(Source: Business Wire)
Olympic Steel, Inc., (Nasdaq: ZEUS), a national steel service center, today announced that due to continued weakness in the economy and the steel market, it has taken additional actions to reduce its operating expenses, and it will be required to write down the value of its inventory at March 31, 2009, in accordance with lower of cost or market accounting guidance.
Demand for flat rolled steel remained soft and pricing continued to unexpectedly deteriorate through March 2009. In response to the weak market conditions, Olympic Steel estimates that it has reduced its annual operating expenses for 2009 by approximately $65 million, or approximately 35%, compared to total annual operating expenses for 2008. Cost reductions have been achieved through various initiatives including: headcount reductions of 21% from peak 2008 levels; reduced work hours to match depressed customer production schedules; company-wide base pay reductions ranging from 2.5% to 10% effective March 30, 2009, including cash compensation reductions taken by our executive management team equal to 20% of each executive's base salary; a 20% cash compensation reduction by our board of directors; benefit reductions; and heightened control over all discretionary spending.
Market conditions will also require the Company to report an inventory lower of cost or market pretax charge of approximately $30 million, or approximately 12% of its March 31, 2009 inventory.
Commenting on the Company's actions, Chairman and Chief Executive Officer Michael D. Siegal, stated, "In light of challenging market conditions in 2009, where February year-to-date steel service center shipments have declined by 43% compared to the same period of 2008 according to the Metals Service Center Institute's Metals Activity Report, we have taken actions to reduce our expenses and preserve our cash, including the suspension of new non-maintenance capital expenditures. We expect to generate significant cash flow from inventory reductions in the next six months to substantially reduce our outstanding debt by the end of 2009. We have also completed an amendment to our revolving credit facility eliminating the impact of the inventory lower of cost or market charge on our covenants. We believe that our focus on cash flow, expense reductions and our strong balance sheet will be advantageous once an economic recovery occurs," concluded Mr. Siegal.
The Company also announced that it has reached a new three-year contractual agreement with the collective bargaining unit representing its Minneapolis plate facility employees.
