Olympic Steel
Annual Report 2021

Plain-text annual report

2021 Annual Report About the Company Olympic Steel is a leading metals service center that operates in three reportable segments; Specialty Metals Flat Products, Carbon Flat Products, and Tubular and Pipe Products. We provide metals processing and distribution services for a wide range of customers. 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, prime tin mill products and fabricated parts. Through the acquisition of Shaw Stainless & Alloy, Inc., or Shaw, on October 1, 2021 and Action Stainless & Alloys, Inc., or Action Stainless, on December 14, 2020, our Specialty Metals Flat Products segment expanded its geographic footprint and enhanced its product offerings ff in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe. Shaw also manufactures and distributes stainless steel bollards and water treatment systems. Action Stainless offers ff a range of processing capabilities, including plasma, laser and waterjet cutting and computer numerical control, or CNC machining. Our Carbon Flat Products segment’s focus is on the direct sale and distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products and fabricated parts. Through the acquisitions of McCullough Industries and certain assets related to the manufacturing of the EZ Dumper®rr hydraulic dump inserts in 2019, our Carbon Flat Products segment expanded its product offerings ff to include self-dumping metal hoppers and steel and stainless-steel dump inserts for pickup truck and service truck beds. In addition, we distribute metal tubing, pipe, bar, valves and fittings and fabricate pressure parts supplied to various industrial markets through our Tubular and Pipe Products segment. Products that require more value- added processing generally have a higher gross profit. Accordingly, our overall gross profit is affected ff 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. Financial Information In thousands, except per-share and ratio data 2021 2020 2019 For the Year Net sales Operating income 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 $ 2,312,253 ) $ 1,234,144 ) $ 1,579,040) 172,466 ) 121,051 ) 10.52 ) 11,503 ) 11,011 ) 284,570 ) 485,029 ) 1,023,572 ) 327,764 ) 424,439 ) 38.16 ) 573 ) (5,595)) (0.49)) 11,447 ) 9,803 ) 151,601 ) 240,001 ) 640,605 ) 160,609 ) 301,010 ) 27.18 ) 16,610) 3,856) 0.34) 11,509) 10,165) 133,572) 273,531) 649,555) 192,925) 308,352) 28.04) 0.77 to 1 ) 0.53 to 1 ) 0.63 to 1) 2021 Letter to Shareholders Dear Fellow Shareholders, It was a historic year for Olympic Steel. We are extremely proud of the accomplishments that made 2021 special in many ways – including our record-breaking financial results, our strategic execution, and our commitment to environmental, social and governance priorities. Our diversification and acquisition strategy, combined with our focus on controlling expenses and aggressively managing working capital to achieve record inventory turnover, served us well in 2021. We experienced strong demand and record earnings across all three of our business segments, while navigating the challenges of unprecedented price volatility, well-publicized supply chain and labor constraints, and lingering effects ff of the global pandemic. In addition to delivering exceptional results, we strengthened Olympic Steel for the future with a solid balance sheet, increased liquidity and a disciplined capital deployment approach. Our diversification of the business through the divestiture of under- performing assets and investments in acquisitions and high-return growth opportunities has reduced our exposure to cyclical risks and positioned the Company to deliver sustainably higher returns. Our success would not have been possible without the dedication of the entire Olympic Steel team. I want to thank our more than 1,600 employees for the accomplishments we achieved together in 2021. 2021 HIGHLIGHTS – A YEAR OF RECORDS We delivered record net income of $121.1 million on record net sales of $2.3 billion, and all three of our business segments generated record profitability for the year. Our total assets exceeded $1 billion for the first time in our Company’s history, and our inventory turns reached all-time highs. While achieving this historic performance, we remained focused on Olympic Steel’s Core Values and strong relationships with key suppliers to provide our customers with service excellence. The impacts of our strategic actions were an important element of our success. The December 2020 acquisition of Action Stainless & Alloys was immediately accretive. In September, we sold our Detroit flat-rolled operations and assets, and redeployed a portion of those proceeds into a higher-return growth opportunity with the acquisition of Shaw Stainless & Alloy, our fifth acquisition in the last four years. We also advanced our market position in the Southeast and Southwest U.S., invested in new equipment to service growing customer demand, and drove automation and systems initiatives to enhance the safety and effiff ciencies of our operations. It was a year of accelerated growth for Specialty Metals. Our stainless and aluminum businesses grew to 25% of our total revenue by year end. All of our specialty divisions performed well, including our newest additions. Building on the success of prior specialty acquisitions like Berlin Metals, our Action Stainless acquisition meaningfully contributed to our emphasis on sustainably increasing our returns in all markets, through its high-profit model of small-order-size distribution. The acquisition of Shaw in October 2021 further expanded our specialty metals distribution footprint in the Southeast, while adding fabrication capabilities and architectural and barrier defense bollard manufacturing to our product offerings. ff We continued to gain market share in 2021, as our stainless volumes were up 34% compared with a 17% increase for the industry, and we achieved a 29% increase in aluminum product shipments compared with 20% for the industry. The Pipe and Tube segment, which is approximately 17% of our revenue, also grew its market share. We continued to invest in new equipment to serve the growing value-add processing needs of our customers while enhancing our returns. It was a record year for sales and earnings, as our team focused on serving our customers, controlling expenses through asset consolidation, and delivering record inventory turnover in 2021. 2021 Letter to Shareholders Our Carbon business also had its best year ever for sales, earnings and inventory turnover. In fact, this segment’s 2021 profitability surpassed the entire Company’s earnings high for any previous year. In support of our strategy to further diversify our product and geographic mix and earn consistently higher returns in all markets, we exited the carbon-centric Detroit market and used a portion of the sale proceeds to advance our specialty metals expansion in the Southeast. The growth and transformation of our operations in the Southeast, including the successful ramp-up of our new fabricating facility in Buford, Georgia, and expansion of our automotive capabilities in Winder, Georgia, were important pillars to our success. We are excited to add a second stamping press with automated packaging in Winder, and robotic welding capabilities in Buford in 2022. Moving forward, our Carbon business is under the capable and experienced leadership of David Gea, who was promoted to President – Carbon Flat Rolled in January 2022. We are excited to support David and his team as they execute on our mission to deliver profitable growth in carbon flat products. Importantly, we also took steps in 2021 to maximize flexibility for access to capital. We extended our credit facility for five years, with the ability to upsize, and we filed a new stock “at the market” (ATM) AA program that will allow us to issue and sell shares of common stock, from time to time, to accompany our previous Board-authorized share repurchase program. These actions, combined with our strong balance sheet and liquidity, will allow us to invest in acquisitions, organic growth and operational needs while simultaneously rewarding shareholders. We were especially pleased to share our success with our shareholders through a significantly higher dividend. In March 2022, we increased our regular quarterly dividend from 2 cents per share to 9 cents per share, and we expect to maintain this increased quarterly dividend, subject to our Board’s approval. COMMITMENT TO SAFETY,YY HEALTHLL AND COMMUNITY At Olympic Steel, our mission is to achieve profitable growth by safely providing quality business solutions for our customers. Together with our Core Values, this sets the foundation for our environmental, social and governance (ESG) agenda. Ensuring safety is the most important business we do each day, and we are a stronger Company because everyone in our organization is committed to Safety First – Always. We congratulate our 10 divisions that had zero recordable events in 2021, as well as our Cleveland division for earning its OSHA Safety & Health Achievement Recognition Program (SHARP) recertification. Our “Focus on Diversity” and other ESG initiatives are helping to build a more diverse and inclusive culture. We are committed to attracting, engaging, developing and retaining a diverse group of individuals to support our vision for Olympic Steel. We strive to infuse greater diversity of thought and perspective, provide opportunities for career growth for all employees, overcome bias in the workplace, and improve the representation of women and minorities in leadership – all with the goal of strengthening who we are as a company. We have made great progress through dozens of new initiatives, training, education and feedback sessions, but there is much more to do. We are also proud of our long-standing dedication to active corporate citizenship with programs such as Make-A-Wish and Sol Siegal Educational Scholarships (named for our founder) that support our communities and employees. We look forward to sharing additional ESG details and progress on our priorities when we issue our first Corporate Responsibility Report in 2022. 2021 Letter to Shareholders THE YEAR AHEAD – CONTINUING TO ADVANCE VV OUR STRATEGY AA Our strategic actions in 2021 position Olympic Steel to deliver sustainably higher, consistent returns, even in the current, rapidly changing global economic environment that is driving record metal volatility. We have the balance sheet strength and ample access to capital to advance our growth strategy while rewarding shareholders with an increased dividend. We remain focused on the disciplined pursuit of high-performing acquisitions. Our robust capital expenditure plan for the upcoming year includes significant investments in growth, augmented by investments in automation to help offset ff the tight labor market and improve safety and productivity. We remain committed to profitably growing our Company, and maintaining a sharp focus on expense control, disciplined working capital and high-velocity inventory turnover. At the same time, we will continue enhancing an inclusive culture built on respect for our people, our suppliers and customers, and the communities in which we operate. In closing, I want to thank our Olympic team for making 2021 a remarkable year. We have foundationally strengthened our Company for sustainable success in 2022 and beyond. We are excited about the future, and thank you, our shareholders, for your continued support and confidence. I look forward to sharing our progress as we build an even stronger Olympic Steel. Sincerelyy,, Richard T. Marabito Chief Executive Offiff cer March 18, 2022 [This page intentionally left blank] 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 For The Year Ended December 31, 2021 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) 34-1245650 (I.R.S. Employer Identification Number) 22901 Millcreek Boulevard, Suite 650, Highland Hills, OH (Address of principal executive offices) 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 Trading Symbol(s) ZEUS 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 ☒ 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 ☒ 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 ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐ 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. Large accelerated filer ☐ Accelerated filer ☒ Small reporting company ☐ Emerging growth company ☐ Non-accelerated filer ☐ 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ As of June 30, 2021, the aggregate market value of voting stock held by non-affiliates of the registrant based on the closing price at which such stock was sold on the Nasdaq Global Select Market on such date approximated $273,520,889. Indicate the number of shares of each of the issuer's classes of common stock, as of the latest practicable date: Class Common stock, without par value Outstanding as of February 25, 2022 11,123,700 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, 2021, 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 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 ............................................................................................................................ Information About Our Executive Officers................................................................................................ Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ................................................................................................................................................ Item 6. [Reserved] .................................................................................................................................................. 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 ...................................................................................................................................... Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ....................................................... 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................................................................................................................................................... Page 4 16 25 26 27 28 29 30 31 32 43 44 73 73 73 73 74 74 74 74 74 75 75 79 80 3 This pagea intentionallyl lefte blank ITEM 1. BUSINESS The Company PART I We are a leading metals service center that operates in three reportable segments; specialty metals flat products, carbon flat products, and tubular and pipe products. We provide metals processing and distribution services for a wide range of customers. 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, prime tin mill products and fabricated parts. Through the acquisition of Shaw Stainless & Alloy, Inc., or Shaw, on October 1, 2021 and Action Stainless & Alloys, Inc., or Action Stainless, on December 14, 2020, our specialty metals flat products segment expanded its geographic footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe. Shaw also manufactures and distributes stainless steel bollards and water treatment systems. Action Stainless offers a range of processing capabilities, including plasma, laser and waterjet cutting and computer numerical control, or CNC machining. Our carbon flat products segment’s focus is on the direct sale and distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products and fabricated parts. Through the acquisitions of McCullough Industries, or McCullough, and certain assets related to the manufacturing of the EZ Dumper® hydraulic dump inserts, or EZ Dumper, in 2019, our carbon flat products segment expanded its product offerings to include self-dumping metal hoppers and steel and stainless-steel dump inserts for pickup truck and service truck beds. In addition, we distribute metal tubing, pipe, bar, valves and fittings and fabricate parts supplied to various industrial markets through our tubular and pipe products segment. Products that require more value-added processing generally have a higher gross profit. Accordingly, our overall gross profit is affected by, among other things, product mix, the amount of processing performed, the demand for and availability of metals, and volatility in selling prices and material purchase costs. We also perform toll processing of customer-owned metals. We sell certain products internationally, primarily in Canada and Mexico. International sales are immaterial to our consolidated financial results and to the individual segments’ results. 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. 4 Corporate History Our company was founded in 1954 by the Siegal family as a general steel service center. 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. Over the past ten years, our company has expanded into new product offerings through multiple acquisitions. Our tubular and pipe products segment was established in 2011 after the acquisition of Chicago Tube and Iron, or CTI, a private leading distributor of tubing, pipe, bar, valves, and fittings. Our specialty metals flat products segment has expanded since its creation, most recently with the acquisitions of Berlin Metals, in 2018, Action Stainless in 2020 and Shaw in 2021, and our carbon flat products segment expanded into manufacturing metal intensive branded products with the acquisitions of McCullough and EZ Dumper in 2019. Michael Siegal, the son of one of our founders, began his career with us in the early 1970s and serves as our Executive Chairman of the Board of Directors. Mr. Siegal served as our Chief Executive Officer from 1984 through 2018. Richard T. Marabito has served as our Chief Executive Officer since January 2019. Mr. Marabito joined us in 1994 and served as our Chief Financial Officer from 2000 until the end of 2018. Richard A. Manson has served as our Chief Financial Officer since January 2019. Mr. Manson has served in various capacities at our company since 1996, most recently serving as our Vice President and Treasurer. Andrew S. Greiff has served as our President and Chief Operating Officer since January 2020. Mr. Greiff joined us in 2009 to lead our specialty metals business and most recently served as our Executive Vice President and Chief Operating Officer. 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) localization 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) improving safety performance; (ii) managing inventory turnover; (iii) managing operating expenses; (iv) providing on-time delivery and quality performance for our customers; (v) diversifying product offerings; (vi) profitably growing our market share; (vii) increasing and providing more consistent returns; (viii) maintaining targeted cash turnover rates and (ix) investing in technology and business information systems. These operating objectives are supported by: ● A set of core values, which are communicated, practiced and measured throughout the Company. ● An internal communications program designed to engage and motivate employees to support our strategy, values and culture. ● Our “flawless execution” program (Fe), an internal continuous improvement program that rewards employees who achieve profitable growth by delivering superior customer service and exceeding customer expectations. ● Operational initiatives designed to improve efficiencies and reduce costs by improving processes and creating an environment to facilitate change and improve the way we work and create value. ● Information systems and key metric reporting to focus managers on achieving specific operating objectives. ● Alignment of compensation with the financial objectives and performance of the Company and the achievement of specific financial and operating objectives. We believe our depth of management experiences, facilities, locations, processing capabilities, inventory, focus on safety, quality and customer service, extensive and experienced sales force, and the strength of our customer and supplier relationships provide a strong foundation for implementation of our strategy and achievement of our objectives. Certain elements of our strategy are set forth in more detail below. 