Olympic Steel Annual Report 2017

FY2017 Annual Report · Olympic Steel

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2017 Annual Report

About the Company

We are a leading metals service center that operates in three reportable segments; carbon flat products, specialty metals

flat products, and tubular and pipe products. We provide metals processing and distribution services for a wide range of

customers. The 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. Our specialty metals flat products segment’s

focus is on the direct sale and distribution of processed aluminum and stainless flat-rolled sheet and coil products, flat bar

products and fabricated parts. In addition, through our tubular and pipe products segment, we distribute metal tubing, pipe,

bar, valves and fittings and fabricate pressure parts supplied to various industrial markets.

We also perform toll processing of customer-owned metals. Our processing capabilities include tempering, stretch leveling,

cutting to length, CNC machining, laser punching, blanking, edging, slitting, burning, forming, shearing, welding, shot blasting,

deburring, plate rolling, powder coating, and inspecting.

Our customers operate in diversified end markets and are served from 30 strategically located facilities in the United States

and Mexico. A small portion of our products are sold internationally, primarily in Canada, Mexico and Central and South

America. International sales totaled 2.4% and 2.2% of consolidated net sales in 2017 and 2016, respectively.

Financial Information

In thousands, except per-share and ratio data

2017

2016

2015

For the Year

Net sales

Goodwill and intangible asset impairment

Operating income (loss)

Net income (loss)

Net income (loss) per diluted share

Weighted average diluted shares outstanding

Capital expenditures

At Year End

Accounts receivable, net

Inventories

Total assets

Total debt

Shareholders’ equity

Shareholders’ equity per share

Debt-to-equity ratio

$ 1,330,696)

$ 1,055,116) $ 1,175,543)

23,986)

18,963)

1.67)

11,381)

10,160)

132,737)

275,307)

604,158)

197,165)

272,583)

24.80)

5,748)

(1,078)

(0.10)

11,210)

6,824)

101,902)

254,526)

556,068)

166,424)

253,390)

23.11)

(24,951)

(27,779)

(26,777)

(2.39)

11,192)

7,317)

92,877)

206,645)

511,880)

148,490)

254,695)

23.25)

0.72 to 1)

0.66 to 1)

0.58 to 1)

2017 Letter to Shareholders

Dear Fellow Shareholders
Olympic Steel’s commercial and financial success in 2017 generated our most productive year since 2011. Exiting the Great
Recession, our long-term strategy involved diversifying products, adding geographic reach, and increasing value added
services. In 2017, U.S. GDP grew at the fastest rate in six years and our substantially higher profitability in this environment
validated our strategy.

Economic expansion following the last recession has been the slowest on record in more than 50 years. However, economic
activity began to accelerate following the 2016 U.S. Presidential Election and stronger year-over-year demand for metals
continued throughout 2017. Groundwork laid in previous years positioned us to take advantage of just such a market recovery.

Our sales in 2017 reached $1.3 billion, aided by a revitalized carbon steel industry, an organically growing specialty metals
business, and growth in the tubular and pipe products segment. Net income was $19.0 million, or $1.67 per diluted share.

The key driver of our success has always been our people. We enhanced our direct sales force, operating teams, and
management in 2017. James Post and David Gea were both promoted to expanded roles as Regional Vice Presidents. Jim
continues to manage the Chambersburg, Pennsylvania facility, while assuming added oversight responsibility for facilities in
Cleveland, Ohio and Mt. Sterling, Kentucky. Dave remains General Manager of the Detroit, Michigan facility. He also now
supervises the Milford, Connecticut and Atlanta, Georgia facilities. Additionally, Terry Rohde was promoted to Director of
Operations and now leads facility and equipment efforts on a Company-wide basis, and new general managers were elevated
at several locations.

Zachary Siegal was named Vice President of Strategic Development, where he assumed responsibility for developing new
internal processing opportunities and growing the Company’s product portfolio. In addition, he is charged with disseminating
best practices across all business units and evaluating potential acquisitions.

We also welcomed Steven Wasil to Olympic Steel. Steve joined the management team as Vice President for our fast-growing
specialty metals business. At Chicago Tube and Iron, Steven West and James Farnan were both promoted to Vice President
roles to support growth in our tubular and pipe products.

Irrespective of market conditions, we consistently develop our people and, in turn, advance our Company. For the second
consecutive year, these talented teams have generated improved profitability for each of our three operating segments.

During the year, we bid farewell to Esther Potash who retired from her role as Chief Information Officer. We thank Esther for
her dedicated service and wish her a long and well-deserved retirement. Chris Garrett, a 23-year Olympic Steel veteran, was
promoted to Vice President, IT. This internal succession resulted in a seamless transition, with Chris capably assuming IT
leadership responsibilities.

Financially, we advanced working capital initiatives and strengthened our balance sheet during the year. We turned our flat
rolled inventory 4.5 times during 2017, while absorbing 12% more shipping volume. Our asset-based lending agreement
was enhanced, increasing the size to $400 million, with potential to expand further to $600 million, and extending maturity to
December 2022. This low-cost financing provides exceptional flexibility to fund growth objectives, and benefits our competitive
position when markets are more capital-intensive from higher commodity prices.

There are numerous internal capital projects budgeted for strategic growth areas. Some of the larger 2018 investments include
expanding our facility in Schaumburg, Illinois, by 40,000 square feet to accommodate a new stainless steel cut-to-length line.
We are also installing new flat and tube laser equipment to meet higher demand for those services.

SEGMENT REVIEW

Carbon Flat Products
In my prior two annual letters, I described how we optimized resource allocation and improved inventory turnover to navigate
through depressed market cycles, all while maintaining a long-term growth bias. This prudent approach allowed us to respond
immediately to fast-changing market conditions by flexing up inventory levels and shipments to meet suddenly higher demand.
Crisp execution on improving demand, aided by higher average selling prices, resulted in net sales growth of 30% in 2017,
while profitability dramatically improved. Operating income for this segment rose by more than $22 million to $17.9 million,
reversing the prior year’s operating loss of $4.4 million.

2017 Letter to Shareholders

Specialty Metals Flat Products
Our stainless steel and aluminum business continued to prosper in 2017. Net sales increased 20% over 2016. Once again,
this segment shipped record sales volume, generating record revenue and record market share. With operating income rising
14% in 2017, to $11.2 million, we also earned record profitability.

Consumers of our stainless steel sheet and coil products include makers of appliances, transportation tankers, food and beverage
service equipment; and, handling vessels for chemicals and pharmaceuticals. These customers are expressing optimism for
near-term business activity. Our sales of aluminum products are also increasing, primarily to automobile manufacturers, as
many of them pursue light-weighting in their new models. This segment also continues to benefit from our ability to provide pre-
production processing services, as well as cross-selling specialty metals products to our legacy carbon customers.

Tubular and Pipe Products
Chicago Tube and Iron also grew net sales by 20% in 2017. We gained market share in these products, and this segment
contributed $4.6 million to consolidated operating income during the year. Here, the business cycle lags flat products by a few
quarters. Therefore, the same industry dynamics currently providing tailwinds for our flat product segments are expected to
positively impact financial results for pipe and tube products in 2018.

2018 AND BEYOND

After yearend, we announced the nomination of Dr. Idalene (Idie) Kesner, to serve as an independent director on the Company’s
Board of Directors. Dr. Kesner is the Dean at Indiana University’s Kelley School of Business and she is also an expert in
corporate governance and M&A activities. Her election would increase the number of independent directors to six. We look
forward to her joining our Board, pursuant to shareholder vote, at our annual meeting in May.

In early 2018, positive momentum in U.S. manufacturing has continued. Industrial OEMs and metal fabricators are anticipating
that growth will continue this year. New orders are exceeding current production levels in the same industrial sectors where
we have recently gained market share. Our facilities and equipment are operating efficiently, and we have sufficient capacity
and capital to handle more volume.

Looking ahead, we are encouraged by the prospect for sustainable demand improvement. Increasing business activity, recent tax
legislation, and higher defense spending are supporting capital investments and reviving manufacturing activity in our geographic
markets. Congressional progress on an infrastructure bill would provide additional momentum to our expanding marketplace.

Metals pricing remains strong due to higher demand in the U.S. and abroad, rising raw material prices, and import tariffs. The
tariffs of 25% on steel imports and 10% on aluminum imports, were established under Section 232 to support national security.
They are designed to stimulate domestic steel production and increase capacity utilization to maintain a vibrant U.S. steel
industry and enhance capabilities for national defense.

I have worked in this industry, and at Olympic Steel, for 45 years. Twenty-four of those years have been spent as Chairman
and CEO. During the length of my entire career, I have never seen the collective steel-market outlook as uniformly positive
as it is today.

I’m proud that our strategy perfectly positions us to take advantage of a revitalized industrial sector. We have the right people
in place and the right assets. With steady demand, margins and volumes should expand in 2018, further improving our
financial results.

In closing, I would like to thank our dedicated employees for their hard work, our loyal customers for allowing us to improve
their supply chains and, last, but not least, our shareholders for their unwavering support.

Sincerely,

Michael D. Siegal
March 20, 2018

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

( X )

For The Year Ended December 31, 2017

( )

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Transition Period From _______________ To _______________

Commission File Number 0-23320
OLYMPIC STEEL, INC.
(Exact name of registrant as specified in its charter)

Ohio
(State or other jurisdiction of incorporation or organization)

22901 Millcreek Boulevard, Suite 650, Highland Hills, OH
(Address of principal executive offices)

34-1245650
(I.R.S. Employer Identification Number)

44122
(Zip Code)

Registrant's telephone number, including area code (216) 292-3800

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class
Common Stock, without par value

Name of each Exchange on which registered
The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ( ) No (X)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes ( ) No (X)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes (X) No ( )

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files). Yes (X) No ( )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (X)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one:)

Large accelerated filer ( )
Non-accelerated filer ( )
(Do not check if a smaller reporting company)

Accelerated filer (X)
Small reporting company ( )
Emerging growth company ( )

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ( )

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ( ) No (X)

As of June 30, 2017, the aggregate market value of voting stock held by nonaffiliates of the registrant based on the closing price at which
such stock was sold on the Nasdaq Global Select Market on such date approximated $176,429,526.

The number of shares of common stock outstanding as of March 2, 2018 was 10,998,480.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file with the Securities and Exchange Commission a definitive Proxy Statement pursuant to Regulation 14A of
the Securities Exchange Act of 1934 within 120 days of the close of its fiscal year ended December 31, 2017, portions of which document
shall be deemed to be incorporated by reference in Part III of this Annual Report on Form 10-K from the date such document is filed.

TABLE OF CONTENTS

Page

Part I

Item 1. Business ......................................................................................................................................................
Item 1A. Risk Factors ................................................................................................................................................
Item 1B. Unresolved Staff Comments .......................................................................................................................
Item 2. Properties ....................................................................................................................................................
Item 3. Legal Proceedings .......................................................................................................................................
Item 4. Mine Safety Disclosures .............................................................................................................................
Executive Officers of the Registrant ...........................................................................................................

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities ....................................................................................................................................................
Item 6. Selected Financial Data ..............................................................................................................................
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .....................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ....................................................................
Item 8. Financial Statements and Supplementary Data ...........................................................................................
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .....................
Item 9A. Controls and Procedures .............................................................................................................................
Item 9B. Other Information .......................................................................................................................................

Part III

Item 10. Directors, Executive Officers and Corporate Governance ..........................................................................
Item 11. Executive Compensation ............................................................................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...
Item 13. Certain Relationships and Related Transactions, and Director Independence ............................................
Item 14. Principal Accountant Fees and Services ....................................................................................................

Part IV

Item 15. Exhibits and Financial Statement Schedules ..............................................................................................
Index to Exhibits ........................................................................................................................................
Item 16. Form 10-K Summary ..................................................................................................................................
Signatures ...................................................................................................................................................

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11
18
19
20
20
21

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23
24
44
45
74
74
74

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75

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79

PART I

ITEM 1. BUSINESS

The Company

We are a leading metals service center that operates in three reportable segments; carbon flat products, specialty metals flat
products, and tubular and pipe products. We provide metals processing and distribution services for a wide range of
customers. The 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. Our specialty metals flat products segment’s
focus is on the direct sale and distribution of processed aluminum and stainless flat-rolled sheet and coil products, flat bar
products and fabricated parts. In addition, through our tubular and pipe products segment, we distribute metal tubing, pipe,
bar, valves and fittings and fabricate pressure parts supplied to various industrial markets. Products that require more value-
added processing generally have a higher gross profit. 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, Mexico and Central and South America. International sales totaled 2.4% and 2.2% of
consolidated net sales in 2017 and 2016, respectively.

Segment reporting information is contained in Note 15 of Notes to Consolidated Financial Statements, which can be found
in Part II, Item 8 of this Annual Report on Form 10-K and which is incorporated herein by reference.

We are incorporated under the laws of the State of Ohio. Our executive offices are located at 22901 Millcreek Boulevard,
Suite 650, Highland Hills, Ohio 44122. Our telephone number is (216) 292-3800, and our website address is
www.olysteel.com. 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.

Industry Overview

The metals industry is comprised of three types of entities: metals producers, intermediate metals processors and metals
service centers. Metals producers have historically emphasized the sale of metals to volume purchasers and have generally
viewed intermediate metals processors and metals service centers as part of their customer base. However, all three types of
entities can compete for certain customers who purchase large quantities of metals. Intermediate metals processors tend to
serve as processors in large quantities for metals producers and major industrial consumers of processed metals, including
automobile and appliance manufacturers.

Services provided by metals service centers can range from storage and distribution of unprocessed metal products to
complex, precision value-added metals processing. Metals service centers respond directly to customer needs and emphasize
value-added processing of metals pursuant to specific customer demands, such as cutting-to-length, slitting, shearing, roll
forming, shape correction and surface improvement, blanking, tempering, plate burning and stamping. These processes
produce metals to specified lengths, widths, shapes and surface characteristics through the use of specialized equipment.
Metals service centers typically have lower cost structures than, and provide services and value-added processing not
otherwise available from, metals producers.

End product manufacturers and other metals users seek to purchase metals on shorter lead times and with more frequent and
reliable deliveries than can normally be provided by metals producers. Metals service centers generally have lower labor
costs than metals producers and consequently process metals on a more cost-effective basis. In addition, due to this lower
cost structure, metals service centers are able to handle orders in quantities smaller than would be economical for metals
producers. The benefits to customers purchasing products from metals service centers include lower inventory levels, lower
overall cost of raw materials, more timely response and decreased manufacturing time and expense. Customers also benefit
from a lower investment in production labor, buildings and equipment, which allows them to focus on the engineering,
assembly and marketing of their products. 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.

Corporate History

Our company was founded in 1954 by the Siegal family as a general steel service center. Michael Siegal, the son of one of
the founders, began his career with us in the early 1970s and has served as our Chief Executive Officer since 1984, and as
our Chairman of the Board of Directors since 1994. David Wolfort, our President, joined us as General Manager in 1984. In
the late 1980s, our business strategy changed from a focus on warehousing and distributing steel from a single facility with
no major processing equipment to a focus on geographic and product growth, customer diversity and value-added processing.
An integral part of our growth has been the acquisition and start-up of processing and sales operations, and the investment in
processing equipment. In 1994, we completed an initial public offering and, in 1996, we completed a follow-on offering of
our common stock. In July 2011, we acquired Chicago Tube and Iron, or CTI, a private leading distributor of tubing, pipe,
bar, valves, and fittings, which represents our tubular and pipe products segment. Andrew Greiff, our Executive Vice
President and Chief Operating Officer joined us in 2009 and managed the Company’s rapidly expanding specialty metals
business.

Business Strategy and Objectives

We believe that the metals service center and processing industry is driven by the following primary trends: (i) shift by
customers to fewer suppliers that are larger and financially strong; (ii) increased customer demand for more frequent
deliveries, higher quality products and services; and (iii) globalization of metals industry participants.

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.

We are focused on specific operating objectives including: (i) managing inventory turnover; (ii) managing operating
expenses; (iii) maintaining targeted cash turnover rates; (iv) investing in value-added processing and material handling
equipment; (v) growing our market share; (vi) investing in technology and business information systems; (vii) improving
safety performance; and (viii) improving on-time delivery and quality performance for our customers.

These operating objectives are supported by:

● A set of core values, which are communicated, practiced and measured throughout the Company.
● Our “flawless execution” program (Fe), which is an internal recognition 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 three key sub-systems:
● Operating system: Focused on continuously improving processes through waste and variation

elimination using Lean Six Sigma tools and employee certifications.

● Cultural system: Focused on creating the environment to facilitate change and improve the way we

work and create value.

● Management system: Focused on creating the measurements and governance structure to support

continuous improvement.

●
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.

We believe our depth of management, 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.

Investments and Acquisitions. Historically, we have accelerated our growth through acquisitions and capital investments in
facilities and processing equipment. During 2017, we created a new position, Vice President of Strategic Development, whose
focus is on profitable growth opportunities, including acquisitions. When the results of sales and marketing efforts and our
financial justifications indicate that there is sufficient customer demand for a particular product, process or service, we may
purchase equipment to satisfy that demand. We also evaluate our existing equipment to ensure that it remains productive,
and we upgrade, replace, redeploy or dispose of equipment when necessary. We invest in processing equipment to support
customer demand and to respond to the growing trend among original equipment manufacturers (our customers) to outsource
non-core production processes, such as plate processing, machining, welding and fabrication, in order to concentrate on
engineering, design and assembly.

Our capital investments during the past three years have primarily consisted of initial spending on a building expansion and
building improvements, a slitter for our specialty metals flat products segment, a stretcher leveling line as well as other
processing equipment for our expanded value-added customer base in Winder, Georgia, added tube and pipe distribution
capabilities from our Cleveland, Ohio, Locust, North Carolina and Monterey, Mexico facilities and additional processing
equipment for all of our three segments.

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 continuously analyze our customer base to ensure
that strategic customers are properly targeted and serviced, while focusing our efforts to supply and successfully service
multi-location customers from multi-location Olympic facilities. We service certain customers with carbon and specialty
metals flat products and tubular and pipe products through cross-stocking of products in certain facilities.

We offer business solutions to our customers through value-added and value-engineered services. We also provide inventory
stocking programs and in-plant Olympic Steel employees located at certain customer locations to help reduce customers’
costs. Our owned truck fleet further enhances our just-in-time deliveries based on our customers’ requirements.

Our flawless execution (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 sales force makes direct daily sales calls
to customers throughout the continental United States, Canada and Mexico. The continuous interaction between our sales
force and active and prospective customers provides us with valuable market information and sales opportunities, including
opportunities for outsourcing, improving customer service and increasing sales.

Our sales efforts are further supported by metallurgists, engineers, technical and quality service personnel and product
specialists who have specific expertise in carbon and stainless steel, aluminum, alloy plate and steel fabrication as well as
tubular and pipe products. Our services for certain customers also include integration into our internal business systems to
provide cost efficiencies for both us and our customers.

Management. We believe one of our strengths is the depth, knowledge and experience of our management team. 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 17 years with our company. During 2017, we further enhanced our management team
by the promotions of several employees to senior management positions within the organization.

Products, Processing Services and Quality Standards

We maintain inventory of carbon, stainless and aluminum coil, plate and sheet products, and tubular and pipe products. Coil
is in the form of a continuous sheet, typically 36 to 96 inches wide, between 0.015 and 0.625 inches thick, and rolled into 10
to 30 ton coils. Because of the size and weight of these coils and the equipment required to move and process them into
smaller sizes, such coils do not meet the requirements, without further processing, of most customers. Plate is typically thicker
than coil and is processed by laser, plasma or oxygen burning.

Through our CTI subsidiary, we maintain inventory of round, square, and rectangular mechanical and structural tubing;
hydraulic and stainless tubing; boiler tubing; carbon, stainless, and aluminum pipe; and valves and fittings. CTI provides a
variety of value added services to its tube and pipe product line, including saw cutting, laser cutting, beveling, threading and
grooving. CTI also fabricates pressure components supplied to various industrial markets.

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. We attempt to maximize
yield and equipment efficiency through the use of computer software and by combining customer orders for processing each
coil, plate, tube or pipe to the fullest extent practicable.

Our services include both traditional service center processes of cutting-to-length, slitting, flattening, sawing and shearing
and higher value-added processes of blanking, tempering, plate burning, laser cutting, precision machining, welding,
fabricating, bending, beveling, polishing, kitting and painting to process metals to specified lengths, widths and shapes
pursuant to specific customer orders. Cutting-to-length involves cutting metal along the width of the coil. Slitting involves
cutting metal to specified widths along the length of the coil. Shearing is the process of cutting sheet metal. Blanking cuts
the metal into specific shapes with close tolerances. Tempering improves the uniformity of the thickness and flatness of the
metals through a cold rolling process. Plate and laser processing is the process of cutting metal into specific shapes and sizes.
Our forming activities include bending metal. Our machining activities include drilling, milling, tapping, boring and sawing.
Tube processing includes tube bending and end finishing. Finishing activities include shot blasting, grinding, edging and
polishing. Our fabrication activities include machining, welding, assembly and painting of component parts.

The flat products segment is separated into two reportable segments; carbon flat products and specialty metals flat products.
The flat products segments’ assets and resources are shared by the carbon and specialty metals segments and both segments’
products are, in some instances, stored in the shared facilities and processed on the shared equipment.

The following table sets forth, as of December 31, 2017, the major pieces of processing equipment in operation by segment:

Processing Equipment
Tempering
Stretcher-leveling
Cutting-to-length
Slitting
Shearing
Blanking
Plate processing
Laser processing
Forming
Machining
Painting
Tube processing
Finishing
Total

Consolidated
Flat
Products

Tubular and
Pipe
Products

Total

3
2
12
10
7
4
22
25
12
45
1
2
28
173

-
-
13
-
-
-
-
8
-
85
1
39
3
149

3
2
25
10
7
4
22
33
12
130
2
41
31
322

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. These
controls and procedures encompass periodic supplier and customer audits, workshops with customers, inspection equipment
and criteria, preventative actions, traceability and certification. We have quality testing labs at several of our facilities,
including at our temper mill facilities in Cleveland, Ohio and Bettendorf, Iowa.

In addition, 24 of our facilities have earned International Organization for Standardization (ISO) 9001:2008 or ISO 9001:2015
certifications. CTI has earned The American Society of Mechanical Engineers S Certification and The National Board of
Boiler & Pressure Vessel Inspectors R Certification. Our office building in Winder, Georgia has received Leadership in
Energy and Environmental Design (LEED) certification.

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 8.0%, 8.9% and 11.6% of our consolidated net sales in 2017,
2016 and 2015, respectively. We serve customers in metals consuming industries, including manufacturers and fabricators
of transportation and material handling lift equipment, construction, mining and farm equipment, storage tanks,
environmental and energy generation equipment, automobiles, food service and electrical equipment, military vehicles and
equipment, as well as general and plate fabricators and metals service centers. The table below shows the percentage of our
consolidated net sales to the largest industries for the past three years.

Industry
Industrial machinery and equipment manufacturers and their fabricators
Metals service centers
Automobile manufacturers and their suppliers
Residential and commercial construction
Transportation equipment manufacturers
All others <5%

2017
51.0%
10.6%
9.0%
8.9%
5.9%
14.6%

2016
51.3%
9.7%
9.8%
8.3%
6.4%
14.5%

2015
49.4%
7.2%
9.6%
10.2%
7.1%
16.5%

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. Most customers are located within a 250-mile radius of one of our processing facilities,
thus enabling an efficient delivery system capable of handling a high frequency of short lead time orders. We transport our
products directly to customers via our in-house truck fleet, which further supports the just-in-time delivery requirements of
our customers, and third-party trucking firms. Products sold to foreign customers, which have been immaterial to our
consolidated results, are shipped either directly from metals producers to the customer or to an intermediate processor, and
then to the customer by rail, truck or ocean carrier. Through our facility in Monterrey, Mexico, we are able to stock material
and service our customers in that country with shorter lead times.

We process our metals to specific customer orders as well as for stocking programs. Many of our larger customers commit
to purchase on a regular basis at agreed upon or indexed prices for periods ranging from three to twelve months. To help
mitigate price volatility risks, these price commitments are generally matched with corresponding supply arrangements, or
to a lesser degree by commodities hedging. Customers notify us of specific release dates as processed products are required.
Customers typically notify us of release dates anywhere from a just-in-time basis to one month before the release date.
Therefore, we are required to carry sufficient inventory to meet the short lead time and just-in-time delivery requirements of
our customers. CTI produces pressure parts and other fabricated components primarily for industrial boiler applications
representing 1.9% of consolidated net sales in 2017. These products typically take several months to produce due to their size
and complexity. Due to the time required for production, we may require progress payments throughout the construction
period.

The current global economic environment has resulted in increased supply chain scrutiny by our customers and potential
customers. We believe our size, geographic footprint, financial position, dedication to a field sales force, and our focus on
quality and customer service are advantageous in maintaining our customer base and in securing new customers.

Raw Materials

Our principal raw materials are carbon, coated, and stainless steel and aluminum, in the forms of pipe and tube, flat rolled
sheet, coil and plate that we typically purchase from multiple primary metals producers. The metals industry as a whole is
cyclical and at times pricing and availability of material can be volatile due to numerous factors beyond our control, including
general domestic and global economic conditions, domestic and global supply and demand imbalance, competition, quickly
changing lead times and late deliveries from metals producers, fluctuations in the costs of raw materials necessary to produce
metals, import duties and tariffs and currency exchange rates. This volatility can significantly affect the availability and cost
of raw materials for us.

