of the MSCI and a past director of Jewish Big Brother Big Sister and the Anti-Defamation League. Lisa K.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed7 unchanged
Biggest changeITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock trades on the Nasdaq Global Select Market under the symbol “ZEUS.” Holders of Record As of January 31, 2023, we estimate there were approximately 99 holders of record of our common stock.
Biggest changeITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock trades on the Nasdaq Global Select Market under the symbol “ZEUS.” Holders of Record As of January 31, 2024, there were approximately 98 holders of record of our common stock.
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. Repurchases may be discontinued at any time. As of December 31, 2022, 360,212 shares remain authorized for repurchase under the program.
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. Repurchases may be discontinued at any time. As of December 31, 2023, 360,212 shares remain authorized for repurchase under the program.
We cannot assure you that dividends will be paid in the future or that, if paid, the dividends will be at the same amount or frequency. Issuer Purchases of Equity Securities We did not purchase any of our equity securities during the quarter ended December 31, 2022.
We cannot assure you that dividends will be paid in the future or that, if paid, the dividends will be at the same amount or frequency. Issuer Purchases of Equity Securities We did not purchase any of our equity securities during the quarter ended December 31, 2023.
Recent Sales of Unregistered Securities We did not have any unregistered sales of equity securities during the quarter ended December 31, 2022. 30
Recent Sales of Unregistered Securities We did not have any unregistered sales of equity securities during the quarter ended December 31, 2023. 30 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

86 edited+15 added−18 removed47 unchanged
Biggest changeDuring 2022, our year-over-year sales volumes were negatively impacted by the sale of our Detroit operations on September 17, 2021, current economic trends and the absence of a large one-time pipe and tube contract shipment in 2021; however, our net sales were positively impacted by the price increases discussed above. 34 Consolidated Operations The following table sets forth certain consolidated income statement data for the years ended December 31, 2022 and 2021 (dollars shown in thousands): 2022 2021 $ % of net sales $ % of net sales Net sales $ 2,559,990 100.0 $ 2,312,253 100.0 Cost of materials sold (a) 2,073,930 81.0 1,802,052 77.9 Gross profit (b) 486,060 19.0 510,201 22.1 Operating expenses (c) 352,313 13.8 337,735 14.6 Operating income 133,747 5.2 172,466 7.5 Other loss, net 45 0.0 36 0.0 Interest and other expense on debt 10,080 0.4 7,631 0.3 Income before income taxes 123,622 4.8 164,799 7.1 Income taxes 32,691 1.2 43,748 1.9 Net income $ 90,931 3.6 $ 121,051 5.2 (a) Includes $565 and $21,850 of LIFO expense in 2022 and 2021, respectively.
Biggest changeWhen average selling prices increase, and net sales increase, gross profit and operating expenses as a percentage of net sales will generally decrease. 34 Table of Contents Consolidated Operations The following table sets forth certain consolidated income statement data for the years ended December 31, 2023 and 2022 (dollars shown in thousands): 2023 2022 % of net sales % of net sales Net sales $ 2,158,163 100.0 $ 2,559,990 100.0 Cost of materials sold (a) 1,684,663 78.1 2,073,930 81.0 Gross profit (b) 473,500 21.9 486,060 19.0 Operating expenses (c) 395,829 18.3 352,313 13.8 Operating income 77,671 3.6 133,747 5.2 Other loss, net 78 0.0 45 0.0 Interest and other expense on debt 16,006 0.7 10,080 0.4 Income before income taxes 61,587 2.9 123,622 4.8 Income taxes 17,058 0.8 32,691 1.2 Net income $ 44,529 2.1 $ 90,931 3.6 (a) Includes $8,258 of LIFO income and $565 of LIFO expense in 2023 and 2022, respectively.
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 acquisitions, our 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.
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 acquisitions, our carbon flat products segment has expanded its product offerings to include self-dumping metal hoppers and steel and stainless-steel dump inserts for pickup truck and service truck beds.
The cost of the remainder of our tubular and pipe product segment’s inventory is determined using a weighted average rolling first-in, first-out (FIFO) method. On the Consolidated Statements of Comprehensive Income (Loss), “Costs of materials sold” consists of the cost of purchased metals, inbound and internal transfer freight, external processing costs, and LIFO income or expense.
The cost of the remainder of our tubular and pipe product segment’s inventory is determined using a weighted average rolling first-in, first-out (FIFO) method. On the Consolidated Statements of Comprehensive Income, “Costs of materials sold” consists of the cost of purchased metals, inbound and internal transfer freight, external processing costs, and LIFO income or expense.
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).
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.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021. 2022 Compared to 2021 Our results of operations are impacted by the market price of metals.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022. 2023 Compared to 2022 Our results of operations are impacted by the market price of metals.
Other than derivative instruments discussed in Note 11 to the Consolidated Financial Statements, as of December 31, 2022, we had no material off-balance sheet arrangements. Effects of Inflation Inflation generally affects us by increasing the cost of employee wages and benefits, transportation services, energy, borrowings under our credit facility, processing equipment, and purchased metals.