5 Investments and Acquisitions. During the past three years, we have accelerated our growth through acquisitions and capital investments in facilities and processing equipment. Our Vice President of Strategic Development focuses on profitable growth opportunities, including acquisitions. On October 1, 2021, we acquired substantially all of the net assets of Shaw, based outside of Atlanta, Georgia. Shaw is a full- line distributor of stainless steel sheet, pipe, tube, bar and angles. Shaw also manufactures and distributes stainless steel bollards and water treatment systems. The acquisition expanded our stainless-steel distribution and fabrication capabilities, as well as our entry into architectural and barrier defense bollards. On December 14, 2020, we acquired substantially all of the net assets of Action Stainless, based outside of Dallas, Texas. Action Stainless is a full-line distributor of stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe and offers a range of processing capabilities, including plasma, laser and waterjet cutting and CNC machining. The acquisition expanded the geographic footprint of our specialty metals flat products segment with locations in Texas, Arkansas, South Carolina and Missouri. On June 1, 2020, we opened a 120,000-square-foot metal processing facility, located in Buford, Georgia. The location expanded our southeastern region footprint, which also includes facilities in Locust, North Carolina; Winder, Georgia; and Hanceville, Alabama. The Buford facility acts as the region’s primary flat-rolled fabrication hub, with first-stage metal processing anchored in the Winder facility, metal distribution in both the Winder, Georgia and Hanceville, Alabama locations, and pipe and tube laser fabrication and bending and welding at the Locust, North Carolina location. As part of the expansion, we added a new Mitsubishi fiber optic laser and a 600-ton Verson stamping press with a COE coil feed system. The additional equipment and processing capacity complement the region’s existing value-added fabrication capabilities and support the Company’s commitment to automotive original equipment manufacturers, or OEMs, and their tier 1 and 2 parts makers, as well as responds to increasing demand from other OEM customers. On August 5, 2019, we acquired certain assets related to the manufacturing of the EZ-Dumper® hydraulic dump inserts. The dump inserts are sold through a network of more than 100 dealers across the United States and Canada from our processing facilities in Chambersburg, Pennsylvania. On January 2, 2019, we acquired substantially all of the net assets of McCullough, based in Kenton, Ohio. McCullough is a manufacturer of self-dumping hoppers used in a variety of industrial applications. The downstream vertical integration of McCullough represents our first acquisition of a manufacturer of metal-intensive branded products, which allows us to deploy our purchasing, logistics and processing expertise to achieve synergies, expand margins and increase returns. In addition to the acquisitions noted above, our capital investments during the past three years have primarily consisted of additional processing equipment for all three of our segments. 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 OEMs (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. Disposition of Assets: On September 17, 2021, we sold substantially all of the assets related to our Detroit, Michigan operation to Venture Steel (U.S.), Inc. The proceeds of the sale were used for working capital needs as well as future acquisitions and investments in organic growth opportunities. The Detroit operation was primarily focused on the distribution of carbon flat- rolled steel to domestic automotive manufacturers and their suppliers. 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 multiple Olympic Steel 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 truck fleet further enhances our just-in-time deliveries based on our customers’ requirements. 6 Our Fe program is a commitment to provide superior customer service while striving to exceed customer expectations. This program includes tracking on-time delivery and quality performance against objectives, and recognition of employee initiatives to improve efficiencies, streamline processes or reduce operating expenses at each operation. We believe our large and experienced sales force provides strategic advantages. Our sales force makes direct daily sales calls to customers throughout the continental United States, and parts of 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 Olympic 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 28 years of experience in the metals industry and 19 years with our company. We have a succession planning process in place, which allows us to further enhance our management team by the promotions of employees to executive management positions within the organization. Products, Processing Services and Quality Standards We carry a wide selection of metals products and grades, ranging from commercial quality to ultra-high strength steel and specialty metals including; ● Specialty metals includes a variety of stainless steel and aluminum coil and sheet products, angles, rounds and flat bar; ● Alloy, heat treated and abrasion resistant coil, sheet and plate; ● Coated metals including galvanized, galvannealed, electro galvanized, advanced high strength steels, aluminized, and automotive grades of steel; ● Cold rolled carbon including commercial quality, advanced high strength steel, drawing steel and automotive grades cold rolled steel coil and sheet products; ● Hot rolled carbon includes a broad range of hot rolled coil, sheet and plate steel products including hot roll dry and pickled and oiled, automotive grades, advanced high strength steels, and high strength low alloys; ● Tube, pipe & bar products including round, square, and rectangular mechanical and structural tubing; hydraulic and stainless tubing; boiler tubing; carbon, stainless, and aluminum pipe; and valves and fittings; and ● Tin mill products including electrolytic tinplate, electrolytic chromium coated steel and black plate. With the acquisitions of EZ Dumper and McCullough, we also manufacture hydraulic dump inserts and self-dumping hoppers. With the acquisition of Shaw, we also manufacture and distribute stainless steel bollards and water treatment systems. 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 traditional service center and higher value-added processes include; ● Cut-to-length - cutting metal along the width of the coil, or to desired lengths; ● Slitting - cutting metal to specified widths along the length of the coil; ● Shearing - the process of cutting sheet metal; ● Blanking - cutting metal into specific shapes with close tolerances; ● Tempering - cold rolling process that improves the uniformity of the thickness and flatness of the metals; ● Stretcher-leveling - stretching process that improves the uniformity of the thickness and flatness of the metals; ● Plate and laser processing - cutting metal into specific shapes and sizes; 7 ● Forming and machining - bending, drilling, milling, tapping, boring and sawing metal; ● Tube processing - tube bending and end finishing; ● Finishing - shot blasting, grinding, edging and polishing; ● Fabrication - machining, welding, assembly and painting of component parts; and ● Value added services, including saw cutting, laser cutting, beveling, threading and grooving. The flat products segment is separated into two reportable segments; specialty metals flat products and carbon flat products. The flat products segments’ assets and resources are shared by the specialty metals and carbon flat products segments and both segments’ products are, in some instances, stored in the shared facilities and processed on the shared equipment. The following table sets forth, as of December 31, 2021, the major pieces of processing equipment in operation by segment: Processing Equipment Cut-to-length Slitting Shearing Blanking Tempering Stretcher-leveling Plate processing Laser processing Forming Machining Tube processing Finishing Painting Total Consolidated Flat Products Tubular and Pipe Products Total 18 12 9 2 3 2 26 30 23 39 2 30 1 197 14 - - - - - - 10 - 82 35 3 1 145 32 12 9 2 3 2 26 40 23 121 37 33 2 342 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, material 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, 28 of our facilities have earned International Organization for Standardization (ISO) 9001:2015 certifications. Our Romeoville, Illinois and Locust, North Carolina facilities have earned the American Society of Mechanical Engineers S Certification and our Locust, North Carolina facility has earned the National Board of Boiler & Pressure Vessel Inspectors R and U Certifications. 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 6%, 6% and 10% of our consolidated net sales in 2021, 2020 and 2019, 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, as well as general and plate fabricators and metals service centers. 8 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 Residential and commercial construction Automobile manufacturers and their suppliers Transportation equipment manufacturers All others <5% 2021 2020 2019 47% 11% 8% 7% 6% 21% 45% 10% 9% 11% 6% 19% 46% 8% 13% 11% 8% 14% 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. 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. The current global economic environment has resulted in increased supply chain scrutiny by our customers and potential customers. Supply chain disruptions experienced during 2021 may result in increased reliance on closer domestic sourcing. 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, 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; tariffs and quotas; and currency exchange rates. This volatility can significantly affect the availability and cost of raw materials to 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, supplier lead times 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 pass through nickel 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. We have some fixed priced purchase agreements that support fixed priced sales agreements; however, in general we have no long-term, fixed-price metals purchase contracts, except for commodity hedges. 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. 9 Suppliers We concentrate on developing supply relationships with reliable high-quality domestic and international metals producers, using a coordinated effort to be the customer of choice for business critical suppliers. We employ sourcing strategies that maximize the quality, production lead times and transportation economies of a global supply base. 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 is competitively priced. We believe the access to our facilities and equipment, and our high quality customer services and solutions, combined with our long-standing 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 flat-rolled steel market. We purchased approximately 51% and 56% of our total metals requirements from our three largest suppliers in 2021 and 2020, 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 public and private 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 related personnel as a foundation for growth. We depend on our Enterprise Resource Planning, or 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 the latest technology offerings. Our information systems focus on the following core application areas: Inventory Management. Our information systems track the status, quantity and cost of inventories by product, location and process on a daily basis. This information is essential to optimize inventory management. Differentiated Services To Customers. Our information systems support value-added services to customers, including quality control and on-time delivery monitoring and reporting, just-in-time inventory management and shipping services. E-Commerce and Advanced Customer Interaction. We are actively participating in electronic commerce initiatives to reduce processing cost and time. In addition to full electronic data interchange, or EDI, capabilities with our customers and vendors, we also have implemented extranet sites for specific customers. System and Process Enhancements. We have completed development of business system solutions to replace our legacy information systems and have successfully implemented new ERP systems at most of our locations. We continue to implement these systems to provide standardized business processes, enhanced inventory management, production cost, sales administrative controls and reduced technical support requirements. Our business analysts work with our quality team to identify opportunities for efficiency and improved customer service. We collaborate 10 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. Human Capital Management Our employees are our most valued resource. We work to attract a diverse, qualified workforce through an inclusive and accessible recruiting process that utilizes online recruiting, campus outreach, internships and job fairs. We seek to retain employees by offering competitive wages, benefits and training opportunities, as well as promoting a safe and healthy workplace culture. We comply with all applicable state, local and international laws governing nondiscrimination in employment in every location in which we operate. All applicants and employees are treated with the same high level of respect regardless of their gender, ethnicity, religion, national origin, age, marital status, political affiliation, sexual orientation, gender identity, disability, veteran or other protected status. Our core values (Accountability, Corporate Citizenship, Customer Satisfaction, Employee Development, Financial Stability, Integrity, Respect, Safety and Teamwork) guide our decisions and behavior and set a standard of excellence that rewards our employees. At December 31, 2021, we employed approximately 1,642 people. Approximately 182 of the hourly plant personnel are represented by seven separate collective bargaining units. The table below shows the expiration dates of the collective bargaining agreements. Facility Minneapolis (plate), Minnesota Hammond, Indiana Locust, North Carolina St. Paul, Minnesota Romeoville, Illinois Minneapolis (coil), Minnesota Indianapolis, Indiana Expiration date March 31, 2022 November 30, 2024 March 4, 2025 May 25, 2025 May 31, 2025 September 30, 2025 January 29, 2026 We have never experienced a work stoppage and we believe that our relationship with employees is strong. 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. 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 Iowa, Inc., does business in certain states under the name “Oly Steel Iowa, Inc.” Our Integrity Stainless operation conducts business under the name “Integrity Stainless.” Our CTI operation conducts business under the name “CTI Power.” Our operation in Monterrey, Mexico operates under the name “Metales de Olympic S. de R.L. de C.V.” Our wholly owned subsidiary, B Metals, Inc., does business under the name “Berlin Metals.” Our wholly owned subsidiary, MCI, Inc., does business under the name “McCullough Industries” and we conduct business under the name “EZ Dumper” for certain of our products. Our wholly owned subsidiary, ACT Acquisition, Inc., does business under the name “Action Stainless & Alloys.” Our wholly-owned subsidiary, SHAQ, Inc., does business under the name “Shaw Stainless & Alloys”. 11 We hold a trademark for our stainless steel sheet and plate product “OLY-FLATBRITE,” which has a unique combination of surface finish and flatness and for our “WRIGHT” self-dumping metal hoppers produced by McCullough. The registered trademark “ACTION STAINLESS” was acquired in conjunction with the asset acquisition of Action Stainless. The “EZ DUMPER®” tradename was acquired by us in conjunction with the acquisition of certain assets related to the manufacturing of the EZ Dumper hydraulic dump inserts. 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 We are committed to responsible environmental management practices and commit to the prevention of pollution by continually identifying opportunities and improving environmental performance in all aspects of our business. Our facilities are subject to certain federal, state and local requirements relating to the protection of the environment. 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 customer 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, excluding increases in the price of metals and increased labor and distribution expense, has not had a material effect on our financial results during the past three years, but may have a significant impact in future years. 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 Securities and Exchange Commission, or SEC, under the Securities Exchange Act of 1934. 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. 12 Information relating to our corporate governance at Olympic Steel, including our environmental, social and governance, or ESG, commitments to operating responsibly, 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. 13 Forward-Looking Information This Annual Report on Form 10-K and other documents we file with the SEC contain various forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, business, our beliefs and our management’s assumptions. 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: ● risks of falling metals prices and inventory devaluation; ● risks associated with supply chain disruption resulting from the imbalance of metal supply and end-user demands related to the novel coronavirus, or COVID-19, pandemic and other factors; ● supply disruptions and inflationary pressures, including the availability and rising costs of transportation and logistical services and labor; ● increased customer demand without corresponding increase in metal supply could lead to an inability to meet customer demand and result in lower sales and profits; ● risks associated with the COVID-19 pandemic, including, but not limited to customer closures, reduced sales and profit levels, slower payment of accounts receivable and potential increases in uncollectible accounts receivable, falling metals prices that could lead to lower of cost or net realizable value inventory adjustments and the impairment of intangible and long-lived assets, reduced availability and productivity of our employees, increased operational risks as a result of remote work arrangements, including the potential effects on internal controls, as well as cybersecurity risks and increased vulnerability to security breaches, information technology disruptions and other similar events, negative impacts on our liquidity position, inability to access our traditional financing sources on the same or reasonably similar terms as were available before the COVID-19 pandemic and increased costs associated with and less ability to access funds under our asset-based credit facility, or ABL Credit Facility, and the capital markets; ● general and global business, economic, financial and political conditions, including legislation passed under the new administration; ● competitive factors such as the availability, and global pricing of metals and production levels, industry shipping and inventory levels and rapid fluctuations in customer demand and metals pricing; ● supplier consolidation or addition of capacity; ● customer, supplier and competitor consolidation, bankruptcy or insolvency; ● reduced production schedules, layoffs or work stoppages by our own, our suppliers’ or customers’ personnel; ● the levels of imported steel in the United States and the tariffs initiated by the U.S. government in 2018 under Section 232 of the Trade Expansion Act of 1962 and imposed tariffs and duties on exported steel or other products, U.S. trade policy and its impact on the U.S. manufacturing industry; ● cyclicality and volatility within the metals industry; ● the adequacy of our efforts to mitigate cyber security risks and threats, especially with employees working remotely due to the COVID-19 pandemic; ● fluctuations in the value of the U.S. dollar and the related impact on foreign steel pricing, U.S. exports, and foreign imports to the United States; ● the successes of our efforts and initiatives to improve working capital turnover and cash flows, and achieve cost savings; ● our ability to further diversify our business, deliver consistent profitability and enhance shareholder value, including, without limitation, our ability to successfully redeploy the proceeds from the sale of our Detroit operation and other capital; ● our ability to generate free cash flow through operations and repay debt; ● our ability to sell shares of our common stock under the at-the-market equity program; ● the adequacy of our existing information technology and business system software, including duplication and security processes; ● the amounts, successes and our ability to continue our capital investments and strategic growth initiatives, including acquisitions and our business information system implementations; 14 ● our ability to successfully integrate recent acquisitions into our business and risks inherent with the acquisitions in the achievement of expected results, including whether an acquisition will be accretive and within the expected timeframe; ● events or circumstances that could adversely impact the successful operation of our processing equipment and operations; ● rising interest rates and their impacts on our variable interest rate debt; ● the impacts of union organizing activities and the success of union contract renewals; ● changes in laws or regulations or the manner of their interpretation or enforcement could impact our financial performance and restrict our ability to operate our business or execute our strategies; ● events or circumstances that could impair or adversely impact the carrying value of any of our assets; ● risks and uncertainties associated with intangible assets, including impairment charges related to indefinite lived intangible assets; ● the timing and outcomes of inventory lower of cost or net realizable value adjustments and last-in, first-out, or LIFO, income or expense; ● the inflation or deflation existing within the metals industry, as well as product mix and inventory levels on hand, which can impact our cost of materials sold as a result of the fluctuations in the LIFO inventory valuation; ● 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; and ● unanticipated developments that could occur with respect to contingencies such as litigation, arbitration and environmental matters, including any developments that would require any increase in our costs for such contingencies. 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. 15 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. Although the risks are organized by headings, and each risk is discussed separately, many are interrelated. You should not interpret the disclosure of any risk factor to imply that the risk has not already materialized. 