Inventory management is a key profitability driver in the metals service center industry. Similar to many other metals service
centers, we maintain substantial inventories of metals to accommodate the short lead times and just-in-time delivery
requirements of our customers. Accordingly, we purchase metals in an effort to maintain our inventory at levels that we
believe to be appropriate to satisfy the anticipated needs of our customers based upon historic buying practices, purchase
commitments with customers and market conditions.

Our commitments to purchase metals are generally at prevailing market prices in effect at the time we place our orders.
During the past three years, we have entered into pass through nickel and carbon swaps at the request of our customers in
order to mitigate our customers’ risk of volatility in the price of metals. 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. During 2014, we entered into cash flow metals hedges to mitigate our risk of volatility in the price of metals. The
cash flow hedges were settled with the brokers at maturity and the economic benefit or loss arising from the changes in fair
value of the hedges was recorded to “Cost of Materials Sold” in the Consolidated Statements of Comprehensive Income. All
of the metals cash flow hedges settled during 2015, and we have no outstanding metals cash flow hedges as of December 31,
2017.

We have no long-term, fixed-price metals purchase contracts, except for commodity hedges. 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.

Suppliers

We concentrate on developing supply relationships with 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. 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 at what we believe to be competitive prices. We believe the access to our facilities and equipment,
and our high quality customer services and solutions, combined with our long-standing and continuous prompt pay practices,
will continue to be an important factor in maintaining strong relationships with metals suppliers.

The metals producing supply base has experienced significant consolidation, with a few suppliers accounting for a majority
of the domestic carbon steel market. We purchased approximately 53% and 54% of our total metals requirements from our
three largest suppliers in 2017 and 2016, respectively. Although we have no long-term supply commitments, we believe we
have good relationships with our metals suppliers. If, in the future, we are unable to obtain sufficient amounts of metals on a
timely basis, we may not be able to obtain metals from alternate sources at competitive prices. In addition, interruptions or
reductions in our supply of metals could make it difficult to satisfy our customers’ just-in-time delivery requirements, which
could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Competition

Our principal markets are highly competitive. We compete with other regional and national metals service centers, single
location service centers and, to a certain degree, metals producers and intermediate metals processors on a regional basis. We
have different competitors for each of our products and within each region. We compete on the basis of price, product
selection and availability, customer service, value-added capabilities, quality, financial strength and geographic proximity.
Certain of our competitors have greater financial and operating resources than we have.

With the exception of certain Canadian or Mexican operations, foreign-located metals service centers are generally not a
material competitive factor in our principal domestic markets.

Management Information Systems

Information systems are an important component of our strategy. We have invested in technologies and human resources as
a foundation for growth. We depend on our Enterprise Resource Planning (ERP) systems for financial reporting,
management decision-making, inventory management, order tracking and fulfillment and production optimization. We
continue to upgrade and consolidate our systems for optimal use of resources and to assure we are taking advantage of
technology offerings.

Our information systems focus on the following core application areas:

Inventory Management. Our information systems track the status and cost of inventories by product, location and
process on a daily basis. This information is essential to optimize management of inventory.

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. In addition to full electronic data interchange (EDI) capabilities with our
customers and vendors, we also have implemented extranet sites for specific customers which are integrated with
our internal business systems.

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 and have
decommissioned three legacy systems as of December 31, 2017. We continue to implement these systems to provide
standardized business processes, enhanced inventory management, production cost, and 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. 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 information
professionals employ proven security and monitoring practices 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, with migration of our other systems which
are in progress.

Employees

At December 31, 2017, we employed approximately 1,670 people. Approximately 280 of the hourly plant personnel are
represented by nine separate collective bargaining units. The table below shows the expiration dates of the collective
bargaining agreements.

Facility
Duluth, Minnesota
St. Paul, Minnesota
Milan, Illinois
Locust, North Carolina
Romeoville, Illinois
Minneapolis, Minnesota (coil)
Indianapolis, Indiana
Minneapolis, Minnesota (plate)
Detroit, Michigan

Expiration date
December 21, 2017
May 25, 2018
August 12, 2018
March 4, 2020
May 31, 2020
September 30, 2020
January 29, 2021
March 31, 2022
August 31, 2022

We have never experienced a work stoppage and we believe that our relationship with employees is good. 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. Negotiations are currently on-going for our
collective bargaining unit in Duluth, Minnesota.

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. 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. In such states, we have registered under different names, including “Oly Steel” and “Olympia Steel.”
Our wholly-owned subsidiary, Olympic Steel Lafayette, Inc., does business in certain states under the names “Olympic Steel
Detroit,” “Lafayette Steel and Processing” and “Lafayette Steel.” Our wholly-owned subsidiary, Olympic Steel Iowa, Inc.
does business in certain states under the name “Oly Steel Iowa, Inc.”. Our North Carolina operation conducted business under
the name “Olympic Steel North Carolina.” Our Integrity Stainless operation conducts business under the name “Integrity
Stainless”. Our CTI North Carolina 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.”

We also hold a trademark for our stainless steel sheet and plate product “OLY-FLATBRITE,” which has a unique
combination of surface finish and flatness.

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. 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.

Environmental

Our facilities are subject to certain federal, state and local requirements relating to the protection of the environment. 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.

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 shut-downs in July, November and December due to holidays.

Effects of Inflation

Inflation generally affects us by increasing the cost of employee wages and benefits, transportation services, processing
equipment, purchased metals, energy and borrowings under our credit facility. General inflation has not had a material effect
on our financial results during the past three years. We expect transportation expenses to increase in excess of general inflation
in 2018 due to the Electronic Log Device mandate by the Federal Motor Carrier Safety Administration issued in 2017.

Backlog

Because we conduct our operations generally on the basis of short-term orders, we do not believe that backlog is a material
or meaningful indicator of future performance.

Available Information

We file annual, quarterly, and current reports, proxy statements, and other documents with the SEC under the Securities
Exchange Act of 1934. The public may read and copy any materials filed with the SEC at the SEC’s Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC. The public can obtain
any documents that are filed by the Company at http://www.sec.gov.

In addition, our annual reports on Form 10-K, as well as our quarterly reports on Form 10-Q, current reports on Form 8-K
and any amendments to all of the foregoing reports, are made available free of charge on or through the “Investor Relations”
section of our website at www.olysteel.com as soon as reasonably practicable after such reports are electronically filed with
or furnished to the SEC.

Information relating to our corporate governance at Olympic Steel, including our Business Ethics Policy, information
concerning our executive officers, directors and Board committees (including committee charters), and transactions in our
securities by directors and officers, is available free of charge on or through the “Investor Relations” section of our website
at www.olysteel.com. 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.

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. In addition, we, or others on our behalf, may make forward-looking statements in press
releases or written statements, or in our communications and discussions with investors and analysts in the normal course of
business through meetings, conferences, webcasts, phone calls and conference calls. Words such as “may,” “will,”
“anticipate,” “should,” “intend,” “expect,” “believe,” “estimate,” “project,” “plan,” “potential,” and “continue,” as well as
the negative of these terms or similar expressions are intended to identify forward-looking statements, which are made
pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such 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:

● general and global business, economic, financial and political conditions;
●

competitive factors such as the availability, global production levels and pricing of metals, industry shipping and
inventory levels and rapid fluctuations in customer demand and metals pricing;
cyclicality and volatility within the metals industry;

●

●
●
●

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 levels of imported steel in the United States and any associated and threatened tariffs and duties;
the availability and rising costs of transportation and logistical services;
the successes of our efforts and initiatives to increase sales and earnings, maintain or improve working capital
turnover and free cash flows, improve our customer service, and achieve cost savings;

●

●
●
●
●
●
●

● our ability to generate free cash flow through operations and repay debt within anticipated time frames;
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 additional impairment charges related to indefinite
●
lived intangible assets;
events or circumstances that could adversely impact the successful operation of our processing equipment and
operations;
the amounts, successes and our ability to continue our capital investments and strategic growth initiatives, including
acquisitions and our business information system implementations;
the successes of our operational initiatives to improve our operating, cultural and management systems and reduce
our costs;
the ability to comply with the terms of our asset-based credit facility;
the ability of our customers and third parties to honor their agreements related to derivative instruments;
customer, supplier and competitor consolidation, bankruptcy or insolvency;
reduced production schedules, layoffs or work stoppages by our own, our suppliers’ or customers’ personnel;
the impacts of union organizing activities and the success of union contract renewals;
the timing and outcomes of inventory lower of cost or market adjustments and last-in, first-out, or LIFO, income or
expense;
the ability of our customers (especially those that may be highly leveraged, and those with inadequate liquidity) to
maintain their credit availability;
the inflation or deflation existing within the metals industry, as well as our product mix and inventory levels on hand,
which can impact our cost of materials sold as a result of the fluctuations in the LIFO inventory valuation;
the adequacy of our existing information technology and business system software, including duplication and
security processes;
the adequacy of our efforts to mitigate cyber security risks and threats;
access to capital and global credit markets;

●
●
● 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;
● 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; and
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.

●

Should one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, intended, expected, believed, estimated, projected or planned. You
are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. 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.

ITEM 1A. RISK FACTORS

In addition to the other information in this Annual Report on Form 10-K and our other filings with the SEC, the following
risk factors should be carefully considered in evaluating us and our business before investing in our common stock. The risks
and uncertainties described below are not the only ones facing us. Additional risks and uncertainties, not presently known to
us or otherwise, may also impair our business. If any of the risks actually occur, our business, financial condition or results
of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline,
and investors may lose all or part of their investment.

Risks Related to our Business

Volatile metals prices can cause significant fluctuations in our operating results. Our sales and operating income could
decrease if metals prices decline or if we are unable to pass producer price increases on to our customers.

Our principal raw materials are carbon and stainless steel and aluminum flat rolled coil, sheet, plate, pipe and tube that we
typically purchase from multiple primary metals producers. The metals industry as a whole is cyclical and, at times, pricing
and availability of metals can be volatile due to numerous factors beyond our control, including general domestic and
international economic conditions, sales levels, competition, levels of inventory held by other metals service centers, producer
lead times, higher raw material costs for the producers of metals, imports, import duties and tariffs and currency exchange
rates. This volatility can significantly affect the availability and cost of raw materials for us.

Similar to many other metals service centers, we maintain substantial inventories of metals to accommodate the short lead
times and just-in-time delivery requirements of our customers. Accordingly, we purchase metals in an effort to maintain our
inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon historic
buying practices, supply agreements with customers and market conditions. Our commitments to purchase metals are
generally at prevailing market prices in effect at the time we place our orders. We entered into metals hedges, which carry
counterparty performance risk, in order to mitigate our risk of volatility in the price of metals. We have no long-term, fixed-
price metals purchase contracts, except for metals hedges. When metals prices increase, competitive conditions will influence
how much of the price increase we can pass on to our customers. To the extent we are unable to pass on future price increases
in our raw materials to our customers, the net sales and profitability of our business could be adversely affected. 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 market adjustments as we use existing
inventory. Significant or rapid declines in metals prices or reductions in sales volumes could adversely impact our ability to
remain in compliance with certain financial covenants in our revolving credit facility, as well as result in us incurring
inventory or asset impairment charges. 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.

Government actions during 2017, imposing tariffs on imports from certain countries and the pending Section 232
investigation by the Commerce Department, which may impose trade actions on imported steel and aluminum, has led to
increased metals prices. Although the tariffs slowed imports from the countries impacted by the tariffs, imports from other
countries increased in 2017 while awaiting the outcome of the Section 232 investigation. Any future tariffs or quotas imposed
on steel and aluminum imports may increase the price of metal, which may impact our sales, gross margin and profitability
if we are unable to pass the increased prices onto our customers.

We service industries that are highly cyclical, and any fluctuation in our customers’ demand could impact our sales,
gross profits and profitability.

We sell our products in a variety of industries, including capital equipment manufacturers for industrial, agricultural and
construction use, the automotive industry, the utilities industry, and manufacturers of fabricated metals products. 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. Any fluctuation in demand within one or more of these industries may be
significant and may last for a lengthy period of time. 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.

Approximately 51.0% of our 2017 consolidated net sales were to industrial machinery and equipment manufacturers and
their fabrications. 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. Approximately 9.0% of our 2017
consolidated net sales were to automotive manufacturers or manufacturers of automotive components and parts, whom we
refer to as automotive customers. 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.

We depend, in part, on third parties for transportation services, and increases in costs or the availability of
transportation 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 in-house truck fleet or by third-party trucking firms. Products sold to
foreign customers are shipped either directly from metals producers to the customer or to an intermediate processor, and then
to the customer by rail, truck or ocean carrier. Our business depends on the daily transportation of a large number of products.
We depend to a certain extent on third parties for transportation of our products to customers as well as inbound delivery of
our raw materials.

If any of these providers were to fail to deliver raw materials to us in a timely manner, we may be unable to process and
deliver our products in response to customer demand. In addition, if any of these third parties were to cease operations or
cease doing business with us, we may be unable to replace them at a reasonable cost. In addition, such failure of a third-party
transportation provider could harm our reputation, negatively affect our customer relationships and have a material adverse
effect on our financial position and results of operations.

Changes to, or new, regulations within the transportation industry, such as the Electronic Log Device mandate by the Federal
Motor Carrier Safety Administration issued in 2017, which would impact the availability of drivers, may increase our cost of
transportation which may have a material adverse effect on our financial position and results of operations.

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 8.0% and 8.9% of our consolidated net sales
in 2017 and 2016, respectively. Many of our larger customers commit to purchase on a regular basis at agreed upon prices
over periods from three to twelve months. We generally do not have long-term contracts with our customers. As a result, the
relationship, as well as particular orders, can generally be terminated with relatively little advance notice. 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.

An interruption in the sources of our metals supply could have a material adverse effect on our results of operations.

In recent years, the metals producing supply base has experienced significant consolidation with a few domestic producers
accounting for a majority of the domestic metals market. Collectively, we purchased approximately 53% and 54% of our
total metals requirements from our three largest suppliers in 2017 and 2016, respectively. The number of available suppliers
could be reduced in the future by factors such as further industry consolidation or bankruptcies affecting metals suppliers.
Additionally, fewer available suppliers increases the risk of supply disruption through both scheduled and unscheduled
supplier outages. We have no long-term supply commitments with our metals suppliers. If, in the future, we are unable to
obtain sufficient amounts of metals on a timely basis, we may not be able to obtain metals from alternate sources at
competitive prices. In addition, late deliveries, interruptions or reductions in our supply of metals could make it difficult to
satisfy our customers’ just-in-time delivery requirements, which could have a material adverse effect on our business,
financial condition, results of operations and cash flows.

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.

Our implementation of information systems could adversely affect our results of operations and cash flows.

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. Risks
associated with the phased implementation include, but are not limited to:

●
●
●

●

a significant deployment of capital and a significant use of management and employee time;
the possibility that software and implementation vendors may not be able to support the project as planned;
the possibility that the timelines, costs or complexities related to the new system implementation will be greater
than expected;
the possibility that the software, once fully implemented, does not function as planned;
the possibility that benefits from the systems may be less or take longer to realize than expected;
the possibility that disruptions from the implementation may make it difficult for us to maintain relationships
with our customers, employees or suppliers; and
limitations on the availability and adequacy of proprietary software or consulting, training and project
management services, as well as our ability to retain key personnel.

Although we have successfully initiated use of the systems at most of our locations, we can provide no assurance that the
rollout to the remaining locations will be successful or will occur as planned and without disruption to operations. Difficulties
associated with the design and implementation of new information systems could adversely affect our business, our customer
service, our results of operations and our cash flows.

The failure of our key computer-based systems could have a material adverse effect on our business.

Until our systems implementations are completed, 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.
These systems are vulnerable to, among other things, damage or interruption from fire, flood, tornado and other natural
disasters, power loss, computer system and network failures, operator negligence, physical and electronic loss of data or
security breaches and computer viruses. 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.

We may not be able to retain or expand our customer base as the U.S. manufacturing industry continues to fluctuate.

Our customer base primarily includes manufacturing and industrial firms in the United States, some of which are, or have
considered, relocating production operations outside the United States or outsourcing particular functions outside the United
States. Our facilities are primarily located in the United States and, therefore, to the extent that our customers relocate or
move operations where we do not have a presence, we could lose their business.

Processing equipment investments at our existing locations may be unable to achieve expected results, and events or
circumstances that could adversely impact the successful operation of new processing equipment and operations could
have a material adverse effect on our results of operations.

We continue to invest in processing equipment to support customer demand. Although we have successfully installed new
and used processing equipment in the past, we can provide no assurance that future installations will be successful, or achieve
expected results. Risks associated with the installations include, but are not limited to:

●
●
●

a significant use of management and employee time;
the possibility that the performance of the equipment does not meet expectations; and
the possibility that disruptions from the installations may make it difficult for us to maintain relationships with
our customers, employees or suppliers.

Difficulties associated with the installation of new processing equipment could adversely affect our business, our customer
service, our results of operations and our cash flows.

We depend on our senior management team and the loss of any member could prevent us from implementing our
business strategy.

Our success is dependent upon the management and leadership skills of our senior management team. We have employment
agreements, which include non-competition provisions, with our Chief Executive Officer, our President, the President of
CTI, our Executive Vice President and Chief Operating Officer and our Chief Financial Officer that expire on December 31,
2018, December 31, 2020, June 30, 2021, July 1, 2020 and January 1, 2021, respectively. During 2017, we further enhanced
our management team by the promotions of several employees to senior management positions within the organization. The
loss of any member of our senior management team or the failure to attract and retain additional qualified personnel could
prevent us from implementing our business strategy.

Risks associated with our growth strategy may adversely impact our ability to sustain our growth.

Historically, we have grown internally by increasing sales and services to our existing customers, aggressively pursuing new
customers and services, building or purchasing new facilities and acquiring and upgrading processing equipment in order to
expand the range of customer services and products that we offer. In addition, we have grown through the acquisition of other
service centers and related businesses. We intend to actively pursue our growth strategy in the future.

Future expansion or construction projects, could have adverse effects on our results of operations due to the impact of the
associated start-up costs and the potential for underutilization in the start-up phase of a facility. While we are pursuing
potential acquisition targets, we are unable to predict whether or when any prospective acquisition candidate will become
available or the likelihood that any acquisition will be completed. Moreover, in pursuing acquisition opportunities, we may
compete for acquisition targets with other companies with similar growth strategies that may be larger and have greater
financial and other resources than we have. Competition among potential acquirers could result in increased prices for
acquisition targets. As a result, we may not be able to consummate acquisitions on satisfactory terms to us, or at all.

The pursuit of acquisitions and other growth initiatives may divert management’s time and attention away from day-to-day
operations. In order to achieve growth through acquisitions, expansion of current facilities, greenfield construction or
otherwise, additional funding sources may be needed and we may not be able to obtain the additional capital necessary to
pursue our growth strategy on terms that are satisfactory to us, or at all.

Our information technology systems could be negatively affected by cyber security threats.

Increased global information technology security requirements, vulnerabilities, threats and a rise in sophisticated and targeted
cyber crime pose a risk to the security of our systems, networks and the confidentiality, availability and integrity of our data.
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. This could lead to disclosure, modification or
destruction of proprietary and other key information, production downtimes and operational disruptions, which in turn could
adversely affect our results of operations. We may face greater risks in this area than our competitors as we implement the
ERP system because among other things, we must simultaneously protect both the ERP and legacy systems until the ERP
project is complete.

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.

From time to time, we may be subject to a litigation incidental to our businesses, including claims for damages arising out of
use of our products, claims involving employment matters, cyber security claims and commercial disputes.

We currently carry insurance from financially solid, highly rated counterparties in established markets to cover significant
risks and liabilities. However, our insurance coverage may be inadequate if such claims do arise and any liability not covered
by insurance could have a material adverse effect on our business. Disputes with insurance carriers, including over policy
terms, reservation of rights, the applicability of coverage (including exclusions), compliance with provisions (including
notice) and/or the insolvency of one or more of our insurers may significantly affect the amount or timing of recovery.
Although we have been able to obtain insurance in amounts we believe to be appropriate to cover such liability to date, our
insurance premiums may increase in the future as a consequence of conditions in the insurance business generally or our
situation in particular. 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. However, these protections are not always available, are typically
subject to certain terms or limitations, including the availability of funds, and may not be sufficient to cover all losses or
liabilities incurred.

If insurance coverage, customer indemnifications and/or other legal protections are not available or are not sufficient to cover
our risks or losses, it could have a material adverse effect on our results of operations.

We may not achieve the expected results of our operating expense and inventory management initiatives.

We actively manage our operating expenses and our inventory in an effort to enhance margins and profitability. The risks
associated with these efforts include a significant use of management and employee time, the possibility that the efforts do
not meet expectations and the possibility that our efforts do not provide the expected or sustained economic results.
Difficulties associated with managing our operating expenses and inventory could adversely affect our business, our customer
service, our results of operations and our cash flows.

Customer and third-party credit constraints and credit losses could have a material adverse effect on our results of
operations.

Some of our customers may experience difficulty obtaining and/or maintaining credit availability. In particular, certain
customers that are highly leveraged represent an increased credit risk. Some customers have reduced their purchases because
of these credit constraints. Moreover, our disciplined credit policies have, in some instances, resulted in lost sales. 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 doubtful accounts.

Although we expect to finance our growth initiatives through borrowings under our credit facility, we may have to
find additional sources of funding, which could be difficult. Additionally, increased leverage and borrowing rates
could adversely impact our business and results of operations.

We expect to finance our growth initiatives through borrowings under our credit facility, which matures on December 8,
2022. However, our credit facility may not be sufficient or available to finance our growth initiatives, and we may have to
find additional sources of financing. It may be difficult for us in the future to obtain the necessary funds and liquidity to run
and expand our business.

The borrowings under our credit facility are primarily at variable interest rates. If interest rates in the future were to increase
100 basis points (1.0%) from December 31, 2017 rates and, assuming no change in total debt from December 31, 2017 levels,
the additional annual interest expense to us would be approximately $2.0 million.

Labor disruptions at any of our facilities or those of major customers could adversely affect our business, results of
operations and financial condition.

At December 31, 2017, we employed approximately 1,670 people. Approximately 280 of the hourly plant personnel are
represented by nine separate collective bargaining units. Negotiations are currently on-going for our collective bargaining
unit in Duluth, Minnesota, whose contract expired December 31, 2017. 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.

In addition, many of our larger customers, including those in the automotive industry, have unionized workforces and some
have experienced significant labor disruptions in the past such as work stoppages, slow-downs and strikes. A labor disruption
at one or more of our major customers could interrupt production or sales by that customer and cause that customer to halt or
limit orders for our products. Any such reduction in the demand for our products could adversely affect our business, financial
condition, results of operations and cash flows.

Our business is highly competitive, and increased competition could reduce our market share and harm our financial
performance.

Our business is highly competitive. We compete with metals service centers and, to a certain degree, metals producers and
intermediate metals processors, on a regular basis, primarily on quality, price, inventory availability and the ability to meet
the delivery schedules and service requirements of our customers. We have different competitors for each of our products
and within each region. Certain of these competitors have financial and operating resources in excess of ours. Increased
competition could lower our gross profits or reduce our market share and have a material adverse effect on our financial
performance.

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. Our operating costs increase if energy costs, including electricity, diesel fuel and natural gas, rise.
During periods of higher energy costs, we may not be able to recover our operating cost increases through price increases
without reducing demand for our products. In addition, we generally do not hedge our exposure to higher prices via energy
futures contracts. 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.

Changes in laws or regulations, including recently enacted tax reform legislation, or the manner of their interpretation
or enforcement could adversely impact our financial performance and restrict our ability to operate our business or
execute our strategies.

New laws or regulations, or changes in existing laws or regulations, or the manner of their interpretation or enforcement,
could increase our cost of doing business and restrict our ability to operate our business or execute our strategies. In particular,
there may be significant changes in U.S. laws and regulations and existing international trade agreements by the current U.S.
presidential administration that could affect a wide variety of industries and businesses, including those businesses we own
and operate. 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.

Impairment 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 trade names and customer relationships, net of accumulated amortization,
related to our tubular and pipe products segment. 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. 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.

Participation in multiemployer pension plans carry withdrawal liability risks, which could impact our results of
operations and financial condition.

Through our CTI subsidiary, we contribute to one multiemployer pension plan. The risks of participating in the multiemployer
plan are different from a single-employer plan in that 1) assets contributed to the multiemployer plan by one employer may
be used to provide benefits to employees of other participating employers, 2) if a participating employer stops contributing
to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers, and 3) if CTI chooses
to stop participating in the multiemployer plan, CTI may be required to pay the plan an amount based on the unfunded status
of the plan, referred to as a withdrawal liability.

We are subject to significant environmental, health and safety laws and regulations and related compliance
expenditures and liabilities.

Our businesses are subject to many federal, state and local environmental, health and safety laws and regulations, particularly
with respect to the use, handling, treatment, and disposal of substances and waste used or generated in our manufacturing
processes. We have incurred and expect to continue to incur expenditures to comply with applicable environmental laws and
regulations. Our failure to comply with applicable environmental laws and regulations and permit requirements could result
in civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing
operations or requiring corrective measures, installation of pollution control equipment or remedial actions.

We may in the future be required to incur costs relating to the investigation or remediation of property, and for addressing
environmental conditions. Some environmental laws and regulations impose liability and responsibility on present and former
owners, operators or users of facilities and sites for contamination at such facilities and sites without regard to causation or
knowledge of contamination. Consequently, we cannot assure you that existing or future circumstances, the development of
new facts or the failure of third parties to address contamination at current or former facilities or properties will not require
significant expenditures by us.