Other than derivative instruments discussed in Note 11 to the Consolidated Financial Statements, as of December 31, 2023, we had no material off-balance sheet arrangements. Effects of Inflation Inflation generally affects us by increasing the cost of employee wages and benefits, transportation services, energy, borrowings under our credit facility, processing equipment, and purchased metals.
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. 32 Reportable Segments We operate in three reportable segments: specialty metals flat products, carbon flat products and tubular and pipe products.
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. 32 Table of Contents Reportable Segments We operate in three reportable segments: specialty metals flat products, carbon flat products and tubular and pipe products.
(b) Future interest obligations are calculated using the debt balances and interest rates in effect on December 31, 2022. (c) See Note 9 to the Consolidated Financial Statements. (d) See Note 15 to the Consolidated Financial Statements. Classification is based on expected settlement dates and the expiration of certain statutes of limitations.
(b) Future interest obligations are calculated using the debt balances and interest rates in effect on December 31, 2023. (c) See Note 9 to the Consolidated Financial Statements. (d) See Note 15 to the Consolidated Financial Statements. Classification is based on expected settlement dates and the expiration of certain statutes of limitations.
Financing Activities During 2022, $166.9 million of cash was used for financing activities, which primarily consisted of $162.1 million of net repayments under our ABL Credit Facility, $4.0 million of dividends paid, $0.7 million of principal payments for financing lease obligations and a $0.1 million payment for credit facility fees and expenses.
During 2022, $166.9 million of cash was used for financing activities, which primarily consisted of $162.1 million of net repayments under our ABL Credit Facility, $4.0 million of dividends paid, $0.7 million of principal payments for financing lease obligations and $0.1 million of payments for credit facility fees and expenses.
Combined, the carbon and specialty metals flat products segments have 34 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.
Combined, the carbon and specialty metals flat products segments have 36 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.
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 2022 or 2021.
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 2023 or 2022.
See Note 1 to our consolidated financial statements for our significant accounting policies related to our critical accounting estimates. 41 Allowance for Credit Losses The allowance for credit losses is maintained at a level considered appropriate based on historical experience and specific customer collection issues that we have identified.
See Note 1 to our consolidated financial statements for our significant accounting policies related to our critical accounting estimates. 41 Table of Contents Allowance for Credit Losses The allowance for credit losses is maintained at a level considered appropriate based on historical experience and specific customer collection issues that we have identified.
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 December 31, 2022) or 10.0% of the aggregate borrowing base ($47.5 million at December 31, 2022), 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.
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 ($62.5 million at December 31, 2023) or 10.0% of the aggregate borrowing base ($53.4 million at December 31, 2023), 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.
Results of Operations This section of this Annual Report on Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Results of Operations This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
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 last-in, first-out, or LIFO, method.
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.
Although general inflation, excluding increases in the price of metals and increased labor and distribution expense, has increased during 2022, it has not had a material effect on our financial results during the past three years, but may have a significant impact in future years.
Although general inflation, excluding increases in the price of metals and increased labor, has increased during 2023, it has not had a material effect on our financial results during the past three years, but may have a significant impact in future years.
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.
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 SOFR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at 2.42%.
Purchases in excess of $15.0 million require us to (i) maintain availability in excess of 20% of the aggregate revolver commitments ($95.0 million at December 31, 2022) or (ii) to maintain availability equal to or greater than 15% of the aggregate revolver commitments ($71.3 million at December 31, 2022) 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.
Purchases in excess of $15.0 million require us to (i) maintain availability in excess of 20.0% of the aggregate revolver commitments ($125.0 million at December 31, 2023) or (ii) to maintain availability equal to or greater than $15.0 of the aggregate revolver commitments ($93.8 million at December 31, 2023) 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.
Our Board previously approved 2022 and 2021 regular quarterly dividends of $0.09 per share and $0.02 per share, respectively, which were paid in March, June, September and December of 2022 and 2021.
Our Board previously approved 2023 and 2022 regular quarterly dividends of $0.125 per share and $0.09 per share, respectively, which were paid in March, June, September and December of 2023 and 2022.
In February 2023, our Board of Directors approved a regular quarterly dividend of $0.125 per share, which is payable on March 15, 2023 to shareholders of record as of March 1, 2023.
In February 2024, our Board of Directors approved a regular quarterly dividend of $0.15 per share, which is payable on March 15, 2024 to shareholders of record as of March 4, 2024.
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 December 31, 2022, 360,212 shares remain authorized for repurchase under the program. 39 There were no shares repurchased during 2022.
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 December 31, 2023, 360,212 shares remain authorized for repurchase under the program.
As of December 31, 2022, we were in compliance with our covenants and had approximately $305.6 million of availability under the ABL Credit Facility. As of December 31, 2022, $1.2 million of bank financing fees were included in “Prepaid expenses and other” and “Other long-term assets” on the accompanying Consolidated Balance Sheets.
As of December 31, 2023, we were in compliance with our covenants and had approximately $339.4 million of availability under the ABL Credit Facility. As of December 31, 2023, $1.7 million of bank financing fees were included in “Prepaid expenses and other” and “Other long-term assets” on the accompanying Consolidated Balance Sheets.