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 we are unable to pass producer price increases on to our customers or if metals prices decline. Our principal raw materials are carbon and stainless steel and aluminum flat-rolled coil, sheet, plate, prime tin mill, 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. For example, starting in August 2020, metals prices increased significantly and reached record levels during 2021 before beginning to decline in October 2021. This volatility can significantly affect the availability and cost of raw materials to 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 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. Declining metals prices, customer demand for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently, lower gross profits and potentially inventory lower of cost or net realizable value adjustments as we use existing inventory. 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 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. Supply chain disruptions and inflationary pressures caused by the COVID-19 pandemic, and other factors, has had, and could continue to have an adverse effect on our business, financial condition and liquidity. On March 11, 2020, the World Health Organization classified the COVID-19 outbreak as a pandemic. Olympic Steel is an essential business and has remained open in all locations, adhering to all health guidelines to operate safely provided by the Center for Disease Control and Prevention and local authorities. We are dependent on our suppliers to provide us with metal. During 2021, we experienced increased supply chain disruptions resulting from the imbalance of metal supply and end-user demands as customer demand increased without a corresponding increase in metal supply, as businesses reopened after the COVID-19 pandemic. Our inability to meet customer demand as a result of supply disruptions and inflationary pressures could result in lower sales and profits. Although it is not possible to predict the ultimate impact of the COVID-19 pandemic, including on our business, financial position or liquidity, such impacts that may be material include, but are not limited to: (i) reduced sales and profit levels, (ii) the slower payment of accounts receivable and potential increases in uncollectible accounts receivable, (iii) falling metals prices that could lead to lower of cost or market inventory adjustments and the impairment of intangible and long-lived assets, (v) reduced availability and productivity of our employees, (vi) increased operational risks as a result of remote work arrangements, including the potential effects on internal controls, as well as cybersecurity risks and increased vulnerability 16 to security breaches, information technology disruptions and other similar events, (vii) negative impacts on our liquidity position, (viii) inability to access our traditional financing sources on the same or reasonably similar terms as were available before the COVID-19 pandemic, and (ix) increased costs and less ability to access funds under our ABL Credit Facility and the capital markets. To the extent the duration of any of these conditions extends for a longer period of time, the impact will generally be a more severe adverse impact. We cannot predict the impact that the COVID-19 pandemic ultimately will have on our customers, suppliers, vendors, and other business partners, and each of their financial conditions; however, any material effect on these parties could adversely impact us. The situation is changing rapidly and additional impacts may arise that we are not aware of currently. Our business is dependent on transportation and labor. Increases in the cost or availability of transportation or labor could adversely affect our business and operations, as we may be unable to pass cost increases on to our customers. We ship products throughout the United States via our in-house truck fleet or by third-party trucking firms. 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 materials to us in a timely manner, we may be unable to process and deliver our products in response to customer demand. 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. The COVID-19 pandemic impacted the availability of drivers and third-party trucks and increased the price of transportation services in the United States. Failure of a third-party transportation provider to provide transportation services could harm our reputation, negatively affect our customer relationships and have a material adverse effect on our financial position and results of operations. The continued demand for skilled labor has resulted in the need to increase pay rates in certain markets. In addition, we have seen a decline in the skilled labor applicant pool since the start of the COVID-19 pandemic and increased competition for skilled labor. Our operations are dependent on the labor used to operate our equipment and deliver products to our customers. Decreased availability of labor could harm our reputation, negatively affect our customer relationships and have a material adverse effect on our financial position and results of operations. The availability of drivers and labor is integral to our operations, and increases in our cost of transportation or labor may have a material adverse effect on our financial position and results of operations. An interruption in the sources of our metals supply could have a material adverse effect on our results of operations. We purchased approximately 51% and 56% of our total metals requirements from our three largest suppliers in 2021 and 2020, respectively. Over the past year, supplier consolidation, decreased mill production due to the COVID-19 pandemic and import tariffs decreased steel availability and increased mill lead times and increased steel prices. Fewer available suppliers increases the risk of supply disruption through both scheduled and unscheduled supplier outages. Conversely, the addition of new mill sources and decreased domestic demand could lead to domestic over capacity, which could lead to a decrease in steel prices, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. 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. 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 cybercrime pose a risk to the security of our systems, networks and the confidentiality, availability and integrity of our data. The risk has been further enhanced with an increased remote workforce due to the COVID-19 pandemic. 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 17 proprietary and other key information, ransom payments, production downtimes and operational disruptions, which in turn could adversely affect our business, financial condition, results of operations and cash flows. 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 47% and 45% of our 2021 and 2020 consolidated net sales, respectively, were to industrial machinery and equipment manufacturers and their fabricators. Due to the concentration of customers in the industrial machinery and equipment industry, a decline in production levels in that industry could result in lower sales, gross profits and profitability. Approximately 7% and 11% of our 2021 and 2020 consolidated net sales, respectively, 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. On September 17, 2021, we sold substantially all of the assets related to our Detroit, Michigan operation. The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers. After the sale, less than 3% of our sales were to automotive manufacturers or manufacturers of automotive components and parts. 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 6% of our consolidated net sales in both 2021 and 2020. Approximately 47% and 45% of our consolidated net sales during 2021 and 2020, respectively, were directly related to industrial machinery and equipment manufacturers and their fabricators. Due to the large concentration of customers in few segments, changes to demand of product by customers in the industrial machinery and equipment manufacturers and their fabricators could have a material adverse effect on our business, our results of operations and our cash flows. 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. Capital deployed for acquisitions and capital investments at our existing locations may be unable to achieve expected results, or sustain our growth and events or circumstances that could adversely impact operations could have a material adverse effect on our results of operations. We have grown through acquisitions and by increasing sales and services to our existing customers, aggressively pursuing new customers and services, building or purchasing new facilities, acquiring and upgrading processing equipment and expanded our product mix in order to expand the range of customer services and products that we offer. 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. We continue to pursue potential acquisition targets; however, we are unable to predict whether or when any prospective acquisition candidate will become available or the likelihood that any acquisition will be completed. 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 terms satisfactory to us, or at all. 18 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. 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. 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. Interest rate volatility may further amplify this 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 credit losses. The failure of our key computer-based systems could have a material adverse effect on our business. 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. 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. 19 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. 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. 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. Michael Siegal has served as our Executive Chairman of the Board since January 1, 2019, after serving as our Chief Executive Officer since 1984. Richard T. Marabito has served as our Chief Executive Officer since January 1, 2019, after serving as our Chief Financial Officer since 2010, and Richard A. Manson has served as our Chief Financial Officer since January 1, 2019, after serving as our Vice President and Treasurer since 2013. Andrew Greiff has served as our President and Chief Operating Officer since January 1, 2020 after serving as our Executive Vice President and Chief Operating Officer since 2016. 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. We have employment agreements, which include non-competition provisions, with our Chief Executive Officer, our President and Chief Operating Officer, and our Chief Financial Officer that expire on January 1, 2024, January 1, 2025, and January 1, 2027, respectively. 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, 2021, we employed approximately 1,642 people. Approximately 182 of the hourly plant personnel are represented by seven separate collective bargaining units. Any prolonged work stoppages by our personnel represented by collective bargaining units could have a material adverse impact on our business, financial condition, results of operations and cash flows. 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. 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. 20 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 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. 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 non-amortizable goodwill and trade names, covenant not to compete and customer relationships, net of accumulated amortization, related to recent acquisitions. Indefinitely lived assets are evaluated for impairment annually or whenever events or changes in circumstance indicate that the carrying amounts of these assets may not be recoverable. 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. Risks Related to Our Industry 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. Risks Related to Our Debt Although we expect to finance our growth initiatives through borrowings under our ABL 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. 21 We expect to finance our growth initiatives through borrowings under our ABL Credit Facility, which matures on June 16, 2026. However, our ABL 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 on terms acceptable to us, or at all, to run and expand our business. The borrowings under our ABL Credit Facility are primarily at variable interest rates. If interest rates in the future, which may be highly volatile, were to increase 100 basis points (1.0%) from December 31, 2021 rates and, assuming no change in total debt from December 31, 2021 levels, the additional annual interest expense to us would be approximately $2.5 million. Uncertainty relating to the calculation of London Interbank Offered Rate, or LIBOR and other reference rates and their potential discontinuance may adversely affect interest expense related to our outstanding debt, including amounts borrowed under our ABL Credit Facility. National and international regulators and law enforcement agencies have conducted investigations into a number of rates or indices, which are deemed to be “reference rates.” Actions by such regulators and law enforcement agencies may result in changes to the manner in which certain reference rates are determined, their discontinuance, or the establishment of alternative reference rates. The Federal Reserve Bank of New York has begun publishing a Secured Overnight Funding Rate, or SOFR, which is intended to replace U.S. dollar LIBOR, and central banks in several other jurisdictions have also announced plans for alternative reference rates for other currencies. These reforms may cause LIBOR to perform differently than in the past or to disappear entirely. The consequences of these developments with respect to LIBOR cannot be entirely predicted but may result in an increase in the interest cost of our variable rate indebtedness. In the future, we may need to renegotiate our outstanding indebtedness or incur other indebtedness, and the phase-out of LIBOR may negatively impact the terms of such indebtedness. In addition, the overall financial market may be disrupted as a result of the phase-out or replacement of LIBOR. Disruption in the financial market could have a material adverse effect on our financial position, results of operations, and liquidity. Regulatory and Environmental Risks Quotas and tariffs imposed or removed as a result of government actions can cause significant fluctuations in our operating results. Global demand and global metals pricing, supply and demand are impacted by quotas and tariffs imposed as a result of government actions. The tariffs initiated by the U.S. government in 2018 under Section 232 of the Trade Expansion Act of 1962 (section 232 tariffs) resulted in increased metals prices in the United States. Effective January 1, 2022, the United States and the European Union replaced the existing 25 percent tariff on EU steel products and 10 percent tariff on EU aluminum products with a tariff-rate quota, or TRQ. Under the TRQ arrangement, historically based volumes of EU steel and aluminum products will enter the U.S. without application of Section 232 duties subject to certain conditions. The removal and addition of country-specific tariffs has caused uncertainty in the metals marketplace. Any additional 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. The prolonged imposition of tariffs could also lead to additional trade disputes that could impact the global demand for metals and impact on sales, gross margin and profitability. Conversely, the removal of existing tariffs could cause the price of metal to decline, which may impact our sales, gross margin and profitability. Changes in laws or regulations, including 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. 22 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. We may be exposed to certain regulatory and financial risks related to climate change. Growing concerns about climate change may result in the imposition of additional regulations or restrictions to which we may become subject. A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to climate change, including regulating greenhouse gas emissions. The outcome of new legislation or regulation in the United States may result in new or additional requirements, additional charges to fund energy efficient activities, and fees or restrictions on certain activities. Compliance with these climate change initiatives may also result in additional costs to us, including, among other things, increased production costs, additional taxes, reduced emission allowances or additional restrictions on production or operations. Any adopted future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations. Even without such regulation, increased public awareness and adverse publicity about potential impacts on climate change emanating from us or our industry could harm us. We may not be able to recover the cost of compliance with new or more stringent laws and regulations, which could adversely affect our results of operations, cash flow or financial condition. The market price for our common stock may be volatile. Risks Related to Our Common Stock 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; 23 ● general domestic or international economic, market and political conditions; ● fluctuations in the value of the U.S. dollar; ● changes in the legal or regulatory environment affecting our business; and ● announcements by us or our competitors of significant acquisitions, dispositions or joint ventures, or other material events impacting the domestic or global metals industry. 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, including the impact of LIFO expense estimates, many of which are outside of our control. Factors that may affect our quarterly operating results include, but are not limited to, the risk factors listed above. 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. 24 Principal shareholders who own a significant number of shares of our common stock may have interests that conflict with yours. Michael D. Siegal, our Executive Chairman of the Board and one of our largest shareholders, owned approximately 11.1% of our outstanding common stock as of December 31, 2021. 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. General Risks Climate change may cause changes in weather patterns and increase the frequency or severity of weather events and flooding. An increase in severe weather events, including those caused by climate change, may adversely impact us, our operations, and our ability to procure raw materials and process and transport our products and could result in an adverse effect on our business, financial condition and results of operations. Extreme weather conditions may increase our costs, temporarily impact our production capabilities or cause damage to our facilities. Severe weather may also adversely impact our suppliers and our customers and their ability to deliver and/or purchase and transport our products. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 25 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. The following table sets forth certain information concerning our principal properties including which segment’s products are serviced out of each location: Operation Location Square Feet Function Owned or Leased Carbon Flat Cleveland Minneapolis Chambersburg Bedford Heights, Ohio (1) Bedford Heights, Ohio (1) Bedford Heights, Ohio (1) Dover, Ohio Plymouth, Minnesota Plymouth, Minnesota Chambersburg, Pennsylvania Chambersburg, Pennsylvania 127,000 121,500 59,500 62,000 196,800 112,200 157,000 150,000 Iowa Bettendorf, Iowa 244,000 Winder Winder, Georgia 285,000 Kentucky Gary Connecticut Chicago Berlin Metals McCullough Industries Streetsboro Rock Hill Buford, Georgia Mt. Sterling, Kentucky Mt. Sterling, Kentucky Gary, Indiana Milford, Connecticut Schaumburg, Illinois Hammond, Indiana Streetsboro, Ohio Latrobe, Pennsylvania Rock Hill, South Carolina Dallas Carrollton, Texas Houston Houston, Texas Corporate offices, coil processing and distribution center Coil and plate processing, distribution center and offices Plate processing, distribution center and offices Plate processing, fabrication and distribution center Coil and plate processing, distribution center and offices Plate processing, fabrication, distribution center and offices Plate processing, distribution center and offices Plate processing, fabrication, manufacturing, distribution center and offices Coil and plate processing, fabrication, distribution center and offices Coil and plate processing, fabrication, distribution center and offices Coil and plate processing, fabrication, and distribution center Plate processing, fabrication and distribution center 120,000 100,000 107,000 Distribution center and offices 183,000 134,000 122,500 117,950 Coil processing, distribution center and offices Coil processing, distribution center and offices Coil and sheet processing, distribution center and offices Coil processing, distribution center and offices 66,200 43,200 45,075 44,480 30,000 Coil and sheet processing, distribution center and offices Coil and sheet processing, distribution center Distribution, processing center and offices Distribution, processing center and offices Distribution, processing center and offices 26 (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) Owned Owned Leased (2) Owned Owned Owned Owned Owned Owned Owned Leased (3) Owned Owned Owned Owned Owned Leased (4) Owned Owned Leased (5) Owned Owned Leased (6) Kenton, Ohio 75,000 Manufacturing facility Segment Specialty Metals Flat Tube and Pipe (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) Operation Location Square Feet Function Owned or Leased Carbon Flat Specialty Metals Flat Tube and Pipe (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) (cid:6447) Springdale Kansas City Powder Springs Marietta Hiram Albany Chicago St. Paul Charlotte Fond du Lac Indianapolis Des Moines Owatonna Springdale, Arkansas Riverside, Missouri Powder Springs, Georgia Powder Springs, Georgia Powder Springs, Georgia Marietta, Georgia Marietta, Georgia Hiram, Georgia Albany, Georgia Romeoville, Illinois St. Paul, Minnesota Locust, North Carolina Fond du Lac, Wisconsin Indianapolis, Indiana Ankeny, Iowa Owatonna, Minnesota 12,200 11,300 Distribution, processing center and offices Distribution, processing center and offices 11,275 Fabrication and offices 17,766 Fabrication 22,200 Fabrication 11,300 Distribution and offices 26,880 Distribution and offices 16,000 Fabrication and offices 12,000 Distribution 363,000 Corporate offices, fabrication and distribution center 132,000 Distribution center and offices 127,600 Distribution center, fabrication and offices 117,000 Distribution center and offices 79,000 Distribution center and offices 50,000 Distribution center and offices 23,000 Production cutting center Leased (7) Leased (8) Leased (9) Leased (10) Leased (11) Leased (12) Leased (13) Leased (14) Leased (15) Owned Owned Owned Owned Owned Owned Owned (cid:6447) The Bedford Heights facilities are all adjacent properties. (1) This facility is leased from a related party. The lease expires on December 31, 2023, with renewal options. (2) The lease on this facility expires on July 1, 2027. (3) The lease on this facility expires on August 31, 2024, with renewal options. (4) The lease on this facility expires on May 1, 2024. (5) The lease on this facility expires on October 31, 2022, with renewal options. (6) The lease on this facility expires on July 1, 2022, with renewal options. (7) The lease on this facility expires on January 31, 2023, with renewal options (8) The lease on this facility expires on June 30, 2029. (9) (10) The lease on this facility expires on June 30, 2029. (11) The lease on this facility expires on June 30, 2029. (12) The lease on this facility expires on June 30, 2029. (13) The lease on this facility expires on June 30, 2029. (14) The lease on this facility expires on June 30, 2029. (15) The lease on this facility expires on January 1, 2029. In addition to the facilities listed above, our executive office is leased and located in Highland Hills, Ohio and we have leased offices located in Media, Pennsylvania, Bonita Springs, Florida, San Antonio, Texas and Monterrey, Mexico. 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. 27 ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 28 INFORMATION ABOUT OUR EXECUTIVE OFFICERS This information is included in this Annual Report on Form 10-K pursuant to Instruction 3 of Item 401(b) of Regulation S-K. The following is a list of our executive officers and a brief description of their business experience. Each executive officer will hold office until his or her successor is chosen and qualified. Michael D. Siegal, age 69, has served as the Executive Chairman of our Board of Directors since January 2019. He previously served as our Chief Executive Officer from 1984 until December 2018 and as Chairman of our Board of Directors from 1994 until December 2018. From 1984 until January 2001, he also served as our President. He has been employed by us in a variety of capacities since 1974. Mr. Siegal serves on the Board of Directors of Twin City Fan Companies, Ltd. He 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. Richard T. Marabito, age 58, has served as our Chief Executive Officer since January 2019. From March 2000 through December 2018, he served as our Chief Financial Officer. He joined us in 1994 as Corporate Controller and served in this capacity until March 2000. He also served as Treasurer from 1994 through 2002 and again from 2010 through 2012. 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 the Chair of the Metals Service Center Institute (MSCI), a North American metals industry trade association. He serves on the Board of Trustees for the University of Mount Union and has been a Board and Audit Committee member of CBIZ (CBZ: NYSE), one of the nation’s top providers of accounting, tax and advisory services, since August 2021. He served as a board member of the Make-A-Wish Foundation of Ohio, Kentucky and Indiana and was past Chair of its Northeast Ohio regional board. Richard A. Manson, age 53, has served as our Chief Financial Officer since January 2019, and has been employed by us since 1996. From January 2013 through December 2018, he served as our Vice President and Treasurer. From March 2010 through December 2012, he served as our Vice President of Human Resources and Administration. 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 member of the Advisory Board of Seeds for Literacy. Mr. Manson is a certified public accountant and member of the Ohio Society of Certified Public Accountants and the American Institute of Certified Public Accountants. Andrew S. Greiff, age 60, has served as our President and Chief Operating Officer since January 2020. From August 2016 through December 2019, he served as Executive Vice President and Chief Operating Officer. He previously served as President, Specialty Metals from 2011 to 2016 after having joined us in 2009 as Vice President of Specialty Metals. Prior thereto, Mr. Greiff spent 24 years in various positions within the steel industry and served as the President and CEO of his own steel trading company. Mr. Greiff served as a Board Member of the MSCI and a past director of Jewish Big Brother Big Sister and the Anti-Defamation League. Lisa K. Christen, age 45, has served as our Treasurer and Corporate Controller since January 2019, and has been employed by us since 1999. From March 2010 through December 2018, she served as our Corporate Controller. From 1999 through 2010 she served in various positions within the accounting department. Ms. Christen serves as the Treasurer and is a Board Member of Seton Catholic School in Hudson, Ohio and serves on the finance committee of Walsh Jesuit High School, in Cuyahoga Falls, Ohio. Ms. Christen is a certified public accountant and member of the Ohio Society of Certified Public Accountants. 29 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock trades on the Nasdaq Global Select Market under the symbol “ZEUS.” Holders of Record As of January 31, 2022, we estimate there were approximately 85 holders of record of our common stock. Dividends We expect to continue 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 ABL Credit Facility 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 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. 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, 2021. 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 ABL Credit Facility. Our ABL Credit Facility 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 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 the ABL Credit Facility, and repurchases may be discontinued at any time. As of December 31, 2021, 360,212 shares remain authorized for repurchase under the program. Recent Sales of Unregistered Securities We did not have any unregistered sales of equity securities during the quarter ended December 31, 2021. 30 ITEM 6. [RESERVED] The following table sets forth selected financial and other data for each of the five years in the period ended December 31, 2021. 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, 2021 2020 2018 2019 (in thousands, except per share data) 2017 Income Statement Data: Net sales Cost of materials sold Gross profit (a) Operating expenses (b) Operating income 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 $ 2,312,253 $ 1,234,144 $ 1,579,040 $ 1,715,081 $ 1,330,696 1,055,212 1,280,110 275,484 298,930 251,498 282,320 23,986 16,610 7,518 11,289 16,350 5,289 18,963 3,856 $ 1,802,052 510,201 337,735 172,466 7,631 164,799 121,051 $ 1,372,954 342,127 285,075 57,052 10,681 46,064 33,759 $ 979,099 255,045 254,472 573 7,411 (6,911) (5,595) $ $ $ $ $ 10.53 $ 10.52 $ 0.08 $ (0.49) $ (0.49) $ 0.08 $ 0.34 $ 0.34 $ 0.08 $ 2.95 $ 2.95 $ 0.08 $ 1.67 1.67 0.08 11,492 11,503 11,447 11,447 11,509 11,509 11,432 11,440 11,381 11,381 Balance Sheet Data (as of December 31): Current assets Current liabilities Working capital (f) Total assets Total debt Shareholders' equity $ $ 789,400 $ 224,336 565,064 1,023,572 327,764 424,439 $ 402,204 $ 126,725 275,479 640,605 160,609 301,010 $ 419,842 $ 101,087 318,755 649,555 192,925 308,352 $ 562,769 $ 128,427 434,342 760,740 302,530 306,991 $ 420,136 111,147 308,989 604,158 197,165 272,583 (a) Gross profit is calculated as net sales less the cost of materials sold (includes LIFO expense of $21,850 in 2021, LIFO income of $1,517 and $3,669 in 2020 and 2019, respectively, and LIFO expense of $8,408 and $2,707 in 2018 and 2017, respectively). (b) Operating expenses are calculated as total costs and expenses less the cost of materials sold. (c) The year ended December 31, 2017, includes a $6.2 million benefit related to the 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) Calculated as current assets less current liabilities. 31 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; specialty metals flat products, carbon flat products, and tubular and pipe products. We provide metals processing and distribution services for a wide range of customers. 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, prime tin mill products and fabricated parts. Through the acquisition of Shaw Stainless & Alloy, Inc., or Shaw, on October 1, 2021 and Action Stainless & Alloys, Inc., or Action Stainless, on December 14, 2020, our specialty metals flat products segment expanded its geographic footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe. Action Stainless offers a range of processing, including plasma, laser and waterjet cutting and machining. Our carbon flat products segment’s focus is on the direct sale and distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products and fabricated parts. Through the acquisitions of McCullough Industries, or McCullough, and the EZ Dumper® hydraulic dump inserts, or EZ Dumper, in 2019, our carbon flat products segment expanded its product offerings to include self-dumping metal hoppers and carbon and stainless-steel dump inserts for pickup truck and service truck beds. On September 17, 2021, the Company sold substantially all of the assets related to its Detroit operation. The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers and primarily included in the carbon flat-rolled segment. In addition, we distribute metal tubing, pipe, bar, valves and fittings and fabricate pressure parts supplied to various industrial markets through our tubular and pipe products segment. Products that require more value-added processing generally have a higher gross profit. Accordingly, our overall gross profit is affected by, among other things, product mix, the amount of processing performed, the demand for and availability of metals, and volatility in selling prices and material purchase costs. We also perform toll processing of customer-owned metals. We sell certain products internationally, primarily in Canada and Mexico. 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, tariffs, and inventory held in the supply chain; the availability, and increased costs of labor; 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. From time to time, we have entered into nickel swaps at the request of our customers in order to mitigate our customers’ risk of volatility in the price of metals, and we have entered into metals hedges to mitigate our risk of volatility in the price of metals. We have no long-term, fixed-price metals purchase contracts. 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. 32 Reportable Segments We operate in three reportable segments: specialty metals flat products, carbon flat products and tubular and pipe products. The specialty metals flat products segment and the carbon 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 specialty metals and carbon flat products 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 specialty metals flat products segment and the carbon 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 last-in, first-out, or 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. 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. Through the acquisition of Shaw on October 1, 2021 and Action Stainless on December 14, 2020, our specialty metals flat products segment expanded its geographic footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe. Through the acquisition of Berlin Metals, LLC, or Berlin Metals, on April 2, 2018, our specialty metals flat products segment expanded its product offerings to include differing types of stainless flat-rolled sheet and coil and prime tin mill products. 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. 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. Combined, the carbon and specialty metals flat products segments have 33 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 33 supplied to various industrial markets. Founded in 1914, CTI operates from seven 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 This section of this Annual Report on Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020. 2021 Compared to 2020 Our results of operations are impacted by the market price of metals. Metals prices fluctuate significantly and changes to our net sales, cost of materials sold, gross profit, cost of inventory and profitability, are all impacted by industry metals pricing. Starting in August 2020, metals prices increased significantly and reached record levels during 2021 before beginning to decline in October 2021. The increased industry metals pricing has been caused primarily by disruptions in the domestic and global supply chains; increased raw material pricing; supply shortages, including increased lead times and delivery delays; increased transportations costs; and increased domestic demand as the economy recovers from the COVID-19 pandemic. 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. During 2021, our sales volumes were negatively impacted by supply chain disruptions; however, our net sales were positively impacted by the price increases experienced during 2021, in particular for carbon flat products, which increased our profitability during 2021. Consolidated Operations The following table sets forth certain consolidated income statement data for the years ended December 31, 2021 and 2020 (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 Net income $ $2,312,253 1,802,052 510,201 337,735 172,466 (36) 7,631 164,799 43,748 $ 121,051 2021 % of net sales 2020 $ % of net sales 100.0 $1,234,144 979,099 255,045 254,472 573 (73) 7,411 (6,911) (1,316) (5,595) 77.9 22.1 14.6 7.5 (0.0) 0.3 7.1 1.9 5.2 $ 100.0 79.3 20.7 20.6 0.0 (0.0) 0.6 (0.6) (0.1) (0.5) (a) Includes $21,850 of LIFO expense and $1,517 of LIFO income in 2021 and 2020, 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. 34 Net sales increased $1.1 billion, or 87.4%, to $2.3 billion in 2021 from $1.2 billion in 2020. Specialty metals flat products net sales increased $272.6 million, or 87.0%, to $585.8 million in 2021 compared to $313.2 million in 2020 and were 25.3% of total net sales in 2021 compared to 25.4% of total net sales in 2020. Carbon flat products net sales increased $653.9 million, or 94.7%, in 2021 compared to 2020 and were 58.1% of total net sales in 2021 compared to 55.9% of total net sales in 2020. Tubular and pipe products net sales increased $151.7 million, or 65.7%, to $382.4 million in 2021 compared to $230.7 million in 2020 and were 16.5% of total net sales in 2021 compared to 18.7% of total net sales in 2020. The increase in net sales was due to a 75.0% increase in consolidated average selling prices during 2021 compared to 2020, and a 7.1% increase in consolidated volume. Average selling prices in 2021 were $1,942 per ton, compared to $1,110 per ton in 2020. The increase in the average selling price is a result of the market pricing dynamics discussed above in Results of Operations. Cost of materials sold increased $823.0 million, or 84.1%, to $1.8 billion in 2021 from $1.0 billion in 2020. During 2021, we recorded LIFO expense of $21.9 million compared to LIFO income of $1.5 million in 2020. The increase in cost of materials sold in 2021 is primarily related to increased metals pricing in 2021 compared to 2020. As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) increased to 22.1% in 2021 from 20.7% in 2020. The increase in the gross profit as a percentage of net sales is due to the impact of the rapidly increasing average selling prices discussed above in Results of Operations, while the average costs of inventory did not increase as quickly as the average selling price. Operating expenses (as defined in footnote (c) in the table above) increased $83.3 million, or 32.7%, to $337.7 million in 2021 from $254.5 million in 2020. As a percentage of net sales, operating expenses decreased to 14.6% in 2021 from 20.6% in 2020. Operating expenses in the specialty metals flat products segment increased $38.3 million, operating expenses in the carbon flat products segment increased $25.7 million, operating expenses in the tubular and pipe products segment increased $13.6 million, and corporate expenses increased $5.7 million. Operating expenses increased during 2021 as a result of increased variable expenses related to increased sales volume, increased labor hours and increased variable performance- based incentive compensation; and inflationary impacts on labor, transportation and other product support costs compared to 2020. In addition, the inclusion of operating expenses related to the December 2020 acquisition of Action Stainless and the October 2021 acquisition of Shaw increased operating expenses in the specialty metals flat products segment by $16.7 million. Interest and other expense on debt totaled $7.6 million in 2021 compared to $7.4 million in 2020. Our effective borrowing rate, exclusive of deferred financing fees and commitment fees, was 2.5% in 2021 compared to 3.3% in 2020. The decreased effective borrowing rate is due to lower interest rates compared to 2020. Total average borrowings increased $67.4 million, or 35.8%, to $255.8 million in 2021 from $188.4 million in 2020, primarily related to increased working capital needs in 2021. Income before income taxes totaled $164.8 million, or 7.1% of net sales, compared to loss before income taxes of $6.9 million, or (0.6%) of net sales, in 2020. An income tax provision of 26.5% was recorded in 2021, compared to an income tax benefit of 19.0% in 2020. The lower rate in 2020 was primarily attributable to the impact of permanently non-deductible items on a pre-tax loss. Net income in 2021 totaled $121.1 million, or $10.53 per basic share and $10.52 per diluted share, compared to net loss of $5.6 million, or $0.49 per basic and diluted share, in 2020. 35 Segment Results of Operations Specialty metals flat products The following table sets forth certain income statement data for the specialty metals flat products segment for the years ended December 31, 2021 and 2020 (dollars shown in thousands, except per ton data): 2021 % of net sales 2020 % of net sales 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 $ $ 149,935 7,872 157,807 585,751 3,712 441,825 143,926 73,382 70,544 115,354 11,319 126,673 313,190 2,472 266,434 46,756 35,090 11,666 100.0 $ 75.4 24.6 12.5 12.0 $ 100.0 85.1 14.9 11.2 3.7 (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 31 thousand tons, or 24.6%, to 158 thousand tons in 2021 from 127 thousand tons in 2020. The increase in tons sold was due to the acquisition of Action Stainless as well as customer demand returning to more normalized levels, compared to suppressed sales in 2020 caused by the COVID-19 pandemic. Net sales increased $272.6 million, or 87.0%, to $585.8 million in 2021 from $313.2 million in 2020. The increase in sales was due to a 50.1% increase in average selling prices and a 24.6% increase in sales volume during 2021 compared to 2020. Sales volumes in 2020 were adversely impacted by the COVID-19 pandemic. Average selling prices in 2021 increased to $3,712 per ton, compared to $2,472 per ton in 2020. The increase in the year over year average selling price per ton is a result of the increased industry metals pricing discussed above in Results of Operations. Cost of materials sold increased $175.4 million, or 65.8%, to $441.8 million in 2021 from $266.4 million in 2020. The increase in cost of materials sold was due to the increase in sales volume and increased industry metals pricing discussed above in Results of Operations. As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) increased to 24.6% in 2021 from 14.9% in 2020. The average gross profit per ton sold totaled $912 in 2021 compared to $369 in 2020. The increase in the gross profit as a percentage of net sales is due to the impact of the rapidly increasing average selling prices discussed above in Results of Operations, while the average costs of inventory did not increase as quickly as the average selling price. Operating expenses (as defined in footnote (b) in the table above) increased $38.3 million, or 109.1%, to $73.4 million in 2021 from $35.1 million in 2020. As a percentage of net sales, operating expenses increased to 12.5% of net sales in 2021 from 11.2% in 2020. The increase in operating expenses was primarily attributable to the inclusion of operating expenses related to the December 2020 acquisition of Action Stainless and the October 2021 acquisition of Shaw, which accounted for $16.7 million of the operating expense increase; increased variable expenses related to increased sales volume, increased labor hours and increased variable performance-based incentive compensation; and inflationary impacts on labor, transportation and other product support costs. Operating income for 2021 totaled $70.5 million, or 12.0% of net sales, compared to $11.7 million, or 3.7% of net sales, in 2020. 