We expect to continue to be subject to environmental and health and safety laws and regulations. It is difficult to predict the
future interpretation and development of environmental and health and safety laws and regulations or their impact on our
future earnings and operations. We anticipate that compliance will continue to require increased capital expenditures and
operating costs. Any increase in these costs, or unanticipated liabilities arising for example, out of discovery of previously
unknown conditions or more aggressive enforcement actions, could have a material adverse effect on our business, financial
condition, results of operations and cash flows.

Risks Related to Our Common Stock

The market price for our common stock may be volatile.

Historically, there has been volatility in the market price for our common stock. Furthermore, the market price of our common
stock could fluctuate substantially in the future in response to a number of factors, including, but not limited to, the risk
factors described herein. 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 US 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.

In the past, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant
effect on the market prices of securities issued by many companies for reasons unrelated to their specific operating
performance. These factors may adversely affect the trading price of our common stock, regardless of actual operating
performance.

In addition, stock markets from time to time experience extreme price and volume fluctuations that may be unrelated or
disproportionate to the operating performance of companies. In the past, some shareholders have brought securities class
action lawsuits against companies following periods of volatility in the market price of their securities. We may in the future
be the target of similar litigation. Securities litigation, regardless of whether our defense is ultimately successful, could result
in substantial costs and divert management’s attention and resources.

Our quarterly results may be volatile.

Our operating results have varied on a quarterly basis during our operating history and are likely to fluctuate significantly in
the future. Our operating results may be below the expectations of our investors or stock market analysts as a result of a
variety of factors, 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.

Many factors could cause our revenues and operating results to vary significantly in the future. Accordingly, we believe that
quarter-to-quarter comparisons of our operating results are not necessarily meaningful. Investors should not rely on the results
of one quarter as an indication of our future performance. Further, it is our practice not to provide forward-looking sales or
earnings guidance and not to endorse any analyst’s sales or earnings estimates. Nonetheless, if our results of operations in
any quarter do not meet analysts’ expectations, our stock price could materially decrease.

Certain provisions in our charter documents and Ohio law could delay or prevent a change in management or a
takeover attempt that you may consider to be in your best interest.

We are subject to Chapter 1704 of the Ohio Revised Code, which prohibits certain business combinations and transactions
between an “issuing public corporation” and an “Ohio law interested shareholder” for at least three years after the Ohio law
interested shareholder attains 10% ownership, unless the Board of Directors of the issuing public corporation approves the
transaction before the Ohio law interest shareholder attains 10% ownership. 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.”

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. For example, these
provisions:

allow our Board of Directors to issue preferred stock without shareholder approval;

●
● provide for our Board of Directors to be divided into two classes of directors serving staggered terms;
●
●

limit who can call a special meeting of shareholders; and
establish advance notice requirements for nomination for election to the Board of Directors or for proposing
matters to be acted upon at shareholder meetings.

These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over
market price or adversely affect the market price of, and the voting and other rights of the holders of our common stock.
These provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect
directors other than the candidates nominated by our Board of Directors.

Principal shareholders who own a significant numbers of shares of our common stock may have interests that conflict
with yours.

Michael D. Siegal, our Chief Executive Officer and Chairman of the Board and one of our largest shareholder, owned
approximately 11.2% of our outstanding common stock as of December 31, 2018. 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.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We believe that our properties are strategically situated relative to our domestic suppliers, our customers and each other,
allowing us to support customers from multiple locations. Product is shipped from the most advantageous facility, regardless
of where the customer order is taken. The facilities are located in the hubs of major metals consumption markets, and within
a 250-mile radius of most of our customers, a distance approximating the one-day driving and delivery limit for truck
shipments. During 2017, we ceased operations at our Siler City, North Carolina facility and the building is currently held for
sale. In addition, we terminated the lease on the Oklahoma City, Oklahoma warehouse facility in 2017.

The following table sets forth certain information concerning our principal properties including which segment’s products
are serviced out of each location:

Segment

Owned or
Leased

Carbon

Specialty
Metals

Pipe
and
Tube

Owned

✓

✓
✓

✓

✓
✓
✓
✓
✓

✓

✓
✓

Owned
Leased (2)
Owned

Owned

Owned
Owned
Owned
Owned (3)
Owned
Owned

Owned

Owned
Leased (4)
Leased (5)
Leased (6)
Owned
Owned
Owned

✓

✓
✓
✓
✓

Operation

Location

Square
Feet

Function

Cleveland

Minneapolis

Bedford Heights, Ohio (1) 121,500

Bedford Heights, Ohio (1) 127,000

Corporate offices, coil processing and distribution
center
Coil and plate processing, distribution center and
offices
Bedford Heights, Ohio (1) 59,500 Plate processing, distribution center and offices
Dover, Ohio
Plymouth, Minnesota

62,000 Plate processing, fabrication and distribution center
196,800

Plymouth, Minnesota

112,200

Chambersburg Chambersburg,

157,000

Pennsylvania
Chambersburg,
Pennsylvania
Bettendorf, Iowa

150,000

244,000

Iowa

Winder

Winder, Georgia

285,000

Coil and plate processing, distribution center and
offices
Plate processing, fabrication, distribution center and
offices
Plate processing, distribution center and offices

Plate processing, fabrication, distribution center and
offices
Coil and plate processing, fabrication, distribution
center and offices
Coil and plate processing, fabrication, distribution
center and offices

Detroit
Kentucky

Gary
Connecticut
Chicago

Detroit, Michigan
Mt. Sterling, Kentucky
Mt. Sterling, Kentucky
Gary, Indiana
Milford, Connecticut
Schaumburg, Illinois

256,000 Coil processing, distribution center and offices
100,000 Plate processing, fabrication and distribution center
107,000 Distribution center and offices
183,000 Coil processing, distribution center and offices
134,000 Coil processing, distribution center and offices
80,500

Coil and sheet processing, distribution center and
offices
Coil and sheet processing, distribution center and
offices

Streetsboro

Streetsboro, Ohio

66,200

Washington
Mexico
Chicago
St. Paul
Charlotte

Latrobe, Pennsylvania
Moses Lake, Washington
Monterrey, Mexico
Romeoville, Illinois
St. Paul, Minnesota
Locust, North Carolina

43,200 Coil and sheet processing, distribution center
14,000 Distribution center
60,000 Distribution center

363,000 Corporate offices, fabrication and distribution center
132,000 Distribution center and offices
127,600 Distribution center, fabrication and offices

Operation

Location

Square
Feet

Function

Fond du Lac
Indianapolis
Quad Cities
Des Moines
Duluth
Owatonna

Fond du Lac, Wisconsin
Indianapolis, Indiana
Milan, Illinois
Ankeny, Iowa
Proctor, Minnesota
Owatonna, Minnesota

117,000 Distribution center and offices
79,000 Distribution center and offices
57,600 Distribution center and offices
50,000 Distribution center and offices
45,202 Distribution center and offices
23,000 Production cutting center

Segment

Owned or
Leased

Carbon

Specialty
Metals

✓

Owned
Owned
Owned
Owned
Leased (7)
Owned

Pipe
and
Tube
✓
✓
✓
✓
✓
✓

(1)
(2)
(3)
(4)
(5)

(6)

(7)

The Bedford Heights facilities are all adjacent properties.
This facility is leased from a related party. The lease expires on December 31, 2018, with renewal options.
50% of the facility is leased on a month-to-month basis to an unrelated party.
The lease on this facility expires on May 1, 2019.
The Moses Lake location is comprised of two different facilities located in Moses Lake and Quincy, Washington.
The facilities are leased on a month-to-month basis.
The lease on this facility expires on August 31, 2021. 75% of the facility is leased to an unrelated party whose lease
expires on May 31, 2018 with renewal options.
The lease on this facility expires on April 30, 2019.

In addition to the facilities listed above, our executive office is leased and located in Highland Hills, Ohio and we have leased
sales offices located in Media, Pennsylvania; Miami, Florida; and Monterrey, Mexico. Management believes we will be able
to accommodate our capacity needs for the immediate future at our existing facilities.

ITEM 3. LEGAL PROCEEDINGS

We are party to various legal actions that we believe are ordinary in nature and incidental to the operation of our business. In
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.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

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 successor is chosen and qualified.

Michael D. Siegal, age 65, has served as our Chief Executive Officer since 1984 and as Chairman of our Board of Directors
since 1994. 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 Cleveland-Cliffs, Inc. He is also the immediate past
Board Chair of the Jewish Federations of North America and is currently on the Board of the Development Corporation for
Israel and the Chair of the Board of Trustees of the Jewish Agency for Israel.

David A. Wolfort, age 65, has served as our President since January 2001 and as a director since 1987. He previously served
as Chief Operating Officer from 1995 to 2016 and as Vice President Commercial from 1987 to 1995, after having joined us
in 1984 as General Manager. Prior thereto, he spent eight years with a primary steel producer in a variety of sales assignments.
Mr. Wolfort serves as a member of the United States Industry Trade Advisory Committee on Steel. He previously served on
the board of directors of the MSCI and was a past Chairman of both the MSCI Political Action Committee and the MSCI
Governmental Affairs Committee. He was previously a Trustee and Chair of Ohio University Board of Trustees and is a
current Trustee of the Musical Arts Association (Cleveland Orchestra), where he serves as Vice Chairman of the Human
Resources Committee, and is a member of the Finance Committee.

Andrew S. Greiff, age 56, has served as our Executive Vice President and Chief Operating Officer since August 2016. 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 is a past director of Hawken School and the MSCI Specialty
Metals Product Council.

Richard T. Marabito, age 54, serves as our Chief Financial Officer. He joined us in 1994 as Corporate Controller and served
in this capacity until being named Chief Financial Officer in 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. Mr. Marabito
is a Governance board member of the Make-A-Wish Foundation of Ohio, Kentucky and Indiana and also was the immediate
past Chair of its Northeast Ohio regional board. Mr. Marabito serves on the Board of Trustees and was the Treasurer for
Hawken School in Cleveland, Ohio. He is also a Vice Chair and Executive Committee member of the Metals Service Center
Institute and is a past Chair of its Foundation for Education and Research.

Richard A. Manson, age 49, has served as our Vice President and Treasurer since January 2013 and has been employed by
us since 1996. 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. Prior to joining us, Mr. Manson was employed for
seven years by a national accounting firm in its tax department. Mr. Manson is a Board Member of the West Side Catholic
Center and the Cleveland Catholic Cemeteries Association. 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.

Donald McNeeley, age 63, has served as the President of CTI, a wholly owned subsidiary of Olympic Steel, Inc., since the
acquisition on July 1, 2011. He joined CTI in 1972 and has held several operational and executive positions within the
company. After serving as CTI’s Vice President of Operations and subsequently Executive Vice President, in 1990, Dr.
McNeeley was appointed President and Chief Operating Officer. He is a former Chairman of the Metals Service Center
Institute. Dr. McNeeley is an adjunct professor at Northwestern University where he teaches in the graduate engineering
program. He serves on the board of directors of Saulsbury Industries in Odessa, Texas, where he chairs the Audit Committee.
Dr. McNeeley also serves on the board of directors of Vail Rubber Industries in St. Joseph, Michigan, and is a former director
of The Committee for Monetary Research in Greenwich, Connecticut.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Price Range of Common Stock

Our common stock trades on the Nasdaq Global Select Market under the symbol “ZEUS.” The following table sets forth, for
each quarter in the two-year period ended December 31, 2017, the high and low sales prices of our common stock as reported
by the Nasdaq Global Select Market:

First quarter
Second quarter
Third quarter
Fourth quarter

Holders of Record

High
$

2017

2016

Low

High

Low

27.93 $
24.00
22.44
22.86

18.05 $
15.83
16.58
18.10

17.50 $
27.48
31.19
28.67

7.98
15.41
17.42
17.14

As of February 1, 2018, we estimate there were approximately 41 holders of record and 4,973 beneficial holders of our
common stock.

Dividends

During 2017, our Board of Directors approved regular quarterly dividends of $0.02 per share that were paid on March 15,
2017, June 15, 2017, September 15, 2017 and December 15, 2017.

During 2016, our Board of Directors approved regular quarterly dividends of $0.02 per share that were paid on March 15,
2016, June 15, 2016, September 15, 2016 and December 15, 2016.

We expect to make regular quarterly dividend distributions in the future, subject to the continuing determination by our Board
of Directors that the dividend remains in the best interest of our shareholders. Our asset-based credit facility (the Loan
Agreement) restricts the aggregate amount of dividends and common stock repurchases that we can pay to $5.0 million
annually without limitations. Dividend distributions in excess of $5.0 million require us to (i) maintain availability in excess
of 20.0% of the aggregate revolver commitments or (ii) to maintain availability equal to or greater than 15.0% of the aggregate
revolver commitments, and we must maintain a pro-forma ratio of EBITDA minus certain capital expenditures and cash taxes
paid to fixed charges of at least 1.00 to 1.00. Any determinations by the Board of Directors to pay cash dividends in the future
will take into account various factors, including our financial condition, results of operations, current and anticipated cash
needs, plans for expansion and restrictions under our credit agreement and any agreements governing our future debt. 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, 2017.

On October 2, 2015, we announced that our Board of Directors authorized a stock repurchase program of up to 550,000
shares of the Company’s issued and outstanding common stock, which could include open market repurchases, negotiated
block transactions, accelerated stock repurchases or open market solicitations for shares, all or some of which may be effected
through Rule 10b5-1 plans. Any of the repurchased shares will be held in our treasury, or canceled and retired as our Board
may determine from time to time. Any repurchases of common stock are subject to the covenants contained in the Loan
Agreement. Our Loan Agreement restricts the aggregate amount of dividends and common stock repurchases that we can
pay to $5.0 million annually without limitations. Purchases in excess of $5.0 million require us to (i) maintain availability in
excess of 20.0% of the aggregate revolver commitments or (ii) to maintain availability equal to or greater than 15.0% of the
aggregate revolver commitments and we must maintain a pro-forma ratio of Earnings before Interest, Taxes, Depreciation

and Amortization, minus certain capital expenditures and cash taxes paid to fixed charges of at least 1.00 to 1.00. 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.

Recent Sales of Unregistered Securities

We did not have any unregistered sales of equity securities during the quarter ended December 31, 2017.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial and other data for each of the five years in the period ended December 31,
2017. The data presented should be read in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and notes thereto included elsewhere in this Annual
Report on Form 10-K.

For the Years Ended December 31,

2017

2016
2014
2015
(in thousands, except per share data)

2013

Income Statement Data:
Net sales
Cost of materials sold
Gross profit (a)
Operating expenses (b)
Goodwill and intangible asset impairment
Operating income (loss)
Interest and other expense on debt
Income (loss) before income taxes
Net income (loss) (c)

Per Share Data:
Net income (loss) - basic (d)
Net income (loss) - diluted (e)
Dividends paid

Shares Outstanding:
Weighted average shares - basic
Weighted average shares - diluted

Balance Sheet Data (as of December 31):
Current assets (f)
Current liabilities (f)
Working capital (g)
Total assets (f)
Total debt
Shareholders' equity

$ 1,330,696 $ 1,055,116 $ 1,175,543 $ 1,436,270 $ 1,263,331
999,207
1,055,212
264,124
275,484
244,469
251,498
-
-
19,655
23,986
6,703
7,518
12,924
16,350
7,647
18,963 $

942,214 1,160,310
275,960
233,329
261,332
236,157
23,836
24,951
(9,208)
(27,779)
6,780
5,690
(16,114)
(33,594)
(19,064) $
(26,777) $

820,040
235,076
229,328
-
5,748
5,273
420
(1,078) $

$
$
$

1.67 $
1.67
0.08 $

(0.10) $
(0.10)
0.08 $

(2.39) $
(2.39)
0.08 $

(1.71) $
(1.71)
0.08 $

0.69
0.69
0.08

11,381
11,381

11,210
11,210

11,192
11,192

11,120
11,120

11,065
11,074

420,136 $
111,147
308,989
604,158
197,165
272,583 $

364,940 $
104,898
260,042
556,068
166,424
253,390 $

308,946 $
77,060
231,886
511,880
148,490
254,695 $

458,709 $
131,977
326,732
699,154
247,620
280,781 $

417,631
165,633
251,998
695,375
199,269
298,616

(a) Gross profit is calculated as net sales less the cost of materials sold (includes LIFO expense of $2,707 in 2017, LIFO
income of $1,489 and $3,347 in 2016 and 2015, respectively, LIFO expense of $365 in 2014 and LIFO income of $3,572
in 2013).

(b) Operating expenses are calculated as total costs and expenses less the cost of materials sold. It does not include the

goodwill and intangible asset impairment charge shown separately below.

(c) The year ended December 31, 2017, includes a $6.2 million benefit related to the U.S. Tax Cuts and Jobs Act.
(d) Calculated by dividing net income (loss) by weighted average basic shares outstanding.
(e) Calculated by dividing net income (loss) by weighted average diluted shares outstanding.
(f) Prospective adjustment of deferred tax assets and liabilities in 2016, prior periods were not retrospectively adjusted.
(g) Calculated as current assets less current liabilities.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-
looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in
the forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed under
Item 1A, Risk Factors in this Annual Report on Form 10-K. The following section is qualified in its entirety by the more
detailed information, including our financial statements and the notes thereto, which appears elsewhere in this Annual
Report.

Overview

We are a leading metals service center that operates in three reportable segments; carbon flat products, specialty metals flat
products, and tubular and pipe products. We provide metals processing and distribution services for a wide range of
customers. 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. Our specialty metals flat products segment’s
focus is on the direct sale and distribution of processed aluminum and stainless flat-rolled sheet and coil products, flat bar
products and fabricated parts. In addition, we distribute metal tubing, pipe, bar, valves and fittings and fabricate pressure
parts supplied to various industrial markets. Products that require more value-added processing generally have a higher gross
profit. 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, Mexico and
Central and South America. International sales are immaterial to our consolidated financial results and to the individual
segments’ results.

Our results of operations are affected by numerous external factors including, but not limited to: general and global business,
economic, financial, banking and political conditions; fluctuations in the value of the U.S. dollar to foreign currencies,
competition; metals pricing, demand and availability; transportation and energy costs; pricing and availability of raw
materials used in the production of metals; global supply, the level of metals imported into the United States, and inventory
held in the supply chain; customers’ ability to manage their credit line availability; and layoffs or work stoppages by our
own, our suppliers’ or our customers’ personnel. The metals industry also continues to be affected by the global consolidation
of our suppliers, competitors and end-use customers.

Like other metals service centers, we maintain substantial inventories of metals to accommodate the short lead times and
just-in-time delivery requirements of our customers. Accordingly, we purchase metals in an effort to maintain our inventory
at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon customer forecasts,
historic buying practices, supply agreements with customers and market conditions. Our commitments to purchase metals
are generally at prevailing market prices in effect at the time we place our orders. We have entered into nickel and carbon
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. 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. 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.

Reportable Segments

The Company operates in three reportable segments; carbon flat products, specialty metals flat products and tubular and pipe
products. The carbon flat products segment and the specialty metals flat products segment are at times consolidated and
referred to as the flat products segment. Some of the flat products segments’ assets and resources are shared by the carbon
and specialty metals segments and both segments’ products are stored in the shared facilities and, in some locations, processed
on shared equipment. As such, total assets and capital expenditures are reported in the aggregate for the flat products
segments. Due to the shared assets and resources, certain of the flat products segment expenses are allocated between the
carbon flat products segment and the specialty metals flat products segment based upon an established allocation
methodology.

We follow the accounting guidance that requires the utilization of a “management approach” to define and report the financial
results of operating segments. The management approach defines operating segments along the lines used by the chief
operating decision maker, or CODM, to assess performance and make operating and resource allocation decisions. Our
CODM evaluates performance and allocates resources based primarily on operating income. Our operating segments are
based primarily on internal management reporting.

Due to the nature of the products sold in each segment, there are significant differences in the segments’ average selling price
and the cost of materials sold. The tubular and pipe products segment generally has the highest average selling price among
the three segments followed by the specialty metals flat products and carbon flat products segments. Due to the nature of the
tubular and pipe products, we do not report tons sold or per ton information. Gross profit per ton is generally higher in the
specialty metals flat products segment than the carbon flat products segment. Gross profit as a percentage of net sales is
generally highest in the tubular and pipe products segment, followed by the carbon and specialty metals flat products
segments.

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. Adjustments to the LIFO inventory value are recorded to cost
of materials sold and may impact the gross margin and gross margin percentage at the consolidated Company and tubular
and pipe products segment levels.

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. We act as an intermediary between metals
producers and manufacturers that require processed metals for their operations. We serve customers in most metals
consuming industries, including manufacturers and fabricators of transportation and material handling equipment,
construction and farm machinery, storage tanks, environmental and energy generation equipment, automobiles, military
vehicles and equipment, as well as general and plate fabricators and metals service centers. We distribute these products
primarily through a direct sales force.

Specialty metals flat products

The primary focus of our specialty metals flat products segment is on the direct sale and distribution of processed stainless
and aluminum flat-rolled sheet and coil products, flat bar products and fabricated parts. 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.

Combined, the carbon and specialty metals flat products segments have 20 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. 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.

Tubular and pipe products

The tubular and pipe products segment consists of the Chicago Tube and Iron, or CTI, business, acquired in 2011. Through
our tubular and pipe products segment, we distribute metal tubing, pipe, bar, valve and fittings and fabricate pressure parts
supplied to various industrial markets. Founded in 1914, CTI operates from nine locations in the midwestern and southeastern
United States. The tubular and pipe products segment distributes its products primarily through a direct sales force.

Corporate expenses

Corporate expenses are reported as a separate line item for segment reporting purposes. Corporate expenses include the
unallocated expenses related to managing the entire Company (i.e., all three segments), including compensation for certain
personnel, expenses related to being a publicly traded entity such as board of directors’ expenses, audit expenses, and various
other professional fees.

Results of Operations

2017 Compared to 2016

Our results of operations are impacted by the market price of metals. Over the past 24 months, metals prices fluctuated
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 market prices in December 2017 were approximately 7% and 77% higher than
metals market prices in December of 2016 and 2015, respectively. Average quarterly metals market prices during 2017 have
remained relatively flat after increasing in the first quarter of 2017 and were higher than the average quarterly metals market
prices in the comparable quarters of 2016.

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. When
average selling prices increase, and net sales increase, gross profit and operating expenses as a percentage of net sales will
generally decrease. Our year-over-year net sales and earnings comparisons were positively impacted by the price increases,
improved customer demand, and increased sales volume of products that we sell in 2017.

During the second quarter of 2017, we announced the permanent closure of our carbon flat products segment’s Siler City,
North Carolina operation. The facility ceased operations in the third quarter of 2017. The land and building associated with
the operation is classified as Assets held for sale on the accompanying December 31, 2017 Consolidated Balance Sheet. The
operating loss related to the Siler City, North Carolina operation was $1.4 million in 2017.

The following table sets forth certain consolidated income statement data for the years ended December 31, 2017 and 2016
(dollars shown in thousands):

Net sales
Cost of materials sold (a)
Gross profit (b)
Operating expenses (c)
Operating income
Other loss, net
Interest and other expense on debt
Income before income taxes
Income taxes (d)
Net income (loss)

2017

2016

$
$ 1,330,696
1,055,212
275,484
251,498
23,986
(118)
7,518
16,350
(2,613)
18,963

% of net
sales

100.0 $ 1,055,116
820,040
79.3
235,076
20.7
229,328
18.9
5,748
1.8
(0.0)
(55)
5,273
0.6
420
1.2
1,498
(0.2)
(1,078)
1.4 $

100.0
77.7
22.3
21.7
0.5
(0.0 )
0.5
0.0
0.1
(0.1 )

(a) Includes $2,707 of LIFO expense and $1,489 of LIFO income for 2017 and 2016, respectively.
(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.
(d) 2017 includes a $6.2 million tax benefit related to the U.S. Tax Cuts and Jobs Act

Net sales increased $275.6 million, or 26.1%, to $1.33 billion in 2017 from $1.06 billion in 2016. Carbon flat products net
sales increased $198.6 million, or 29.6%, and were 65.4% of total net sales in 2017 compared to 63.6% in 2016. Specialty
metals flat products net sales increased $37.3 million, or 19.6%, and were 17.1% of total net sales in 2017 compared to 18.0%
in 2016. Tubular and pipe products net sales increased $39.7 million, or 20.4%, and were 17.6% of total net sales in 2017
compared to 18.4% of total net sales in 2016. The increase in sales for the year ended December 31, 2017 was due to an
11.3% increase in sales volume and a 13.3% increase in average selling prices. Average selling prices increased in all
segments during 2017 compared to 2016 as market pricing for metals was higher year-over-year. During the year, we
increased our market share for a majority of the product categories that we sell.

Cost of materials sold increased $235.2 million, or 28.7%, to $1.06 billion in 2017 from $820.0 million in 2016. During 2017,
we recorded LIFO expense of $2.7 million compared to LIFO income of $1.5 million in 2016. The increase in cost of materials
sold in 2017 is due to the increased sales volume and increased metals costs of 15.6% during 2017.

As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) decreased to 20.7% in 2017 from
22.3% in 2016. Gross profit as a percentage of net sales decreased in the carbon flat products segment to 20.2% from 21.2%
in 2016, in the specialty metals flat products segment to 14.5% in 2017 from 15.7% in 2016 and in the tubular and pipe
products segment to 28.5% from 32.6% in 2016. LIFO expense decreased gross profit by 0.2% of net sales in 2017 and the
LIFO income increased gross profit by 0.1% of net sales in 2016. The decrease in gross profit as a percentage of net sales
during 2017 was due to the cost of materials sold increasing more than selling prices in all segments and the increase of
carbon flat products sales as a percentage of total net sales.

