What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-02-07 · 40 added, 78 removed, 86 unchanged (58% of the section changed)

13 unchanged sentences

Results of Operations

Nine Months Ended December 31, 2024 Compared to Nine Months Ended December 31, 2023

During the nine months ended December 31, 2024 (the “ 2024 period”), sales, cost of materials sold and adjusted gross profit decreased approximately $68.6 million, $46.0 million and $22.6 million, respectively, compared to the amounts recorded during the nine months ended December 31, 2023 (the “2023 period”).

Adjusted gross profit is a non-GAAP measure calculated as sales minus cost of materials sold.

The decrease in sales was associated with both a decline in sales volume and a decrease in the average selling price per ton.

Sales volume for the 2024 period consisted of approximately 353,000 tons from inventory and another 60,000 tons of toll processing customer owned material compared to the 2023 period volume consisting of approximately 375,000 tons from inventory and 72,000 tons of toll processing.

The decline in sales volume for the 2024 period was related to a combination of challenging conditions for some of our customers, extended planned downtime for equipment upgrades, and political uncertainty leading up to the presidential election.

Adjusted gross profit was approximately $52.2 million for the 2024 period compared to approximately $74.9 million for the 2023 period.

Adjusted gross profit as a percentage of sales was approximately 16.6% for the 2024 period compared to approximately 19.5% for the 2023 period.

Our operating results are significantly impacted by the market price of hot-rolled steel coil ("HRC").

Entering the 2024 period, HRC prices were on a predominately declining trend dropping approximately 40% from January 2024 through the middle of August 2024.

From August 2024 and to the end of the 2024 period, HRC price remained relatively stable.

As a result, the Company experienced compressed physical margins throughout the 2024 period.

Entering the 2023 period, HRC prices had increased approximately 95% from November 2022 to April 2023.

HRC prices then declined approximately 45% until the October 2023 with prices then increasing by approximately 66% by the end of the 2023 period.

As a result, the 2023 period benefitted from strong physical margins for the first quarter of the period followed by a quarter of compressed margins and then ended the period with a quarter of improving margins.

The Company utilizes HRC futures to partially manage exposure to commodity price risk.

The Company recognized hedging related gains of approximately $5.8 million and $0.7 million in the 2024 and 2023 periods, respectively.

Flat-roll Segment

Flat-roll product segment sales for the 2024 period totaled approximately $286.9 million compared to approximately $352.1 million for the 2023 period.

For a more complete understanding of the average selling prices of goods sold, it is helpful to exclude any sales generated from processing or storage of customer owned material.

Sales generated from processing or storage of customer owned material totaled approximately $3.7 million for the 2024 period compared to approximately $3.6 million for the 2023 period.

Sales generated from flat-roll segment inventory totaled approximately $283.2 million for the 2024 period compared to approximately $348.5 million for the 2023 period.

The average per ton selling price related to these shipments decreased from approximately $995 per ton in the 2023 period to approximately $868 per ton in the 2024 period.

Sales volume for the 2024 period consisted of approximately 326,000 tons from inventory and another 60,000 tons of toll processing customer owned material compared to the 2023 period volume consisting of approximately 351,000 tons from inventory and 72,000 tons of toll processing.

Flat-roll segment operations recorded operating profits of approximately $6.6 million and $23.6 million for the 2024 period and 2023 period, respectively.

The Company’s flat-roll segment purchases its inventory from a limited number of suppliers.

Loss of any of these suppliers could have a material adverse effect on the Company’s business.

Tubular Segment

Tubular product segment sales for the 2024 period totaled approximately $28.5 million compared to approximately $31.9 million for the 2023 period.

Sales decreased primarily due to a decrease in the average selling price per ton from approximately $1,319 per ton for the 2023 period to approximately $1,065 per ton for the 2024 quarter.

Tons sold increased from approximately 24,000 tons in the 2023 period to approximately 26,500 tons in the 2024 period.

The tubular segment recorded an operating loss of approximately $2.0 million for t he 2024 period compared to recording operating profit of approximately $2.2 million for the 2023 period.