36 Carbon flat products The following table sets forth certain income statement data for the carbon flat products segment for the years ended December 31, 2021 and 2020 (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) 2021 % of net sales 2020 % of net sales 868,775 52,520 921,295 $ 1,344,150 1,459 1,059,620 284,530 174,456 110,074 $ 849,688 48,021 897,709 690,273 769 551,788 138,485 148,774 (10,289) 100.0 $ 78.8 21.2 13.0 8.1 $ 100.0 79.9 20.1 21.6 (1.6) (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 24 thousand tons, or 2.6%, to 921 thousand tons in 2021 from 898 thousand tons in 2020. Toll tons sold increased 5 thousand tons, or 9.3%, to 53 thousand tons in 2021 from 48 thousand tons in 2020. The increase in tons sold is due to customer demand returning to more normalized levels, compared to suppressed sales in 2020 caused by the COVID- 19 pandemic; however, our ability to ship is still limited due to supply chain disruptions experienced by our customers. In addition, tons sold by the carbon flat products segment was negatively impacted by the sale of our Detroit operation in September 2021 resulting in a decrease of 28 thousand tons, or 24.8%, to 85 thousand tons in 2021 from 112 thousand tons in 2020. Net sales increased $653.9 million, or 94.7%, to $1.3 billion in 2021 from $690.3 million in 2020. The increase in sales was due to an 89.7% increase in average selling prices and a 2.6% increase in sales volume, partially offset by a lower volume due to the sale of our Detroit operation in September 2021. Average selling prices in 2021 increased 89.7% to $1,459 per ton compared to $769 per ton in 2020. Cost of materials sold increased $507.8 million, or 92.0%, to $1.1 billion in 2021 from $551.8 million in 2020. The increase in cost of materials sold was due to increased industry metals pricing discussed above in Results of Operations. As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) increased to 21.2% in 2021 from 20.1% in 2020. The average gross profit per ton sold increased $155 per ton, or 100.2%, to $309 in 2021 from $154 in 2020. Operating expenses in 2021 increased $25.7 million, or 17.3%, to $174.5 million from $148.8 million in 2020. As a percentage of net sales, operating expenses decreased to 13.0% in 2021 from 21.6% in 2020. Operating expenses increased as a result of increased variable expenses related to increased sales volume, increased labor hours and increased variable performance-based incentive compensation and inflationary impacts on labor, transportation and other product support costs. Operating income totaled $110.0 million, or 8.1% of net sales, in 2021 compared to operating loss of $10.3 million, or (1.6%) of net sales, in 2020. 37 Tubular and pipe products The following table sets forth certain income statement data for the tubular and pipe products segment for the years ended December 31, 2021 and 2020 (dollars shown in thousands). Net sales Cost of materials sold (a) Gross profit (b) Operating expenses (c) Operating income 2021 2020 $ 382,352 300,607 81,745 74,392 7,353 $ $ % of net sales 100.0 $ 78.6 21.4 19.4 1.9 $ $ 230,681 160,877 69,804 60,785 9,019 % of net sales 100.0 69.7 30.3 26.3 3.9 (a) Includes $21,850 of LIFO expense and $1,517 of LIFO income in 2021 and 2020, 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 $151.7 million, or 65.7%, to $382.4 million in 2021 from $230.7 million in 2020. The increase in net sales was due to a 30.3% increase in average selling prices and a 27.2% increase in sales volume during 2021. The increase in sales volume is due to customer demand returning to more normalized levels, compared to suppressed sales in 2020 caused by the COVID-19 pandemic. Cost of materials sold increased $139.7 million, or 86.9%, to $300.6 million in 2021 from $160.9 million in 2020. The increase in cost of materials sold is due to increased metals pricing discussed above in Results of Operations and increased sales volumes. As a result of rapidly increasing prices, during 2021, our tubular and pipe products segment recorded $21.9 million of LIFO expense, compared to $1.5 million of LIFO income recorded in 2020. As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) decreased to 21.4% in 2021 compared to 30.3% in 2020. As a percentage of net sales, the LIFO expense recorded in 2021 decreased gross profit by 5.7% compared to the LIFO income recorded in 2020, which increased gross profit by 0.7%. Operating expenses (as defined in footnote (c) in the table above) increased $13.6 million, or 22.4%, to $74.4 million in 2021 from $60.8 million in 2020. As a percentage of net sales, operating expenses decreased to 19.4% in 2021 compared to 26.3% in 2020. Operating expenses increased as a result of increased variable expenses related to increased sales volume and increased variable performance-based incentive compensation and inflationary impacts on labor, transportation and other product support costs. Operating income for 2021 totaled $7.4 million, or 1.9% of net sales, compared to $9.0 million, or 3.9% of net sales, in 2020. Corporate expenses Corporate expenses increased $5.7 million, or 57.8%, to $15.5 million in 2021 compared to $9.8 million in 2020. Corporate expense increased as a result of increased performance-based incentive compensation offset by the $3.5 million gain, net of expenses, on the sale of our Detroit operation in September 2021. Liquidity, Capital Resources and Cash Flows Our principal capital requirements include funding working capital needs, purchasing, upgrading and acquiring processing equipment and facilities, making acquisitions and paying dividends. We use cash generated from operations and borrowings under our asset-based credit facility, or ABL Credit Facility, to fund these requirements. We believe that funds available under our ABL Credit Facility, 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 any share repurchases and business acquisitions over at least the next 12 months and for the foreseeable future thereafter. 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. 38 Accordingly, the timing and size of our capital requirements are subject to change as business conditions warrant and opportunities arise. 2021 Compared to 2020 Operating Activities During 2021, we used $146.4 million of cash for operations, of which $137.5 million was generated from operating activities and $283.9 million was used for working capital needs. Net cash from operations during 2021 was primarily comprised of net income of $121.1 million and the $21.0 million addback of non-cash depreciation and amortization expense. During 2020, we generated $61.7 million of net cash from operations, of which $14.5 million was generated from operating activities and $47.1 million was generated from working capital. Net cash from operations during 2020 was primarily comprised of the $20.0 million addback of non-cash depreciation and amortization expense to the net loss of $5.6 million. Working capital at December 31, 2021 totaled $565.1 million, a $289.6 million increase from December 31, 2021. The increase was primarily attributable to a $241.9 million increase in inventory (resulting from higher average inventory costs and higher inventory levels in 2021 compared to 2020), and a $131.5 million increase in accounts receivable (resulting primarily from increased sales prices and shipping volumes at the end of 2021 compared to 2020, offset by increased accounts payable and outstanding checks (resulting from increased inventory purchases and higher inventory costs at the end of 2021 compared to 2020) and increased accrued payroll and other accrued liabilities (resulting from increased performance based incentive compensation). Investing Activities Net cash used for investing activities was $13.5 million during 2021, compared to $28.1 million during 2020. Investment activities in 2021 included the acquisition of Shaw for $12.1 million and $11.0 million of capital expenditures, primarily attributable to processing equipment at our existing facilities. Net proceeds from the sale of property and equipment of our Detroit operation totaled $9.5 million. Investment activities in 2020 included the acquisition of Action Stainless for $19.5 million and $9.8 million of capital expenditures, primarily attributable to processing equipment at our existing facilities. During 2022, we expect our capital spending to exceed our annual depreciation expense. Financing Activities During 2021, $164.1 million of cash was from financing activities, which primarily consisted of $167.2 million of net borrowings under our ABL Credit Facility, offset by $1.3 million of credit facility fees and expenses related to our refinancing and $0.9 million of dividends paid and $0.8 million of principal payments for financing lease obligations. During 2020, $33.7 million of cash was used for financing activities, which primarily consisted of $32.3 million of net repayments under our ABL Credit Facility, and $0.9 million of dividends paid. In February 2022, our Board of Directors approved a regular quarterly dividend of $0.09 per share, which is payable on March 15, 2022 to shareholders of record as of March 1, 2022. Our Board previously approved 2021 and 2020 regular quarterly dividends of $0.02 per share, which were paid in March, June, September and December of 2021 and 2020. Dividend distributions in the future are subject to the availability of cash, limitations on cash dividends under our ABL Credit Facility 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 our 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 will be held in our treasury, or canceled and retired as our Board of Directors may determine from time to time. Any repurchases of common stock are subject to the covenants contained in the ABL Credit Facility. Under the ABL Credit Facility, 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% of the aggregate revolver commitments ($95.0 million at December 31, 2021) or (ii) to maintain availability equal to or greater than 15% of the aggregate revolver commitments ($71.3 million at December 31, 2021) 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 39 program will depend upon several factors, including market and business conditions, and limitations under the ABL Credit Facility, and repurchases may be discontinued at any time. As of December 31, 2021, 360,212 shares remain authorized for repurchase under the program. There were no shares repurchased during 2021. During 2020 and 2019, we repurchased 15,000 and 109,505 shares, for an aggregate cost of $0.1 million and $1.5 million, respectively. At- the-Market Equity Program On September 3, 2021, we commenced an at-the-market, or ATM, equity program under our shelf registration statement, which allows us to sell and issue up to $50 million in shares of our common stock from time to time. We entered into an Equity Distribution Agreement on September 3, 2021 with KeyBanc Capital Markets Inc., or KeyBanc, relating to the issuance and sale of shares of common stock pursuant to the program. KeyBanc is not required to sell any specific amount of securities but will act as our sales agent using commercially reasonable efforts consistent with its normal trading and sales practices, on mutually agreed terms between KeyBanc and us. KeyBanc will be entitled to compensation for shares sold pursuant to the program of 2.0% of the gross proceeds of any shares of common stock sold under the Equity Distribution Agreement. No shares were sold under the ATM program during the twelve months ended December 31, 2021. Debt Arrangements On June 16, 2021, we entered into a Fourth Amendment to Third Amended and Restated Loan and Security Agreement, which amended and extended our existing ABL Credit Facility. The $475 million ABL Credit Facility consists of: (i) a revolving credit facility of up to $445 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 ABL Credit Facility, 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 and add real estate as collateral at our discretion. The ABL Credit Facility matures on June 16, 2026. The ABL Credit Facility 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 us; (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 ABL Credit Facility contains a financial covenant which provides that: (i) if any commitments or obligations are outstanding and our availability is less than the greater of $30 million or 10.0% of the aggregate amount of revolver commitments ($47.5 million at December 31, 2021) or 10.0% of the aggregate borrowing base ($47.5 million at December 31, 2021), 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, 2021, we were in compliance with our covenants and had approximately $143.5 million of availability under the ABL Credit Facility. As of December 31, 2021, $1.6 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 ABL Credit Facility and are included in “Interest and other expense on debt” on the accompanying Consolidated Statements of Comprehensive Income (Loss). On January 10, 2019, we entered into a five-year forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $75 million of the outstanding LIBOR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at 2.57%. 40 Contractual and Other Obligations The following table reflects the material cash requirements for our contractual and other obligations as of December 31, 2021. We believe that funds available under our ABL Credit Facility, together with funds generated from operations, will be sufficient to provide us with the liquidity necessary to satisfy these obligations. Contractual Obligations (amounts in thousands) Long-term debt obligations Interest obligations Finance lease obligations Unrecognized tax positions Other long-term liabilities Total 327,764 $ 26,808 1,886 259 11,054 (a) $ (b) (c) (d) (e) Less than 1 year 1-3 years 3-5 years More than 5 years - $ - $ 7,021 709 240 - 12,244 796 19 7,273 327,764 $ 7,542 337 - 2,909 Total contractual obligations $ 367,771 $ 7,970 $ 20,332 $ 338,553 $ - - 44 - 872 916 (a) See Note 10 to the Consolidated Financial Statements. (b) Future interest obligations are calculated using the debt balances and interest rates in effect on December 31, 2021. (c) See Note 9 to the Consolidated Financial Statements. (d) See Note 15 to the Consolidated Financial Statements. Classification is based on expected settlement dates and the expiration of certain statutes of limitations. (e) Consists of retirement liabilities and deferred compensation payable in future years. 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 derivative instruments discussed in Note 11 to the Consolidated Financial Statements, as of December 31, 2021, 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 labor and distribution expense, has not had a material effect on our financial results during the past three years. Critical Accounting Estimates 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. 41 We believe the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in developing estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. See Note 1 to our consolidated financial statements for our significant accounting policies related to our critical accounting estimates. Allowance for Credit Losses The allowance for credit losses is maintained at a level considered appropriate based on historical experience and specific customer collection issues that we have identified. 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 credit losses each quarter. Valuation of Deferred Tax Assets The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The assessment regarding whether a valuation allowance is required or should be adjusted is based on an evaluation of possible sources of taxable income and also considers all available positive and negative evidence factors. 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 the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more- likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Impact of Recently Issued Accounting Pronouncements In December 2019, the Financial Account Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The objective of this ASU is to simplify the accounting for income taxes by removing certain exceptions to general principles in ASC 740 and by clarifying and amending existing guidance within U.S. generally accepted accounting principles. ASU 2019-12 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Different components of the guidance require retrospective, modified retrospective or prospective adoption, and early adoption is permitted. The adoption of this ASU during the first quarter of 2021 did not have a material impact on our Consolidated Financial Statements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326).” which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. The ASU replaces the existing incurred loss impairment model with a forward-looking expected credit loss model, which will result in earlier recognition of credit losses. The adoption of this ASU on January 1, 2020 did not have a material impact on our Consolidated Financial Statements. 42 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. We, like many other metals service centers, 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 47%, 45% and 46% of our consolidated net sales in 2021, 2020 and 2019, 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, purchased metals, energy and borrowings under our ABL Credit Facility. General inflation, excluding increases in the price of metals and increased labor and distribution expense, has not had a material effect on our financial results during the past three years. We are exposed to the impact of fluctuating metals prices and interest rate changes. During 2021, 2020 and 2019, we entered into metals swaps at the request of customers. These derivatives have not been designated as hedging instruments. For certain customers, we enter into contractual relationships that entitle us to pass-through the economic effect of trading positions that we take with other third parties on our customers’ behalf. 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, 2021 rates and, assuming no change in total debt from December 31, 2021 levels, the additional annual interest expense to us would be approximately $2.5 million. We have the option to enter into 30- to 180- day fixed base rate LIBOR loans under the revolving credit facility provided by our ABL Credit Facility. On January 10, 2019, we entered into a five-year interest rate swap that locked the interest rate at 2.567% on $75 million of our revolving debt. 43 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Olympic Steel, Inc. Index to Consolidated Financial Statements Reports of Independent Registered Public Accounting Firms (PCAOB ID Number 248)................................................ Management’s Report on Internal Control Over Financial Reporting .............................................................................. Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019 .. Consolidated Balance Sheets as of December 31, 2021 and 2020 .................................................................................... Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019................................. Supplemental Disclosures of Cash Flow Information for the Years Ended December 31, 2021, 2020 and 2019 ............ Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2021, 2020 and 2019.................. Notes to Consolidated Financial Statements for the Years Ended December 31, 2021, 2020 and 2019........................... Schedule II – Valuation and Qualifying Accounts for the Years Ended December 31, 2021, 2020 and 2019 ................. Page 45 47 48 49 50 51 52 53 72 44 Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Olympic Steel, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Olympic Steel, Inc. (an Ohio corporation) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 25, 2022 expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our specially challenging, subjective or complex judgments. We determined that there are no critical audit matters. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2019. Cleveland, Ohio February 25, 2022 45 Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Olympic Steel, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Olympic Steel, Inc. (an Ohio corporation) and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our report dated February 25, 2022 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible 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 an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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/ GRANT THORNTON LLP Cleveland, Ohio February 25, 2022 46 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, 2021. 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, 2021, 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, 2021 has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in their report, which appears herein. 