Operating expenses (as defined in footnote (c) in the table above) increased $22.2 million, or 9.7%, to $251.5 million in 2017
from $229.3 million in 2016. As a percentage of net sales, operating expenses decreased to 18.9% in 2017 from 21.7% in
2016. Variable operating expenses, such as distribution and warehouse and processing, increased primarily related to the
11.3% volume increase. Distribution expense, in addition to the volume increase, increased as a result of the continued
inflationary pressures for freight. Warehouse and processing costs increased $7.9 million, or 9.9%, and distribution expense
increased by $5.3 million, or 14.5%. Selling and administrative and general costs increased $9.8 million, or 11.4%, primarily
related to increased variable based incentive compensation based on increased sales volumes and profitability. Depreciation
expense decreased $1.0 million, or 5.7%, as a result of certain assets being fully depreciated in 2017. Operating expenses in
the carbon flat products segment increased $11.7 million, operating expenses in the specialty metals products segment
increased $1.9 million, operating expenses in the tubular and pipe products segment increased $6.3 million, and Corporate
expenses increased $2.3 million.

Interest and other expense on debt totaled $7.5 million in 2017 compared to $5.3 million in 2016. Our effective borrowing
rate, exclusive of deferred financing fees and commitment fees, was 3.0% in 2017 compared to 2.4% in 2016 due to the
increases in LIBOR rates since 2016. Total average borrowings increased $48 million, or 31.5%, from $152.5 million in 2016
to $200.6 million in 2017, primarily related to increased working capital needs in 2017.

Income before income taxes totaled $16.4 million in 2017 compared to $0.4 million in 2016.

An income tax benefit of (16.0%) was recorded for 2017, compared to an income tax provision of 356.6% in 2016. On
December 22, 2017, the President of the United States signed the Tax Cuts and Jobs Act, or the Tax Act. The Tax Act, among
other things, lowered the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. As a result, our 2017
effective tax rate included a one-time $6.2 million benefit from a revaluation of our deferred tax liability to the new corporate
income tax rate. The net benefit recorded was based on currently available information and interpretations of applying the
provisions of the 2017 Tax Act as of the time of filing this Annual Report on Form 10-K. In accordance with Staff Accounting
Bulletin, or SAB, No. 118 issued by the Securities and Exchange Commission, or SEC, the income tax effect for certain
aspects of the Tax Act represent provisional amounts for which our accounting is incomplete but a reasonable estimate could
be determined and recorded during the fourth quarter of 2017. The 2017 effective tax rate also included an out-of-period
adjustment to correct and record previously unrecognized deferred tax assets, and the associated tax benefit, related to our
supplemental executive retirement plan recorded in the first quarter of 2017. The adjustment, which has accumulated since
the inception of the plan in 2005, resulted in an increase to after-tax income of $1.9 million. The effective tax rate was
disproportionately high in 2016 due to low income before taxes relative to items that impact the effective tax rate. The 2016
effective income tax rate was also impacted by increased valuation allowances and non-deductible expenses.

Net income for 2017 totaled $19.0 million, or $1.67 per basic and diluted share, compared to net loss of $1.1 million, or $0.10
per basic and diluted share, for 2016.

Segment Results of Operations

Carbon flat products

The following table sets forth certain income statement data for the carbon flat products segment for the years ended
December 31, 2017 and 2016 (dollars shown in thousands, except per ton data):

Direct tons sold
Toll tons sold
Total tons sold

Net sales
Average selling price per ton
Cost of materials sold
Gross profit (a)
Operating expenses (b)
Operating income (loss)

2017

2016

% of net
sales

1,060,002
87,748
1,147,750

869,628
758
693,742
175,886
158,000
17,886

952,888
73,880
1,026,768

100.0 $

79.8
20.2
18.2
2.0 $

670,983
653
529,021
141,962
146,333
(4,371)

100.0

78.8
21.2
21.8
(0.6)

(a) Gross profit is calculated as net sales less the cost of materials sold.
(b) Operating expenses are calculated as total costs and expenses less the cost of materials sold.

Tons sold increased 121 thousand tons, or 11.8%, to 1.15 million tons in 2017 from 1.03 million tons in 2016. Toll tons sold
increased 14 thousand tons, or 18.8% to 88 thousand tons in 2017 from 74 thousand tons in 2016. The increase in tons sold
is due to improved customer demand in the markets we serve and improved industry-wide shipments by U.S. service centers
in 2017 compared to 2016. The improved customer demand enabled us to grow our market share in most of the carbon flat
products categories we sell.

Net sales increased $198.6 million, or 29.6%, to $869.6 million in 2017 from $671.0 million in 2016. Average selling prices
in 2017 increased 15.9% to $758 per ton, compared to $653 per ton in 2016. The increase in sales was due to the 15.9%
increase in average selling prices and the 11.8% increase in sales volume. The increase in the average selling price is a result
of higher prices in the metals industry during 2017 as discussed in the overview of Results of Operations above. We expect
carbon flat metals market prices in the first quarter of 2018 to increase over the prices in the fourth quarter of 2017.

Cost of materials sold increased $164.7 million, or 31.1%, to $693.7 million in 2017 from $529.0 million in 2016. The
increase in cost of materials sold was due to a 17.3% increase in the average cost of materials sold per ton during 2017
compared to 2016 and the 11.8% increase in sales volume.

As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) decreased to 20.2% in 2017 from
21.2% in 2016. The average gross profit per ton sold increased $15 per ton to $153 in 2017 from $138 in 2016.

Operating expenses in 2017 increased $11.7 million, or 8.0%, to $158.0 million from $146.3 million in 2016. As a percentage
of net sales, operating expenses decreased to 18.2% for 2017 from 21.8% in 2016. The percentage increase in operating
expenses in 2017 were less than the volume increases during the year. Variable operating expenses, such as distribution and
warehouse and processing, increased as a result of increased sales volume and distribution cost inflation. Selling and
administrative and general expenses increased primarily as a result of increased variable performance based incentive
compensation.

Operating income for 2017 totaled $17.9 million compared to operating loss of $4.4 million in 2016.

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, 2017 and 2016 (dollars shown in thousands, except per ton data):

Direct tons sold
Toll tons sold
Total tons sold

Net sales
Average selling price per ton
Cost of materials sold
Gross profit (a)
Operating expenses (b)
Operating income

2017

2016

% of net
sales

90,106
54
90,160

227,200
2,520
194,199
33,001
21,761
11,240

100.0 $

85.5
14.5
9.6
4.9 $

82,156
129
82,285

189,930
2,308
160,185
29,745
19,904
9,841

100.0

84.3
15.7
10.5
5.2

(a) Gross profit is calculated as net sales less the cost of materials sold.
(b) Operating expenses are calculated as total costs and expenses less the cost of materials sold.

Tons sold increased 8 thousand tons, or 9.6%, to 90 thousand tons in 2017 from 82 thousand tons in 2016. The increase in
tons sold is due to improved customer demand in the markets we serve. Industry-wide shipments increased in 2017 compared
to 2016. The specialty metals flat products segment increased its market share in stainless products in 2017.

Net sales increased $37.3 million, or 19.6%, to $227.2 million in 2017 from $189.9 million in 2016. Average selling prices
in 2017 increased to $2,520 per ton, compared to $2,308 per ton in 2016. The increase in the average selling price is a result
of higher prices in the metals industry during 2017 as discussed in the overview of Results of Operations above. We expect
stainless steel and aluminum market prices in the first quarter of 2018 to increase over the fourth quarter 2017 prices.

Cost of materials sold increased $34.0 million, or 21.2%, to $194.2 million in 2017 from $160.2 million in 2016. The increase
in cost of materials sold was due to a 10.6% increase in the average cost of materials sold per ton during 2017 compared to
2016 and the 9.6% volume increase.

As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) decreased to 14.5% in 2017 from
15.7% in 2016. The average gross profit per ton sold totaled $366 in 2017 compared to $361 per ton in 2016. The decrease
in the gross profit percentage is a result of relatively flat gross margins per ton realized on higher average selling prices in
2017.

Operating expenses (as defined in footnote (b) in the table above) increased $1.9 million, or 9.3%, to $21.8 million in 2017
from $19.9 million in 2016. As a percentage of net sales, operating expenses decreased to 9.6% of net sales in 2017 from
10.5% in 2016. Variable operating expenses, such as distribution and warehouse and processing, increased as a result of
increased sales volume and distribution cost inflation. Selling and administrative and general expenses increased primarily
as a result of increased variable based incentive compensation related to the increased sales volume and gross profit.

Operating income for 2017 totaled $11.2 million compared to $9.8 million in 2016.

Tubular and pipe products

The following table sets forth certain income statement data for the tubular and pipe products segment for 2017 and 2016
(dollars shown in thousands).

Net sales
Cost of materials sold (a)
Gross profit (b)
Operating expenses (c)
Operating income

$
$ 233,868
167,271
66,597
62,029
4,568

2017

% of net
sales

2016

% of net
sales

100.0 $ 194,203
130,834
71.5
63,369
28.5
55,656
26.5
7,713
2.0 $

100.0
67.4
32.6
28.7
3.9

(a) Includes $2,707 of LIFO expense and $1,489 of LIFO income in 2017 and 2016, respectively.
(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 $39.7 million, or 20.4%, to $233.9 million in 2017 from $194.2 million in 2015. The increase in net sales
was due to a 12.6% increase in average selling prices and a 6.9% increase in sales volume during 2017. The increase in
volume was due to increased customer demand despite lower industry-wide shipments of pipe and tube products. The increase
in the average selling price is a result of higher prices in the metals industry during 2017 as discussed in the overview of
Results of Operations above. We expect tubular and pipe products market prices in the first quarter of 2018 to increase over
the fourth quarter 2017 prices

Cost of materials sold increased $36.5 million, or 27.8%, to $167.3 million in 2017 from $130.8 million in 2016. The increase
in cost of materials sold was due to a 12.6% increase in sales volume and a 19.6% increase in the average cost of materials
sold which was impacted by the LIFO expense of $2.7 million in 2017 compared to LIFO income of $1.5 million in 2016.

As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) decreased to 28.5% in 2017 compared
to 32.6%, in 2016. The LIFO expense decreased gross profit by 1.2% of net sales in 2017 compared to the LIFO income
which increased gross profit by 0.8% of net sales in 2016. In addition, tubular and pipe products segment gross profit
decreased as a result of a change in sales mix to more pipe and fitting products, which traditionally has a lower gross profit,
from higher gross profit fabrication product sales.

Operating expenses (as defined in footnote (c) in the table above) increased $6.3 million, or 11.6%, to $62.0 million from
$55.7 million in 2016. As a percentage of net sales, operating expenses decreased to 26.5% in 2017 compared to 28.7% in
2016. Operating expenses increased in 2017 primarily as a result of increased distribution expense related to increased
shipments and distribution cost inflation, less labor and overhead capitalized into inventory, and increased variable incentive
compensation related to increased gross profit and costs associated with a settlement of a commercial dispute.

Operating income for 2017 totaled $4.6 million, compared to an operating income of $7.7 million in 2016.

Corporate expenses

Corporate expenses increased $2.3 million, or 30.6%, to $9.7 million in 2017 compared to $7.4 million in 2016. The increase
in corporate expenses is primarily attributable to increased variable performance based incentive compensation and, effective
August 2016, when our President of Specialty Metals was appointed to the position of Executive Vice President and Chief
Operating Officer, his associated costs were classified as Corporate expenses.

2016 Compared to 2015

During 2015, the hot-rolled carbon coil index pricing declined by approximately 36% as a result of the strengthened U.S.
dollar, a historically high level of imported material arriving in the United States, low raw material costs to produce metals
and a global oversupply of metals. The pricing environment in 2015 drove our average selling prices down and caused
margins to be pressured as the average cost of inventory did not decrease as quickly as the average selling price, as we
traditionally keep approximately two and a half to three months of inventory on hand.

During the first six months of 2016, the market price of metals increased and fully recovered the decrease experienced during
2015. Metals market pricing peaked in June 2016, and then decreased until November 2016. Metals prices in December 2016
were not as high as the June 2016 prices, but were more than 65% per ton higher than the December 2015 prices. Although
prices increased during 2016, the average selling price during 2016 was still lower than the average selling price during 2015.
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. As sales
volumes were relatively flat between the years, lower average selling prices were the driver for our decreased net sales in
2016. When the average selling price decreases, and net sales decreases, the gross profit and operating expenses as a
percentage of net sales will generally increase.

The following table sets forth certain consolidated income statement data for the years ended December 31, 2016 and 2015
(dollars shown in thousands):

2016

2015

Net sales
Cost of materials sold (a)
Gross profit (b)
Operating expenses (c)
Goodwill and intangible asset impairment (d)
Operating income (loss)
Other loss, net
Interest and other expense on debt
Income (loss) before income taxes
Income taxes
Net loss

$
$ 1,055,116
820,040
235,076
229,328
-
5,748
(55)
5,273
420
1,498
(1,078)

% of net
sales

100.0 $ 1,175,543
942,214
77.7
233,329
22.3
236,157
21.7
24,951
(0.0)
(27,779)
0.5
(125)
(0.0)
5,690
0.5
(33,594)
0.0
(6,817)
0.1
(26,777)
(0.1) $

100.0
80.2
19.8
20.1
2.1
(2.4)
(0.0)
0.5
(2.9)
(0.6)
(2.3)

(a) Includes $1,489 and $3,347 of LIFO income for 2016 and 2015, respectively.
(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. Excludes goodwill and

intangible asset impairment shown seperately below for comparability purposes.

(d) The 2015 non-cash goodwill and intangible asset impairment charge is seperately displayed for operating expense
comparability purposes. $24,451 of the impairment charge is related to the tubular and pipe products segment and $500
is related to the specialty metals flat products segment.

Net sales decreased $120.4 million, or 10.2%, to $1.06 billion in 2016 from $1.18 billion in 2015. Carbon flat products net
sales decreased $94.4 million, or 12.3%, and were 63.6% of total net sales in 2016 compared to 65.1% in 2015. Specialty
metals flat products net sales decreased $2.6 million, or 1.3%, and were 18.0% of total net sales in 2016 compared to 16.4%
in 2015. Tubular and pipe products net sales decreased $23.4 million, or 10.8%, and were 18.4% of total net sales in 2016
compared to 18.5% of total net sales in 2015. The decrease in sales for the year ended December 31, 2016 was due to a 10.2%
decrease in average selling prices as sales volumes were flat between years. Average selling prices decreased in all segments
during 2016 compared to 2015 as market pricing for metals was still lower year-over-year. During 2016, we increased our
market share for all of the product categories that we sell.

Cost of materials sold decreased $122.2 million, or 13.0%, to $820.0 million in 2016 from $942.2 million in 2015. During
2016, we recorded LIFO income of $1.5 million compared to LIFO income of $3.3 million recorded in 2015. The decrease
in cost of materials sold in 2016 is due to the decreased metals costs of 12.9% during 2016 as sales volumes were flat between
years.

As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) increased to 22.3% in 2016 from
19.8% in 2015. Gross profit as a percentage of net sales increased in the carbon flat products segment to 21.2% in 2016 from
19.2% in 2015 and in the tubular and pipe products segment to 32.6% in 2016 from 32.5% in 2015. Gross profit as a
percentage of net sales increased in the specialty metals flat products segment to 15.7% in 2016 from 8.2% in 2015. LIFO
income increased gross profit by 0.1% and 0.3% of net sales in 2016 and 2015, respectively. The increase in gross profit as
a percentage of net sales during 2016 was primarily due to the cost of materials sold decreasing more than selling prices in
all segments.

Operating expenses (as defined in footnote (c) in the table above) decreased $6.8 million, or 2.9%, to $229.3 million in 2016
from $236.2 million in 2015. As a percentage of net sales, operating expenses increased to 21.7% in 2016 from 20.1% in
2015. Warehouse and processing costs decreased $5.9 million, or 6.9%, primarily due to reductions in labor hours worked.
Administrative costs decreased by $1.9 million, or 3.0%, primarily related to reductions in labor and personnel expenses and
lower variable based incentive compensation. Distribution expense increased by $0.4 million, or 1.2%, on flat sales volumes.
Selling expenses increased $1.9 million, or 9.0%, as a result of hiring additional sales professionals. Occupancy expenses
decreased $0.8 million as a result of elimination of certain leased warehouse space. Depreciation expense decreased $0.6
million, or 3.0%, as a result of certain assets being fully depreciated in 2016. Operating expenses in the carbon flat products
segment decreased $7.6 million, operating expenses in the specialty metals products segment increased $3.0 million,
operating expenses in the tubular and pipe products segment decreased $2.5 million, and Corporate expenses increased $0.3
million.

The goodwill and intangible asset impairment charge in 2015 included a $16.5 million non-cash goodwill impairment and a
$8.0 million intangible asset impairment for the tubular and pipe products segment as well as a $0.5 million goodwill
impairment for the specialty metals flat products segment. The 2015 goodwill impairment charges fully impaired the goodwill
for both the tubular and pipe products segment and the specialty metals flat products segment.

Interest and other expense on debt totaled $5.3 million in 2016 compared to $5.7 million in 2015. Our effective borrowing
rate, exclusive of deferred financing fees and commitment fees, was 2.4% in 2016 compared to 2.1% in 2015. The decrease
in interest and other expense on debt in 2016 was attributable to lower average borrowings during 2016 compared to 2015.

Income before income taxes totaled $0.4 million in 2016 compared to a loss before income taxes of $33.6 million in 2015.
2015 loss before income taxes includes goodwill impairment charges of $17.0 million and a $8.0 million intangible asset
impairment charge.

An income tax provision of 356.6% was recorded for 2016, compared to an income tax benefit of (20.3%) in 2015. The
effective tax rate was disproportionately high in 2016 from comparative periods due to low income before taxes relative to
items that impact the effective tax rate. The 2016 effective income tax rate was impacted by increased valuation allowances
and non-deductible expenses. The 2015 effective income tax rate was impacted by the non-deductibility of the goodwill
impairment charges. The income tax benefit for 2015 prior to the goodwill impairment charge was 39.8%.

Net loss for 2016 totaled $1.1 million, or $0.10 per basic and diluted share, compared to net loss of $26.8 million, or $2.39
per basic and diluted share, for 2015. The goodwill and intangible asset impairments in 2015 impacted earnings per share by
$1.93 per basic and diluted shares.

Segment Results of Operations

Carbon flat products

The following table sets forth certain income statement data for the carbon flat products segment for the years ended
December 31, 2016 and 2015 (dollars shown in thousands, except per ton data):

Direct tons sold
Toll tons sold
Total tons sold

2016

2015

% of net
sales

952,888
73,880
1,026,768

935,165
102,360
1,037,525

Net sales
Average selling price per ton
Cost of materials sold
Gross profit (a)
Operating expenses (b)
Operating loss

670,983
653
529,021
141,962
146,333
(4,371)

100.0 $

78.8
21.2
21.8
(0.6) $

765,400
738
618,674
146,726
153,943
(7,217)

100.0

80.8
19.2
20.1
(0.9)

(a) Gross profit is calculated as net sales less the cost of materials sold.
(b) Operating expenses are calculated as total costs and expenses less the cost of materials sold.

Tons sold decreased 1.0% to 1.03 million tons in 2016 from 1.04 million tons in 2015. Toll tons sold decreased 27.8% to 74
thousand tons in 2016 from 102 thousand tons in 2015. The decrease in tons sold is due to decreased customer demand and
lower industry-wide shipments by U.S. service centers in 2016 compared to 2015. Despite the further softening of industry-
wide shipments in 2016, we grew our market share in all of the carbon flat product categories we sell.

Net sales decreased $94.4 million, or 12.3%, to $671.0 million in 2016 from $765.4 million in 2015. Average selling prices
in 2016 decreased 11.4% to $653 per ton, compared to $738 per ton in 2015. The decrease in sales was primarily due to a
11.4% decrease in average selling prices during 2016 as volumes were down only 1%. The decrease in the average selling
price is a result of lower prices in the metals industry during 2016, discussed in the overview of Results of Operations above.

Cost of materials sold decreased $89.7 million, or 14.5%, to $529.0 million in 2016 from $618.7 million in 2015. The decrease
in cost of materials sold was due to a 13.6% decrease in the average cost of materials sold per ton during 2016 compared to
2015, as volumes were down only 1% between years.

As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) increased to 21.2% in 2016 from
19.2% in 2015. The increase in gross profit percentage in 2016 was primarily due to the cost of materials sold decreasing
more than selling prices. The average gross profit per ton sold declined to $138 in 2016 from $141 in 2015, due to the
significant decline in market prices for metals in 2016.

Operating expenses in 2016 decreased $7.6 million, or 4.9%, to $146.3 million from $153.9 million in 2015, exceeding the
sales volume decrease of 1.0%. As a percentage of net sales, operating expenses increased to 21.8% for 2016 from 20.1% in
2015. Operating expenses decreased through reductions in labor and personnel expenses, lower variable based incentive
compensation, lower depreciation expense and lower occupancy expense as a result of elimination of certain leased
warehouse space offset by an increase in distribution expense and increased selling expenses as a result of hiring additional
sales professionals.

Operating loss for 2016 totaled $4.4 million compared to operating loss of $7.2 million in 2015.

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, 2016 and 2015 (dollars shown in thousands, except per ton data):

Direct tons sold
Toll tons sold
Total tons sold

Net sales
Average selling price per ton
Cost of materials sold
Gross profit (a)
Operating expenses (b)
Goodwill impairment charge (c)
Operating income (loss)

2016

2015

% of net
sales

82,156
129
82,285

189,930
2,308
160,185
29,745
19,904
-
9,841

72,041
36
72,077

192,516
2,671
176,686
15,830
16,904
500
(1,574)

100.0 $

84.3
15.7
10.5
-
5.2 $

100.0

91.8
8.2
8.8
0.2
(0.8)

(a) Gross profit is calculated as net sales less the cost of materials sold.
(b) Operating expenses are calculated as total costs and expenses less the cost of materials sold. Excludes goodwill

impairment charge shown separately below for comparability purposes.

Tons sold increased 14.2% to 82 thousand tons in 2016 from 72 thousand tons in 2015. The specialty metals flat products
segment increased its market share in both the stainless steel and aluminum products it sells.

Net sales decreased $2.6 million, or 1.3%, to $189.9 million in 2016 from $192.5 million in 2015. Average selling prices in
2016 decreased to $2,308 per ton, compared to $2,671 per ton in 2015. The decrease in sales was due to a 13.6% decrease in
the average selling price during 2016, offset by a 14.2% increase in sales volume. The decrease in the year-over-year average
selling price per ton is a result of lower market prices of stainless steel and aluminum in 2016. Average market prices for
nickel (a component of stainless steel) were also lower in 2016 compared to 2015.

Cost of materials sold decreased $16.5 million, or 9.3%, to $160.2 million in 2016 from $176.7 million in 2015. The decrease
in cost of materials sold was due to a 20.6% decrease in the average cost of materials sold per ton during 2016 compared to
2015, offset by a 14.2% sales volume increase.

As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) increased to 15.7% in 2016 from 8.2%
in 2015. The average gross profit per ton sold totaled $361 in 2016 compared to $220 per ton in 2015. The increase in the
gross profit percentage is a result of our cost of materials sold decreasing more than the average selling price in 2016,
compared to 2015 as inventory turnover improved in 2016.

Operating expenses (as defined in footnote (b) in the table above) increased $3.0 million, or 17.7%, to $19.9 million in 2016
from $16.9 million in 2015. The increase in operating expenses is related to the increased sales volume of 14.2%. As a
percentage of net sales, operating expenses increased to 10.5% of net sales in 2016 from 8.8% in 2015. Variable operating
expenses, such as distribution, wages and variable based incentive compensation increased as a result of higher sales volumes
and improved profitability. In 2015, we recorded a $0.5 million non-cash goodwill impairment charge as a result of the
continued market pressures which fully eliminated the goodwill for the specialty metals flat products segment.

Operating income for 2016 totaled $9.8 million compared to operating loss of $1.6 million in 2015.

Tubular and pipe products

The following table sets forth certain income statement data for the tubular and pipe products segment for 2016 and 2015
(dollars shown in thousands).

Net sales
Cost of materials sold (a)
Gross profit (b)
Operating expenses (c)
Goodwill and intangible asset impairment (d)
Operating income (loss)

2016

2015

$
194,203
130,834
63,369
55,656
-
7,713

% of net
sales

100.0 $
67.4
32.6
28.7
-
3.9 $

$
217,627
146,854
70,773
58,190
24,451
(11,868)

% of net
sales

100.0
67.5
32.5
26.8
11.2
(5.5 )

(a) Includes $1,489 and $3,347 of LIFO income in 2016 and 2015, respectively.
(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.
(d) The 2015 non-cash goodwill and intangible asset impairment charges are separately displayed for operating expense

comparability purposes.

Net sales decreased $23.4 million, or 10.8%, to $194.2 million in 2016 from $217.6 million in 2015. The decrease in net
sales was due to a 0.8% decrease in sales volume and a 10.0% decrease in average selling prices during 2016. The decrease
in volume was due to decreased customer demand and lower industry-wide shipments of tube and pipe products. The decrease
in average selling prices were due to lower industry market prices for metals in 2016 compared to 2015.