Certain inventoried products of our tubular and pipe segment are stated under the LIFO method. At December 31, 2022, and December 31, 2021, approximately $46.3 million, or 11.1% of consolidated inventory, and $55.4 million, or 11.4% of consolidated inventory, respectively, was reported under the LIFO method of accounting.
Certain inventoried products of our tubular and pipe segment are stated under the LIFO method. At December 31, 2023, and December 31, 2022, approximately $38.2 million, or 9.9% of consolidated inventory, and $46.3 million, or 11.1% of consolidated inventory, respectively, was reported under the LIFO method of accounting.
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. Metals prices in our specialty metals products segment increased during 2022 compared to 2021 due to the unprecedented increase in metal surcharges experienced during 2022.
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. Metals prices in our specialty metals products segment decreased during 2023 compared to 2022 due to decreases in metal surcharges experienced during 2023.
During 2021 we repurchased 15,000 shares for an aggregate cost of $0.1 million. 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.
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.
The increase in cost of materials sold in 2022 is primarily related to increased metals pricing in 2022 compared to 2021. As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) decreased to 19.0% in 2022 from 22.1% in 2021.
The decrease in cost of materials sold in 2023 is primarily related to decreased average metals pricing in 2023 compared to 2022. As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) increased to 21.9% in 2023 from 19.0% in 2022.
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%.
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 Secured Overnight Financing Rate, or SOFR, plus a premium ranging from 1.25% to 2.75%.
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.
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.
(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 $247.7 million, or 10.7%, to $2.6 billion in 2022 from $2.3 billion in 2021.
(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 decreased $401.8 million, or 15.7%, to $2.2 billion in 2023 from $2.6 billion in 2022.
The increase in net sales was due to a 26.0% increase in consolidated average selling prices during 2022 compared to 2021 partially offset by a 12.2% decrease in consolidated volume. Average selling prices in 2022 were $2,448 per ton, compared to $1,942 per ton in 2021.
The decrease in net sales was due to a 17.4% decrease in consolidated average selling prices during 2023 compared to 2022 partially offset by a 2.0% increase in consolidated volume. Average selling prices in 2023 were $2,023 per ton, compared to $2,448 per ton in 2022.
(b) Operating expenses are calculated as total costs and expenses less the cost of materials sold. Tons sold in our specialty metals flat product segment decreased 16 thousand tons, or 10.0%, to 142 thousand tons in 2022 from 158 thousand tons in 2021.
(b) Operating expenses are calculated as total costs and expenses less the cost of materials sold. Tons sold in our specialty metals flat product segment decreased 27 thousand tons, or 18.7%, to 115 thousand tons in 2023 from 142 thousand tons in 2022.
Overview We are a leading metals service center that operates in three reportable segments; specialty metals flat products, carbon flat products, and tubular and pipe products. We provide metals processing and distribution services for a wide range of customers.
We provide metals processing and distribution services for a wide range of customers. We operate in three reportable segments: specialty metals flat products, carbon flat products, and tubular and pipe products.
From time to time, we have entered into pass-through 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.
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 pass-through nickel swaps at the request of our customers in order to mitigate our customers’ risk of volatility in the price of metals. We have no long-term, fixed-price metals purchase contracts.
Accordingly, the timing and size of our capital requirements are subject to change as business conditions warrant and opportunities arise. 38 2022 Compared to 2021 Operating Activities During 2022, we generated $185.9 million of cash from operations, of which $111.8 million was generated from operating activities and $74.1 million was generated from working capital.
Accordingly, the timing and size of our capital requirements are subject to change as business conditions warrant and opportunities arise. 38 Table of Contents 2023 Compared to 2022 Operating Activities During 2023, we generated $175.2 million of cash from operations, of which $94.1 million was generated from working capital and $81.1 million was generated from operating activities.
During 2021, $164.1 million of cash was generated from financing activities, which primarily consisted of $167.2 million of net borrowings under our ABL Credit Facility, offset by $1.3 million of credit facility fees and expenses related to our refinancing, $0.9 million of dividends paid and $0.8 million of principal payments for financing lease obligations.
Financing Activities During 2023, $16.8 million of cash was generated from financing activities, which primarily consisted of $24.5 million of net borrowings under our ABL Credit Facility, offset by, $5.6 million of dividends paid, $1.2 million of payments for credit facility fees and expenses and a $1.0 million of principal payments for financing lease obligations.
The increase in the average selling price is a result of the market pricing dynamics discussed above in Results of Operations. Cost of materials sold increased $271.9 million, or 15.1%, to $2.1 billion in 2022 from $1.8 billion in 2021. During 2022, we recorded LIFO expense of $0.6 million compared to LIFO expense of $21.9 million in 2021.
The decrease in the average selling price is a result of the market pricing dynamics discussed above in Results of Operations. Cost of materials sold decreased $389.3 million, or 18.8%, to $1.7 billion in 2023 from $2.1 billion in 2022. During 2023, we recorded LIFO income of $8.3 million compared to LIFO expense of $0.6 million in 2022.
(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 $45.0 million, or 11.8%, to $427.4 million in 2022 from $382.4 million in 2021.