47 Olympic Steel, Inc. Consolidated Statements of Comprehensive Income (Loss) 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 Total costs and expenses Operating income Other loss, net Income 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 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 2021 2020 2019 $ 2,312,253 $ 1,234,144 $ 1,579,040 1,802,052 103,017 104,617 55,404 41,881 12,500 17,952 2,364 2,139,787 172,466 (36) 172,430 7,631 164,799 43,748 121,051 $ 2,960 (740) 123,271 $ 10.53 $ 11,492 10.52 $ 11,503 0.08 $ 979,099 83,091 71,451 44,728 26,050 9,662 17,936 1,554 1,233,571 573 (73) 500 7,411 (6,911) (1,316) (5,595) $ (2,579) 645 (7,529) $ (0.49) $ 11,447 (0.49) $ 11,447 0.08 $ 1,280,110 99,457 76,863 48,159 28,839 9,972 17,686 1,344 1,562,430 16,610 (32) 16,578 11,289 5,289 1,433 3,856 (3,041) 760 1,575 0.34 11,509 0.34 11,509 0.08 $ $ $ $ $ The accompanying notes are an integral part of these consolidated statements. 48 Olympic Steel, Inc. Consolidated Balance Sheets As of December 31, (in thousands) Assets Cash and cash equivalents Accounts receivable, net Inventories, net (includes LIFO reserve of $19,736 and LIFO debit of $2,115 as of December 31, 2021 and 2020, respectively) Prepaid expenses and other Total current assets Property and equipment, at cost Accumulated depreciation Net property and equipment Goodwill Intangible assets, net Other long-term assets Right-of use assets, net Total assets Accounts payable Accrued payroll Other accrued liabilities Current portion of lease liabilities Total current liabilities Credit facility revolver Other long-term liabilities Deferred income taxes Lease liabilities Total liabilities Liabilities Commitments and contingencies (Note 13) 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; 11,124 issued; 11,124 and 11,075 shares outstanding Treasury stock, at cost, 0 and 0 shares held Accumulated other comprehensive loss Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 2021 2020 $ 9,812 $ 284,570 5,533 151,601 485,029 9,989 789,400 413,396 (266,340) 147,056 10,496 33,653 15,241 27,726 1,023,572 $ 148,649 $ 44,352 25,395 5,940 224,336 327,764 15,006 9,890 22,137 599,133 240,001 5,069 402,204 434,579 (277,379) 157,200 5,123 32,593 18,131 25,354 640,605 87,291 10,985 22,869 5,580 126,725 160,609 22,478 9,818 19,965 339,595 - - 133,427 - (1,996) 293,008 424,439 1,023,572 $ 132,382 - (4,215) 172,843 301,010 640,605 $ $ $ The accompanying notes are an integral part of these consolidated statements. 49 Olympic Steel, Inc. Consolidated Statements of Cash Flows For The Years Ended December 31, (in thousands) Adjustments to reconcile net income (loss) to net cash from (used for) operating activities. Net income (loss) Adjustments to reconcile net income (loss) to net cash from (used for) operating activities - Depreciation and amortization (Gain) loss on disposition of property and equipment Gain on disposition of Detroit operation (before expenses of $2,569) Stock-based compensation Intangibles and 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: Acquisitions Capital expenditures Proceeds from sale of Detroit property and equipment 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 Principal payments under finance lease obligation Credit facility fees and expenses Repurchase of common stock Dividends paid Net cash from (used for) financing activities Cash and cash equivalents: Net change Beginning balance Ending balance 2021 2020 2019 $ 121,051 $ (5,595) $ 3,856 20,954 (22) (6,068) 1,045 6,796 (6,231) 137,525 (131,459) (241,899) (4,850) 60,538 (1,189) 34,960 (283,899) (146,374) (12,105) (11,011) 9,506 146 (13,464) 757,788 (590,632) (828) (1,325) - (886) 164,117 20,008 2,026 - 1,215 (4,349) 1,220 14,525 (14,790) 37,186 2,112 23,333 (6,893) 6,179 47,127 61,652 (19,500) (9,803) - 1,154 (28,149) 339,538 (371,854) (242) (124) (145) (885) (33,712) 19,548 (222) - 2,188 (3,835) 1,283 22,818 42,141 95,836 2,464 (33,651) 7,053 (7,040) 106,803 129,621 (11,133) (10,165) - 269 (21,029) 536,944 (646,549) (63) (100) (1,522) (879) (112,169) 4,279 5,533 9,812 $ (209) 5,742 5,533 $ (3,577) 9,319 5,742 $ The accompanying notes are an integral part of these consolidated statements. 50 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 2021 2020 2019 $ $ 6,843 46,548 $ $ 7,002 1 $ $ 10,951 460 The Company incurred financing lease obligations of $1.4 million during the year ended December 31, 2020. This non-cash transaction has been excluded from the Consolidated Statement of Cash Flows for the year ended December 31, 2020. There were no financing lease obligations incurred during the years ended December 31, 2021 and 2019. The accompanying notes are an integral part of these consolidated statements 51 Olympic Steel, Inc. Consolidated Statements of Shareholders’ Equity For The Years Ended December 31, (in thousands) Accumulated Other Treasury Comprehensive Retained Earnings Loss Stock Common Stock Total Equity Balance at December 31, 2018 Net income Payment of dividends Stock-based compensation Stock repurchase Change in fair value of hedges Other Balance at December 31, 2019 Net loss Payment of dividends Stock-based compensation Stock repurchase Change in fair value of hedges Other Balance at December 31, 2020 Net income Payment of dividends Stock-based compensation Change in fair value of hedges Other $ $ $ $ $ $ 130,778 $ (132) $ - $ 176,345 $ 306,991 - $ - 869 - - - - $ - 1,319 (1,522) - - - $ - - (2,281) - 3,856 $ (879) - - - (1) 3,856 (879) 2,188 (1,522) (2,281) (1) 131,647 $ (335) $ (2,281) $ 179,321 $ 308,352 - $ - 735 - - - - $ - 480 (145) - - 132,382 $ - $ - 1,045 - - - $ - $ - - - - - $ - $ - - (1,934) - (5,595) $ (885) - - - 2 (5,595) (885) 1,215 (145) (1,934) 2 (4,215) $ 172,843 $ 301,010 - $ - - 2,220 (1) 121,051 $ (886) - - - 121,051 (886) 1,045 2,220 (1) (1,996) $ 293,008 $ 424,439 Balance at December 31, 2021 $ 133,427 $ The accompanying notes are an integral part of these consolidated statements. 52 Olympic Steel, Inc. Notes to Consolidated Financial Statements For The Years Ended December 31, 2021, 2020 and 2019 1. Summary of Significant Accounting Policies: Nature of Business The Company operates in three reportable segments: specialty metals flat products, carbon flat products, and tubular and pipe products. The specialty metals flat products segment and the carbon flat products segment are at times consolidated and referred to as the flat products segments. Certain of the flat products segments’ assets and resources are shared by the specialty metals and carbon flat products 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 specialty metals flat products segment and the carbon flat products segment based upon an established allocation methodology. The specialty metals flat products segment sells and distributes processed aluminum and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. Through the acquisition of Action Stainless & Alloys, Inc. (Action Stainless) on December 14, 2020, the specialty metals flat products segment expanded its geographic footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe. Action Stainless offers a range of processing capabilities, including plasma, laser and waterjet cutting and computer numerical control (CNC) machining. On October 1, 2021, the Company acquired all of the net assets of Shaw Stainless & Alloy, Inc. (Shaw), based in Powder Springs, Georgia. Shaw is a full-line distributor of stainless steel sheet, pipe, tube, bar and angles. Shaw also manufactures and distributes stainless steel bollards and water treatment systems. The acquisition includes Shaw's stainless-steel distribution and fabrication businesses as well as its architectural and barrier defense businesses. The carbon flat products segment sells and distributes large volumes of processed carbon and coated flat-rolled sheet, coil and plate products, and fabricated parts. Through the acquisitions of McCullough Industries (McCullough) and certain assets related to the manufacturing of the EZ Dumper® hydraulic dump inserts (EZ Dumper) in 2019, the carbon flat products segment expanded its product offerings to include self-dumping metal hoppers and steel and stainless-steel dump inserts for pickup truck and service truck beds. On September 17, 2021, the Company sold substantially all of the assets related to its Detroit operation. The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers. The tubular and pipe products segment, which consists of the Chicago Tube and Iron subsidiary (CTI), distributes metal tubing, pipe, bar, valves and fittings and fabricates pressure parts supplied to various industrial markets. 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 payroll expenses for certain personnel, expenses related to being a publicly traded entity such as board of directors’ expenses, audit expenses, and various other professional fees. On March 11, 2020, the World Health Organization classified the novel coronavirus (COVID-19) outbreak as a pandemic. The Company continues to be an essential business and has remained open in all locations throughout 2021, adhering to all health guidelines to operate safely provided by the Center for Disease Control and Prevention and local authorities. The Company has implemented actions to maintain its financial health and liquidity and through these actions has maintained sales volumes in 2021 which are close to pre-pandemic levels. The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business. However, as a result of the many uncertainties surrounding the COVID- 19 pandemic, the Company is unable to predict the impact that it ultimately will have on its financial condition, results of operations, comprehensive income (loss), and cash flows. Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements have been prepared from the financial records of Olympic Steel, Inc. and its wholly-owned subsidiaries (collectively, Olympic or the Company), after elimination of intercompany accounts and transactions. 53 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 51%, 56% and 57% of its total steel requirements from its three largest suppliers in 2021, 2020 and 2019, 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 23%, 25% and 29% of consolidated net sales in 2021, 2020 and 2019, respectively. In addition, the Company’s largest customer accounted for approximately 2%, 2% and 5% of consolidated net sales in 2021, 2020 and 2019, respectively. Sales to industrial machinery and equipment manufacturers and their fabricators accounted for 47%, 45% and 46% of consolidated net sales in 2021, 2020, and 2019, 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. The Company maintains cash levels in bank accounts that, at times, may exceed federally-insured limits. The Company have not experienced significant loss, and believe we are not exposed to significant risk of loss, in these accounts. 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 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, 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 Credit Losses The Company’s allowance for credit losses 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 credit losses each quarter. Inventory Valuation Non-last-in, first-out (LIFO) inventories are stated at the lower of its cost or 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 54 transportation. LIFO inventories are stated at the lower of cost or market. Market is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion. Inventory costs include the costs of the purchased metals, inbound freight, external and internal processing and applicable labor and overhead costs. Costs of the Company’s specialty metals and carbon 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 LIFO method. At December 31, 2021 and December 31, 2020, approximately $55.4 million, or 11.4% of consolidated inventory, and $50.3 million, or 21.0% 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. On the Consolidated Statements of Comprehensive Income (Loss), “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. 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 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. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not 55 threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company had no material unrecognized tax benefits as of or during the year ended December 31, 2021. The Company expects no significant increases or decrease in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2021. Revenue Recognition The Company's contracts with customers are comprised of purchase orders with standard terms and conditions. Occasionally the Company may also have longer-term agreements with customers. Substantially all of the contracts with customers require the delivery of metals, which represent single performance obligations that are satisfied upon transfer of control of the product to the customer. Transfer of control is assessed based on the use of the product distributed and rights to payment for performance under the contract terms. Transfer of control and revenue recognition for substantially all of the Company’s sales occur upon shipment or delivery of the product, which is when title, ownership and risk of loss pass to the customer and is based on the applicable shipping terms. The shipping terms depend on the customer contract. An invoice for payment is issued at time of shipment and terms are generally net 30 days. The Company has certain fabrication contracts in one business unit for which revenue is recognized over time as performance obligations are achieved. This fabrication business is immaterial to the Company's consolidated results. 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. 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 (Loss) is entirely comprised of all shipping and other transportation costs incurred by the Company in shipping goods to its customers. Stock-Based Compensation The Company records compensation expense for stock awards issued to employees and directors. For additional information, see Note 13, Equity Plans. Impact of Recently Issued Accounting Pronouncements In December 2019, the Financial Account Standards Board, or FASB, issued Accounting Standards Update (ASU) No. 2019- 12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The objective of this ASU is to simplify the accounting for income taxes by removing certain exceptions to general principles in ASC 740 and by clarifying and amending existing guidance within U.S. generally accepted accounting principles. ASU 2019-12 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Different components of the guidance require retrospective, modified retrospective or prospective adoption, and early adoption is permitted. The adoption of this ASU during the first quarter of 2021 did not have a material impact on the Company’s Consolidated Financial Statements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326).” which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. The ASU replaces the existing incurred loss impairment model with a forward-looking expected credit loss model, which will result in earlier recognition of credit losses. The adoption of this ASU on January 1, 2020 did not have a material impact on the Company’s Consolidated Financial Statements. 2. Acquisitions On October 1, 2021, the Company acquired all of the net assets of Shaw, based in Powder Springs, Georgia, for $12.1 million. Shaw is a full-line distributor of stainless steel sheet, pipe, tube, bar and angles. Shaw also manufactures and distributes stainless steel bollards and water treatment systems. The acquisition includes Shaw's stainless-steel distribution and fabrication businesses as well as its architectural and barrier defense businesses. As of the effective date of the acquisition, 56 Shaw’s results are included in the Company’s specialty metals flat products segment. Upon the acquisition, the Company entered into an amendment to its credit facility to include the eligible assets of Shaw. On December 14, 2020, the Company acquired the assets of Action Stainless, based outside of Dallas, Texas, for $19.5 million. Action Stainless is a full line distributor of stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe and offers a wide range of processing capabilities including plasma, laser and waterjet cutting and CNC machining. As of the effective date of the acquisition, Action Stainless results are included in the Company’s specialty metals flat products segment. Upon the acquisition, the Company entered into an amendment to its credit facility to include the eligible assets of Action Stainless. On August 5, 2019, the Company acquired certain assets related to the manufacturing of the EZ Dumper® hydraulic dump inserts for $0.1 million. The dump inserts are sold through a network of more than 100 dealers across the United States and Canada. As of the effective date of the acquisition, EZ Dumper’s results are included in the Company’s carbon flat products segment. On January 2, 2019, the Company acquired substantially all of the net assets of McCullough, based in Kenton, Ohio, for $11.0 million. McCullough was founded in 1965 and manufactures and sells branded self-dumping metal hoppers used in a variety of industrial applications. McCullough’s products are primarily sold through industrial distributors and catalogues. As of the effective date of the acquisition, McCullough’s results are included in the Company’s carbon flat products segment. The acquisitions are not considered significant and thus pro forma information has not been provided. The acquisitions were accounted for as business combinations and the assets and liabilities were valued at fair market value. The table below summarizes the final purchase price allocation of the fair market values of the assets acquired and liabilities assumed. Details of Acquisition (in thousands) Assets acquired Accounts receivable, net Inventories Property and equipment Prepaid expenses and other Goodwill Intangible assets Total assets acquired Total liabilities assumed Cash paid Shaw As of October 1, 2021 Action Stainless As of December 14, 2020 EZ Dumper As of August 5, 2019 McCullough As of January 2, 2019 $ $ 1,510 3,129 1,886 5,986 5,262 2,750 20,523 (8,418) 12,105 $ $ 3,239 3,656 10,610 204 1,894 4,410 24,013 (4,513) 19,500 $ $ - 43 67 - 166 23 299 (166) 133 $ $ 461 586 4,138 - 898 5,599 11,682 (682) 11,000 The purchase price allocations presented above are based upon management’s estimate of the fair value of the acquired assets and assumed liabilities using Level 3 valuation techniques including income, cost and market approaches. The fair value estimates involve the use of estimates and assumptions, including, but not limited to, the timing and amounts of future cash flows, revenue growth rates, discount rates, and royalty rates. The total liabilities assumed for Action Stainless include an immaterial earn-out amount. 3. Disposition of Assets On September 17, 2021, the Company sold substantially all of the assets related to its Detroit operation to Venture Steel (U.S.), Inc. for $58.4 million plus a working capital adjustment, estimated at $13.5 million, which was settled in early 2022. The working capital adjustment is included in “Accounts Receivable, net” on the Consolidated Balance Sheet as of December 31, 2021. The sale price included $9.5 million for property and equipment and the remaining assets and liabilities were sold at fair value, which equaled carrying value. The proceeds of the sale will be used for working capital needs as well as future acquisitions and investments in organic growth opportunities. The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers. The sale of the Detroit operation does not indicate a strategic shift in the Company’s operations. The gain on the sale net of associated professional and legal fees totaled $3.5 million and is included in “Administrative and general” in the Corporate segment in the Consolidated Statements 57 of Comprehensive Income (Loss) for the year ended December 31, 2021. The operating results of the Detroit operation were included in the flat-products segments prior to the disposition. 