Cost of materials sold decreased $16.0 million, or 10.9%, to $130.8 million in 2016 from $146.9 million in 2015. The decrease
in cost of materials sold was due to a 0.8% decrease in sales volume and a 10.2% decrease in the average cost of materials
sold which was impacted by the LIFO income of $1.5 million in 2016, compared to LIFO income of $3.3 million in 2015.

As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) remained relatively flat at 32.6% in
2016 compared to 32.5%, in 2015. The LIFO income increased gross profit by 0.8% of net sales in 2016, compared to 1.5%
of net sales in 2015.

Operating expenses (as defined in footnote (c) in the table above) decreased $2.5 million, or 4.4%, to $55.7 million from
$58.2 million in 2015. As a percentage of net sales, operating expenses increased to 28.7% in 2016 compared to 26.8% in
2015. Variable operating expenses, such as variable performance-based incentive compensation, decreased in 2016 as a result
of lower sales and income before impairment charges.

In 2015, we recorded a $16.5 million non-cash goodwill impairment charge and an $8.0 million non-cash intangible asset
impairment charge. There were no intangible asset impairment charges recorded in 2016.

Operating income for 2016 totaled $7.7 million, compared to an operating loss of $11.9 million in 2015. The operating loss
for 2015 was the result of the goodwill impairment of $16.5 million and the asset impairment charge of $8.0 million.

Corporate expenses

Corporate expenses increased $0.3 million, or 4.4%, to $7.4 million in 2016 compared to $7.1 million in 2015. The increase
in corporate expenses is primarily attributable to our President of Specialty Metals being appointed to the position of
Executive Vice President and Chief Operating Officer and the associated transfer of expenses from the Specialty Metals flat
products segment to the Corporate expenses in 2016.

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, leasing
transactions and borrowings under our credit facility to fund these requirements.

We believe that funds available under our credit facility, lease arrangement proceeds and the sale of equity or debt securities,
together with funds generated from operations, will be sufficient to provide us with the liquidity necessary to fund anticipated
working capital requirements, capital expenditure requirements, our dividend payments and share repurchases and any
business acquisitions over at least the next 12 months. In the future, we may as part of our business strategy, acquire and
dispose of assets or other companies in the same or complementary lines of business, or enter into or exit strategic alliances
and joint ventures. Accordingly, the timing and size of our capital requirements are subject to change as business conditions
warrant and opportunities arise.

2017 Compared to 2016

Operating Activities

During 2017, we used $19.0 million of cash for operations, of which $26.7 million was generated from operating activities
and $45.7 million was used for working capital. During 2016, we used $9.8 million of cash for operations, of which $16.8
million was generated from operating activities and $26.6 million was used for working capital.

Net cash generated from operations totaled $26.7 million during 2017 and was primarily comprised of net income of $18.9
million, depreciation and amortization of $18.6 million offset by the net change in long-term assets and liabilities of $11.9
million, which includes the $6.2 million tax benefit related to the Tax Act. Net cash generated from operations totaled $16.8
million during 2016 and was primarily comprised of depreciation and amortization of $19.4 million offset by the net change
in long-term assets and liabilities of $1.7 million and the net loss of $1.1 million.

Working capital at December 31, 2017 totaled $310.0 million, a $50.0 million increase from December 31, 2016. The increase
was primarily attributable to a $31.0 million increase in accounts receivable (resulting primarily from higher sales in 2017)
and a $20.8 million increase in inventory (resulting from increased inventory levels throughout 2017), offset by a $4.6 million
increase in accounts payable and outstanding checks (resulting from the increased inventory purchases at the end of 2017)
and a $1.6 million increase in accrued payroll and other accrued liabilities.

Investing Activities

Net cash used for investing activities was $9.2 million during 2017, compared to $6.4 million during 2016. In 2017, capital
expenditures totaled $10.2 million and were primarily attributable to processing equipment, facilities expansions and facilities
maintenance. During 2018, we expect our capital spending to approximate $25 million primarily related to a building
expansion and new processing equipment at our existing facilities.

Financing Activities

In 2017, $28.9 million of cash was generated from financing activities which primarily consisted of $31.6 million of net
borrowings under our Third Amended and Restated Loan and Security Agreement, or Loan Agreement, offset by $0.9 million
of credit facility fees and expenses paid in connection with the Loan Agreement. In 2016, $17.0 million of cash was generated
from financing activities which primarily consisted of $18.8 million of net borrowings under our asset- based credit facility,
or ABL Credit Facility.

In February 2018, our Board of Directors approved a regular quarterly dividend of $0.02 per share, which is payable on
March 15, 2018 to shareholders of record as of March 1, 2018. Our Board previously approved 2017 regular quarterly
dividends of $0.02 per share, which were paid on each of March 15, 2017, June 15, 2017, September 15, 2017 and December
15, 2017. Dividend distributions in the future are subject to the availability of cash, limitations on cash dividends under our
Loan Agreement (as defined below) and continuing determination by our Board of Directors that the payment of dividends
remains in the best interest of our shareholders.

Stock Repurchase Program

In 2015, our Board of Directors authorized a stock repurchase program of up to 550,000 shares of the Company’s issued and
outstanding common stock, which could include open market repurchases, negotiated block transactions, accelerated stock
repurchases or open market solicitations for shares, all or some of which may be effected through Rule 10b5-1 plans.
Repurchased shares are held in our treasury, or canceled and retired as our Board may determine from time to time. Any
repurchases of common stock are subject to the covenants contained in the Loan Agreement. Under the Loan Agreement, we
may repurchase common stock and pay dividends up to $5.0 million in the aggregate during any trailing twelve months
without restrictions. Purchases in excess of $5.0 million require us to (i) maintain availability in excess of 20.0% of the
aggregate revolver commitments ($80.0 million at December 31, 2017) or (ii) to maintain availability equal to or greater than
15.0% of the aggregate revolver commitments ($60.0 million at December 31, 2017) 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. 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 Loan Agreement,
and repurchases may be discontinued at any time. During 2018, we expect to be limited to the $5.0 million available without
restrictions to repurchase common stock and pay dividends.

There were no shares repurchased during 2017 or 2016. During the fourth quarter of 2015, we repurchased 65,283 shares for
a total cost of $0.7 million.

Debt Arrangements

On December 8, 2017, we entered into a Third Amended and Restated Loan and Security Agreement, or Loan Agreement.
The Loan Agreement provides for, among other things: (i) a revolving credit facility of up to $370 million, including a $20
million sub-limit for letters of credit and (ii) a first in, last out revolving credit facility of up to $30 million. Under the terms
of the Loan Agreement, we may, subject to the satisfaction of certain conditions, request additional commitments under the
revolving credit facility in the aggregate principal amount of up to $200 million to the extent that existing or new lenders
agree to provide such additional commitments. The Loan Agreement matures on December 8, 2022.

The Loan Agreement is secured by substantially all of our existing and future personal property. The Loan Agreement
contains customary representations and warranties and certain covenants that limit our ability to, among other things: (i) incur
or guarantee additional indebtedness; (ii) pay distributions on, redeem or repurchase capital stock or redeem or repurchase
subordinated debt; (iii) make investments; (iv) sell assets; (v) enter into agreements that restrict distributions or other
payments from restricted subsidiaries to the Company; (vi) incur or suffer to exist liens securing indebtedness; (vii)
consolidate, merge or transfer all or substantially all of their assets; and (viii) engage in transactions with affiliates. In
addition, the Loan Agreement contains a financial covenant which includes: (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 ($40.0 million at December 31, 2017) or 10.0% of the aggregate borrowing base ($32.9 million at December
31, 2017) 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.

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%.

As of December 31, 2017, we were in compliance with our covenants and had approximately $128.9 million of availability
under the Loan Agreement.

As of December 31, 2017, $1.9 million of bank financing fees were included in “Prepaid expenses and other” and “Other
long-term assets” on the accompanying Consolidated Balance Sheets. The financing fees are being amortized over the five-
year term of the Loan Agreement and are included in “Interest and other expense on debt” on the accompanying Consolidated
Statements of Comprehensive Income.

As part of the CTI acquisition in July 2011, we assumed approximately $5.9 million of Industrial Revenue Bond, or IRB,
indebtedness ($0.9 million at December 31, 2017). The bond matures in April 2018, with the option to provide principal
payments annually in April. On April 3, 2017, we made an optional principal payment of $0.9 million. The remaining balance
of the IRB is included in “Current portion of long-term debt” on the accompanying Consolidated Balance Sheets as the
payment is due in April 2018. Interest is payable monthly, with a variable rate that resets weekly. As a security for payment
of the bonds, we obtained a direct pay letter of credit issued by JPMorgan Chase Bank, N.A. The letter of credit reduces
annually by the principal reduction amount. The interest rate at December 31, 2017 was 1.71% for the IRB debt.

CTI entered into an interest rate swap agreement to reduce the impact of changes in interest rates on the above IRB. At
December 31, 2017, the effect of the swap agreement on the bond was to fix the rate at 3.46%. The swap agreement matures
in April 2018, and is reduced annually by the amount of the optional principal payments on the bond. The Company is
exposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreement. However, the
Company does not anticipate nonperformance by the counterparties.

We entered into a forward starting fixed rate interest rate hedge that commenced June 2013, in order to eliminate the
variability of cash interest payments on $53.2 million of the then outstanding LIBOR-based borrowings under the ABL Credit
Facility. The hedge, which matured on June 1, 2016, fixed the rate at 1.21% plus a premium ranging from 1.25% to 1.75%.

2016 Compared to 2015

Operating Activities

During 2016, we used $9.8 million of cash for operations, of which $16.8 million was generated from operating activities
and $26.6 million was used for working capital. During 2015, we generated $107.5 million of cash from operations, of which
$12.4 million was generated from operating activities and $95.1 million was generated from working capital.

Net cash used for operations totaled $16.8 million during 2016 and was primarily comprised of depreciation and amortization
of $19.4 million offset by the net change in long-term assets and liabilities of $1.7 million and the net loss of $1.1 million.
Net cash from operations totaled $12.4 million during 2015 and was primarily comprised of depreciation and amortization
of $19.9 million and the non-cash goodwill and intangible asset impairment of $25.0 million, offset by the net loss of $26.8
million.

Working capital at December 31, 2016 totaled $260.0 million, a $28.2 million increase from December 31, 2015. The increase
was primarily attributable to a $47.9 million increase in inventory (resulting from increased inventory purchases at the end
of 2016), a $9.0 million increase in accounts receivable (resulting primarily from higher sales volume at the end of 2016)
offset by a $23.8 million increase in accounts payable and outstanding checks (resulting from the increased inventory
purchases at the end of 2016) and a $4.9 million increase in accrued payroll and other accrued liabilities.

Investing Activities

Net cash used for investing activities was $6.4 million during 2016, compared to $7.3 million during 2015. In 2016, capital
expenditures were primarily attributable to additional processing equipment and facilities maintenance.

Financing Activities

In 2016, $17.0 million of cash was generated from financing activities, which primarily consisted of $18.8 million of net
borrowings under our ABL Credit Facility. In 2015, $100.8 million of cash was used for financing activities, which primarily
consisted of $98.3 million of net repayments under our ABL Credit Facility.

Our Board previously approved 2016 and 2015 regular quarterly dividends of $0.02 per share, which were paid in March,
June, September and December of 2016 and 2015.

Contractual Obligations

The following table reflects our contractual obligations as of December 31, 2017:

Contractual Obligations
(amounts in thousands)
Long-term debt obligations
Interest obligations
Unrecognized tax positions
Other long-term liabilities
Operating leases

Total contractual obligations

Less than

More than

Total

1 year

1-3 years

3-5 years

5 years

(a) $
(b)
(c)
(d)
(e)
$

197,165 $
31,522
40
11,972
26,740
267,439 $

930 $
6,513
14
373
6,385
14,215 $

- $
13,005
26
6,905
10,256
30,192 $

196,235 $
12,004
-
2,859
6,646
217,744 $

-
-
-
1,835
3,453
5,288

(a) See Note 6 to the Consolidated Financial Statements.
(b) Future interest obligations are calculated using the debt balances and interest rates in effect on December 31, 2017.
(c) See Note 12 to the Consolidated Financial Statements. Classification is based on expected settlement dates and the

expiration of certain statutes of limitations.

(d) Primarily consists of retirement liabilities and deferred compensation payable in future years.
(e) See Note 11 to the Consolidated Financial Statements

Off-Balance Sheet Arrangements

An off-balance sheet arrangement is any contractual arrangement involving an unconsolidated entity under which a company
has (a) made guarantees, (b) a retained or a contingent interest in transferred assets, (c) any obligation under certain derivative
instruments or (d) any obligation under a material variable interest in an unconsolidated entity that provides financing,
liquidity, market risk or credit risk support to a company, or engages in leasing, hedging, or research and development services
within a company.

Other than operating leases, which are disclosed above, and derivative instruments discussed in Note 7 to the Consolidated
Financial Statements, as of December 31, 2017, 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, processing
equipment, purchased metals, energy and borrowings under our credit facility. General inflation, excluding increases in the
price of metals and increased distribution expense, has not had a material effect on our financial results during the past three
years. We expect transportation expenses to increase in excess of general inflation in 2018 due to the Electronic Log Device
mandate by the Federal Motor Carrier Safety Administration issued in 2017.

Critical Accounting Policies

This discussion and analysis of financial condition and results of operations is based on our consolidated financial statements,
which have been prepared in conformity with accounting principles generally accepted in the United States. The preparation
of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the
financial statements. Actual results could differ from these estimates under different assumptions or conditions. On an on-
going basis, we monitor and evaluate our estimates and assumptions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in preparation
of our consolidated financial statements:

Cash and Cash Equivalents

Cash equivalents consist of short-term highly liquid investments, with a three month or less maturity, which are readily
convertible into cash.

Fair Market Value

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or
most advantageous market for the liability in an orderly transaction between market participants on the measurement
date. Valuation techniques must maximize the use of observable inputs and minimize the use of unobservable inputs. To
measure fair value, we apply a fair value hierarchy that is based on three levels of inputs, of which the first two are considered
observable and the last unobservable, as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar
assets or liabilities; quoted prices that are not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value
of the assets or liabilities.

Financial instruments, such as cash and cash equivalents, accounts receivable, accounts payable and the credit facility
revolver, are stated at their carrying value, which is a reasonable estimate of fair value. The fair value of marketable securities
is based on quoted market prices.

Allowance for Doubtful Accounts Receivable

The allowance for doubtful accounts in maintained at a level considered appropriate based on historical experience and
specific customer collection issues that we have identified. Estimations are based upon the application of a historical
collection rate to the outstanding accounts receivable balance, which remains fairly level from year to year, and judgments
about the probable effects of economic conditions on certain customers, which can fluctuate significantly from year to year.
We cannot be certain that the rate of future credit losses will be similar to past experience. We consider all available
information when assessing the adequacy of our allowance for doubtful accounts each quarter.

Inventory Valuation

Inventories are stated at the lower of its cost or net realizable value with the adoption of Accounting Standards Update, or
ASU, 2015-11 on January 1, 2017. Inventory costs include the costs of the purchased metals, inbound freight, external and
internal processing and applicable labor and overhead costs. Net realizable value is the estimated selling price in the ordinary
course of business, less reasonably predictable costs of completion, disposal and transportation.

Costs of our carbon and specialty metals flat products segments’ inventories, including flat-rolled sheet, coil and plate
products are determined using the specific identification method.

Certain of our tubular and pipe products inventory is stated under the LIFO method. At December 31, 2017, approximately
$48.1 million, or 17.5% of consolidated inventory, was reported under the LIFO method of accounting. The cost of the
remainder of tubular and pipe product segment’s inventory is determined using a weighted average rolling first-in, first-out
method.

On the Consolidated Statements of Comprehensive Income, “Cost of materials sold (exclusive of items shown separately
below)” consists of the cost of purchased metals, inbound and internal transfer freight, external processing costs, and LIFO
income or expense.

Property and Equipment, and Depreciation

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful
lives of the assets ranging from two to 30 years. We capitalize the costs of obtaining or developing internal-use software,
including directly related payroll costs. We amortize those costs over five years, beginning when the software is ready for its
intended use.

Intangible Assets and Recoverability of Long-lived Assets

impairment. Events or changes in circumstances that could trigger an impairment review include significant nonperformance
relative to the expected historical or projected future operating results, significant changes in the manner of the use of the
acquired assets or the strategy for the overall business or significant negative industry or economic trends. Management uses
judgment to determine whether to use a qualitative analysis or a quantitative fair value measurement for the reporting unit
that carries intangible assets.

If a quantitative fair value measurement is used, the fair value of each indefinite-lived intangible asset is compared to its
carrying value and an impairment charge is recorded if the carrying value exceeds the fair value. We estimate the fair value
of indefinite-lived intangible assets using a discounted cash flow methodology. Management’s assumptions used for the
calculations are based on historical results, projected financial information and recent economic events. Actual results could
differ from these estimates under different assumptions or conditions which could adversely affect the reported value of
intangible assets.

We evaluate the recoverability of long-lived assets and the related estimated remaining lives whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Events or changes in circumstances that could trigger
an impairment review include significant underperformance relative to the expected historical or projected future operating
results, significant changes in the manner of the use of the acquired assets or the strategy for the overall business or significant
negative industry or economic trends. We record an impairment or change in useful life whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable or the useful life has changed.

Income Taxes

Deferred income taxes on the consolidated balance sheet include, as an offset to the estimated temporary differences between
the tax basis of assets and liabilities and the reported amounts on the consolidated balance sheets, the tax effect of operating
loss and tax credit carryforwards. If we determine that we will not be able to fully realize a deferred tax asset, we will record
a valuation allowance to reduce such deferred tax asset to its net realizable value. We recognize interest accrued related to
unrecognized tax benefits in normal income tax expense. Penalties, if incurred, would be recognized as a component of
administrative and general expense.

During 2017, a net tax benefit was recorded based on currently available information and interpretations of applying the
provisions of the Tax Act as of the time of filing this Annual Report on Form 10-K. In accordance with SAB No. 118 issued
by the SEC, the income tax effect for certain aspects of the Tax Act represent provisional amounts for which our accounting
is incomplete but a reasonable estimate could be determined and recorded during the fourth quarter of 2017. The guidance
provides for a measurement period, up to one year from the enactment date, in which provisional amounts may be adjusted
when additional information is obtained, prepared or analyzed about facts and circumstances that existed as of the enactment
date, which, if known, would have affected the amounts that were initially recorded as provisional amounts. Adjustments to
provisional amounts identified during the measurement period should be recorded as an income tax expense or benefit in the
period the adjustment is determined.

Revenue Recognition

For both direct and toll shipments, revenue is recognized when title and risk of loss is transferred, which generally occurs
upon delivery to our customers. Given the proximity of our customers to our facilities, substantially all of our sales are
shipped and received within one day. Sales returns and allowances are treated as reductions to sales and are provided for
based on historical experience and current estimates and are immaterial to the consolidated financial statements.

Certain engineered products produced by CTI can take several months to manufacture due to their size and complexity.
Substantially all projects are completed within six months. We may request advance payments from customers during the
production of these products. These payments are included in “Other accrued liabilities” on the Company’s Consolidated
Balance Sheets. Revenue for the contracts is recognized when the product is shipped and title of the product transfers to the
customers. Revenues for these engineered products accounted for approximately 1.9%, 1.7% and 1.8% of our net sales during
2017, 2016 and 2015, respectively.

Shipping and Handling Fees and Costs

Amounts charged to customers for shipping and other transportation services are included in net sales. The distribution
expense line on the accompanying Consolidated Statements of Comprehensive Income is entirely comprised of all shipping
and other transportation costs incurred by us in shipping goods to its customers.

Stock-Based Compensation

We record compensation expense for stock awards issued to employees and directors. For additional information, see Note
10, Equity Plans in the accompanying Notes to Consolidated Financial Statements.

Impact of Recently Issued Accounting Pronouncements

In August 2017, the Financial Accounting Standards Board, or FASB issued ASU No 2017-12, “Derivatives and Hedging”.
This ASU aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to
both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.
To meet that objective, the ASU expand and refine hedge accounting for both nonfinancial and financial risk components
and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial
statements. This ASU also make certain targeted improvements to simplify the application of hedge accounting guidance and
ease the administrative burden of hedge documentation requirements and assessing hedge effectiveness. This ASU is the
final version of Proposed Accounting Standards Update 2016-310, “Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities”, which has been deleted. For public business entities, this ASU is
effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other
entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal
years beginning after December 15, 2020. Early application is permitted in any interim period after issuance of the ASU. All
transition requirements and elections should be applied to hedging relationships existing (that is, hedging relationships in
which the hedging instrument has not expired, been sold, terminated, or exercised or the entity has not removed the
designation of the hedging relationship) on the date of adoption. The effect of adoption should be reflected as of the beginning
of the fiscal year of adoption. The adoption of this ASU is not expected to materially impact our consolidated financial
statements.

In May 2017, the FASB issued ASU No 2017-09, “Compensation – Stock Compensation (Topic 718)”. This ASU provides
clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718,
Compensation – Stock Compensation, to a change to the terms or conditions of a share-based payment award. The ASU
provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply
modification accounting in Topic 718. This Update is the final version of proposed Accounting Standards Update 2016-360,
“Compensation—Stock Compensation (Topic 718)—Scope of Modification Accounting,” which has been deleted. The
amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods,
beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public
business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for
reporting periods for which financial statements have not yet been made available for issuance. The amendments in this
Update should be applied prospectively to an award modified on or after the adoption date. The adoption of this ASU is not
expected to materially impact our consolidated financial statements.

In August 2016, the FASB issued ASU No 2016-15, “Classification of certain cash receipts and cash payments”. This ASU
addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-
coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective
interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the
settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including
bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in
securitization transactions; and separately identifiable cash flows and application of the predominance principle. The
guidance will be effective for annual reporting periods beginning after December 15, 2017, and interim periods within those
fiscal years with early adoption permitted. The adoption of this ASU is not expected to materially impact our consolidated
financial statements.

In March 2016, the FASB issued ASU No 2016-09, “Improvements to Employee Share-Based Payment Accounting”. This
ASU is part of the FASB’s Simplification Initiative and has been issued to reduce complexity in the presentation of employee
share-based payment transactions, including the income tax consequences, classification of awards as either equity or
liabilities, and classification on the statement of cash flows. The adoption of this ASU did not materially impact our
consolidated financial statements.

will be effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years
with early adoption permitted. We are in the process of evaluating the impact of the future adoption of this standard on our
consolidated financial statements.

In July 2015, the FASB issued ASU No 2015-11, Simplifying the Measurement of Inventory, “Inventory (Topic 330)”, which
requires that inventory within the scope of this ASU be measured at the lower of cost and net realizable value. Net realizable
value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal
and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (LIFO) or the retail
inventory method. We adopted this standard effective January 1, 2017. The adoption of this ASU did not have a material
impact to our consolidated financial statements.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the
Effective Date, which deferred the effective date of ASU 2014-09 for all entities by one year. This update is effective for
public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within
those reporting periods. Earlier application was permitted only as of annual reporting periods beginning after December 15,
2016, including interim reporting periods within that reporting period. ASU 2014-09 was to become effective for us beginning
January 2017; however, ASU 2015-14 deferred our effective date until January 2018, which is when we adopted this standard.
The ASU permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective
method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial
application (the modified retrospective method). The ASU also requires expanded disclosures relating to the nature, amount,
timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and
quantitative disclosures are required for customer contracts, significant judgments and changes in judgments, and assets
recognized from the costs to obtain or fulfill a contract. We have completed the process of evaluating the effect of the adoption
and determined there were no material changes required to our reported revenues as a result of the adoption. The majority of
our revenue arrangements generally consist of a single performance obligation to transfer goods or services. Based on our
evaluation process and review of our contracts with customers, the timing and amount of revenue recognized based on ASU
2015-14 is consistent with our revenue recognition policy under previous guidance.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our principal raw materials are carbon, coated and stainless steel, and aluminum, pipe and tube, flat rolled coil, sheet and
plate that we typically purchase from multiple primary metals producers. The metals industry as a whole is cyclical and, at
times, pricing and availability of metals can be volatile due to numerous factors beyond our control, including general
domestic and international economic conditions, the levels of metals imported into the United States, labor costs, sales levels,
competition, levels of inventory held by other metals service centers, consolidation of metals producers, new global capacity
by metals producers, higher raw material costs for the producers of metals, import duties and tariffs and currency exchange
rates. This volatility can significantly affect the availability and cost of raw materials for us.

Similar to other metals service centers, we maintain substantial inventories of metals to accommodate the short lead times
and just-in-time delivery requirements of our customers. Accordingly, we purchase metals in an effort to maintain our
inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon historic
buying practices, supply agreements with customers and market conditions. Our commitments to purchase metals are
generally at prevailing market prices in effect at the time we place our orders. We have no long-term, fixed-price metals
purchase contracts. When metals prices increase, competitive conditions will influence how much of the price increase we
can pass on to our customers. To the extent we are unable to pass on future price increases in our raw materials to our
customers, the net sales and profitability of our business could be adversely affected. 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 inventory lower of cost or market adjustments as we sell existing inventory. Significant or rapid
declines in metals prices or reductions in sales volumes could adversely impact our ability to remain in compliance with
certain financial covenants in our credit facility, as well as result in us incurring inventory or intangible asset impairment
charges. Changing metals prices therefore could significantly impact our net sales, gross profits, operating income and net
income.