The tubular segment purchases its inventory from a limited number of suppliers.

Loss of any of these suppliers could have a material adverse effect on the Company’s business.

General, Selling and Administrative Costs

During the 2024 period, selling, general and administrative costs decreased approximately $2.6 million compared to the 2023 period.

This decrease is primarily related to lower incentive compensation expense due to the lower earnings in the 2024 period.

Income taxes decreased from a provision for the 2023 period of approximately $3.8 million to a provision for the 2024 period of approximately $0.1 million.

This decrease was primarily related to lower earnings before taxes for the 2024 period.

The income tax provision as a percentage of earnings before tax was approximately 12.4% and 23.4% for the nine months ended December 31, 2024 and 2023, respectively.

For the nine months ended December 31, 2024 , the effective tax rate differed from the federal statutory rate due primarily to the tax effect of restricted stock vesting during the period with this impact partially reduced by the inclusion of state tax expenses in the provision.

For the nine months ended December 31, 2023 , the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses in the provision.

Three Months Ended December 31, 2024 Compared to Three Months Ended December 31, 2023

During the three months ended December 31, 2024 (the “ 2024 quarter”), sales, cost of materials sold and adjusted gross profit decreased approximately $21.9 million, $13.5 million and $8.4 million , respectively, compared to the amounts recorded during the three months ended December 31, 2023 (the “ 2023 quarter”).

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

During the three months ended June 30, 2025 (the “ 2025 quarter”), sales, cost of materials sold and adjusted gross profit increased approximately $20.2 million, $9.3 million and $10.9 million , respectively, compared to the amounts recorded during the three months ended June 30, 2024 (the “ 2024 quarter”).

Adjusted gross profit is a non-GAAP measure calculated as sales minus cost of materials sold.

The decrease in sales was associated with both a decline in sales volume and a decrease in the average selling price per ton.

The increase in sales was primarily due to an increase in sales volume.

Sales volume for the 2025 quarter consisted of approximately 141,500 tons from inventory and another 19,000 tons of toll processing customer owned material compared to the 2024 quarter volume consisting of approximately 119,000 tons from inventory and 24,000 tons of toll processing.

The decline in sales volume for the 2024 quarter was related to a combination of weaker demand among some customers and hesitancy among others given political uncertainty during the quarter.

The increase in sales volume for the 2025 quarter was related to a combination of stronger demand among some customers and successful commercial efforts to increase capacity utilization.

Adjusted gross profit was approximately $29.1 million for the 2025 quarter compared to approximately $18.1 million for the 2024 quarter.

Adjusted gross profit as a percentage of sales was approximately 21.6% for the 2025 quarter compared to approximately 15.8% for the 2024 quarter.

Our operating results are significantly impacted by the market price of HRC.

Entering the 2024 quarter, HRC price had reached the bottom of a price cycle after a prolonged decline and remained relatively stable near the bottom during the 2024 quarter.

As a result, the Company experienced compressed margins throughout the 2024 quarter.

The Company experienced an inflection point in HRC price during the 2023 quarter with prices increasing approximately 66% from early October 2023 and through the end of the 2023 quarter.

As a result, the Company experienced considerable margin improvement in the second half of the 2023 quarter.

Our operating results are significantly impacted by the market price of hot-rolled steel coil ("HRC").

Entering the 2025 quarter, HRC price had reached the top of a price cycle and remained relatively stable during the 2025 quarter, decreasing slightly towards the end of the quarter.

As a result, the Company experienced increased margins during the 2025 quarter.

Entering the 2024 quarter, HRC price was on a predominately declining trend which continued throughout the 2024 quarter resulting in compressed physical margins.

The Company utilizes HRC futures to partially manage exposure to commodity price risk.

7 unchanged sentences

Sales volume for the 2025 quarter consisted of approximately 132,500 tons from inventory and another 19,000 tons of toll processing customer owned material compared to the 2024 quarter volume consisting of approximately 109,000 tons from inventory and 24,000 tons of toll processing.