(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 decreased $58.0 million, or 13.6%, to $369.3 million in 2023 from $427.4 million in 2022.
Income before income taxes totaled $123.6 million, or 4.8% of net sales, in 2022, compared to income before taxes of $164.8 million, or 7.1% of net sales, in 2021. 35 An income tax provision of 26.4% was recorded in 2022, compared to an income tax provision of 26.5% in 2021.
Income before income taxes totaled $61.6 million, or 2.9% of net sales, in 2023, compared to income before taxes of $123.6 million, or 4.8% of net sales, in 2022. 35 Table of Contents An income tax provision of 27.7% was recorded in 2023, compared to an income tax provision of 26.4% in 2022.
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.
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.
Average selling prices in 2022 increased to $1,681 per ton, compared to $1,459 per ton in 2021. Cost of materials sold increased $104.8 million, or 9.9%, to $1.2 billion in 2022 from $1.1 billion in 2021. The increase in cost of materials sold was due to increased industry metals pricing discussed above in Results of Operations.
Average selling prices in 2023 decreased to $1,430 per ton, compared to $1,681 per ton in 2022. Cost of materials sold decreased $200.8 million, or 17.2%, to $963.7 million in 2023 from $1.2 billion in 2022. The decrease in cost of materials sold was due to decreased industry metals pricing discussed above in Results of Operations.
Segment Results of Operations Specialty metals flat products The following table sets forth certain income statement data for the specialty metals flat products segment for the years ended December 31, 2022 and 2021 (dollars shown in thousands, except per ton data): 2022 2021 % of net sales % of net sales Direct tons sold 135,584 149,935 Toll tons sold 6,508 7,872 Total tons sold 142,092 157,807 Net sales $ 776,022 100.0 $ 585,751 100.0 Average selling price per ton 5,461 3,712 Cost of materials sold 589,472 76.0 441,825 75.4 Gross profit (a) 186,550 24.0 143,926 24.6 Operating expenses (b) 92,888 11.9 73,382 12.5 Operating income $ 93,662 12.1 $ 70,544 12.0 (a) Gross profit is calculated as net sales less the cost of materials sold.
Segment Results of Operations Specialty metals flat products The following table sets forth certain income statement data for the specialty metals flat products segment for the years ended December 31, 2023 and 2022 (dollars shown in thousands, except per ton data): 2023 2022 % of net sales % of net sales Direct tons sold 112,412 135,584 Toll tons sold 3,175 6,508 Total tons sold 115,587 142,092 Net sales $ 567,728 100.0 $ 776,022 100.0 Average selling price per ton 4,912 5,461 Cost of materials sold 473,784 83.5 589,472 76.0 Gross profit (a) 93,944 16.5 186,550 24.0 Operating expenses (b) 71,060 12.5 92,888 11.9 Operating income $ 22,884 4.0 $ 93,662 12.1 (a) Gross profit is calculated as net sales less the cost of materials sold.
Operating income for 2022 totaled $34.9 million, or 8.2% of net sales, compared to $7.4 million, or 1.9% of net sales, in 2021. Corporate expenses Corporate expenses increased $4.3 million, or 27.6%, to $19.8 million in 2022 compared to $15.5 million in 2021.
Operating income for 2023 totaled $40.7 million, or 11.0% of net sales, compared to $34.9 million, or 8.2% of net sales, in 2022. Corporate expenses Corporate expenses increased $0.7 million, or 3.5%, to $20.5 million in 2023 compared to $19.8 million in 2022.
Operating income for 2022 totaled $93.7 million, or 12.1% of net sales, compared to $70.5 million, or 12.0% of net sales, in 2021. 36 Carbon flat products The following table sets forth certain income statement data for the carbon flat products segment for the years ended December 31, 2022 and 2021 (dollars shown in thousands, except per ton data): 2022 2021 % of net sales % of net sales Direct tons sold 777,748 868,775 Toll tons sold 29,171 52,520 Total tons sold 806,919 921,295 Net sales $ 1,356,605 100.0 $ 1,344,150 100.0 Average selling price per ton 1,681 1,459 Cost of materials sold 1,164,459 85.8 1,059,620 78.8 Gross profit (a) 192,146 14.2 284,530 21.2 Operating expenses (b) 167,131 12.4 174,456 13.0 Operating income (loss) $ 25,015 1.8 $ 110,074 8.1 (a) Gross profit is calculated as net sales less the cost of materials sold.
Operating income for 2023 totaled $22.9 million, or 4.0% of net sales, compared to $93.7 million, or 12.1% of net sales, in 2022. 36 Table of Contents Carbon flat products The following table sets forth certain income statement data for the carbon flat products segment for the years ended December 31, 2023 and 2022 (dollars shown in thousands, except per ton data): 2023 2022 % of net sales % of net sales Direct tons sold 820,144 777,748 Toll tons sold 34,048 29,171 Total tons sold 854,192 806,919 Net sales $ 1,221,093 100.0 $ 1,356,605 100.0 Average selling price per ton 1,430 1,681 Cost of materials sold 963,667 78.9 1,164,459 85.8 Gross profit (a) 257,426 21.1 192,146 14.2 Operating expenses (b) 222,844 18.2 167,131 12.4 Operating income $ 34,582 2.8 $ 25,015 1.8 (a) Gross profit is calculated as net sales less the cost of materials sold.