Rising metals prices result in higher working capital requirements for us and our customers. Some customers may not have
sufficient credit lines or liquidity to absorb significant increases in the price of metals. While we have generally been
successful in the past in passing on producers’ price increases and surcharges to our customers, there is no guarantee that we
will be able to pass on price increases to our customers in the future. Declining 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 51%, 51% and 49% of our consolidated net sales in 2017, 2016 and 2015, respectively, were directly related
to industrial machinery and equipment manufacturers and their fabricators.

Inflation generally affects us by increasing the cost of employee wages and benefits, transportation services, processing
equipment, energy and borrowings under our credit facility. General inflation has not had a material effect on our financial
results during the past three years. We expect transportation expenses to increase in excess of general inflation in 2018 due
to the Electronic Log Device mandate by the Federal Motor Carrier Safety Administration issued in 2017.

We are exposed to the impact of fluctuating metals prices and interest rate changes. During 2017, 2016 and 2015, we entered
into metals swaps at the request of customers. While these derivatives are intended to be effective in helping us manage risk,
they have not been designated as hedging instruments. We had no outstanding metals cash flow hedges at December 31,
2017. In 2014, we entered into carbon swaps in order to mitigate the volatility in the price of metals. The carbon swaps were
accounted for as cash flow hedges and all of them settled in 2015.

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, 2017 rates and, assuming no change in total debt from December 31, 2017 levels, the
additional annual interest expense to us would be approximately $2.0 million. We have the option to enter into 30- to 180-
day fixed base rate LIBOR loans under the Loan Agreement. We assumed an interest rate swap agreement on the $5.9 million
of CTI IRB. The swap agreement matures in April 2018, but the notional amount may be reduced annually by the amount of
the optional principal payments on the IRB. We are exposed to credit loss in the event of nonperformance by the other parties
to the interest rate swap agreements. However, we do not anticipate nonperformance by the counterparties.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Olympic Steel, Inc.

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm ...............................................................................................
Management’s Report on Internal Control Over Financial Reporting ...............................................................................
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2017, 2016 and 2015 ..............
Consolidated Balance Sheets as of December 31, 2017 and 2016 .....................................................................................
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015 ..................................
Supplemental Disclosures of Cash Flow Information for the Years Ended December 31, 2017, 2016 and 2015 .............
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2017, 2016 and 2015 ...................
Notes to Consolidated Financial Statements for the Years Ended December 31, 2017, 2016 and 2015 ............................
Schedule II – Valuation and Qualifying Accounts for the Years Ended December 31, 2017, 2016 and 2015 ..................

46
48
49
50
51
52
53
54
72

Page

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Olympic Steel, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Olympic Steel, Inc. and its subsidiaries as of December
31, 2017 and 2016, and the related consolidated statements of comprehensive income, cash flows, and shareholders’ equity
for each of the three years in the period ended December 31, 2017, including the related notes and financial statement schedule
listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited
the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of
internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a reasonable basis for our opinions..

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/PricewaterhouseCoopers LLP
Cleveland, Ohio
March 2, 2018

We have served as the Company’s auditor since 2002.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our
internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In
making this assessment, our management used the criteria established in Internal Control - Integrated Framework (2013),
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, we
concluded that, as of December 31, 2017, our internal control over financial reporting was effective based on those criteria.

The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears
herein.

Olympic Steel, Inc.
Consolidated Statements of Comprehensive Income
For The Years Ended December 31,
(in thousands, except per share data)

Net sales

Costs and expenses

Cost of materials sold (excludes items shown separately below)
Warehouse and processing
Administrative and general
Distribution
Selling
Occupancy
Depreciation
Amortization
Goodwill and intangible asset impairment

Total costs and expenses

Operating income (loss)

Other loss, net

Income (loss) before interest and income taxes

Interest and other expense on debt

Income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

Gain (loss) on cash flow hedges
Tax effect of hedges
Reclassification of loss included in net income, net of tax of $804

for 2015
Total comprehensive income (loss)

Net income (loss) per share - basic
Weighted average shares outstanding - basic

Net income (loss) per share - diluted
Weighted average shares outstanding - diluted

Dividends declared per share of common stock

2017

2016

2015

1,330,696 $

1,055,116 $

1,175,543

1,055,212
87,425
69,659
41,789
26,285
8,862
16,589
889
-
1,306,710
23,986
(118)
23,868
7,518
16,350
(2,613)
18,963 $

-
-

-
18,963 $

1.67 $
11,381

820,040
79,521
63,054
36,490
23,060
8,718
17,596
889
-
1,049,368
5,748
(55 )
5,693
5,273
420
1,498
(1,078 ) $

114
(44 )

-
(1,008 ) $

(0.10 ) $
11,210

942,214
85,411
64,987
36,073
21,158
9,492
18,147
889
24,951
1,203,322
(27,779 )
(125 )
(27,904 )
5,690
(33,594 )
(6,817 )
(26,777 )

(1,816 )
699

1,596
(26,298 )

(2.39 )
11,192

0.08 $

0.08

The accompanying notes are an integral part of these consolidated statements.

Olympic Steel, Inc.
Consolidated Balance Sheets
As of December 31,
(in thousands)

Cash and cash equivalents
Accounts receivable, net
Inventories, net (includes LIFO debit of $5,337 and $8,045 as of December 31, 2017

Assets

and 2016, respectively)
Prepaid expenses and other
Assets held for sale

Total current assets
Property and equipment, at cost
Accumulated depreciation

Net property and equipment

Intangible assets, net
Other long-term assets

Total assets

Current portion of long-term debt
Accounts payable
Accrued payroll
Other accrued liabilities

Total current liabilities

Credit facility revolver
Other long-term liabilities
Deferred income taxes
Total liabilities

Liabilities

Commitments and contingencies (Note 11)

Preferred stock, without par value, 5,000 shares authorized, no shares issued or

Shareholders' Equity

outstanding

Common stock, without par value, 20,000 shares authorized, 10,989 and 10,963 shares

issued and outstanding

Treasury stock, at cost, 31 and 57 shares held
Retained earnings

Total shareholders' equity
Total liabilities and shareholders' equity

2017

2016

3,009 $
132,737

2,315
101,902

275,307
8,333
750
420,136
376,710
(229,062 )
147,648
22,980
13,394
604,158 $

930 $
84,034
11,999
14,184
111,147
196,235
12,048
12,145
331,575

254,526
6,197
-
364,940
374,242
(218,476)
155,766
23,869
11,493
556,068

1,825
79,458
8,445
15,170
104,898
164,599
10,062
23,119
302,678

129,453
(337 )
143,467
272,583
604,158 $

128,619
(609)
125,380
253,390
556,068

The accompanying notes are an integral part of these consolidated statements.

Olympic Steel, Inc.
Consolidated Statements of Cash Flows
For The Years Ended December 31,
(in thousands)

Cash flows from (used for) operating activities:

Net income (loss)
Adjustments to reconcile net income (loss) to net cash from

operating activities -

Depreciation and amortization
Goodwill and intangible asset impairment
(Gain) loss on disposition of property and equipment
Stock-based compensation
Other long-term assets
Deferred income taxes and other long-term liabilities

Changes in working capital:
Accounts receivable
Inventories
Prepaid expenses and other
Accounts payable
Change in outstanding checks
Accrued payroll and other accrued liabilities

Net cash from (used for) operating activities

Cash flows from (used for) investing activities:

Capital expenditures
Proceeds from disposition of property and equipment

Net cash used for investing activities

Cash flows from (used for) financing activities:

Credit facility revolver borrowings
Credit facility revolver repayments
Industrial revenue bond repayments
Credit facility fees and expenses
Proceeds from employee stock purchases
Repurchase of common stock
Dividends paid

Net cash from (used for) financing activities

Cash and cash equivalents:

Net change
Beginning balance
Ending balance

2017

2016

2015

18,963 $

(1,078 ) $

(26,777 )

18,587
-
(52)
1,096
(2,874)
(8,988)
26,732

(30,835)
(20,781)
(1,303)
3,918
658
2,570
(45,773)
(19,041)

(10,160)
991
(9,169)

19,402
-
(376 )
534
(638 )
(1,074 )
16,770

(9,025 )
(47,881 )
1,620
28,619
(4,846 )
4,930
(26,583 )
(9,813 )

19,873
24,951
15
1,759
44
(7,500 )
12,365

30,927
104,463
13,808
(21,923 )
(13,644 )
(18,511 )
95,120
107,485

(6,824 )
376
(6,448 )

(7,317 )
3
(7,314 )

387,220
(355,584)
(895)
(969)
10
-
(878)
28,904

307,298
(288,499 )
(865 )
(131 )
46
-
(877 )
16,972

311,372
(409,662 )
(840 )
(127 )
30
(699 )
(879 )
(100,805 )

694
2,315
3,009 $

711
1,604
2,315 $

(634 )
2,238
1,604

The accompanying notes are an integral part of these consolidated statements.

Olympic Steel, Inc.
Supplemental Disclosures of Cash Flow Information
For The Years Ended December 31,
(in thousands)

Cash paid during the period

Interest paid
Income taxes paid

2017

2016

2015

$
$

6,433 $
9,357 $

4,300 $
982 $

5,083
565

The accompanying notes are an integral part of these consolidated statements

Olympic Steel, Inc.
Consolidated Statements of Shareholders’ Equity
For The Years Ended December 31,
(in thousands)

Accumulated
Other

Common Treasury Comprehensive Retained Total
Stock

Earnings Equity

Stock

Loss

Balance at December 31, 2014

$ 126,339 $

- $

(549) $ 154,991 $

280,781

Net loss
Repurchase of common stock
Payment of dividends
Employee stock purchases (2 shares)
Stock-based compensation
Changes in fair value of hedges
Other

Balance at December 31, 2015

Net loss
Payment of dividends
Employee stock purchase (3 shares)
Stock-based compensation
Changes in fair value of hedges

Balance at December 31, 2016

Net income
Payment of dividends
Employee stock purchases (1 share)
Stock-based compensation
Other

Balance at December 31, 2017

- $

-
30
1,759
-
1
$ 128,129 $

- $
-
46
444
-
$ 128,619 $

- $
-
10
824
-
$ 129,453 $

- $
(699)
-
-
-
-
-
(699) $

- $
-

90
-
(609) $

- $
-
-
272
-
(337)

- $

(26,777) $

-
-
-
479
-

(879)
-
-
-
-
(70) $ 127,335 $

- $
-

(1,078) $
(877)

-
70

-
-
- $ 125,380 $

18,963 $
- $
(878)
-
-
-
-
-
-
2
- $ 143,467 $

(26,777)
(699)
(879)
30
1,759
479
1
254,695

(1,078)
(877)
46
534
70
253,390

18,963
(878)
10
1,096
2
272,583

The accompanying notes are an integral part of these consolidated statements.

Olympic Steel, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2017, 2016 and 2015

1. Summary of Significant Accounting Policies:

Nature of Business

The Company is a leading U.S. metals service center specializing in the processing and distribution of large volumes of
carbon, coated, aluminum and stainless steel, flat-rolled coil, sheet and plate products and tubular and pipe products from
facilities throughout the United States. The Company operates in three reportable segments; carbon flat products, specialty
metals flat products, and tubular and pipe products. The carbon flat products segment and the specialty metals flat products
segments are at times consolidated and referred to as the flat products segments. The flat products segments’ assets and
resources are shared by the carbon and specialty metals segments and both segments’ products are stored in the shared
facilities and, in some locations, processed on shared equipment. Due to the shared assets and resources, certain of the flat
products segment expenses are allocated between the carbon flat products segment and the specialty metals flat products
segment based upon an established allocation methodology. Through its carbon flat products segment, the Company sells
and distributes large volumes of processed carbon and coated flat-rolled sheet, coil and plate products, and fabricated parts.
Through its specialty metals flat products segment, the Company sells and distributes processed aluminum and stainless flat-
rolled sheet and coil products, flat bar products and fabricated parts. Through our tubular and pipe products segment, which
consists of our Chicago Tube & Iron (CTI) subsidiary the Company distributes metal tubing, pipe, bar, valves and fittings
and fabricate pressure parts supplied to various industrial markets.

Principles of Consolidation and Basis of presentation

The accompanying consolidated financial statements include the accounts of Olympic Steel, Inc. and its wholly-owned
subsidiaries (collectively, the Company or Olympic), after elimination of intercompany accounts and transactions.

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.

Concentration Risks

The Company is a major customer of flat-rolled coil and plate and tubular and pipe steel for many of its principal suppliers,
but is not dependent on any one supplier. The Company purchased approximately 53%, 54% and 51% of its total steel
requirements from its three largest suppliers in 2017, 2016 and 2015, respectively.

The Company has a diversified customer and geographic base, which reduces the inherent risk and cyclicality of its business.
The concentration of net sales to the Company’s top 20 customers approximated 27%, 29% and 31% of consolidated net
sales in 2017, 2016 and 2015, respectively. In addition, the Company’s largest customer accounted for approximately 4%,
4% and 6% of consolidated net sales in 2017, 2016 and 2015, respectively. Sales to industrial machinery and equipment
manufacturers and their fabricators accounted for 51%, 51% and 49% of consolidated net sales in 2017, 2016 and 2015,
respectively.

Cash and Cash Equivalents

Cash equivalents consist of short-term highly liquid investments, with a three month or less maturity, which are readily
convertible into cash.

Fair Market Value

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or
most advantageous market for the liability in an orderly transaction between market participants on the measurement
date. Valuation techniques must maximize the use of observable inputs and minimize the use of unobservable inputs. To
measure fair value, the Company applies a fair value hierarchy that is based on three levels of inputs, of which the first two
are considered observable and the last unobservable, as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value
of the assets or liabilities.

Accounts Receivable

The Company’s allowance for doubtful accounts is maintained at a level considered appropriate based on historical
experience and specific customer collection issues that the Company has identified. Estimations are based upon the
application of a historical collection rate to the outstanding accounts receivable balance, which remains fairly level from year
to year, and judgments about the probable effects of economic conditions on certain customers, which can fluctuate
significantly from year to year. The Company cannot guarantee that the rate of future credit losses will be similar to past
experience. The Company considers all available information when assessing the adequacy of the allowance for doubtful
accounts each quarter.

Inventories

Inventories are stated at the lower of its cost or net realizable value with the adoption of Accounting Standards Update (ASU)
2015-11 on January 1, 2017. Inventory costs include the costs of the purchased metals, inbound freight, external and internal
processing and applicable labor and overhead costs. Net realizable value is the estimated selling price in the ordinary course
of business, less reasonably predictable costs of completion, disposal and transportation.

Costs of the Company’s carbon and specialty metals flat products segments’ inventories, including flat-rolled sheet, coil and
plate products are determined using the specific identification method.

Certain of the Company’s tubular and pipe products inventory is stated under the last-in, first-out (LIFO) method. At
December 31, 2017 and December 31, 2016, approximately $48.1 million, or 17.5% of consolidated inventory, and $43.4
million, or 17.1% of consolidated inventory, respectively, was reported under the LIFO method of accounting. The cost of
the remainder of tubular and pipe product segment’s inventory is determined using a weighted average rolling first-in, first-
out (FIFO) method.

Property and Equipment, and Depreciation

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful
lives of the assets ranging from two to 30 years. The Company capitalizes the costs of obtaining or developing internal-use
software, including directly related payroll costs. The Company amortizes those costs over five years, beginning when the
software is ready for its intended use.

Intangible Assets and Recoverability of Long-lived Assets

The Company performs an annual impairment test of indefinite-lived intangible assets for the tubular and pipe products
segment in the fourth quarter, or more frequently if changes in circumstances or the occurrence of events indicate potential
impairment. Events or changes in circumstances that could trigger an impairment review include significant nonperformance
relative to the expected historical or projected future operating results, significant changes in the manner of the use of the
acquired assets or the strategy for the overall business or significant negative industry or economic trends. Management uses
judgment to determine whether to use a qualitative analysis or a quantitative fair value measurement for each of the
Company’s reporting units that carry intangible assets.

If a quantitative fair value measurement is used, the fair value of each indefinite-lived intangible asset is compared to its
carrying value and an impairment charge is recorded if the carrying value exceeds the fair value. The Company estimates the
fair value of indefinite-lived intangible assets using a discounted cash flow methodology. Management’s assumptions used
for the calculations are based on historical results, projected financial information and recent economic events. Actual results
could differ from these estimates under different assumptions or conditions which could adversely affect the reported value
of intangible assets.

The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives whenever events or
changes in circumstances indicate that the carrying value may not be recoverable. Events or changes in circumstances that
could trigger an impairment review include significant underperformance relative to the expected historical or projected
future operating results, significant changes in the manner of the use of the acquired assets or the strategy for the overall
business or significant negative industry or economic trends. The Company records an impairment or change in useful life
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has
changed.

Income Taxes

The Company records, as an offset to the estimated effect of temporary differences between the tax basis of assets and
liabilities and the reported amounts in its consolidated balance sheets, the tax effect of operating loss and tax credit
carryforwards. If the Company determines that it will not be able to fully realize a deferred tax asset, it will record a valuation
allowance to reduce such deferred tax asset to its realizable value. The Company recognizes interest accrued related to
unrecognized tax benefits in income tax expense. Penalties, if incurred, would be recognized as a component of administrative
and general expense.

During 2017, a net tax benefit was recorded based on currently available information and interpretations of applying the
provisions of the 2017 U.S. Tax Cuts and Jobs Act (Tax Act) as of the time of filing this Annual Report on Form 10-K. In
accordance with Staff Accounting Bulletin (SAB) No. 118 issued by the Securities and Exchange Commission (SEC), the
income tax effect for certain aspects of the Tax Act represent provisional amounts for which the Company’s accounting is
incomplete but a reasonable estimate could be determined and recorded during the fourth quarter of 2017. The guidance
provides for a measurement period, up to one year from the enactment date, in which provisional amounts may be adjusted
when additional information is obtained, prepared or analyzed about facts and circumstances that existed as of the enactment
date, which, if known, would have affected the amounts that were initially recorded as provisional amounts. Adjustments to
provisional amounts identified during the measurement period should be recorded as an income tax expense or benefit in the
period the adjustment is determined.

Revenue Recognition

For both direct and toll shipments, revenue is recognized when title and risk of loss is transferred, which generally occurs
upon delivery to the Company’s customers. Given the proximity of the Company’s customers to its facilities, substantially
all of the Company’s sales are shipped and received within one day. Sales returns and allowances are treated as reductions to
sales and are provided for based on historical experience and current estimates and are immaterial to the consolidated financial
statements.

Certain engineered products produced by the tubular and pipe products segment typically take several months to produce due
to their size and complexity. Substantially all projects are completed within nine months. The Company may request advance
payments from customers during the production of these products. These payments are included in current short-term
liabilities on the Company’s Consolidated Balance Sheet. Due to their short-term nature, the Company uses the units of
delivery method to account for these contracts. Revenue for the contracts is recognized when the product is shipped and title
of the product transfers to the customers. Revenues for these engineered products accounted for approximately 1.9%, 1.7%
and 1.8% of the Company’s consolidated net sales during 2017, 2016 and 2015, respectively.

Shipping and Handling Fees and Costs

Stock-Based Compensation

The Company records compensation expense for stock awards issued to employees and directors. For additional information,
see Note 10, Equity Plans.

Impact of Recently Issued Accounting Pronouncements

In August 2017, the Financial Accounting Standards Board (FASB) issued ASU No 2017-12, “Derivatives and Hedging”.
This ASU aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to
both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.
To meet that objective, the ASU expand and refine hedge accounting for both nonfinancial and financial risk components
and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial
statements. This ASU also make certain targeted improvements to simplify the application of hedge accounting guidance and
ease the administrative burden of hedge documentation requirements and assessing hedge effectiveness. This ASU is the
final version of Proposed Accounting Standards Update 2016-310, “Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities”, which has been deleted. For public business entities, this ASU is
effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other
entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal
years beginning after December 15, 2020. Early application is permitted in any interim period after issuance of the ASU. All
transition requirements and elections should be applied to hedging relationships existing (that is, hedging relationships in
which the hedging instrument has not expired, been sold, terminated, or exercised or the entity has not removed the
designation of the hedging relationship) on the date of adoption. The effect of adoption should be reflected as of the beginning
of the fiscal year of adoption. The adoption of this ASU is not expected to materially impact the Company’sconsolidated
financial statements.

In May 2017, the FASB issued ASU No 2017-09, “Compensation – Stock Compensation (Topic 718)”. This ASU provides
clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718,
Compensation – Stock Compensation, to a change to the terms or conditions of a share-based payment award. The ASU
provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply
modification accounting in Topic 718. This ASU is the final version of proposed Accounting Standards Update 2016-360,
“Compensation—Stock Compensation (Topic 718)—Scope of Modification Accounting,” which has been deleted. The
amendments in this ASU are effective for all entities for annual periods, and interim periods within those annual periods,
beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public
business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for
reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU
should be applied prospectively to an award modified on or after the adoption date. The adoption of this ASU is not expected
to materially impact the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which specifies the accounting for leases. The objective is
to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements
about the amount, timing and uncertainty of cash flows arising from a lease. This ASU introduces the recognition of lease
assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The guidance
will be effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years
with early adoption permitted. The Company is in the process of evaluating the impact of the future adoption of this standard
on the Company’s consolidated financial statements.

In July 2015, the FASB issued ASU No 2015-11, Simplifying the Measurement of Inventory, “Inventory (Topic 330)”, which
requires that inventory within the scope of this ASU be measured at the lower of cost and net realizable value. Net realizable
value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal
and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (LIFO) or the retail
inventory method. The Company adopted this standard effective January 1, 2017. The adoption of this ASU did not have a
material impact to the Company’s consolidated financial statements.”

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the
Effective Date, which deferred the effective date of ASU 2014-09 for all entities by one year. This update is effective for
public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within
those reporting periods. Earlier application was permitted only as of annual reporting periods beginning after December 15,
2016, including interim reporting periods within that reporting period. ASU 2014-09 was to become effective for us beginning
January 2017; however, ASU 2015-14 deferred our effective date until January 2018, which is when we adopted this standard.
The ASU permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective
method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial
application (the modified retrospective method). The ASU also requires expanded disclosures relating to the nature, amount,
timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and
quantitative disclosures are required for customer contracts, significant judgments and changes in judgments, and assets
recognized from the costs to obtain or fulfill a contract. The Company completed the process of evaluating the effect of the
adoption and determined there were no material changes required to the reported revenues as a result of the adoption. The
majority of the revenue arrangements generally consist of a single performance obligation to transfer goods or services. Based
on the evaluation process and review of the contracts with customers, the timing and amount of revenue recognized based on
ASU 2015-14 is consistent with the revenue recognition policy under previous guidance. The adoption of this ASU on January
1, 2018 using the modified retrospective approach will not have a material impact to the Company’s consolidated financial
statements.

2. Accounts Receivable:

Accounts receivable are presented net of allowances for doubtful accounts and unissued credits of $2.8 million and $2.4
million as of December 31, 2017 and 2016, respectively. Bad debt expense totaled $0.6 million, $0.4 million and $0.5 million
in 2017, 2016 and 2015, respectively.

The Company’s allowance for doubtful accounts is maintained at a level considered appropriate based on historical
experience and specific customer collection issues that the Company has identified. Estimations are based upon a calculated
percentage of accounts receivable, which remains fairly level from year to year, and judgments about the probable effects of
economic conditions on certain customers, which can fluctuate significantly from year to year. The Company cannot
guarantee that the rate of future credit losses will be similar to past experience. The Company considers all available
information when assessing the adequacy of its allowance for doubtful accounts.

3. Inventories:

Inventories consisted of the following:

As of December 31,

(in thousands)
Unprocessed
Processed and finished

Totals

2017

2016

225,187 $
50,120
275,307 $

203,256
51,270
254,526

During 2017, the Company recorded $2.7 million of LIFO expense as a result of increased metals pricing during 2017. The
LIFO expense decreased the Company’s inventory balance and increased its cost of materials sold. During 2016, the
Company recorded $1.5 million of LIFO income as a result of decreased metals pricing during 2016. The LIFO income
increased the Company’s inventory balance and decreased its cost of materials sold.

If the FIFO method had been in use, inventories would have been $5.3 million and $8.0 million lower than reported at
December 31, 2017 and 2016, respectively.

4. Property and Equipment:

Property and equipment consists of the following:

(in thousands)
Land
Land improvements
Buildings and improvements
Machinery and equipment
Furniture and fixtures
Computer software and equipment
Vehicles
Construction in progress

Less accumulated depreciation
Net property and equipment

Depreciable
Lives
-
5 - 10
7 - 30
2 - 15
3 - 7
2 - 5
2 - 5
-

December 31,
2017

December 31,
2016

15,881 $
3,270
131,655
184,683
6,298
28,677
1,746
4,500
376,710
(229,062)
147,648 $

16,001
3,133
133,010
185,676
6,311
27,848
1,456
807
374,242
(218,476)
155,766

Leasehold improvements are included with buildings and improvements and are depreciated over the life of the lease or seven
years, whichever is less.

Construction in progress as of December 31, 2017, primarily consisted of payments for a building expansion and additional
processing equipment at our existing facilities that were not yet placed into service.

During the second quarter of 2017, the Company began actively marketing for sale certain property at the flat product
segment’s Siler City, North Carolina facility. As a result of that decision, the Company reclassified $0.8 million of net book
value related to that property along with certain machinery and equipment as assets held for sale in the Consolidated Balance
Sheets. The sale of those assets is expected to be completed within the next twelve months and are presented as current assets.
Based on the present real estate market and discussions with the Company’s real estate adviser, no material impairment of
the recorded amounts has occurred as of December 31, 2017.