4. Revenue Recognition The Company provides metals processing, distribution and delivery of large volumes of processed carbon, coated flat-rolled sheet, coil and plate products, aluminum, and stainless flat-rolled products, prime tin mill products, flat bar products, metal tubing, pipe, bar, valves, fittings, and fabricated parts. The Company's contracts with customers are comprised of purchase orders with standard terms and conditions. Occasionally the Company may also have longer-term agreements with customers. Substantially all of the contracts with customers require the delivery of metals, which represent single performance obligations that are satisfied at a point in time upon transfer of control of the product to the customer. Transfer of control is assessed based on the use of the product distributed and rights to payment for performance under the contract terms. Transfer of control and revenue recognition for substantially all of the Company’s sales occur upon shipment or delivery of the product, which is when title, ownership and risk of loss pass to the customer and is based on the applicable shipping terms. The shipping terms depend on the customer contract. An invoice for payment is issued at time of shipment and terms are generally net 30 days. The Company has certain fabrication contracts in one business unit for which revenue is recognized over time as performance obligations are achieved. This fabrication business is not material to the Company's consolidated results. Within the metals industry, revenue is frequently disaggregated by products sold. The tables below disaggregates the Company’s revenues by segment and products sold for the year ended December 31, 2021, 2020 and 2019, respectively. Disaggregated Revenue by Products Sold For the Twelve Months Ended December 31, 2021 Carbon flat products Specialty metals flat products 31.4% 10.4% 7.0% 7.7% - - 1.6% 58.1% - - - - 25.3% - 0.1% 25.4% Tubular and pipe products - - - - - 16.5% - 16.5% Total 31.4% 10.4% 7.0% 7.7% 25.3% 16.5% 1.7% 100.0% Disaggregated Revenue by Products Sold For the Twelve Months Ended December 31, 2020 Carbon flat products Specialty metals flat products 29.7% 9.6% 5.9% 9.6% - - 1.1% 55.9% - - - - 23.5% - 1.9% 25.4% Tubular and pipe products - - - - - 18.7% - 18.7% Total 29.7% 9.6% 5.9% 9.6% 23.5% 18.7% 3.0% 100.0% Hot Rolled Plate Cold Rolled Coated Specialty Pipe & Tube Other Total Hot Rolled Plate Cold Rolled Coated Specialty Pipe & Tube Other Total 58 Disaggregated Revenue by Products Sold For the Twelve Months Ended December 31, 2019 Carbon flat products Specialty metals flat products Tubular and pipe products Total 32.3 % 12.2 % 5.5 % 7.7 % - - 1.0 % 58.7 % - - - - 20.9 % - 2.1 % 23.0 % - - - - - 18.3 % - 18.3 % 32.3 % 12.2 % 5.5 % 7.7 % 20.9 % 18.3 % 3.1 % 100.0 % Hot Rolled Plate Cold Rolled Coated Specialty Pipe & Tube Other Total 5. Accounts Receivable: Accounts receivable are presented net of allowances for credit losses and unissued credits of $4.4 million and $3.6 million as of December 31, 2021 and 2020, respectively. Credit loss expense totaled $1.3 million, $1.2 million and $0.6 million in 2021, 2020 and 2019, respectively. The allowance for credit losses is maintained at a level considered appropriate based on historical experience, specific customer collection issues that have been identified, current market conditions and estimates for supportable forecasts when appropriate. 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 credit losses and unissued credits. 6. Inventories: Inventories consisted of the following: (in thousands) Unprocessed Processed and finished Total As of December 31, 2020 2021 194,614 45,387 240,001 $ 417,595 $ 67,434 $ 485,029 $ During 2021, the Company recorded $21.9 million of LIFO expense as a result of increased metals pricing during 2021. The LIFO expense decreased the Company’s inventory balance and increased its cost of materials sold. During 2020, the Company recorded $1.5 million of LIFO income as a result of decreased metals pricing during 2020. The LIFO income increased the Company’s inventory balance and decreased its cost of materials sold. Our pipe and tubular inventory quantities were reduced during 2021 and 2020 resulting in a liquidation of LIFO inventory layers (a LIFO decrement). A LIFO decrement results in the erosion of layers created in earlier years, and, therefore, a LIFO layer is not created for years that have decrements. For the years ended December 31, 2021 and 2020, the effect of the LIFO decrement impacted cost of materials sold by an immaterial amount. If the FIFO method had been in use, inventories would have been $19.7 million higher and $2.1 million lower than reported at December 31, 2021 and 2020, respectively. 59 7. 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 Financing lease Construction in progress Less accumulated depreciation Net property and equipment Depreciable Lives December 31, 2021 December 31, 2020 - 5 - 10 7 - 30 2 - 15 3 - 7 2 - 5 2 - 5 - $ $ 15,238 $ 3,780 141,979 210,410 6,229 25,053 3,054 2,710 4,943 413,396 (266,340) 147,056 $ 15,698 3,742 148,507 222,802 6,699 28,977 2,504 3,582 2,068 434,579 (277,379) 157,200 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, 2021 and December 31, 2020, primarily consisted of payments for additional processing equipment at our existing facilities that were not yet placed into service. 8. Goodwill and Intangible Assets: The Company’s intangible assets were recorded in connection with its acquisitions of Shaw in 2021, Action Stainless in 2020, EZ Dumper and McCullough in 2019, Berlin Metals in 2018 and CTI in 2011. The intangible assets were evaluated on the premise of highest and best use to a market participant, primarily utilizing the income approach valuation methodology. Goodwill, by reportable unit, was as follows as of December 31, 2021 and December 31, 2020, respectively. The goodwill is deductible for tax purposes. (in thousands) Balance as of December 31, 2019 Acquisitions Impairments Balance as of December 31, 2020 Acquisitions Impairments $ Balance as of December 31, 2021 $ Carbon Flat Products Specialty Metals Flat Products Tubular and Pipe Products Total 1,065 $ - - 1,065 - - 1,065 $ 2,358 $ 1,700 - 4,058 5,373 - 9,431 $ - $ - - - - - - $ 3,423 1,700 - 5,123 5,373 - 10,496 The useful life of the customer relationships was determined to be ten to 15 years, based primarily on the consistent and predictable revenue source associated with the existing customer base, the present value of which extends through the amortization period. The useful life of the non-compete agreements was determined to be the length of the non-compete agreements, which range from one to five years. The useful life of the trade names was determined to be indefinite primarily due to their history and reputation in the marketplace, the Company’s expectation that the trade names will continue to be used, and the conclusion that there are currently no other factors identified that would limit their useful life. The Company will continue to evaluate the useful life assigned to its amortizable customer relationships and noncompete agreements in future periods. 60 Intangible assets, net, consisted of the following as of December 31, 2021 and 2020, respectively: (in thousands) Customer relationships - subject to amortization Covenant not to compete - subject to amortization Trade name - not subject to amortization (in thousands) Customer relationships - subject to amortization Covenant not to compete - subject to amortization Trade name - not subject to amortization Gross Carrying Amount As of December 31, 2021 Accumulated Amortization Intangible Assets, Net 22,559 $ 509 21,368 44,436 $ (10,552) $ (231) - (10,783) $ 12,007 278 21,368 33,653 Gross Carrying Amount As of December 31, 2020 Accumulated Amortization Intangible Assets, Net 21,442 $ 259 20,179 41,880 $ (9,101) $ (186) - (9,287) $ 12,341 73 20,179 32,593 $ $ $ $ During 2021 and 2020, a qualitative test was performed for the indefinitely lived intangible assets and no indication of impairment was identified. The Company estimates that amortization expense for its intangible assets subject to amortization will be approximately $1.6 million per year for the next four years and $1.2 million per year for the one year thereafter. 9. Leases: The Company leases warehouses and office space, industrial equipment, office equipment, vehicles, industrial gas tanks and forklifts from other parties and leases land and warehouse space to third parties. The Company determines if a contract contains a lease when the contract conveys the right to control the use of identified assets for a period of time in exchange for consideration. Upon identification and commencement of a lease, the Company establishes a right-of-use (ROU) asset and a lease liability. Operating leases are included in ROU assets, current portion of lease liabilities, and lease liabilities on the accompanying Consolidated Balance Sheets. Financing leases are included in property, plant and equipment, other accrued liabilities and other long-term liabilities. The Company has remaining lease terms ranging from one year to 17 years, some of these include options to renew the lease for up to five years. The total lease term is determined by considering the initial term per the lease agreement, which is adjusted to include any renewal options that the Company is reasonably certain to exercise as well as any period that the Company has control over the space before the stated initial term of the agreement. If the Company determines a reasonable certainty of exercising termination or early buyout options, then the lease terms are adjusted to account for these facts. The Company leases one warehouse from a related party. The Company’s Executive Chairman of the Board 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, 2023 with three five-year renewal options. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Lease expense is recognized on a straight-line basis over the lease term. 61 The components of lease expense were as follows for the years ended December 31, 2021, 2020 and 2019: (in thousands) Operating lease cost Finance lease cost Amortization Interest on lease liabilities 2021 2020 2019 6,952 $ 7,089 $ 7,013 721 71 792 $ 254 54 308 $ 67 15 82 $ $ Supplemental cash flow information related to leases was as follows for the years ended December 31, 2021 and 2020: (in thousands) 2021 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases Operating cash flows from finance leases Financing cash flows from finance leases Total cash paid for amounts included in the measurement of lease liabilities $ $ $ 6,830 71 699 $ 6,996 54 242 7,600 $ 7,292 $ 6,913 15 63 6,991 Supplemental balance sheet information related to leases was as follows: (in thousands) 2021 2020 Operating leases Operating lease Operating lease accumulated amortization Operating lease right of use asset, net Operating lease current liabilities Operating lease liabilities (in thousands) Finance leases Finance lease Finance lease accumulated depreciation Finance lease, net Finance lease current liabilities Finance lease liabilities Weighted average remaining lease term (in years) Operating leases Finance leases Weighted average discount rate Operating leases Finance leases 62 $ $ $ $ $ $ 42,023 $ (14,297) 27,726 $ 5,940 22,137 28,077 $ 36,060 (10,706) 25,354 5,580 19,965 25,545 2021 2020 2,710 $ (965) 1,745 $ 661 1,115 1,776 $ 2021 2020 6 4 3.44% 3.42% 3,582 (333) 3,249 815 2,453 3,268 3.76% 3.80% Maturities of lease liabilities were as follows: (in thousands) Year Ending December 31, 2022 2023 2024 2025 2026 Thereafter Total future minimum lease payments Less remaining imputed interest Total Operating Lease Finance Lease $ $ $ 6,775 $ 5,770 5,004 3,769 2,857 7,154 31,329 $ (3,252) 28,077 $ 709 441 355 188 149 44 1,886 (110) 1,776 10. Debt: The Company’s debt is comprised of the following components: (in thousands) Asset-based revolving credit facility due June 16, 2026 Total debt Less current amount Total long-term debt As of December 31, 2020 2021 $ $ 327,764 $ 327,764 - 327,764 $ 160,609 160,609 - 160,609 On June 16, 2021, the Company entered into a Fourth Amendment to Third Amended and Restated Loan and Security Agreement (the ABL Credit Facility), which amended and extended the Company’s existing ABL Credit Facility. The $475 million ABL Credit Facility consists of: (i) a revolving credit facility of up to $445 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 ABL Credit Facility, 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, and add real estate as collateral at the Company’s discretion. The ABL Credit Facility matures on June 16, 2026. The ABL Credit Facility 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 ABL Credit Facility contains a financial covenant which provides that: (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 ($47.5 million at December 31, 2021) or 10.0% of the aggregate borrowing base ($47.5 million at December 31, 2021), 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, 2021, the Company was in compliance with its covenants and had approximately $143.5 million of availability under the ABL Credit Facility. 63 As of December 31, 2021 and December 31, 2020, $1.6 million and $0.9 million, respectively, 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 ABL Credit Facility and are included in “Interest and other expense on debt” on the accompanying Consolidated Statements of Comprehensive Income (Loss). 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 Total principal payments 2022 2023 2024 2025 $ $ - - $ $ - - $ $ - - $ $ 2026 327,764 327,764 Total 327,764 327,764 $ $ - - $ $ The overall effective interest rate for all debt, exclusive of deferred financing fees and deferred commitment fees, amounted to 2.5%, 3.3% and 4.0% in 2021, 2020 and 2019, respectively. Interest paid totaled $6.8 million, $7.0 million and $11.0 million for the years ended December 31, 2021, 2020 and 2019, respectively. Average total debt outstanding was $255.8 million, $188.4 million and $257.6 million in 2021, 2020 and 2019, respectively. 11. Derivative Instruments: Metals swaps During 2021, 2020 and 2019, 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 Sheets at December 31, 2021. There were no outstanding metal swaps at December 31, 2020. The Company entered into the swaps to mitigate its customers’ risk of volatility in the price of metals. 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 (Loss). 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 (Loss). The cumulative change in fair value of the metals swaps that had not yet settled as of December 31, 2021 were included in “Accounts Receivable, net” and the embedded customer derivatives are included in “Other accrued liabilities” on the Consolidated Balance Sheets. Fixed rate interest rate hedge On January 10, 2019, the Company entered into a five-year forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $75 million of the outstanding LIBOR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at 2.57%. The interest rate hedge is included in “Other long-term liabilities” on the Consolidated Balance Sheets as of December 31, 2021 and 2020 and had a fair value of $2.7 million and $5.6 million, respectively. The mark-to-market adjustment of the fair value of the hedge is recorded to “Accumulated other comprehensive loss” on the Company’s Consolidate Balance Sheets. Although the Company is exposed to credit loss in the event of nonperformance by the other party to the interest rate hedge agreement, the Company anticipates performance by the counterparty. There was no net impact from the nickel swaps or embedded customer derivative agreements to the Company’s Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019. The table below shows the total impact to the Company’s Consolidated Statements of Comprehensive Income (Loss) through “Net income (loss)” of the derivatives for the years ended December 31, 2021, 2020 and 2019. 64 (in thousands) Fixed interest rate hedge Metals swaps Embedded customer derivatives Total loss Net Gain (Loss) Recognized 2020 2021 2019 $ $ (1,880) $ 418 (418) (1,880) $ (1,520) $ 55 (55) (1,520) $ (227) 291 (291) (227) 12. 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 2021 and 2020, 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, 2021. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value as of December 31, 2021: Metals swaps and embedded customer derivatives – Determined by using Level 2 inputs that include the price of nickel indexed to the LME. 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. Fixed rate interest rate hedge – 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 tables present 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: Metal Swaps Fixed interest rate hedge Total liabilities recorded at fair value (in thousands) Liabilities: Fixed interest rate hedge Total liabilities recorded at fair value Value of Items Recorded at Fair Value As of December 31, 2021 Level 1 Level 2 Level 3 Total - $ - $ - $ - - $ 2,286 $ 2,286 $ 2,178 $ 2,661 4,839 $ - $ - $ - $ - - $ 2,286 2,286 2,178 2,661 4,839 Value of Items Recorded at Fair Value As of December 31, 2020 Level 1 Level 2 Level 3 Total - - $ 5,620 5,620 $ - - $ 5,620 5,620 $ $ $ $ $ The value of the items not recorded at fair value represent the carrying value of the liabilities. 65 The carrying value of the ABL Credit Facility was $327.8 million and $160.6 million at December 31, 2021 and 2020, respectively. Because the ABL Credit Facility was amended on June 16, 2021, management believes that its carrying value approximates fair value. 13. Equity Plans: Restricted Stock Units Pursuant to the Amended and Restated Olympic Steel 2007 Omnibus Incentive Plan (the Incentive Plan), the Company may grant stock options, stock appreciation rights, restricted shares, restricted share units (RSUs), performance shares, and other stock- and cash-based awards to employees and directors of, and consultants to, the Company and its affiliates. Since adoption of the Incentive Plan, 1,400,000 shares of common stock have been authorized for equity grants. On an annual basis, the compensation committee of the Company’s Board of Directors awards RSUs, to each non-employee director as part of their annual compensation. The annual awards for 2021 and 2020 per director were $80,000. Subject to the terms of the Incentive 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. Prior to 2021, under the Incentive Plan, each eligible participant was 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. Due to the COVID-19 pandemic, no RSU awards were granted in 2020 or 2021. In January 2022, the Company adopted a new C-Suite Long-Term Incentive Plan (the LTIP) that operates under the Incentive Plan and awards RSUs to eligible participants. In each calendar year, eligible participants may be awarded a long-term incentive of both an RSU award and a performance stock unit (PSU) award pursuant to the LTIP. Under the Incentive Plan, the Company awards RSUs to newly-appointed executive officers, based upon a percentage of their base salary. Upon Mr. Marabito’s promotion to Chief Executive Officer and Mr. Manson’s promotion to Chief Financial Officer on January 1, 2019, they received 51,506 RSUs and 14,891 RSUs, respectively. Upon Mr. Greiff’s promotion to President and Chief Operating Officer on January 1, 2020, he received 15,694 RSUs. The RSUs will vest five years from the grant date, or earlier upon death or disability or upon a change in control of the Company. Stock-based compensation expense recognized on RSUs for the years ended December 31, 2021, 2020 and 2019, respectively, is summarized in the following table: (in thousands) RSU expense before taxes of the Plan RSU expense after taxes For the years ended December 31, 2020 2019 2021 $ 1,045 $ 767 1,265 $ 1,024 965 704 All pre-tax charges related to RSUs were included in the caption “Administrative and general” on the accompanying Consolidated Statements of Comprehensive Income (Loss). The total compensation cost of non-vested awards totaled $1.0 million and the weighted average remaining vesting period is 1.3 years as of December 31, 2021. 66 The following table summarizes the activity related to RSUs for the year ended December 31, 2021, 2020 and 2019: 2021 2020 2019 Beginning balance Granted Converted into shares Forfeited Outstanding at December 31 Vested at December 31 Number of Shares Number of Shares Number of Shares Weighted Average Estimated Fair Value 18.25 23.29 18.67 17.55 18.40 18.78 610,540 $ 20,604 (49,191) (5,086) 576,867 $ 370,771 $ Weighted Average Estimated Fair Value 19.25 11.92 20.27 18.14 18.25 18.88 636,086 $ 70,588 (94,161) (1,973) 610,540 $ 375,692 $ Weighted Average Estimated Fair Value 20.65 16.36 20.59 22.80 19.25 20.37 527,546 $ 207,521 (96,845) (2,136) 636,086 $ 419,721 $ Of the RSUs granted in 2019, 62,229 RSUs were used to fund supplemental executive retirement plan (SERP) contributions. No RSUs were used to fund the SERP in 2020 or 2021. 14. 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. 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, 2021, approximately 182 of the hourly plant personnel are represented by seven separate collective bargaining units. The table below shows the expiration dates of the collective bargaining agreements. Facility Minneapolis (plate), Minnesota Hammond, Indiana Locust, North Carolina St. Paul, Minnesota Romeoville, Illinois Minneapolis (coil), Minnesota Indianapolis, Indiana Expiration date March 31, 2022 November 30, 2024 March 4, 2025 May 25, 2025 May 31, 2025 September 30, 2025 January 29, 2026 15. Income Taxes: The components of the Company’s provision (benefit) for income taxes from continuing operations were as follows: (in thousands) Current: Federal International State and local Deferred Income tax provision (benefit) 2021 As of December 31, 2020 2019 $ $ 36,592 $ 85 7,739 44,416 (668) 43,748 $ 321 $ 103 59 483 (1,799) (1,316) $ 1,747 107 22 1,876 (443) 1,433 67 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 credit losses Accrued expenses Lease liabilities Interest rate hedge Other Deferred tax assets before valuation allowance Valuation allowance Total deferred tax assets Deferred tax liabilities: LIFO reserve Property and equipment Lease right of use assets Intangibles Total deferred tax liabilities Deferred tax liabilities, net 2021 2020 2,198 $ 1,375 626 5,288 8,568 665 205 18,925 (1,197) 17,728 (3,500) (12,293) (8,483) (3,342) (27,618) (9,890) $ 1,529 3,510 440 5,778 7,348 1,405 390 20,400 (2,302) 18,098 (3,528) (13,562) (7,294) (3,532) (27,916) (9,818) $ $ The net deferred tax liability increased by $740 thousand related to the fixed interest rate hedge, which is recorded in “Other Comprehensive Income (Loss)” in the Consolidated Statements of Comprehensive Income (Loss). The following table summarizes the activity related to the Company’s gross unrecognized tax benefits: (in thousands) Balance as of January 1 Change in tax due to tax law Increases related to current year tax positions Increases related to prior year tax positions Decreases related to lapsing of statute of limitations Balance as of December 31 $ $ 2021 2020 2019 28 $ - 8 200 (8) 228 $ 28 $ - 8 - (8) 28 $ 27 - 10 - (9) 28 It is expected that the amount of unrecognized tax benefits will not materially change in the next twelve months. The tax years 2018 through 2020 remain open to examination by major taxing jurisdictions to which the Company is subject. The Company recognized interest related to uncertain tax positions in the income tax provision. 