Through acquisitions, including the acquisition of Metal-Fab on January 3, 2023, our carbon flat products segment expanded its product offerings to include self-dumping metal hoppers, steel and stainless-steel dump inserts for pickup truck and service truck beds and venting, micro air and clean air products for residential, commercial and industrial applications.
Through the acquisition of Metal-Fab, on January 3, 2023, the carbon flat products segment further expanded its product offerings to include venting, micro air and clean air products for residential, commercial and industrial applications.
As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) decreased to 14.2% in 2022 from 21.2% in 2021. The average gross profit per ton sold decreased $71 per ton, or 22.9%, to $238 in 2022 from $309 in 2021.
As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) increased to 21.1% in 2023 from 14.2% in 2022. The average gross profit per ton sold increased $63 per ton, or 26.6%, to $301 in 2023 from $238 in 2022.
The objective of this ASU is to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. The objective of this ASU is to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.
The decrease was primarily attributable to a $68.1 million decrease in inventory, a $64.8 million decrease in accounts receivable, and a $0.8 million decrease in prepaid expenses and other, offset by a $47.2 million decrease in accounts payable and outstanding checks and a $12.4 million decrease in accrued payroll and other accrued liabilities.
The decrease was primarily attributable to a $51.5 million decrease in inventory, a $44.6 million decrease in accounts receivable, a $12.1 million increase in accounts payable and outstanding checks, offset by a $11.9 million decrease in accrued payroll and other accrued liabilities and a $2.3 million increase in prepaid expenses and other.
Operating expenses increased during 2022 as a result of the inclusion of operating expenses related to the October 2021 acquisition of Shaw, increased inflationary impacts on transportation, labor, and other product support costs and increased variable performance-based compensation for the specialty metals flat products and pipe and tubular products segments, partially offset by lower year-over-year variable performance-based incentive compensation for the carbon flat products segment.
Operating expenses increased during 2023 as a result of the inclusion of operating expenses related to the January 3, 2023 acquisition of Metal-Fab for the carbon flat products segment and the October 2, 2023 acquisition of CTB for the tubular and pipe segment, partially offset by lower year-over-year variable performance-based incentive compensation and reduced operating costs for the specialty metals flat products segment.
Net cash from operations during 2022 was primarily comprised of net income of $90.9 million and the $20.2 million addback of non-cash depreciation and amortization expense. During 2021, we used $146.4 million of net cash for operations, of which $137.5 million was generated from operating activities and $284.9 million was used for working capital needs.
Net cash from operations during 2023 was primarily comprised of net income of $44.5 million and the $27.2 million addback of non-cash depreciation and amortization expense. During 2022, we generated $185.9 million of net cash for operations, of which $111.8 million was generated from operating activities and $74.1 million was generated from working capital.
Net income in 2022 totaled $90.9 million, or $7.87 per basic and diluted share, compared to net income of $121.1 million, or $10.53 per basic and $10.52 per diluted share, in 2021.
Net income in 2023 totaled $44.5 million, or $ 3.85 per basic and diluted share, compared to net income of $90.9 million, or $ 7.87 per basic and diluted share, in 2022.
Specialty metals flat products net sales increased $190.3 million, or 32.5%, to $776.0 million in 2022 compared to $585.8 million in 2021 and were 30.3% of total net sales in 2022 compared to 25.3% of total net sales in 2021.
Specialty metals flat products net sales decreased $208.3 million, or 26.8%, to $567.7 million in 2023 compared to $776.0 million in 2022 and were 26.3% of total net sales in 2023 compared to 30.3% of total net sales in 2022.
Carbon flat products net sales increased $12.5 million, or 0.9%, to $1.4 billion in 2022 compared to $1.3 billion in 2021 and were 53.0% of total net sales in 2022 compared to 58.1% of total net sales in 2021.
Carbon flat products net sales decreased $135.5 million, or 10.0%, to $1.2 billion in 2023 compared to $1.4 billion in 2022 and were 56.6% of total net sales in 2023 compared to 53.0% of total net sales in 2022.
Action Stainless offers a range of processing capabilities, including plasma, laser and waterjet cutting and CNC machining. 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 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.
Net cash from operations during 2021 was primarily comprised of net income of $121.1 million and the $21.0 million addback of non-cash depreciation and amortization expense. Working capital at December 31, 2022 totaled $493.4 million, a $71.7 million decrease from December 31, 2021.
Net cash from operations during 2022 was primarily comprised of net income of $90.9 million and the $20.2 million addback of non-cash depreciation and amortization expense. Working capital at December 31, 2023 totaled $422.9 million, a $70.5 million decrease from December 31, 2022.
Through the acquisition of Action Stainless on December 14, 2020 and Shaw on October 1, 2021, 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. Shaw also manufactures and distributes stainless steel bollards and water treatment systems.
Through acquisitions, our specialty metals flat products segment has expanded its geographical footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tube and pipe and the manufacturing and distribution of stainless steel bollards and water treatment systems.
The interest rate hedge fixed the rate at 2.57%. 40 Contractual and Other Obligations The following table reflects the material cash requirements for our contractual and other obligations as of December 31, 2022.
The interest rate swap expired on January 10, 2024. 40 Table of Contents Contractual and Other Obligations The following table reflects the material cash requirements for our contractual and other obligations as of December 31, 2023.
As a percentage of net sales, the LIFO expense recorded in 2022 decreased gross profit by 0.2% compared to the LIFO expense recorded in 2021, which decreased gross profit by 5.7%. Operating expenses (as defined in footnote (c) in the table above) decreased $1.9 million, or 2.5%, to $72.5 million in 2022 from $74.4 million in 2021.
As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) increased to 33.1% in 2023 compared to 25.1% in 2022. As a percentage of net sales, the LIFO income recorded in 2023 increased gross profit by 2.2% compared to the LIFO expense recorded in 2022, which decreased gross profit by 0.1%.
The decrease in gross profit as a percentage of net sales, and per ton, is a result of average selling prices decreasing more quickly than the average cost of inventory as discussed above in Results of Operations. Operating expenses in 2022 decreased $7.3 million, or 4.2%, to $167.1 million from $174.5 million in 2021.
The decrease in the gross profit as a percentage of net sales is due to average selling price decreasing more quickly than the average cost of inventory as discussed above in Results of Operations. Operating expenses (as defined in footnote (b) in the table above) decreased $21.8 million, or 23.5%, to $71.1 million in 2023 from $92.9 million in 2022.
(b) Operating expenses are calculated as total costs and expenses less the cost of materials sold. Tons sold decreased 114 thousand tons, or 12.4%, to 807 thousand tons in 2022 from 921 thousand tons in 2021. Toll tons sold decreased 23 thousand tons, or 44.4%, to 29 thousand tons in 2022 from 53 thousand tons in 2021.
(b) Operating expenses are calculated as total costs and expenses less the cost of materials sold. Tons sold increased 47 thousand tons, or 5.9%, to 854 thousand tons in 2023 from 806 thousand tons in 2022. Toll tons sold increased 4 thousand tons, or 16.7%, to 34 thousand tons in 2023 from 29 thousand tons in 2022.
For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.
For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. 42 Table of Contents Impact of Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure".
Tubular and pipe products net sales increased $45.0 million, or 11.8%, to $427.4 million in 2022 compared to $382.4 million in 2021 and were 16.7% of total net sales in 2022 compared to 16.5% of total net sales in 2021.
Tubular and pipe products net sales decreased $58.0 million, or 13.6%, to $369.3 million in 2023 compared to $427.4 million in 2022 and were 17.1% of total net sales in 2023 compared to 16.7% of total net sales in 2022.
The decrease in tons sold was primarily due to the sale of our Detroit operations on September 17, 2021. Net sales increased $12.5 million, or 0.9%, to $1.4 billion in 2022 from $1.3 billion in 2021. The increase in sales was due to a 15.2% increase in average selling prices offset by a 12.4% decrease in sales volume.
We do not report tons sold for our end-use products. Net sales decreased $135.5 million, or 10.0%, to $1.2 billion in 2023 from $1.4 billion in 2022. The decrease in sales was due to a 15.0% decrease in average selling prices partially offset by a 5.9% increase in sales volume.
Operating expenses (as defined in footnote (b) in the table above) increased $19.5 million, or 26.6%, to $92.9 million in 2022 from $73.4 million in 2021. As a percentage of net sales, operating expenses decreased to 12.0% of net sales in 2022 from 12.5% in 2021.
Operating expenses (as defined in footnote (c) in the table above) increased $43.5 million, or 12.4%, to $395.8 million in 2023 from $352.3 million in 2022. As a percentage of net sales, operating expenses increased to 18.3% in 2023 from 13.8% in 2022.
During 2021, we recorded a $3.5 million gain, net of expenses, on the sale of our Detroit operations on September 17, 2021. Interest and other expense on debt totaled $10.1 million in 2022 compared to $7.6 million in 2021. Our effective borrowing rate, exclusive of deferred financing fees and commitment fees, was 3.2% in 2022 compared to 2.5% in 2021.
Interest and other expense on debt totaled $16.0 million in 2023 compared to $10.1 million in 2022. Our effective borrowing rate, exclusive of deferred financing fees and commitment fees, was 5.9% in 2023 compared to 3.2% in 2022. The increased effective borrowing rate is due to higher interest rates compared to 2022.
Investing Activities Net cash used for investing activities was $16.6 million during 2022, compared to $13.5 million during 2021. Investment activities in 2022 included $19.9 million of capital expenditures, primarily attributable to processing equipment at our existing facilities offset by $3.3 million in proceeds from disposition of property and equipment, primarily attributable to the sale of the Milan, Iowa facility.
Investment activities in 2022 included $19.9 million of capital expenditures, primarily attributable to processing equipment at our existing facilities, partially offset by the $3.3 million gain on the sale of the Milan, IL facility.
Cost of materials sold increased $19.4 million, or 6.5%, to $320.0 million in 2022 from $300.6 million in 2021. The increase in cost of materials sold is due to increased metals pricing discussed above in Results of Operations.
Cost of materials sold decreased $115.7 million, or 19.6%, to $473.8 million in 2023 from $589.5 million in 2022. The decrease in cost of materials sold was due to the decrease in industry metals pricing discussed above in Results of Operations.
The average gross profit per ton sold totaled $1,313 in 2022 compared to $912 in 2021. The decrease in the gross profit as a percentage of net sales is due to average selling price decreasing more quickly than the average cost of inventory as discussed above in Results of Operations.
The increase in gross profit as a percentage of net sales, and per ton, is a result of the acquisition of Metal-Fab during 2023, as well as average cost of inventory decreasing more quickly than the average selling prices as discussed above in Results of Operations.
During the first quarter of 2023, we expect to record approximately $4.0 to $5.0 million of required GAAP-related purchase price expenses and adjustments, primarily expensed deal fees, the write-up of inventory to fair market value and the amortization of certain acquired intangible assets. 37 Tubular and pipe products The following table sets forth certain income statement data for the tubular and pipe products segment for the years ended December 31, 2022 and 2021 (dollars shown in thousands). 2022 2021 $ % of net sales $ % of net sales Net sales $ 427,363 100.0 $ 382,352 100.0 Cost of materials sold (a) 319,999 74.9 300,607 78.6 Gross profit (b) 107,364 25.1 81,745 21.4 Operating expenses (c) 72,508 16.9 74,392 19.4 Operating income $ 34,856 8.2 $ 7,353 1.9 (a) Includes $565 and $21,850 of LIFO expense in 2022 and 2021, respectively.
Operating income totaled $34.6 million, or 2.8% of net sales, in 2023 compared to operating income of $25.0 million, or 1.8% of net sales, in 2022. 37 Table of Contents Tubular and pipe products The following table sets forth certain income statement data for the tubular and pipe products segment for the years ended December 31, 2023 and 2022 (dollars shown in thousands). 2023 2022 % of net sales % of net sales Net sales $ 369,342 100.0 $ 427,363 100.0 Cost of materials sold (a) 247,212 66.9 319,999 74.9 Gross profit (b) 122,130 33.1 107,364 25.1 Operating expenses (c) 81,438 22.0 72,508 16.9 Operating income $ 40,692 11.0 $ 34,856 8.2 (a) Includes $8,258 of LIFO income and $565 of LIFO expense in 2023 and 2022, respectively.
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. 33 Tubular and pipe products The tubular and pipe products segment consists of the Chicago Tube and Iron, or CTI, business, acquired in 2011.
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. 33 Table of Contents Tubular and pipe products The primary focus of our tubular and pipe products segment is on the distribution of metal tubing, pipe, bar, valve and fittings and the fabrication of pressure parts supplied to various industrial markets.
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 increased $147.6 million, or 33.4%, to $589.5 million in 2022 from $441.8 million in 2021.
Average selling prices in 2023 decreased to $4,912 per ton, compared to $5,461 per ton in 2022. The decrease in the year-over-year average selling price per ton is a result of the decreased industry metals pricing discussed above in Results of Operations.
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 asset-based credit facility, or ABL Credit Facility, to fund these requirements.
We use cash generated from operations and borrowings under our asset-based credit facility, or ABL Credit Facility, to fund these requirements.
Through the acquisition of Shaw Stainless & Alloy, Inc., or Shaw, on October 1, 2021 and 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.
Through acquisitions, our specialty metals flat products segment has expanded its geographical footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tube and pipe and the manufacturing and distribution of stainless steel bollards and water treatment systems.
As a percentage of net sales, operating expenses decreased to 13.8% in 2022 from 14.6% in 2021. Operating expenses in the specialty metals flat products segment increased $19.5 million, operating expenses in the carbon flat products segment decreased $7.3 million, operating expenses in the tubular and pipe products segment decreased $1.9 million, and corporate expenses increased $4.3 million.
Operating expenses in the specialty metals flat products segment decreased $21.8 million, operating expenses in the carbon flat products segment increased $55.7 million, operating expenses in the tubular and pipe products segment increased $8.9 million, and corporate expenses increased $0.7 million.
Contractual and Other Obligations Less than More than (amounts in thousands) Total 1 year 1-3 years 3-5 years 5 years Long-term debt obligations (a) $ 165,658 $ - $ - $ 165,658 $ - Interest obligations (b) 33,164 8,690 19,905 4,569 - Finance lease obligations (c) 1,708 640 867 198 3 Unrecognized tax positions (d) 220 10 210 - - Other long-term liabilities (e) 12,464 - 7,641 3,490 1,333 Total contractual and other obligations $ 213,214 $ 9,340 $ 28,623 $ 173,915 $ 1,336 (a) See Note 10 to the Consolidated Financial Statements.
Contractual and Other Obligations Less than More than (amounts in thousands) Total 1 year 1-3 years 3-5 years 5 years Long-term debt obligations (a) 190,198 $ - $ 190,198 $ - $ - Interest obligations (b) 33,020 13,350 19,670 - - Finance lease obligations (c) 3,502 1,218 1,528 717 39 Unrecognized tax positions (d) 174 10 164 - - Other long-term liabilities (e) 17,882 2,866 8,046 4,856 2,114 Total contractual and other obligations $ 244,776 $ 17,444 $ 219,606 $ 5,573 $ 2,153 (a) See Note 10 to the Consolidated Financial Statements.
The increase in cost of materials sold was due to the increase in 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) decreased to 24.0% in 2022 from 24.6% in 2021.
As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) decreased to 16.5% in 2023 from 24.0% in 2022. The average gross profit per ton sold totaled $813 in 2023 compared to $1,313 in 2022.
The adoption of this ASU during the first quarter of 2021 did not have a material impact on our Consolidated Financial Statements. 43
We adopted this ASU in the first quarter of 2023 for the modification of the asset-based credit facility (the ABL Credit Facility) and the interest rate hedge which did not have a material impact on our Consolidated Financial Statements. 43 Table of Contents
The increase in net sales was due to a 28.8% increase in average selling prices offset by a 13.2% decrease in sales volume during 2022. The decrease in sales volume is primarily due to the absence of a large one-time contract shipment in 2021.
The decrease in net sales was due to a 13.9% decrease in average selling prices offset by a 0.3% increase in sales volume during 2023. Cost of materials sold decreased $72.8 million, or 22.7%, to $247.2 million in 2023 from $320.0 million in 2022.
The average price of stainless surcharges increased 40.7% during 2022 compared to 2021. Industry metals pricing on hot rolled coil steel decreased during 2022 by $872 per ton, or 56.8%.
The average price of stainless surcharges decreased 21.6% during 2023 compared to 2022. Metals prices in our carbon flat products segment saw a 45% decrease between April and September 2023. This decreased the average pricing on hot rolled coil steel by $85 per ton, or 8.5%.
The decrease in the gross profit as a percentage of net sales is due to the average costs of inventory increasing more quickly than the average selling prices discussed above in Results of Operations. Operating expenses (as defined in footnote (c) in the table above) increased $14.6 million, or 4.3%, to $352.3 million in 2022 from $337.7 million in 2021.
The increase in the gross profit as a percentage of net sales is due to the acquisitions of Metal-Fab and CTB during 2023, as well as average costs of inventory decreasing more quickly than the average selling prices as discussed above in Results of Operations.
As a percentage of net sales, operating expenses decreased to 12.3% in 2022 from 13.0% in 2021. Operating expenses decreased primarily due to lower variable performance-based incentive compensation and decreased operating costs due to the sale of our Detroit operations on September 17, 2021 partially offset by increased inflationary impacts on transportation and labor.
As a percentage of net sales, operating expenses increased to 12.5% of net sales in 2023 from 11.9% in 2022. The decrease in operating expenses was primarily attributable to lower year-over-year variable performance-based incentive compensation and reduced operating costs.

… 39 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+1 added−0 removed10 unchanged
Biggest changeDeclining 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 52%, 47% and 45% of our consolidated net sales in 2022, 2021 and 2020, respectively, were directly related to industrial machinery and equipment manufacturers and their fabricators.
Biggest changeDeclining 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 48%, 52% and 47% of our consolidated net sales in 2023, 2022 and 2021, respectively, were directly related to industrial machinery and equipment manufacturers and their fabricators.
During 2022, 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.
During 2023, 2022 and 2021, 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.
Although general inflation, excluding increases in the price of metals and increased labor and distribution expense, has increased during 2022, it has not had a material effect on our financial results during the past three years, but may have a significant impact in future years. We are exposed to the impact of fluctuating metals prices and interest rate changes.
Although general inflation, excluding increases in the price of metals and increased labor and distribution expense, has increased during 2023, it has not had a material effect on our financial results during the past three years, but may have a significant impact in future years. We are exposed to the impact of fluctuating metals prices and interest rate changes.
Our primary interest rate risk exposure results from variable rate debt. If interest rates in the future were to increase 100 basis points (1.0%) from December 31, 2022 rates and, assuming no change in total debt from December 31, 2022 levels, the additional annual interest expense to us would be approximately $0.9 million.
Our primary interest rate risk exposure results from variable rate debt. If interest rates in the future were to increase 100 basis points (1.0%) from December 31, 2023 rates and, assuming no change in total debt from December 31, 2023 levels, the additional annual interest expense to us would be approximately $1.9 million.
We have the option to enter into 30- to 180-day fixed base rate LIBOR loans under the revolving credit facility provided by our ABL Credit Facility. On January 10, 2019, we entered into a five-year interest rate swap that locked the interest rate at 2.567% on $75 million of our revolving debt. 44
We have the option to enter into 30- to 180-day fixed base rate SOFR loans under the revolving credit facility provided by our ABL Credit Facility. On January 10, 2019, we entered into a five-year interest rate swap that locked the interest rate at 2.42% on $75 million of our revolving debt.
Added
The interest rate swap expired on January 10, 2024. 44 Table of Contents

Other ZEUS 10-K year-over-year comparisons