5. Intangible Assets:

In accordance with the Accounting Standards Codification (ASC), an impairment test of indefinitely lived intangible assets
is performed at least annually or more frequently if changes in circumstances or the occurrence of events indicate potential
impairment. Events or changes in circumstances that could trigger an impairment review include significant nonperformance
relative to the expected historical or projected future operating results, significant changes in the manner of the use of the
acquired assets or the strategy for the overall business or significant negative industry or economic trends.

All of the Company’s intangible assets were recorded in connection with its July 1, 2011 acquisition of CTI. The intangible
assets were evaluated on the premise of highest and best use to a market participant, primarily utilizing the income approach
valuation methodology. The useful life of the CTI trade name was determined to be indefinite primarily due to its history and
reputation in the marketplace, the Company’s expectation that the CTI trade name will continue to be used throughout the
life of CTI, and the conclusion that there are currently no other factors identified that would limit its useful life. The useful
life of the CTI customer relationships was determined to be fifteen years, based primarily on the consistent and predictable
revenue source associated with the existing CTI customer base, the present value of which extends through the fifteen year
amortization period. The Company will continue to evaluate the useful life assigned to our amortizable customer relationships
in future periods.

During 2017 and 2016, a step zero test was performed for the indefinitely lived intangible assets and no indication of
impairment was present.

Intangible assets, net, consisted of the following as of December 31, 2017 and 2016:

(in thousands)

Customer relationships - subject to amortization
Trade name - not subject to amortization

(in thousands)

Customer relationships - subject to amortization
Trade name - not subject to amortization

As of December 31, 2017

Gross
Carrying
Amount

Accumulated
Amortization Impairments

Intangible
Assets, Net

13,332 $
15,425
28,757 $

(5,777) $
-
(5,777) $

- $
-
- $

7,555
15,425
22,980

As of December 31, 2016

Gross
Carrying
Amount

Accumulated
Amortization Impairments

Intangible
Assets, Net

13,332 $
15,425
28,757 $

(4,888) $
-
(4,888) $

- $
-
- $

8,444
15,425
23,869

The Company estimates that amortization expense for its intangible assets subject to amortization will be $0.9 million per
year in each of the next five years.

6. Debt:

The Company’s debt is comprised of the following components:

(in thousands)
Asset-based revolving credit facility due December 8, 2022
Asset-based revolving credit facility due June 30, 2019
Industrial revenue bond due April 1, 2018
Total debt

Less current amount

Total long-term debt

As of December 31,
2016
2017

196,235 $
-
930
197,165
(930)
196,235 $

-
164,599
1,825
166,424
(1,825 )
164,599

On December 8, 2017, the Company entered into a Third Amended and Restated Loan and Security Agreement (the “Loan
Agreement”). The Loan Agreement provides for, among other things: (i) a revolving credit facility of up to $370 million,
including a $20 million sub-limit for letters of credit and (ii) a first in, last out revolving credit facility of up to $30 million.
Under the terms of the Loan Agreement, the Company may, subject to the satisfaction of certain conditions, request additional
commitments under the revolving credit facility in the aggregate principal amount of up to $200 million to the extent that
existing or new lenders agree to provide such additional commitments. The Loan Agreement matures on December 8, 2022.

The Loan Agreement is secured by substantially all of the existing and future personal property of the Company. The Loan
Agreement contains customary representations and warranties and certain covenants that limit the ability of the Company to,
among other things: (i) incur or guarantee additional indebtedness; (ii) pay distributions on, redeem or repurchase capital
stock or redeem or repurchase subordinated debt; (iii) make investments; (iv) sell assets; (v) enter into agreements that restrict
distributions or other payments from restricted subsidiaries to the Company; (vi) incur or suffer to exist liens securing
indebtedness; (vii) consolidate, merge or transfer all or substantially all of their assets; and (viii) engage in transactions with
affiliates. In addition, the Loan Agreement contains a financial covenant which includes: (i) if any commitments or
obligations are outstanding and the Company’s availability is less than the greater of $30 million or 10.0% of the aggregate
amount of revolver commitments ($40.0 million at December 31, 2017) or 10.0% of the aggregate borrowing base ($32.9
million at December 31, 2017) then the Company must maintain a ratio of Earnings before Interest, Taxes, Depreciation and

Amortization (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.

The Company has 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 (LIBOR) plus a premium ranging from 1.25% to 2.75%.

As of December 31, 2017, the Company was in compliance with its covenants and had approximately $128.9 million of
availability under the Loan Agreement.

As part of the CTI acquisition in July 2011, the Company assumed approximately $5.9 million of Industrial Revenue Bond
(IRB) indebtedness. The bond matures in April 2018, with the option to provide principal payments annually in April. On
April 3, 2017, the Company paid an optional principal payment of $0.9 million. The remaining balance of the IRB is included
in “Current portion of long-term debt” on the accompanying Consolidated Balance Sheets as the payment is due in April
2018. Interest is payable monthly, with a variable rate that resets weekly. As a security for payment of the bonds, the Company
obtained a direct pay letter of credit issued by JPMorgan Chase Bank, N.A. The letter of credit reduces annually by the
principal reduction amount. The interest rate at December 31, 2017 was 1.71% for the IRB debt.

Scheduled Debt Maturities, Interest, Debt Carrying Values

The Company’s principal payments over the next five years are detailed in the table below:

(in thousands)
ABL Credit Facility
Industrial revenue bond
Total principal payments

2018

2019

2020

2021

2022

Total

- $
930
930 $

- $
-
- $

- $ 196,235 $ 196,235
-
930
-
- $ 196,235 $ 197,165

The overall effective interest rate for all debt, exclusive of deferred financing fees and deferred commitment fees, amounted
to 3.0%, 2.4% and 2.1% in 2017, 2016 and 2015, respectively. Interest paid totaled $6.4 million, $4.3 million and $5.1 million
for the years ended December 31, 2017, 2016 and 2015, respectively. Average total debt outstanding was $200.6 million,
$152.5 million and $211.2 million in 2017, 2016 and 2015, respectively.

7. Derivative Instruments:

Metals swaps

During 2017, 2016 and 2015, the Company entered into nickel swaps indexed to the London Metal Exchange (LME) price
of nickel with third-party brokers. The nickel swaps are treated as derivatives for accounting purposes and are included in
“Other accrued liabilities” and “Prepaid expenses and other” on the Consolidated Balance Sheet at December 31, 2017 and
2016. The Company entered into the swaps to mitigate its customers’ risk of volatility in the price of metals. The outstanding
nickel swaps have one to twelve months remaining as of December 31, 2017. The swaps are settled with the brokers at
maturity. The economic benefit or loss arising from the changes in fair value of the swaps is contractually passed through to
the customer. The primary risk associated with the metals swaps is the ability of customers or third-party brokers to honor
their agreements with the Company related to derivative instruments. If the customer or third-party brokers are unable to
honor their agreements, the Company’s risk of loss is the fair value of the metals swaps.

While these derivatives are intended to help the Company manage risk, they have not been designated as hedging instruments.
The periodic changes in fair value of the metals and embedded customer derivative instruments are included in “Cost of

materials sold” in the Consolidated Statements of Comprehensive Income. The Company recognizes derivative positions
with both the customer and the third party for the derivatives and classifies cash settlement amounts associated with them as
part of “Cost of materials sold” in the Consolidated Statements of Comprehensive Income. The cumulative change in fair
value of the metals swaps that have not yet settled as of December 31, 2017 are included in “Accounts receivable, net”, and
the embedded customer derivatives are included in “Other accrued liabilities” on the Consolidated Balance Sheets at
December 31, 2017. The cumulative change in fair value of the metals swaps that had not yet settled as of December 31,
2016 were included in “Other accrued liabilities”, and the embedded customer derivatives were included in “Accounts
receivable, net” on the Consolidated Balance Sheets at December 31, 2016.

In 2014, the Company entered into cash flow metals hedges to mitigate its risk of volatility in the price of metals. The cash
flow metals hedges were indexed to the NYMEX price of U.S. Midwest Domestic Hot-Rolled Coil Steel with third-party
brokers. The metals hedges were accounted for as cash flow hedges. The impact of the mark-to-market adjustment on settled
hedges is recorded in “Cost of materials sold” in the accompanying Consolidated Statements of Comprehensive Income. The
impact for the twelve months ended December 31, 2015 was $2.4 million of expense. There were no cash flow metals hedges
outstanding as of December 31, 2017 or 2016.

Interest rate swap

CTI entered into an interest rate swap to reduce the impact of changes in interest rates on its IRB. The swap agreement
matures in April 2018, the same time as the IRB, and is reduced annually by the amount of the optional principal payments
on the IRB. The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate
swap agreement. However, the Company does not anticipate nonperformance by the counterparties. The interest rate swap is
not treated as a hedge for accounting purposes.

The periodic changes in fair value of the interest rate swap and cash settlement amounts associated with the interest rate swap
are included in “Interest and other expense on debt” in the Consolidated Statements of Comprehensive Income.

Fixed rate interest rate hedge

In June 2012, the Company entered into a forward starting fixed rate interest rate hedge commencing June 2013 in order to
eliminate the variability of cash interest payments on $53.2 million of the then outstanding LIBOR-based borrowings under
the ABL Credit Facility. The hedge, which matured on June 1, 2016, fixed the rate at 1.21% plus a premium ranging from
1.25% to 1.75%. The fixed rate interest rate hedge was accounted for as a cash flow hedging instrument for accounting
purposes.

There was no net impact from the nickel swaps or embedded customer derivative agreements to the Company’s Consolidated
Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015. The table below shows the
total impact to the Company’s Consolidated Statements of Comprehensive Income through “Net income (loss)” of the
derivatives for the years ended December 31, 2017, 2016 and 2015.

(in thousands)
Interest rate swap (CTI)
Fixed interest rate swap (ABL)
Cash flow metals hedges
Metals swaps
Embedded customer derivatives
Total loss

Net Gain (Loss) Recognized
2016

2017

2015

(31) $
-
-
475
(475)
(31) $

(66) $
(98)
-
68
(68)
(164) $

(77)
(365)
(2,400)
(2,304)
2,304
(2,842)

8. Fair Value of Assets and Liabilities:

The Company’s financial instruments include cash and cash equivalents, short-term trade receivables, derivative instruments,
accounts payable and debt instruments. For short-term instruments, other than those required to be reported at fair value on
a recurring basis and for which additional disclosures are included below, management concluded the historical carrying
value is a reasonable estimate of fair value because of the short period of time between the origination of such instruments
and their expected realization.

During 2017 and 2016, there were no transfers of financial assets between Levels 1, 2 or 3 fair value measurements. There
have been no changes in the methodologies used at December 31, 2017 and December 31, 2016. Following is a description
of the valuation methodologies used for assets and liabilities measured at fair value as of December 31, 2017 and
December 31, 2016:

Metals swaps and embedded customer derivatives – Determined by using Level 2 inputs that include the price of
nickel indexed to the LME and the price of Hot Rolled Coil Steel indexed to the NYMEX. The fair value is
determined based on quoted market prices and reflects the estimated amounts the Company would pay or receive to
terminate the nickel swaps.

Interest rate swap – Based on the present value of the expected future cash flows, considering the risks involved,
and using discount rates appropriate for the maturity date. Market observable Level 2 inputs are used to determine
the present value of future cash flows.

The following table presents information about the Company’s assets and liabilities that were measured at fair value on a
recurring basis and indicates the fair value hierarchy of the valuation techniques utilized by the Company:

(in thousands)
Assets:
Metal Swaps
Total assets at fair value

Liabilities:
Embedded customer derivatives
Interest rate swap (CTI)
Total liabilities recorded at fair value

(in thousands)
Liabilities:
IRB
ABL Credit Facility
Total liabilities not recorded at fair value

Value of Items Recorded at Fair Value
As of December 31, 2017
Level 3

Level 2

Total

Level 1

$
$

- $
- $

- $
-
- $

382 $
382 $

382 $
5
387 $

- $
- $

- $
-
- $

382
382

382
5
387

Value of Items Not Recorded at Fair Value
As of December 31, 2017
Level 3

Level 2

Total

Level 1

930 $
-
930 $

- $
196,235
196,235 $

- $
-
- $

930
196,235
197,165

The value of the items not recorded at fair value represent the carrying value of the liabilities.

(in thousands)
Assets:
Embedded customer derivatives
Total assets at fair value

Liabilities:
Metals swaps
Interest rate swap (CTI)
Total liabilities recorded at fair value

(in thousands)
Liabilities:
IRB
ABL Credit Facility
Total liabilities not recorded at fair value

Value of Items Recorded at Fair Value
As of December 31, 2016
Level 3

Level 2

Total

Level 1

$
$

- $
- $

- $
-
- $

113 $
113 $

113 $
36
149 $

- $
- $

- $
-
- $

113
113

113
36
149

Value of Items Not Recorded at Fair Value
As of December 31, 2016
Level 3

Level 2

Total

Level 1

1,825 $
-
1,825 $

- $
164,599
164,599 $

- $
-
- $

1,825
164,599
166,424

The value of the items not recorded at fair value represent the carrying value of the liabilities.

The fair value of the IRB is determined using Level 1 inputs. The carrying value and the fair value of the IRB that qualify as
financial instruments were $0.9 million and $1.8 million at December 31, 2017 and 2016, respectively.

The fair value of the ABL Credit Facility is determined using Level 2 inputs. The carrying value of the ABL Credit Facility
was $196.2 million and $164.6 million at December 31, 2017 and 2016, respectively. Because the ABL Credit Facility was
amended on December 8, 2017, management believes that it is carried at fair value.

9. Accumulated Other Comprehensive Loss:

In June 2012, the Company entered into a forward starting fixed rate interest rate hedge commencing July 2013 in order to
eliminate the variability of cash interest payments on $53.2 million of the outstanding LIBOR-based borrowings under the
ABL Credit Facility. The hedge matured on June 1, 2016 and the notional amount was reduced monthly by $0.7 million. The
balance as of December 31, 2015 was $31.4 million. The fixed rate interest rate hedge was accounted for as a cash flow
hedging instrument for accounting purposes. The fair value of the interest rate hedge was included in “Accumulated other
comprehensive loss” on the Consolidated Balance Sheets at December 31, 2015.

10. Equity Plans:

Restricted Stock Units and Performance Share Units

Pursuant to the Amended and Restated Olympic Steel 2007 Omnibus Incentive Plan (the Plan), the Company may grant stock
options, stock appreciation rights, restricted shares, restricted share units, performance shares, and other stock- and cash-
based awards to employees and Directors of, and consultants to, the Company and its affiliates. Under the Plan, 1,000,000
shares of common stock are available for equity grants.

On March 13, 2017, May 1, 2016 and March 1, 2015, the Compensation Committee of the Company’s Board of Directors
approved the grant of 3,501, 3,094 and 4,639 restricted stock units (RSUs), respectively, to each non-employee Director.
Subject to the terms of the Plan and the RSU agreement, the RSUs vest after one year of service (from the date of grant). The
RSUs are not converted into shares of common stock until the director either resigns or is terminated from the Board of
Directors. The fair value of each RSU was estimated to be the closing price of the Company’s common stock on the date of
the grant, which was $19.99, $22.62 and $15.09 on March 13, 2017, May 1, 2016 and March 1, 2015, respectively.

On July 1, 2016, the Company created a new Senior Management Stock Incentive Program (the New Plan) for certain
participants. Under the New Plan, each participant, subject to the terms and conditions of the plan and the attainment of
minimum performance requirements, can be awarded RSUs with a dollar value equal to 10% of the participant’s base salary,
up to an annual maximum of $17,500. The RSUs have a five-year vesting period and the RSUs will convert into the right to
receive shares of common stock upon a participant’s retirement, or earlier upon the participant’s death or disability or upon
a change in control of the Company. The carbon and specialty metals flat products segments adopted the New Plan on July
1, 2016 and the tubular and pipe products segment adopted the New Plan on January 1, 2017.

Prior to July 1, 2016, the Company’s Senior Management Compensation Program included an equity component in order to
encourage more ownership of common stock by the senior management (the Old Plan). The Old Plan imposed stock
ownership requirements upon the participants. Each participant was required to own at least 750 shares of common stock for
each year that the participant participated in the Old Plan. Any participant that failed to meet the stock ownership requirements
would be ineligible to receive any equity awards under the Company’s equity compensation plans, including the Plan, until
the participant satisfied the ownership requirements. To assist participants in meeting the stock ownership requirements, on
an annual basis, if a participant purchased 500 shares of common stock on the open market, the Company awarded that
participant 250 shares of common stock. During 2016 and 2015, the Company matched 2,500 and 9,000 shares, respectively.
Additionally, any participant who continued to comply with the stock ownership requirements as of the five-year, 10-year,
15-year, 20-year and 25-year anniversaries of the participant’s participation in the Senior Management Compensation
Program would receive a restricted stock unit award with a dollar value of $25 thousand, $50 thousand, $75 thousand, $100
thousand and $100 thousand, respectively. Restricted stock unit awards would convert into the right to receive shares of
common stock upon a participant’s retirement, or earlier upon the participant’s death or disability or upon a change in control
of the Company. The carbon and specialty metals flat products segments terminated this plan on July 1, 2016 and the tubular
and pipe products segment terminated the plan on January 1, 2017.

As part of the termination of the Old Plan and the transition to the New Plan, participants were paid the RSU grants that were
earned to date, or a pro-rata amount of the RSUs earned, depending on the participants’ length of time they participated in
the plan. After the payment of the RSUs noted above, the remaining liability of approximately $1.0 million was reversed
during 2016 in accordance with ASC No. 718.

In 2016, the Company adopted a formal RSU award program for employees who are promoted to an executive level position.
During the third quarter of 2016, Andrew Greiff received 10,573 RSUs upon his promotion to Executive Vice President and
Chief Operating Officer. These RSUs vest on the fifth anniversary of his promotion.

Stock-based compensation income or expense recognized on RSUs is summarized in the following table:

(in thousands)
RSU expense before taxes of New Plan
RSU (income) expense before taxes of Old Plan
RSU (income) expense after taxes

For the years ended December 31,
2016

2015

2017

560 $
-
636

42 $
(73)
81

-
1,047
631

All pre-tax charges related to RSUs were included in the caption “Administrative and general” on the accompanying
Consolidated Statements of Comprehensive Income.

The following table summarizes the activity related to RSUs for the twelve months ended December 31, 2017:

Outstanding at December 31, 2016
Granted
Converted into shares
Forfeited
Outstanding at December 31, 2017
Vested at December 31, 2017

Weighted
Average
Estimated
Fair Value

Number of
Shares

421,486 $
73,021
(25,439)
-
469,068 $
403,428 $

19.93
20.01
16.71
-
20.11
19.89

Of the RSUs granted in 2017, 2016 and 2015, 26,837, 51,075 and 47,639, respectively, were used to fund supplemental
executive retirement plan contributions (SERP). There was no intrinsic value for the RSUs that were converted into shares
in 2017, 2016 and 2015.

11. Commitments and Contingencies:

Operating Leases

The Company leases certain warehouses, sales offices, machinery and equipment and vehicles under long-term operating
lease agreements. The leases expire at various dates through 2025. In some cases, the leases include options to extend. Rent
and lease expense was $9.7 million, $9.1 million and $8.7 million for the years ended December 31, 2017, 2016 and 2015,
respectively.

The future annual minimum lease payments as of December 31, 2017 are as follows:

(in thousands)
Lease payments

2018

2019

2020

2021

2022

Thereafter Total

6,385 $

5,482 $

4,774 $

3,775 $

2,871 $

3,453 $ 26,740

Commitments and Contingencies

The Company is party to various legal actions that it believes are ordinary in nature and incidental to the operation of its
business. In the opinion of management, the outcome of the proceedings to which the Company is currently a party will not
have a material adverse effect upon its results of operations, financial condition or cash flows. During 2017, the Company
recorded $1.0 million related to a settlement of a commercial dispute. The amount was included in “Administrative and
general” expenses in the Consolidated Statements of Comprehensive Income. During 2016, the Company paid $1.7 million
related to an arbitration decision for a 2015 foreign steel purchase. The amount was included in “Cost of materials sold” in
the Consolidated Statements of Comprehensive Income.

In the normal course of business, the Company periodically enters into agreements that incorporate indemnification
provisions. While the maximum amount to which the Company may be exposed under such agreements cannot be estimated,
it is the opinion of management that these indemnifications are not expected to have a material adverse effect on the
Company’s results of operations or financial condition.

At December 31, 2017, approximately 280 of the hourly plant personnel are represented by nine separate collective bargaining
units. The table below shows the expiration dates of the collective bargaining agreements. Negotiations are currently on-
going for our collective bargaining unit in Duluth, Minnesota.

Expiration date
December 21, 2017
May 25, 2018
August 12, 2018
March 4, 2020
May 31, 2020
September 30, 2020
January 29, 2021
March 31, 2022
August 31, 2022

12. Income Taxes:

The components of the Company’s provision (benefit) for income taxes from continuing operations were as follows:

(in thousands)
Current:

Federal
State and local

Deferred
Income tax provision (benefit)

2017

As of December 31,
2016

2015

7,695 $
666
8,361
(10,974)
(2,613) $

2,563 $
929
3,492
(1,994)
1,498 $

(149)
(752)
(901)
(5,916)
(6,817)

The components of the Company’s deferred income taxes at December 31 are as follows:

(in thousands)
Deferred tax assets:

Inventory (excluding LIFO reserve)
Net operating loss and tax credit carryforwards
Allowance for doubtful accounts
Accrued expenses
Other

Deferred tax assets before valuation allowance

Valuation allowance
Total deferred tax assets

Deferred tax liabilities:

LIFO reserve
Property and equipment
Intangibles

Total deferred tax liabilities
Deferred tax liabilities, net

2017

2016

1,690 $
3,520
419
5,684
143
11,456
(2,379 )
9,077

(3,958 )
(11,363 )
(5,901 )
(21,222 )
(12,145 ) $

2,531
3,224
533
7,228
169
13,685
(2,017)
11,668

(5,874)
(19,846)
(9,067)
(34,787)
(23,119)

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits:

(in thousands)
Balance as of January 1
Decreases related to prior year tax positions
Increases related to current year tax positions
Decreases related to lapsing of statute of limitations
Balance as of December 31

2017

2016

2015

38 $
-
15
(13)
40 $

38 $
-
13
(13)
38 $

58
(20)
13
(13)
38

It is expected that the amount of unrecognized tax benefits will not materially change in the next twelve months. The tax
years 2014 through 2016 remain open to examination by major taxing jurisdictions to which the Company is subject.

The Company recognized interest related to uncertain tax positions in income tax expense.

The following table reconciles the U.S. federal statutory rate to the Company’s effective tax rate:

U.S. federal statutory rate in effect
State and local taxes, net of federal benefit
Sec. 199 manufacturing deduction
Meals and entertainment
Tax credits
Change in valuation allowance
Change in U.S. federal statutory rate
Change in tax affect of SERP
Goodwill impairment
All other, net
Effective income tax rate

2017

2016

2015

35.0%
3.6%
(3.8%)
1.8%
(1.3%)
0.6%
(37.7%)
(11.4%)
0.0%
(2.8%)
(16.0%)

35.0%
11.8%
(33.6%)
64.3%
(48.7%)
205.4%
0.0%
0.0%
0.0%
122.4%
356.6%

35.0%
1.4%
0.0%
(0.6%)
0.4%
0.0%
0.0%
0.0%
(17.1%)
1.2%
20.3%

In 2017, the Company made an out-of-period adjustment to correct and record previously unrecognized deferred tax assets,
and the associated tax benefit, related to a portion of the SERP that had previously been considered non-deductible under
Section 162(m) limitations in prior years. Due to the mandatory waiting period of six months prior to any SERP payment
distribution, in 2017 the Company determined that the Section 162(m) non-deductibility limitations did not apply. The
adjustment, which had accumulated since the inception of the SERP in 2005, resulted in an increase to after-tax income of
$1.9 million in 2017. The Company determined that this adjustment was not material to its current or prior period
consolidated financial statements.

On December 22, 2017, the President of the United States signed into law the Tax Act. The Tax Act, among other things,
lowered the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. Consequently, the Company
decreased its net deferred tax liability as of December 31, 2017 by $6.2 million resulting in an income tax benefit to reflect
the estimated impact of the Tax Act. Based on the Company’s predominantly U.S. based operational footprint, additional
international and minimum tax provisions under the Tax Act, including the one-time transition tax for the transition from the
worldwide system to the territorial system, are not applicable, or would not be material to the Company.

The Company believes the calculation of the impact as a result of the reduced U.S. corporate income tax rate is complete
except for changes in estimates that can result from finalizing the filing of its 2017 U.S. income tax return, which are not
anticipated to be material, and changes that may be a direct impact of other provisional amounts recorded due to the enactment
of the Tax Act.

While the Company has substantially completed its analysis of the income tax effects of the Tax Act and recorded a
reasonable estimate of such effects, certain items related to the Tax Act may differ, possibly materially, due to further
refinement of the calculations, changes in interpretations and assumptions made, additional guidance that may be issued by
the U.S. government, and actions related to accounting policy decisions the Company may make as a result of the Tax Act.
The Company will complete its analysis of these items over a one-year measurement period ending December 22, 2018, and
any adjustment provided by the SEC under SAB 118 during this measurement period will be included in net earnings from
continuing operations as an adjustment to income tax expense (benefit) in the reporting period when such adjustments are
determined.

The Company's effective tax rate was disproportionately high in 2016 from comparative periods due to low income before
taxes relative to items that impact the effective tax rate. During 2016, the Company recorded a valuation allowance of $0.9
million to reduce certain state deferred tax assets to the amount that is more likely than not to be realized.

Income taxes paid in 2017, 2016 and 2015 totaled $9.4 million, $1.0 million and $0.6 million, respectively. Some subsidiaries
of the Company’s consolidated group file state tax returns on a separate company basis and have state net operating loss
carryforwards expiring over the next seven to 20 years. A valuation allowance is recorded to reduce certain deferred tax
assets to the amount that is more likely than not to be realized.

13. Shares Outstanding and Earnings Per Share:

Earnings per share have been calculated based on the weighted average number of shares outstanding as set forth below:

(in thousands, except per share data)

For the years ended December 31,
2016

2015

2017

Weighted average basic shares outstanding
Assumed exercise of stock options and issuance of stock awards
Weighted average diluted shares outstanding
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Anti-dilutive securities outstanding

$
$
$

11,381
-
11,381
18,963 $
1.67 $
1.67 $
65

11,210
-
11,210
(1,078) $
(0.10) $
(0.10) $
167

11,192
-
11,192
(26,777)
(2.39)
(2.39)
125

14. Stock Repurchase Program:

On October 2, 2015, the Company announced that its Board of Directors authorized a stock repurchase program of up to
550,000 shares of the Company’s issued and outstanding common stock, which could include open market repurchases,
negotiated block transactions, accelerated stock repurchases or open market solicitations for shares, all or some of which may
be effected through Rule 10b5-1 plans. Any of the repurchased shares are held in the Company’s treasury, or canceled and
retired as the Board may determine from time to time. Any repurchases of common stock are subject to the covenants
contained in the Loan Agreement. Under the Loan Agreement, the Company may repurchase common stock and pay
dividends up to $5.0 million in the aggregate during any trailing twelve months without restrictions. Purchases of common
stock or dividend payments in excess of $5.0 million in the aggregate require the Company to (i) maintain availability in
excess of 20.0% of the aggregate revolver commitments ($80.0 million at December 31, 2017) or (ii) to maintain availability
equal to or greater than 15.0% of the aggregate revolver commitments ($60.0 million at December 31, 2017) and the Company
must maintain a pro-forma ratio of EBITDA minus certain capital expenditures and cash taxes paid to fixed charges of at
least 1.00 to 1.00.

There were no shares repurchased during 2017 or 2016. During the fourth quarter of 2015, the Company repurchased 65,283
shares of outstanding common stock at an average cost of $10.71 per share.

15. Segment Information:

The Company follows the accounting guidance that requires the utilization of a “management approach” to define and report
the financial results of operating segments. The management approach defines operating segments along the lines used by
the Company’s chief operating decision maker (CODM) to assess performance and make operating and resource allocation
decisions. Our CODM evaluates performance and allocates resources based primarily on operating income. Our operating
segments are based primarily on internal management reporting.

The Company operates in three reportable segments; carbon flat products, specialty metals flat products, and tubular and pipe
products. Certain of the flat products segments’ assets and resources are shared by the carbon and specialty metals segments
and both segments’ products are stored in the shared facilities and, in some locations, processed on shared equipment. As
such, total assets and capital expenditures are reported in the aggregate for the flat products segments. Due to the shared
assets and resources, certain of the flat products segment expenses are allocated between the carbon flat products segment
and the specialty metals flat products segment based upon an established allocation methodology. Through its carbon flat
products segment, the Company sells and distributes large volumes of processed carbon and coated flat-rolled sheet, coil and
plate products. Through its specialty metals flat products segment, the Company sells and distributes processed aluminum
and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. Through its tubular and pipe products
segment, the Company distributes metal tubing, pipe, bar, valve and fittings and fabricates pressure parts supplied to various
industrial markets.

The following table provides financial information by segment and reconciles the Company’s operating income by segment
to the consolidated income before income taxes for the years ended December 31, 2017, 2016 and 2015.

(in thousands)
Net sales

Carbon flat products
Specialty metals flat products
Tubular and pipe products

Total net sales

Depreciation and amortization

Carbon flat products
Specialty metals flat products
Tubular and pipe products
Corporate

Total depreciation and amortization

Operating income

Carbon flat products
Specialty metals flat products
Tubular and pipe products
Corporate
Goodwill and intangible asset impairment (a)

Total operating income (loss)

Other loss, net

Income (loss) before interest and income taxes

Interest and other expense on debt

Income (loss) before income taxes

For the Year Ended December 31,
2015
2016

2017

869,628 $
227,200
233,868
1,330,696 $

670,983 $
189,930
194,203
1,055,116 $

765,400
192,516
217,627
1,175,543

10,906 $
811
5,659
102
17,478 $

17,886 $
11,240
4,568
(9,708 )
-
23,986 $
(118 )
23,868
7,518
16,350 $

11,690 $
797
5,896
102
18,485 $

(4,371 ) $
9,841
7,713
(7,435 )
-
5,748 $
(55 )
5,693
5,273
420 $

12,200
698
6,036
102
19,036

(7,217)
(1,074)
12,583
(7,120)
(24,951)
(27,779)
(125)
(27,904)
5,690
(33,594)

(a) $24,451 of the goodwill and intangible asset impairment in 2015 related to the tubular and pipe products segment, $500

related to the specialty metals flat products segment.

(in thousands)
Capital expenditures
Flat products
Tubular and pipe products
Corporate
Total capital expenditures

Assets

Flat products
Tubular and pipe products
Corporate

Total assets

For the Year Ended December 31,
2015
2016
2017

7,325 $
2,833
2
10,160 $

5,105 $
1,719
-
6,824 $

4,295
3,022
-
7,317

409,116 $
194,787
255
604,158 $

363,626
192,088
354
556,068

There were no material revenue transactions between the carbon flat products, specialty metals flat products and tubular and
pipe products segments for the years ended December 31, 2017, 2016 and 2015.

The Company sells certain products internationally, primarily in Canada, Mexico and Central and South America.
International sales are immaterial to the consolidated financial results and to the individual segments’ results.

16. Retirement Plans:

The Company’s retirement plans consist of two 401(k) plans covering certain non-union employees, two separate 401(k)
plans covering all union employees, a multi-employer pension plan covering certain CTI employees and a supplemental
executive retirement plan (SERP) covering certain executive officers of the Company.

The 401(k) retirement plans allow eligible employees to contribute up to the statutory maximum. The Company’s non-union
401(k) matching contribution is determined annually by the Board of Directors and is based on a percentage of eligible
employees’ earnings and contributions. For the 401(k) retirement plans, the Company matched one-half of each eligible
employee’s contribution, limited to the first 6% of eligible compensation.

In 2005, the Board of Directors adopted a SERP, which has been amended from time to time. Contributions to the SERP are
based on: (i) a portion of the participants’ compensation multiplied by a factor of 6.5% or 13% depending on participant; and
(ii) for certain participants a portion of the participants’ compensation multiplied by a factor which is contingent upon the
Company’s return on invested capital. Benefits are subject to a vesting schedule of up to five years.

The Company, through its CTI subsidiary, contributes to one multiemployer pension plan – the Plumbing and Heating
Wholesalers Retirement Income Plan for the Benefit of the Shopmen’s Division of Pipe Fitters’ Association Local Union
597, EIN 36-6511016, Plan Number 001 (the Multiemployer Plan). The risks of participating in the Multiemployer Plan are
different from a single-employer plan in that 1) assets contributed to the multiemployer plan by one employer may be used
to provide benefits to employees of other participating employers, 2) if a participating employer stops contributing to the
plan, the unfunded obligations of the plan may be borne by the remaining participating employers, and 3) if CTI chooses to
stop participating in the Multiemployer Plan, CTI may be required to pay the plan an amount based on the unfunded status
of the plan, referred to as a withdrawal liability.

The most recent Pension Protection Act zone status available is for the plan year beginning January 1, 2017, and the
Multiemployer Plan’s actuary has certified that the Multiemployer Plan is neither in critical status nor endangered status and
that it is in the green zone. The green zone status is based on information that CTI received from the Multiemployer Plan and
is certified by the Multiemployer Plan’s actuary. Among other factors, plans in the green zone are at least 80 percent funded.

CTI contributes to the Multiemployer Plan under the terms of a collective bargaining agreement that covers certain of its
union employees, and which expires May 31, 2020. CTI contributions to the Multiemployer Plan were immaterial for the
years ended December 31, 2017 and 2016.

Retirement plan expense, which includes all Company 401(k), SERP defined contributions and the Multiemployer Plan,
amounted to $2.6 million, $2.2 million and $2.0 million for the years ended December 31, 2017, 2016 and 2015, respectively.

The fair values of the Company's SERP assets as of December 31, 2017 were $6.5 million and are measured at Net Asset
Value (NAV) as a practical expedient to estimate fair value and therefore are not classified in the fair value hierarchy. Under
the practical expedient approach, the NAV is based on the fair value of the underlying investments held by each fund less its
liabilities. This practical expedient would not be used when it is determined to be probable that the fund will sell the
investment for an amount different than the reported NAV. The fair value of the SERP assets are included in Other Long
Term Assets on the consolidated Balance Sheets.

17. Related-Party Transactions:

The Company’s Chief Executive Officer owns 50% of an entity that owns one of the Cleveland warehouses and leases it to
the Company at a fair market value annual rental of $0.2 million. The lease expires on December 31, 2018 with four five-
year renewal options.

Schedule II – Valuation and Qualifying Accounts
(in thousands)

Description
Year Ended December 31, 2015

Allowance for doubtful accounts
Tax valuation reserve

Year Ended December 31, 2016

Allowance for doubtful accounts
Tax valuation reserve

Year Ended December 31, 2017

Allowance for doubtful accounts
Tax valuation reserve

Additions

Balance at
Beginning
of Period

Charged to
Costs and
Expenses

Charged to
Other
Accounts

Deductions

Balance at
End of
Period

$
$

1,348 $
1,381 $

506 $
- $

1,299 $
1,030 $

369 $
987 $

1,385 $
2,017 $

641 $
362 $

- $
- $

(555 ) $
(351 ) $

1,299
1,030

(283 ) $
- $

1,385
2,017

(416 ) $
- $

1,610
2,379

SUPPLEMENTAL FINANCIAL INFORMATION
(in thousands, except per share data)
(unaudited)

2017
Net sales
Operating income (loss) (a)
Income (loss) before income taxes
Net income (b)

$
Basic net income (loss) per share
$
Weighted average shares outstanding - basic
Diluted net income (loss) per share
$
Weighted average shares outstanding -
diluted

1st quarter 2nd quarter 3rd quarter 4th quarter
$

Year

334,893 $
11,051
9,399
7,699 $
0.68 $
11,369
0.68 $

356,195 $
9,633
7,817
4,797 $
0.42 $
11,383
0.42 $

331,442 $
5,286
3,298
2,280 $
0.20 $
11,386
0.20 $

308,166 $ 1,330,696
23,986
16,350
18,963
1.67
11,381
1.67

(1,984)
(4,164)
4,187 $
0.37 $
11,389
0.37 $

Market price of common stock: (c)

High
Low

27.93 $
18.05

24.00 $
15.83

22.44 $
16.58

22.86 $
18.10

27.93
15.83

11,369

11,390

11,386

11,391

11,381

2016
Net sales
Operating income (loss) (d)
Income (loss) before income taxes
Net income (loss)

$
Basic net income (loss) per share
$
Weighted average shares outstanding - basic
Diluted net income (loss) per share
$
Weighted average shares outstanding -
diluted

1st quarter 2nd quarter 3rd quarter 4th quarter
$

Year

258,349 $
35
(1,255)
(767) $
(0.07) $
11,182
(0.07) $

273,608 $
8,339
7,007
3,550 $
0.32 $
11,216
0.32 $

268,255 $
27
(1,288)
(1,757) $
(0.16) $
11,219
(0.16) $

254,904 $ 1,055,116
5,748
420
(1,078)
(0.10)
11,210
(0.10)

(2,653)
(4,044)
(2,104) $
(0.19) $
11,221
(0.19) $

11,182

11,216

11,219

11,221

11,210

Market price of common stock: (c)

High
Low

17.50 $
7.98

27.48 $
15.41

31.19 $
17.42

28.67 $
17.14

31.19
7.98

(a) Operating income (loss) in 2017 includes $2,707 of LIFO expense related to the Company's tubular and pipe products

segment.

(b) Includes a $6.2 million tax benefit related to the U.S. Tax Cuts and Jobs Act.
(c) Represents the high and low sales prices of our common stock as reported by the Nasdaq Global Select Market.
(d) Operating income (loss) in 2016 includes $1,489 of LIFO income related to the Company's tubular and pipe products

segment.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Evaluations required by Rule 13a-15 of the Securities Exchange Act of 1934 of the effectiveness of our disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered
by this Annual Report have been carried out under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer. Based upon such evaluations, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2017 in providing
reasonable assurance that information required to be disclosed by us in reports filed under the Exchange Act is recorded,
processed, summarized and reported within time periods specified in the rules and forms of the SEC.

Management’s Report on Internal Control Over Financial Reporting

Management’s Report on Internal Control Over Financial Reporting is set forth in Part II, Item 8 of this Annual Report on
Form 10-K and is incorporated herein. PricewaterhouseCoopers LLP, the Company’s independent registered public
accounting firm, has issued an attestation report on our internal control over financial reporting that is set forth in Part II,
Item 8 of this Annual Report and is incorporated herein by reference.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2017 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE

Information required by Item 10 as to the executive officers is provided in Part I of this Annual Report on Form 10-K and is
incorporated by reference into this section. Other information required by Item 10 will be incorporated herein by reference
to the information set forth in our definitive proxy statement for our 2018 Annual Meeting of Shareholders.

ITEM 11. EXECUTIVE COMPENSATION

Information required by Item 11 will be incorporated herein by reference to the information set forth in our definitive proxy
statement for our 2018 Annual Meeting of Shareholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Information required by Item 12 will be incorporated herein by reference to the information set forth in our definitive proxy
statement for our 2018 Annual Meeting of Shareholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

Information required by Item 13 will be incorporated herein by reference to the information set forth in our definitive proxy
statement for our 2018 Annual Meeting of Shareholders.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by Item 14 will be incorporated herein by reference to the information set forth in our definitive proxy
statement for our 2018 Annual Meeting of Shareholders.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

PART IV

(a)(1) The following financial statements are included in Part II, Item 8:

Report of Independent Registered Public Accounting Firm
Management’s Report on Internal Control Over Financial Reporting
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2017, 2016 and 2015
Consolidated Balance Sheets as of December 31, 2017 and 2016
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015
Supplemental Disclosures of Cash Flow Information for the Years Ended December 31, 2017, 2016 and 2015
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2017, 2016 and 2015
Notes to Consolidated Financial Statements for the Years Ended December 31, 2017, 2016 and 2015

(a)(2) Financial Statement Schedules.
Schedule II – Valuation and Qualifying Accounts

(a)(3) Exhibits. The Exhibits filed herewith are set forth on the Index to Exhibits filed as part of this Annual Report
and incorporated herein by reference.

INDEX TO EXHIBITS

Exhibit
3.1(i)

Amended and Restated Articles of Incorporation

Incorporated by reference to Exhibit 3.1(i) to the

Description

Reference

3.1(ii)

Amended and Restated Code of Regulations

Incorporated by reference to Exhibit 3.1 to

Registration Statement on Form S-1
(Registration No. 33-73992) filed with the
Commission on January 12, 1994.

4.25

10.8 *

Third Amended and Restated Loan and Security
Agreement, dated as of December 8, 2017, by and
among the Registrant, the financial institutions from
time to time party thereto, Bank of America, N.A., as
administrative agent, and the other agents from time to
time party thereto.
Form of Management Retention Agreement for Senior
Executive Officers of the Company

10.9 *

Form of Management Retention Agreement for Other
Officers of the Company

10.14 *

Olympic Steel, Inc. Executive Deferred Compensation
Plan dated December 15, 2004

10.15 *

Form of Non-Solicitation Agreements

Company’s Form 10-Q filed with the
Commission on August 6, 2015 (Commission
File No. 0-23320).

Incorporated by reference to Exhibit 4.25 to

Registrant's Form 8-K filed with the Commission
on December 14, 2017 (Commission File No. 0-
23320).

Incorporated by reference to Exhibit 10.8 to

Registrant's Form 10-Q filed with the
Commission on August 7, 2000 (Commission
File No. 0-23320).

Incorporated by reference to Exhibit 10.9 to

Registrant's Form 10-Q filed with the
Commission on August 7, 2000 (Commission
File No. 0-23320).

Incorporated by reference to Exhibit 10.14 to

Registrant’s Form 10-K filed with the
Commission on March 14, 2005 (Commission
File No. 0-23320).

Incorporated by reference to Exhibit 10.15 to

Registrant’s Form 8-K filed with the
Commission on March 4, 2005 (Commission File
No. 0-23320).

Exhibit
10.16 *

Form of Management Retention Agreement

Incorporated by reference to Exhibit 10.16 to

Description

Reference

Registrant’s Form 10-Q filed with the
Commission on August 8, 2005 (Commission
File No. 0-23320).

10.17 *

Supplemental Executive Retirement Plan Term Sheet

Incorporated by reference to Exhibit 99.1 to

10.20 *

Olympic Steel, Inc. Supplemental Executive
Retirement Plan

10.21 *

Amended and Restated Olympic Steel, Inc. 2007
Omnibus Incentive Plan

10.30 *

Olympic Steel, Inc. Senior Manager Compensation
Plan

10.31 *

David A. Wolfort Employment Agreement effective as
of January 1, 2016

Registrant’s Form 8-K filed with the
Commission on January 5, 2006 (Commission
File No. 0-23320).

Incorporated by reference to Exhibit 10.20 to

Registrant’s Form 8-K filed with the
Commission on April 28, 2006 (Commission File
No. 0-23320).

Incorporated by reference to Exhibit 4.3 to

Registrant’s Registration Statement on Form S-8
(Registration No. 333-211023) filed with the
Commission on April 29, 2016.

Incorporated by reference to Exhibit 10.30 to

Registrant’s Form 10-Q filed with the
Commission on May 6, 2011 (Commission File
No. 0-23320).

Incorporated by reference to Exhibit 10.31 to

Registrant’s Form 8-K filed with the
Commission on December 31, 2015
(Commission File No. 0-23320).

10.32 *

Donald McNeeley Employment Agreement effective as
of March 31, 2016

Incorporated by reference to Exhibit 10.32 to

Registrant’s Form 8-K filed with the
Commission on March 31, 2016 (Commission
File No. 0-23320).

10.33 *

Richard T. Marabito Employment Agreement effective
as of November 23, 2016

10.34 *

Form of RSU Agreements for Messrs. Siegal, Wolfort
and Marabito.

Incorporated by reference to Exhibit 10.13 to

Registrant’s Form 8-K filed with the
Commission on November 23, 2016
(Commission File No. 0-23320).

Incorporated by reference to Exhibit 10.34 to

Registrant’s Form 10-K filed with the
Commission on February 23, 2012 (Commission
File No. 0-23320).

Michael D. Siegal Employment Agreement effective as
of December 20, 2017

10.35 *

10.37*

Amendment to Form of Management Retention
Agreement for Senior Executive Officers of the
Company

Incorporated by reference to Exhibit 10.35 to

Registrant’s Form 8-K filed with the
Commission on December 22, 2017
(Commission File No. 0-23320).
Incorporated by reference to Exhibit 10.1 to
Registrant’s Form 10-Q filed with the
Commission on May 1, 2015 (Commission File
No. 0-23320).

10.38 *

Andrew S. Greiff Employment Agreement effective as
of August 19, 2016

Incorporated by reference to Exhibit 10.38 to

Registrant’s Form 8-K filed with the
Commission on August 23, 2016 (Commission
File No. 0-23320).

21
23

24
31.1

List of Subsidiaries
Consent of Independent Registered Public Accounting
Firm
Directors and Officers Powers of Attorney
Certification of the Principal Executive Officer of the
Company, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

Filed herewith
Filed herewith

Exhibit
31.2

32.1

32.2

101.INS
101.SCH
101.CAL

101.DEF
101.LAB

101.PRE

Description

Reference

Filed herewith

Furnished herewith

Certification of the Principal Financial Officer of the
Company, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Written Statement of Michael D. Siegal, Chairman and
Chief Executive Officer of the Company pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
Written Statement of Richard T. Marabito, Chief
Financial Officer of the Company pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase
Document
XBRL Taxonomy Extension Definition
XBRL Taxonomy Extension Label Linkbase
Document
XBRL Taxonomy Extension Presentation Linkbase
Document

* This exhibit is a management contract or compensatory plan or arrangement.

ITEM 16. FORM 10-K SUMMARY

None.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant

has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

March 2, 2018

OLYMPIC STEEL, INC.

By: /s/ Richard T. Marabito
Richard T. Marabito,
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons in the capacities indicated and on the dates indicated.

March 2, 2018

/s/ Michael D. Siegal *
Michael D. Siegal

Chairman of the Board and Chief Executive
Officer (Principal Executive Officer)

/s/ David A. Wolfort *
David A. Wolfort
President and Director

/s/ Richard T. Marabito *
Richard T. Marabito
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)

/s/ Donald R. McNeeley *
Donald R. McNeeley
President of Chicago Tube and Iron and Director

/s/ Ralph M. Della Ratta, Jr. *
Ralph M. Della Ratta, Jr., Lead Director

/s/ Arthur F. Anton *
Arthur F. Anton, Director

/s/ Dirk A. Kempthorne *
Dirk A. Kempthorne, Director

/s/ Michael G. Rippey *
Michael G. Rippey, Director

/s/ Howard L. Goldstein *
Howard L. Goldstein, Director

* The undersigned, by signing his name hereto, does sign and execute this Annual Report on Form 10-K pursuant to the
Powers of Attorney executed by the above-named officers and directors of the Company and filed with the Securities and
Exchange Commission on behalf of such officers and directors.

By: /s/ Richard T. Marabito

Richard T. Marabito, Attorney-in-Fact

March 2, 2018

Comparison of 5 Year Cumulative Total Return

Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100 through December 2017

250.00

200.00

150.00

100.00

50.00

0.00

2012

2013

2014

2015

2016

2017

Olympic Steel Inc.

NASDAQ Composite-Total Returns

Peer Group

The peer group consists of Worthington Industries, Ryerson Holding Corporation, Shiloh Industries, Inc.,
and Reliance Steel & Aluminum Co.

Directors & Officers

BOARD OF DIRECTORS

Michael D. Siegal, 65
Chairman of the Board and Chief Executive Officer,
Olympic Steel

David A. Wolfort, 65
President,
Olympic Steel

Arthur F. Anton, 60
Chairman and Chief Executive Officer,
Swagelok Company

Ralph M. Della Ratta, 64
President of the Ohio Region,
Citizens Bank

Howard L. Goldstein, CPA, 65
Partner,
Appelrouth, Farah & Co. P.A.

The Honorable Dirk A. Kempthorne, 66
President and Chief Executive Officer,
The American Council of Life Insurers

Donald R. McNeeley, 63
President,
Chicago Tube & Iron, a subsidiary of Olympic Steel

Michael G. Rippey, 60
President and Chief Executive Officer,
SunCoke Energy, Inc.

CORPORATE OFFICERS

Michael D. Siegal
Chief Executive Officer

David A. Wolfort
President

Richard T. Marabito
Chief Financial Officer

Andrew Greiff
Executive Vice President and Chief Operating Officer

Richard A. Manson
Vice President and Treasurer

Donald R. McNeeley
President,
Chicago Tube & Iron, a subsidiary of Olympic Steel

Christopher M. Kelly
Secretary, Olympic Steel
Partner, Jones Day

Shareholder Information

Corporate Headquarters
Olympic Steel, Inc.
22901 Millcreek Boulevard, Suite 650
Highland Hills, OH 44122
Phone: (216) 292-3800
Fax: (216) 682-4065
www.olysteel.com

Stock Listing
The Company’s common stock trades on the NASDAQ
Global Select Stock Market under the symbol “ZEUS.”

Transfer Agent and Registrar
Computershare
P.O. Box 30170
College Station, TX 77842-3170
(800) 446-2617

2018 Annual Meeting
The annual meeting of shareholders will be held:

Thursday, May 3, 2018
10:00 a.m. Eastern Time
Jones Day
North Point
901 Lakeside Avenue
Cleveland, OH 44114

For information and directions to the annual meeting and to
vote in person, contact ir@olysteel.com.

Independent Auditors
PricewaterhouseCoopers LLP
BP Tower, 18th Floor
200 Public Square
Cleveland, OH 44114

Legal Counsel
Jones Day
North Point
901 Lakeside Avenue
Cleveland, OH 44114

Investor Information
Shareholders and prospective investors are welcome
to call or write with questions or requests for additional
information. Inquiries should be directed to:

Matthew J. Dennis, CFA
Olympic Steel Investor Relations
Clear Perspective Group, LLC
Phone: (216) 672-0522
Email: ir@olysteel.com
www.olysteel.com

Form 10-K
Shareholders who wish to obtain, without charge, a
copy of Olympic Steel’s annual report on Form 10-K,
filed with the Securities and Exchange Commission
for the fiscal year ended Dec. 31, 2017, may do so
by writing to Investor Relations at the Company’s
Corporate Headquarters (address indicated above).

This product
is made from
recycled paper