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 Meals and entertainment Tax credits Stock based compensation All other, net Effective income tax rate 2021 2020 2019 21.0% 4.5% 0.1% (0.1%) - 1.0% 26.5% 21.0% 1.0% (1.8%) 2.0% (3.4%) 0.2% 19.0% 21.0% 3.7% 5.8% (4.2%) - 0.8% 27.1% Income taxes paid in 2021, 2020 and 2019 totaled $46.5 million, $1 thousand and $0.5 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 ten 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. The valuation allowances recorded as of December 31, 2021 and 2020 were related to certain state net operating losses and totaled $1.2 million and $2.3 million, respectively. 68 16. 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, 2020 2021 2019 Weighted average basic shares outstanding Assumed exercise of stock options and issuance of stock awards Weighted average diluted shares outstanding 11,492 11 11,503 11,447 - 11,447 11,509 - 11,509 Net income (loss) Basic earnings (loss) per share Diluted earnings (loss) per share Unvested RSUs 17. Equity Programs: Stock Repurchase Program $ $ $ 121,051 $ (5,595) $ 3,856 10.53 $ 10.52 $ (0.49) $ (0.49) $ 206 235 0.34 0.34 216 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 affected through Rule 10b5-1 plans. Any of the repurchased shares are held in the Company’s treasury, or canceled and retired as the Board of Directors may determine from time to time. Any repurchases of common stock are subject to the covenants contained in the ABL Credit Facility. Under the ABL Credit Facility, 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 ($95.0 million at December 31, 2021) or (ii) to maintain availability equal to or greater than 15.0% of the aggregate revolver commitments ($71.3 million at December 31, 2021) 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. As of December 31, 2021, 360,212 shares remain authorized for repurchase under the program. There were no shares repurchased during 2021. During 2020 and 2019, the Company repurchased 15,000 and 109,505 shares, for an aggregate cost of $0.1 million and $1.5 million, respectively. At-the-Market Equity Program On September 3, 2021, the Company commenced an at-the-market (ATM) equity program under its shelf registration statement, which allows it to sell and issue up to $50 million in shares of its common stock from time to time. The Company entered into an Equity Distribution Agreement on September 3, 2021 with KeyBanc Capital Markets Inc. ("KeyBanc") relating to the issuance and sale of shares of common stock pursuant to the program. KeyBanc is not required to sell any specific amount of securities but will act as the Company’s sales agent using commercially reasonable efforts consistent with its normal trading and sales practices, on mutually agreed terms between KeyBanc and the Company. KeyBanc will be entitled to compensation for shares sold pursuant to the program of 2.0% of the gross proceeds of any shares of common stock sold under the Equity Distribution Agreement. No shares were sold under the ATM program during 2021. 18. 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 69 decisions. The CODM evaluates performance and allocates resources based primarily on operating income (loss). The operating segments are based primarily on internal management reporting. The Company operates in three reportable segments; specialty metals flat products, carbon flat products, and tubular and pipe products. The specialty metals flat products segment and the carbon flat products segment are at times consolidated and referred to as the flat products segments, as certain of the flat products segments’ assets and resources are shared by the specialty metals and carbon flat products segments and both segments’ products are stored in the shared facilities and, in some locations, processed on shared equipment. 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. The following table provides financial information by segment and reconciles the Company’s operating income by segment to the consolidated income (loss) before income taxes for the years ended December 31, 2021, 2020 and 2019. (in thousands) Net sales Specialty metals flat products Carbon flat products Tubular and pipe products Total net sales Depreciation and amortization Specialty metals flat products Carbon flat products Tubular and pipe products Corporate Total depreciation and amortization Operating income Specialty metals flat products Carbon flat products Tubular and pipe products Corporate Total operating income Other loss, net Income before interest and income taxes Interest and other expense on debt Income (loss) before income taxes (in thousands) Capital expenditures Flat products Tubular and pipe products Corporate Total capital expenditures Assets Flat products Tubular and pipe products Corporate Total assets $ $ $ $ $ $ $ $ $ $ $ 70 For the Year Ended December 31, 2020 2019 2021 585,751 $ 1,344,150 382,352 2,312,253 $ 313,190 $ 690,273 230,681 1,234,144 $ 363,634 926,903 288,503 1,579,040 3,692 $ 11,286 5,267 71 20,316 $ 70,544 $ 110,074 7,353 (15,505) 172,466 $ (36) 172,430 7,631 164,799 $ 1,951 $ 11,941 5,478 120 19,490 $ 11,666 $ (10,289) 9,019 (9,823) 573 $ (73) 500 7,411 (6,911) $ 1,830 11,624 5,408 168 19,030 14,321 (5,023) 18,607 (11,295) 16,610 (32) 16,578 11,289 5,289 For the Year Ended December 31, 2020 2021 2019 8,797 $ 2,214 - 11,011 $ 7,589 $ 2,214 - 9,803 $ 6,996 3,169 - 10,165 777,074 $ 245,962 536 1,023,572 $ 404,269 235,516 820 640,605 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, 2021, 2020 and 2019. The Company sells certain products internationally, primarily in Canada and Mexico. International sales are immaterial to the consolidated financial results and to the individual segments’ results. 19. Retirement Plans: The Company’s retirement plans consist of 401(k) plans covering union and non-union employees, a multi-employer pension plan covering certain CTI employees and a 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. For the Action Stainless 401(k) retirement plans, the Company matched 100% of the first 3% of eligible compensation and one-half of the next 2% of each eligible employee’s contribution, limited to 4% 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 seven years. The Company, through its CTI subsidiary, contributes to a multiemployer pension plan. 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, 2025. CTI contributions to the Multiemployer Plan were immaterial for the years ended December 31, 2021 and 2020. Retirement plan expense, which includes all Company 401(k), SERP defined contributions and the Multiemployer Plan, amounted to $3.8 million, $2.0 million and $3.0 million for the years ended December 31, 2021, 2020 and 2019, respectively. As part of the COVID-19 related cost reduction efforts, the Company suspended contributions into the SERP for 2020. The fair values of the Company's SERP assets as of December 31, 2021 and 2020 were $8.7 million and $7.6 million, respectively, 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. 20. Related-Party Transactions: The Company’s Executive Chairman of the Board 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, 2023 with three five-year renewal options. 71 Schedule II – Valuation and Qualifying Accounts (in thousands) Description Year Ended December 31, 2019 Allowance for credit losses Tax valuation reserve Year Ended December 31, 2020 Allowance for credit losses Tax valuation reserve Year Ended December 31, 2021 Allowance for credit losses Tax valuation reserve Additions Balance at Beginning of Period Charged to Costs and Expenses Charged to Other Accounts Deductions Balance at End of Period $ $ $ $ $ $ 1,940 2,055 1,965 2,215 1,726 2,302 $ $ $ $ $ $ 590 160 1,154 87 1,250 236 $ $ $ $ $ $ - - - - - - $ $ $ $ $ $ (565) $ $ - (1,393) $ $ - (474) $ (1,341) $ 1,965 2,215 1,726 2,302 2,502 1,197 72 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, or Exchange Act, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) 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, 2021 in providing reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to allow timely decisions regarding required disclosure. 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. Grant Thornton LLP, our independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2021, as stated in their report, which appears in Part II, Item 8 of this Annual Report. 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, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 73 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 2022 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 2022 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 2022 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 2022 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 2022 Annual Meeting of Shareholders. 74 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 Firms Management’s Report on Internal Control Over Financial Reporting Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019 Consolidated Balance Sheets as of December 31, 2021 and 2020 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 Supplemental Disclosures of Cash Flow Information for the Years Ended December 31, 2021, 2020 and 2019 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2021, 2020 and 2019 Notes to Consolidated Financial Statements for the Years Ended December 31, 2021, 2020 and 2019 (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 2.1 Description Asset Purchase Agreement, dated as of September 17, 2021, by and among Venture Steel (U.S), Inc., Olympic Steel Lafayette, Inc. and Olympic Steel, Inc 3.1(i) Amended and Restated Articles of Incorporation 3.1(ii) Amended and Restated Code of Regulations 3.1(iii) Amendment to Amended and Restated Articles of Incorporation 4.25 4.26 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. Joinder and First Amendment to Bank Agreement, dated as of April 4, 2018, to 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.’ Reference Incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K filed with the Commission on September 22, 2021 (Commission File No. 0-23320) Incorporated by reference to Exhibit 3.1(i) to the Registration Statement on Form S-1 (Registration No. 33-73992) filed with the Commission on January 12, 1994. Incorporated by reference to Exhibit 3.1 to Company’s Form 10-Q filed with the Commission on August 6, 2015 (Commission File No. 0-23320). Incorporated by reference to Exhibit 3.1 to Company’s Form 10-Q filed with the Commission on August 6, 2021 (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 4.25 to Registrant's Form 10-Q filed with the Commission on May 3, 2018 (Commission File No. 0-23320). 75 4.27 4.28 4.29 4.30 4.31 10.8 * 10.9 * Joinder and Second Amendment to Third Amended and Restated Loan and Security Agreement, dated as of November 30, 2018, 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. Description of Securities Joinder and Third Amendment to Third Amended and Restated Loan and Security Agreement, dated as of December 14, 2020, by and among Olympic Steel, Inc., Olympic Steel Lafayette, Inc., Olympic Steel Minneapolis, Inc., Olympic Steel Iowa, Inc., Oly Steel NC, Inc., IS Acquisition, Inc., Chicago Tube and Iron Company, B Metals, Inc., MCI, Inc, and ACT Acquisition, Inc, the lenders from time to time party thereto and Bank of America, N.A. as Agent for the Lenders. Fourth Amendment to Third Amended and Restated Loan and Security Agreement, dated as of June 16, 2021, among Olympic Steel, Inc., Olympic Steel Lafayette, Inc., Olympic Steel Minneapolis, Inc., Olympic Steel Iowa, Inc., Oly Steel NC, Inc., IS Acquisition, Inc., Chicago Tube and Iron Company, B Metals, Inc., MCI, Inc., ACT Acquisition, Inc., the lenders from time to time party thereto and Bank of America, N.A. as Agent for the Lenders Joinder and Fifth Amendment to Third Amended and Restated Loan and Security Agreement, dated as of October 1, 2021, among Olympic Steel, Inc., Olympic Steel Lafayette, Inc., Olympic Steel Minneapolis, Inc., Olympic Steel Iowa, Inc., Oly Steel NC, Inc., IS Acquisition, Inc., Chicago Tube and Iron Company, B Metals, Inc., MCI, Inc., ACT Acquisition, Inc., SHAQ, Inc., the lenders from time to time party thereto and Bank of America, N.A. as Agent for the Lenders Form of Management Retention Agreement for Senior Executive Officers of the Company Form of Management Retention Agreement for Other Officers of the Company 10.14 * Olympic Steel, Inc. Executive Deferred Compensation Plan dated December 15, 2004 Incorporated by reference to Exhibit 4.26 to Registrant's Form 8-K filed with the Commission on December 4, 2018 (Commission File No. 0-23320). Incorporated by reference to Exhibit 4.28 to Registrant's Form 10-K filed with the Commission on February 21, 2020 (Commission File No. 0-23320). Incorporated by reference to Exhibit 4.29 to Registrant's Form 8-K filed with the Commission on December 14, 2020 (Commission File No. 0-23320). Incorporated by reference to Exhibit 4.30 to Registrant’s Form 8-K filed with the Commission on June 21, 2021 (Commission File No. 0-23320) Filed herewith 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). 76 10.15 * Form of Non-Solicitation Agreements 10.16 * Form of Management Retention Agreement 10.17 * Supplemental Executive Retirement Plan Term Sheet 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). Incorporated by reference to Exhibit 10.16 to Registrant’s Form 10-Q filed with the Commission on August 8, 2005 (Commission File No. 0-23320). Incorporated by reference to Exhibit 99.1 to Registrant’s Form 8-K filed with the Commission on January 5, 2006 (Commission File No. 0-23320). 10.20 * Olympic Steel, Inc. Supplemental Executive Retirement Plan Incorporated by reference to Exhibit 10.20 to 10.21 * 10.22 * 10.23 * 10.30 * Olympic Steel, Inc. Amended and Restated Olympic Steel, Inc. 2007 Omnibus Incentive Plan as Amended Effective May 7, 2021 Olympic Steel, Inc. C-Suite Long-Term Incentive Plan Form of C-Suite Long-Term Incentive Agreement for participants. Olympic Steel, Inc. Senior Manager Compensation Plan 10.33 * Richard T. Marabito Employment Agreement effective as of December 21, 2018 10.34 * Form of RSU Agreements for Messrs. Siegal, Wolfort and Marabito. 10.37 * Amendment to Form of Management Retention Agreement for Senior Executive Officers of the Company 10.41 * Employment Agreement, dated as of January 1, 2020, between Olympic Steel, Inc. and Andrew S. Greiff 10.42 * Richard A. Manson Employment Agreement effective as of January 1, 2022 21 List of Subsidiaries Registrant’s Form 8-K filed with the Commission on April 28, 2006 (Commission File No. 0-23320). Incorporated by reference to Exhibit 10.1 to Registrant’s Form 10-Q filed with the Commission on August 6, 2021 (Commission File No-0-23320). Filed herewith Filed herewith 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 10.13 to Registrant’s Form 8-K filed with the Commission on December 21, 2018 (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). 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). Incorporated by reference to Exhibit 10.41 to Registrant’s Form 8-K filed with the Commission on December 27, 2019 (Commission File No. 0-23320). Incorporated by reference to Exhibit 10.40 to Registrant’s Form 8-K filed with the Commission on November 26, 2021 (Commission File No. 0-23320). Filed herewith 77 Filed herewith Filed herewith Filed herewith Filed herewith Furnished herewith Furnished herewith 23.1 24 31.1 31.2 32.1 32.2 101 104 Consent of Grant Thornton, LLP, 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 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 Richard T. Marabito, 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 A. Manson, 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 The following materials from Olympic Steel’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Comprehensive Income (Loss), (iii) the Consolidated Statements of Cash Flows, (iv) the Supplemental Disclosures of Cash Flow Information, (v) the Consolidated Statements of Shareholders’ Equity, (vi) Notes to Unaudited Consolidated Financial Statements and (vii) document and entity information. Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101). * This exhibit is a management contract or compensatory plan or arrangement. 78 ITEM 16. FORM 10-K SUMMARY None. 79 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 February 25, 2022 OLYMPIC STEEL, INC. By:/s/ Richard A. Manson Richard A. Manson, 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. February 25, 2022 February 25, 2022 February 25, 2022 February 25, 2022 February 25, 2022 February 25, 2022 February 25, 2022 February 25, 2022 February 25, 2022 February 25, 2022 /s/ Richard T. Marabito * Richard T. Marabito, Chief Executive Officer (Principal Executive Officer) /s/ Richard A. Manson * Richard A. Manson, Chief Financial Officer (Principal Financial and Accounting Officer) /s/ Michael D. Siegal * Michael D. Siegal, Executive Chairman of the Board /s/ Arthur F. Anton * Arthur F. Anton, Lead Director /s/ Dirk A. Kempthorne * Dirk A. Kempthorne, Director /s/ Idalene F. Kesner * Idalene F. Kesner, Director /s/ Michael G. Rippey * Michael G. Rippey, Director /s/ Richard P. Stovsky * Richard P. Stovsky, Director /s/ Vanessa Whiting * Vanessa Whiting, Director /s/ David A. Wolfort * David A. Wolfort, 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 A. Manson Richard A. Manson, Attorney-in-Fact February 25, 2022 80 Comparison of 5 Year Cumulative Total Return (cid:15)(cid:36)(cid:34)(cid:37)(cid:27)(cid:38)(cid:32)(cid:39)(cid:36)(cid:35)(cid:1)(cid:36)(cid:31)(cid:1)(cid:9)(cid:1)(cid:26)(cid:30)(cid:27)(cid:38)(cid:1)(cid:15)(cid:41)(cid:34)(cid:41)(cid:33)(cid:27)(cid:40)(cid:32)(cid:42)(cid:30)(cid:1)(cid:25)(cid:36)(cid:40)(cid:27)(cid:33)(cid:1)(cid:23)(cid:30)(cid:40)(cid:41)(cid:38)(cid:35) (cid:14)(cid:39)(cid:39)(cid:41)(cid:34)(cid:30)(cid:39)(cid:1)(cid:18)(cid:35)(cid:32)(cid:40)(cid:32)(cid:27)(cid:33)(cid:1)(cid:18)(cid:35)(cid:42)(cid:30)(cid:39)(cid:40)(cid:34)(cid:30)(cid:35)(cid:40)(cid:1)(cid:36)(cid:31)(cid:1)(cid:2)(cid:6)(cid:5)(cid:5) (cid:16)(cid:30)(cid:29)(cid:30)(cid:34)(cid:28)(cid:30)(cid:38)(cid:1)(cid:7)(cid:5)(cid:7)(cid:6) (cid:8)(cid:9)(cid:5)(cid:4)(cid:5)(cid:5) (cid:8)(cid:5)(cid:5)(cid:4)(cid:5)(cid:5) (cid:7)(cid:9)(cid:5)(cid:4)(cid:5)(cid:5) (cid:7)(cid:5)(cid:5)(cid:4)(cid:5)(cid:5) (cid:6)(cid:9)(cid:5)(cid:4)(cid:5)(cid:5) (cid:6)(cid:5)(cid:5)(cid:4)(cid:5)(cid:5) (cid:9)(cid:5)(cid:4)(cid:5)(cid:5) (cid:5)(cid:4)(cid:5)(cid:5) (cid:7)(cid:5)(cid:6)(cid:10) (cid:7)(cid:5)(cid:6)(cid:11) (cid:7)(cid:5)(cid:6)(cid:12) (cid:7)(cid:5)(cid:6)(cid:13) (cid:7)(cid:5)(cid:7)(cid:5) (cid:7)(cid:5)(cid:7)(cid:6) (cid:20)(cid:33)(cid:43)(cid:34)(cid:37)(cid:32)(cid:29)(cid:1)(cid:24)(cid:40)(cid:30)(cid:30)(cid:33)(cid:1)(cid:18)(cid:35)(cid:29)(cid:4) (cid:19)(cid:14)(cid:24)(cid:16)(cid:14)(cid:22)(cid:1)(cid:15)(cid:36)(cid:34)(cid:37)(cid:36)(cid:39)(cid:32)(cid:40)(cid:30)(cid:3)(cid:25)(cid:36)(cid:40)(cid:27)(cid:33)(cid:1)(cid:23)(cid:30)(cid:40)(cid:41)(cid:38)(cid:35) (cid:21)(cid:30)(cid:30)(cid:38)(cid:1)(cid:17)(cid:38)(cid:36)(cid:41)(cid:37) The peer group consists of Worthington Industries, Inc., Ryerson Holding Corp., Friedman Industries, Inc., Reliance Steel & Aluminum Co., and Russel Metals Inc. This pagea intentionallyl lefte blank This pagea intentionallyl lefte blank CORPORATEAA OFFICERS Michael D. Siegal Executive Chairman of the Board Richard T. Marabito Chief Executive Offiff cer Andrew S. Greiff President and Chief Operating Offiff cer Richard A. Manson Chief Financial Offiff cer Lisa K. Christen Treasurer and Corporate Controller Christopher M. Kelly Secretary, Olympic Steel Partner, Jones Day Directors & Offiff cers BOARD OF DIRECTORS Michael D. Siegal, 69 Executive Chairman of the Board, Olympic Steel Richard T. Marabito, 58 Chief Executive Offiff cer, Olympic Steel David A. Wolfort, 69 Senior Advisor, Olympic Steel Arthur F. Anton, 64 Lead Independent Director The Honorable Dirk A. Kempthorne, 70 President, The Kempthorne Group Idalene F. Kesner,r Ph.D., 64 Dean, Indiana University Kelley School of Business Michael G. Rippey,y 64 President and Chief Executive Offiff cer, SunCoke Energy, Inc. Richard P. Stovsky,y 64 Retired Vice Chairman, PricewaterhouseCoopers LLP Vanessa L. Whiting, 62 President, A.E.S. Management Shareholder Information Corporate Headquarters Olympic Steel, Inc. 22901 Millcreek Boulevard, Suite 650 Highland Hills, OH 44122 Phone: (216) 292-3800 Fax: (216) 292-3974 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 2022 Annual Meeting The annual meeting of shareholders will be held in a virtual format on Friday, May 6, 2022 at 11:00 a.m. EDT. For more information on how to attend and participate, please see our 2022 Proxy Statement, available at olysteel.com/investor-relations/. Independent Auditors Grant Thornton LLP 1375 E. 9th Street, Suite 1500 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: Richard A. Manson Chief Financial Offiff cer 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, 2021, may do so by writing to Investor Relations at the Company’s Corporate Headquarters (address indicated above). This product is made from recycled paper 

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