The decline in sales volume for the 2024 quarter was related to a combination of weaker demand among some customers and hesitancy among others given the political uncertainty during the quarter.

Flat-roll segment operations recorded operating profits of approximately $1.3 million and $8.7 million for the 2024 quarter and 2023 quarter, respectively.

The increase in sales volume for the 2025 quarter was related to a combination of stronger demand among some customers and successful commercial efforts to increase capacity utilization.

Flat-roll segment operations recorded earnings from operations of approximately $8.8 million and $2.7 million for the 2025 quarter and 2024 quarter, respectively.

The Company’s flat-roll segment purchases its inventory from a limited number of suppliers.

2 unchanged sentences

Tubular product segment sales for the 2025 quarter totaled approximately $10.7 million compared to approximately $11.2 million for the 2024 quarter.

Sales decreased due primarily to a decrease in the average selling price per ton from approximately $1,164 per ton for the 2023 quarter to approximately $1,013 per ton for the 2024 quarter.

Sales volume was comparable between the periods with approximately 8,000 tons sold in both the 2023 and the 2024 quarters.

The tubular segment recorded operating losses of approximately $0.2 million and $0.1 million for t he 2024 quarter and 2023 quarter, respectively.

Sales decreased primarily due to a decline in tons sold, offset by a slight increase in the average selling price per ton.

Tons sold decreased from approximately 10,000 tons in the 2024 quarter to approximately 9,000 tons in 2025 quarter.

The average per ton selling price increased from approximately $1,140 per ton for the 2024 quarter to approximately $1,206 per ton for the 2025 quarter.

The tubular segment recorded earnings from operations of approximately $1.3 million for t he 2025 quarter compared to a loss from operations of approximately $1.2 million for the 2024 quarter.

The tubular segment purchases its inventory from a limited number of suppliers.

1 unchanged sentence

General, Selling and Administrative Costs

During the 2024 quarter, selling, general and administrative costs decreased approximately $0.3 million compared to the 2023 quarter.

This decrease is primarily related to lower incentive compensation expense due to the lower earnings in the 2024 quarter.

Income taxes decreased from a provision for the 2023 quarter of approximately $0.1 million to a benefit for the 2024 quarter of approximately $0.4 million.

This decrease was primarily related to lower earnings before taxes for the 2024 quarter.

The income tax provision or benefit as a percentage of earnings or loss before tax was approximately 25.8% and 5.9% for the three months ended December 31, 2024 and 2023, respectively .

For the 2024 quarter, the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses in the provision.

For the 2023 quarter, the effective tax rate differed from the federal statutory rate due primarily to the adjustment of interim tax estimates during the quarter.

2025 quarter, selling, general and administrative costs increased approximately $0.9 million compared to the

2024 quarter.

This increase is primarily related to increased incentive compensation expense due to the higher earnings in the

2025 quarter compared to the

2024 quarter.

Income taxes increased from a provision for the 2024 quarter of approximately $0.7 million to a provision for the 2025 quarter of approximately $1.6 million.

This increase was primarily related to increased earnings before taxes for the 2025 quarter.

The income tax provision as a percentage of earnings before tax was approximately 24.3% and 22.2% for the three months ended June 30, 2025 and 2024, respectively .

For both quarters, the effective tax rate differed from the federal statutory rate due primarily to the inclusion of state tax expenses in the provision with this impact partially reduced by the tax effect of restricted stock vesting during the quarters .

Non-GAAP Information

6 unchanged sentences

THREE MONTHS ENDED

NINE MONTHS ENDED

Gross profit (GAAP measure)

4 unchanged sentences

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

The Company’s current ratio amounted to 3.5 a t December 31, 2024 and 3.1 at March 31, 2024 .

Working capital was approximately $107.0 million at December 31, 2024 and $116.0 million at March 31, 2024 .

During the nine months ended December 31, 2024, the Company maintained assets and liabilities at levels it believed were commensurate with operations.

The Company’s current ratio was 3.9 a t June 30, 2025 and 4.3 at March 31, 2025 .

Working capital was approximately $117.5 million at June 30, 2025 and $128.1 million at March 31, 2025 .

During the three months ended June 30, 2025, the Company maintained assets and liabilities at levels it believed were commensurate with operations.

Changes in balance sheet amounts occurred in the ordinary course of business.

1 unchanged sentence

The Company ex pects to continue to monitor, evaluate and manage balance sheet components depending on changes in market conditions and the Company’s operations.

The Company has a $150 million asset-based lending facility ("ABL Facility") which matures on May 19, 2026 and is secured by substantially all of the assets of the Company.

The Company has a $150 million asset-based lending facility ("ABL Facility") in place with JPMorgan Chase Bank, N.A.

as the arranging agent and BMO Harris Bank, N.A.

as a one-third syndicated participant.

On May 6, 2025, the Company executed the fourth amendment to the credit agreement which extended the maturity date of the ABL Facility to August 19, 2026.

The ABL Facility is secured by substantially all of the assets of the Company.

The Company can elect borrowings on a floating rate basis or a term basis.

6 unchanged sentences

The ABL Facility contains other representations and warranties and affirmative and negative covenants that are usual and customary.

If certain conditions precedent are satisfied, the ABL facility may be increased by up to an aggregate of $25 million, in minimum increments of $5 million.

At December 31, 2024, the Company had a balance of approximately $32.5 million under the ABL Facility with an applicable interest rate of 6.5%.

At December 31, 2024, the Company's applicable borrowing base calculation supported access to approximately $99.2 million of the ABL Facility.

If certain conditions precedent are satisfied, the ABL facility may be increased up to an aggregate of $25 million, in minimum increments of $5 million.

At June 30, 2025, the Company had a balance of approximately $33.0 million under the ABL Facility with an applicable interest rate of 6.2%.

At June 30, 2025, the Company's applicable borrowing base calculation supported access to approximately $103.7 million of the ABL Facility.

As of the filing date of this Form 10-Q, the Company had borrowings of approximately $27.9 million outstanding under the ABL Facility and the Company's most recent borrowing base calculation provided access to approximately $104.3 million of the ABL Facility.

The Company believes that its current cash position along with cash flows from operations and borrowing capability due to its financial position are adequate to fund its expected cash requirements for the next 12 months.

With maturity of the existing ABL facility approaching one year, the Company is in the process of renewing its credit arrangement.

HEDGING ACTIVITIES

2 unchanged sentences

Hedging decisions are intended to protect the value of the Company's inventory and produce more consistent financial results over price cycles.

The Company recognized gains of approximately $0.3 million and $5.8 million in the three and nine months ended December 31, 2024, respectively, related to hedging activities with all of this being classified as economic hedges of risk.

The Company recognized gains of approximately $0.3 million and $5.4 million in the three months ended June 30, 2025 and 2024, respectively, related to hedging activities with all of this being classified as economic hedges of risk.

With MTM accounting treatment it is possible that hedging related gains or losses might be recognized in a different fiscal quarter or fiscal year than the corresponding improvement or contraction in our physical margins.

See Note H for additional information related to the Company's hedging activities.

The Company expects sales volume for the fourth quarter of fiscal 2025 to be higher than the third quarter volume due to stronger order activity and the impact of holidays on third quarter volume.

HRC prices were stable at the start of the fourth quarter but began to increase at the time of this filing.

Most industry participants anticipate prices to increase further during the second half of the quarter.

The Company expects fourth quarter sales margins to improve compared to the third quarter.

See Note 8 for additional information related to the Company's hedging activities.

The Company expects sales volume for its second quarter of fiscal 2026 to be slightly higher than the sales volume for the first fiscal quarter as the Company progresses on its efforts to increase the capacity utilization of its facilities.

Hot-rolled coil prices softened at the end of the first quarter and the start of the second quarter.

As a result, the Company expects lower margins for the second quarter compared to the first quarter.

CRITICAL ACCOUNTING ESTIMATES

19 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis