10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended March 31, 2016

(   ) 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	34-1245650
(State or other jurisdiction of incorporation or organization)	(I.R.S.Employer Identification Number)
22901 Millcreek Boulevard, Suite 650, Highland Hills, OH	44122
(Address of principal executive offices)	(Zip Code)

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

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

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

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

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

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

Indicate the number of shares of each of the issuer's classes of common stock, as of the latest practicable date:

Class	Outstanding as of April 29, 2016
Common stock, without par value	10,959,293

Olympic Steel, Inc.

Index to Form 10-Q

	Page No.
Part I. FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Consolidated Balance Sheets – March 31, 2016 (unaudited) and December 31, 2015  (audited)	3
Consolidated Statements of Comprehensive Income – for the three months ended March 31, 2016 and 2015 (unaudited)	4
Consolidated Statements of Cash Flows – for the three months ended March 31, 2016  and 2015 (unaudited)	5
Supplemental Disclosures of Cash Flow Information – for the three months ended March 31, 2016 and 2015 (unaudited)	6
Notes to Unaudited Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	26
Item 4. Controls and Procedures	27
Part II. OTHER INFORMATION	28
Item 6. Exhibits	28
SIGNATURES	29

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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Olympic Steel, Inc.

Consolidated Balance Sheets

(in thousands)

	As of
	March 31, 2016			December 31, 2015
	(unaudited)			(audited)
Assets
Cash and cash equivalents	$	2,430		$	1,604
Accounts receivable, net		114,702			92,877
Inventories, net (includes LIFO debit of $6,555 as of March 31, 2016 and December 31, 2015)		189,814			206,645
Prepaid expenses and other		7,847			7,820
Total current assets		314,793			308,946
Property and equipment, at cost		371,886			372,129
Accumulated depreciation		(208,461	)		(205,591	)
Net property and equipment		163,425			166,538
Intangible assets, net		24,535			24,757
Other long-term assets		14,892			13,229
Total assets	$	517,645		$	513,470
Liabilities
Current portion of long-term debt	$	2,690		$	2,690
Accounts payable		56,038			55,685
Accrued payroll		8,278			6,884
Other accrued liabilities		14,613			11,801
Total current liabilities		81,619			77,060
Credit facility revolver		145,214			145,800
Other long-term liabilities		12,792			11,419
Deferred income taxes		23,443			24,496
Total liabilities		263,068			258,775
Shareholders' Equity
Preferred stock		-			-
Common stock		128,949			128,129
Treasury stock		(699	)		(699	)
Accumulated other comprehensive loss		(23	)		(70	)
Retained earnings		126,350			127,335
Total shareholders' equity		254,577			254,695
Total liabilities and shareholders' equity	$	517,645		$	513,470

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

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Olympic Steel, Inc.

Consolidated Statements of Comprehensive Income

For the Three Months Ended March 31,

(in thousands, except per share data)

	2016			2015
	(unaudited)
Net sales	$	258,349		$	345,865
Costs and expenses
Cost of materials sold (excludes items shown seperately below)		199,820			279,939
Warehouse and processing		20,492			22,537
Administrative and general		16,040			17,330
Distribution		9,207			9,301
Selling		5,687			5,891
Occupancy		2,337			2,710
Depreciation		4,509			4,590
Amortization		222			222
Total costs and expenses		258,314			342,520
Operating income		35			3,345
Other income (loss), net		(5	)		(31	)
Income before interest and income taxes		30			3,314
Interest and other expense on debt		1,285			1,563
Income (loss) before income taxes		(1,255	)		1,751
Income tax provision (benefit)		(488	)		682
Net income (loss)	$	(767	)	$	1,069
Net gain (loss) on cash flow hedges, net of tax of $30 at March 31, 2016 and $397 at March 31, 2015.		48			(636	)
Total comprehensive income (loss)	$	(719	)	$	433
Earnings per share:
Net income (loss) per share - basic	$	(0.07	)	$	0.10
Weighted average shares outstanding - basic		11,182			11,195
Net income (loss) per share - diluted	$	(0.07	)	$	0.10
Weighted average shares outstanding - diluted		11,182			11,195

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

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Olympic Steel, Inc.

Consolidated Statements of Cash Flows

For the Three Months Ended March 31,

(in thousands)

		2016			2015
		(unaudited)
Cash flows from (used for) operating activities:
Net income (loss)	$	(767	)	$	1,069
Adjustments to reconcile net income to net cash from (used for) operating activities -
Depreciation and amortization		4,960			5,007
Gain on disposition of property and equipment		(160	)		-
Stock-based compensation		797			953
Other long-term assets		(1,857	)		(230	)
Other long-term liabilities		367			(3,783	)
		3,340			3,016
Changes in working capital:
Accounts receivable		(21,825	)		(27,673	)
Inventories		16,831			30,842
Prepaid expenses and other		(62	)		5,075
Accounts payable		764			1,091
Change in outstanding checks		(411	)		4,964
Accrued payroll and other accrued liabilities		4,208			(2,747	)
		(495	)		11,552
Net cash from operating activities		2,845			14,568
Cash flows from (used for) investing activities:
Capital expenditures		(1,396	)		(1,691	)
Proceeds from disposition of property and equipment		160			-
Net cash used for investing activities		(1,236	)		(1,691	)
Cash flows from (used for) financing activities:
Credit facility revolver borrowings		57,188			112,410
Credit facility revolver repayments		(57,775	)		(122,400	)
Proceeds from exercise of stock options (including tax benefits) and employee stock purchases		23			9
Dividends paid		(219	)		(220	)
Net cash used for financing activities		(783	)		(10,201	)
Cash and cash equivalents:
Net change		826			2,676
Beginning balance		1,604			2,238
Ending balance	$	2,430		$	4,914

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

5

Olympic Steel, Inc.

Supplemental Disclosures of Cash Flow Information

For the Three Months Ended March, 31

(in thousands)

	2016		2015
	(unaudited)
Interest paid	$	1,026	$	1,413
Income taxes paid	$	3	$	39

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

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Olympic Steel, Inc.

Notes to Unaudited Consolidated Financial Statements

March 31, 2016

1. 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), without audit and reflect all normal and recurring adjustments which are, in the opinion of management, necessary to fairly state the results of the interim periods covered by this report. Year-to-date results are not necessarily indicative of 2016 annual results and these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. All intercompany transactions and balances have been eliminated in consolidation.

The Company operates in three reportable segments; carbon flat products, specialty metals flat products, and tubular and pipe products. Through its carbon flat products segment, the Company sells and distributes large volumes of processed carbon and coated flat-rolled sheet, coil and plate products. Through its specialty metals flat products segment, the Company sells and distributes processed aluminum and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. Through its tubular and pipe products segment, the Company distributes metal tubing, pipe, bar, valve and fittings and fabricates pressure parts supplied to various industrial markets.

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.

2. Accounts Receivable:

Accounts receivable are presented net of allowances for doubtful accounts and unissued credits of $2.2 million as of March 31, 2016 and $3.1 million as of December 31, 2015. The allowance for doubtful accounts is maintained at a level considered appropriate based on historical experience and specific customer collection issues that have been identified. Estimations are based upon a calculated percentage of accounts receivable, which remains fairly level from year to year, and judgments about the probable effects of economic conditions on certain customers, which can fluctuate significantly from year to year. The Company cannot guarantee that the rate of future credit losses will be similar to past experience. The Company considers all available information when assessing the adequacy of its allowance for doubtful accounts and unissued credits each quarter.

3. Inventories:

Inventories consisted of the following:

	Inventory as of
(in thousands)	March 31, 2016		December 31, 2015
Unprocessed	$	151,019	$	163,942
Processed and finished		38,795		42,703
Totals	$	189,814	$	206,645

The Company values certain of its tubular and pipe products inventory at the last-in, first-out (LIFO) method. At March 31, 2016 and December 31, 2015, approximately $40.8 million, or 21.5% of consolidated inventory, and $42.7 million, or 20.7% of consolidated inventory, respectively, was reported under the LIFO method of accounting. The cost of the remainder of the tubular and pipe products inventory is determined using a weighted average rolling first-in, first-out (FIFO) method.

During the three months ended March 31, 2016, the Company did not record an adjustment to LIFO inventory as the current projections anticipate comparative levels and pricing of inventory for the remainder of the year. During the three months ended March 31, 2015, the Company recorded $250 thousand of LIFO income.

If the FIFO method had been in use, inventories would have been $6.6 million lower than reported at March 31, 2016 and December 31, 2015.

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4. Debt:

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

	As of
	March 31,			December 31,
(in thousands)	2016			2015
Asset-based revolving credit facility due June 30, 2019	$	145,214		$	145,800
Industrial revenue bond due April 1, 2018		2,690			2,690
Total debt		147,904			148,490
Less current amount		(2,690	)		(2,690	)
Total long-term debt	$	145,214		$	145,800

The Company’s existing asset-based credit facility (the ABL Credit Facility) is collateralized by the Company’s accounts receivable and inventory. The ABL Credit Facility consists of a revolving credit line of $365 million. Revolver borrowings are limited to the lesser of a borrowing base, comprised of eligible receivables and inventories, or $365 million in the aggregate. The ABL Credit Facility matures on June 30, 2019.

The ABL Credit Facility requires the Company to comply with various covenants, the most significant of which include: (i) until maturity of the ABL Credit Facility, 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 ($36.5 million at March 31, 2016), then the Company 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; (ii) limitations on dividend payments and common stock repurchases; and (iii) restrictions on additional indebtedness. 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 3.00%.

As of March 31, 2016, the Company was in compliance with its covenants and had approximately $93 million of availability under the ABL Credit Facility.

As of March 31, 2016, $2.6 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.

In June 2012, the Company entered into a forward starting fixed rate interest rate hedge that commenced June 2013, in order to eliminate the variability of cash interest payments on $53.2 million of then outstanding LIBOR-based borrowings under the ABL Credit Facility. The hedge matures on June 1, 2016 and the notional amount is reduced monthly by $729 thousand. The hedged balance as of March 31, 2016 was $28.4 million. The interest rate hedge fixed the rate at 1.21% plus a premium ranging from 1.25% to 1.75%. Although the Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate hedge agreement, the Company anticipates performance by the counterparties.

As part of the Chicago Tube and Iron (CTI) acquisition in July 2011, the Company assumed approximately $5.9 million of Industrial Revenue Bond (IRB) indebtedness issued through the Stanly County, North Carolina Industrial Revenue and Pollution Control Authority. The bond matures in April 2018, with the option to provide principal payments annually on April 1st. On April 1, 2016, the Company paid an optional principal payment of $865 thousand. Since the IRB is remarketed annually, it is included in “Current portion of long-term debt” on the accompanying Consolidated Balance Sheets. Interest is payable monthly, with a variable rate that resets weekly. As a security for payment of the bonds, the Company obtained a direct pay letter of credit issued by JPMorgan Chase Bank, N.A. The letter of credit reduces annually by the principal reduction amount. The interest rate at March 31, 2016 was 0.6% for the IRB debt.

CTI entered into an interest rate swap agreement to reduce the impact of changes in interest rates on the above IRB. At March 31, 2016, the effect of the swap agreement on the bond was to fix the rate at 3.46%. The swap agreement matures in April 2018, and is reduced annually by the amount of the optional principal payments on the bond. The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreement. However, the Company does not anticipate nonperformance by the counterparties.

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5. Derivative Instruments:

Metals swaps and embedded customer derivatives

During 2016 and 2015, the Company entered into nickel swaps indexed to the London Metal Exchange (LME) price of nickel with third-party brokers. The nickel swaps are accounted for as derivatives for accounting purposes. The Company entered into them to mitigate its customers’ risk of volatility in the price of metals. The outstanding nickel swaps have one to eight months remaining. The swaps are settled with the brokers at maturity. The economic benefit or loss arising from the changes in fair value of the swaps is contractually passed through to the customer. The primary risk associated with the metals swaps is the ability of customers or third-party brokers to honor their agreements with the Company related to derivative instruments. If the customer or third-party brokers are unable to honor their agreements, the Company’s risk of loss is the fair value of the metals swaps.

While these derivatives are intended to help the Company manage risk, they have not been designated as hedging instruments. The periodic changes in fair value of the metals and embedded customer derivative instruments are included in “Cost of materials sold” in the Consolidated Statements of Comprehensive Income. The Company recognizes derivative positions with both the customer and the third party for the derivatives and classifies cash settlement amounts associated with them as part of “Cost of materials sold” in the Consolidated Statements of Comprehensive Income. The cumulative change in fair value of the metals swaps that have not yet been settled are included in “Other accrued liabilities”, and the embedded customer derivatives are included in “Accounts receivable, net” on the Consolidated Balance Sheets at March 31, 2016 and December 31, 2015.

Interest rate swap

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

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

Fixed rate interest rate hedge

In June 2012, the Company entered into a forward starting fixed rate interest rate hedge commencing July 2013 in order to eliminate the variability of cash interest payments on $53.2 million of the outstanding LIBOR-based borrowings under the ABL Credit Facility. The hedged balance as of March 31, 2016 was $28.4 million. The hedge matures on June 1, 2016 and the notional amount is reduced monthly by $729 thousand. The interest rate hedge fixed the rate at 1.21% plus a premium ranging from 1.25% to 1.75%. Although the Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate hedge agreement, the Company anticipates performance by the counterparties. The fixed rate interest rate hedge is accounted for as a cash flow hedging instrument for accounting purposes.

There was no net impact from the nickel swaps or embedded customer derivative agreements to the Company’s Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and 2015. The table below shows the total impact to the Company’s Consolidated Statements of Comprehensive Income through net income of the derivatives for the three months ended March 31, 2016 and 2015.

	Net Loss Recognized
	For the Three Months Ended March 31,
(in thousands)	2016			2015
Interest rate swap (CTI)	$	(20	)	$	(17	)
Fixed interest rate swap (ABL)		(61	)		(99	)
Metals swaps		(76	)		(1,117	)
Embedded customer derivatives		76			1,117
Total loss	$	(81	)	$	(116	)

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6. Fair Value of Financial Instruments:

During the three months ended March 31, 2016, there were no transfers of financial assets between Levels 1, 2 or 3 fair value measurements. There have been no changes in the methodologies used at March 31, 2016 since December 31, 2015. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value as of March 31, 2016 and December 31, 2015:

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

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

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

	Value of Items Recorded at Fair Value
	As of March 31, 2016
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Embedded customer derivative	$	-	$	204	$	-	$	204
Total assets at fair value	$	-	$	204	$	-	$	204
Liabilities:
Metals swaps	$	-	$	204	$	-	$	204
Interest rate swap (CTI)		-		82		-		82
Fixed interest rate swap (ABL)		-		37		-		37
Total liabilities recorded at fair value	$	-	$	323	$	-	$	323

	Value of Items Not Recorded at Fair Value
	As of March 31, 2016
(in thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
IRB	$	2,690	$	-	$	-	$	2,690
Revolver		-		145,214		-		145,214
Total liabilities not recorded at fair value	$	2,690	$	145,214	$	-	$	147,904

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

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	Value of Items Recorded at Fair Value
	As of December 31, 2015
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Embedded customer derivative	$	-	$	384	$	-	$	384
Total assets at fair value	$	-	$	384	$	-	$	384
Liabilities:
Metals swaps	$	-	$	384	$	-	$	384
Interest rate swap (CTI)		-		102		-		102
Fixed interest rate swap (ABL)		-		114		-		114
Total liabilities recorded at fair value	$	-	$	600	$	-	$	600

	Value of Items Not Recorded at Fair Value
	As of December 31, 2015
(in thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
IRB	$	2,690	$	-	$	-	$	2,690
Revolver		-		145,800		-		145,800
Total liabilities not recorded at fair value	$	2,690	$	145,800	$	-	$	148,490

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

The fair value of the IRB is determined using Level 1 inputs. The carrying value and the fair value of the IRB that qualify as financial instruments were $2.7 million at both March 31, 2016 and December 31, 2015.

The fair value of the revolver is determined using Level 2 inputs. The Level 2 fair value of the Company's long-term debt was estimated using prevailing market interest rates on debt with similar credit worthiness, terms and maturities.

7. Equity Plans:

Restricted Stock Units and Performance Share Units

Pursuant to the Olympic Steel 2007 Omnibus Incentive Plan (Plan), the Company may grant stock options, stock appreciation rights, restricted shares, restricted share units, performance shares, and other stock- and cash-based awards to employees and Directors of, and consultants to, the Company and its affiliates. Under the Plan, 500,000 shares of common stock are available for equity grants.

On March 1, 2015, the Compensation Committee of the Company’s Board of Directors approved the grant of 4,639 restricted stock units (RSUs), respectively, to each non-employee Director. Subject to the terms of the Plan and the RSU agreement, the RSUs vest after one year of service (from the date of grant). The RSUs are not converted into shares of common stock until the director either resigns or is terminated from the Board of Directors.

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The fair value of each RSU was estimated to be the closing price of the Company’s common stock on the date of the grant, which was $15.09 on March 1, 2015.

The Company’s Senior Management Compensation Program includes an equity component in order to encourage more ownership of common stock by the senior management. The Senior Management Compensation Program imposes stock ownership requirements upon the participants. Each participant is required to own at least 750 shares of common stock for each year that the participant participates in the Senior Management Compensation Program. Any participant that fails to meet the stock ownership requirements will be ineligible to receive any equity awards under the Company’s equity compensation plans, including the Plan, until the participant satisfies the ownership requirements. To assist participants in meeting the stock ownership requirements, on an annual basis, if a participant purchases 500 shares of common stock on the open market, the Company will award that participant 250 shares of common stock. During the three months ended March 31, 2016 and 2015, the Company matched 2,500 and 6,500 shares, respectively. Additionally, any participant who continues to comply with the stock ownership requirements as of the five-year, 10-year, 15-year, 20-year and 25-year anniversaries of the participant’s participation in the Senior Management Compensation Program will receive a restricted stock unit award with a dollar value of $25 thousand, $50 thousand, $75 thousand, $100 thousand and $100 thousand, respectively. Restricted stock unit awards 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.

Stock-based compensation expense recognized on RSUs for the three months ended March 31, 2016 and 2015, respectively, is summarized in the following table:

	For the Three Months Ended
	March 31,
(in thousands, except per share data)	2016		2015
RSU expense before taxes	$	239	$	231
RSU expense after taxes	$	146	$	141

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

The following table summarizes the activity related to RSUs for the three months ended March 31, 2016:

					Aggregate
	Number of		Weighted Average		Intrinsic Value
	Shares		Granted Price		(in thousands)
Outstanding at December 31, 2015		287,894	$	22.39
Granted		92,077		10.88
Converted into shares		-		-
Forfeited		-		-
Outstanding at March 31, 2016		379,971	$	19.60	$	788
Vested at March 31, 2016		367,750	$	19.48	$	788

No RSUs were converted into shares during the three months ended March 31, 2016. During the three months ended March 31, 2015, 1,582 RSUs were converted into shares.

8. Income Taxes:

For the three months ended March 31, 2016, the Company recorded an income tax benefit of $488 thousand, or 38.9%, compared to an income tax provision of $682 thousand, or 38.9%, for the three months ended March 31, 2015.

Our tax benefit or provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.

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Our quarterly tax provision and our quarterly estimate of our annual effective tax rate is subject to significant volatility due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, changes in law and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

9. 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:

	For the Three Months Ended
	March 31,
(in thousands, except per share data)	2016			2015
Weighted average basic shares outstanding		11,182			11,195
Assumed exercise of stock options and issuance of stock awards		-			-
Weighted average diluted shares outstanding		11,182			11,195
Net income (loss)	$	(767	)	$	1,069
Basic earnings (loss) per share	$	(0.07	)	$	0.10
Diluted earnings (loss) per share	$	(0.07	)	$	0.10
Anti-dilutive securities outstanding		147			283

10. Segment Information:

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

The Company operates in three reportable segments; carbon flat products, specialty metals flat products, and tubular and pipe products. Through its carbon flat products segment, the Company sells and distributes large volumes of processed carbon and coated flat-rolled sheet, coil and plate products. Through its specialty metals flat products segment, the Company sells and distributes processed aluminum and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. Through its tubular and pipe products segment, the Company distributes metal tubing, pipe, bar, valve and fittings and fabricates pressure parts supplied to various industrial markets.

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.

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

	For the Three Months Ended
	March 31,
(in thousands)	2016			2015
Net sales
Carbon flat products	$	161,434		$	228,545
Specialty metals flat products		45,830			52,631
Tubular and pipe products		51,085			64,689
Total net sales	$	258,349		$	345,865
Depreciation and amortization
Carbon flat products	$	2,954		$	3,161
Specialty metals flat products		193			160
Tubular and pipe products		1,559			1,466
Corporate		25			25
Total depreciation and amortization	$	4,731		$	4,812
Operating income (loss)
Carbon flat products	$	(2,178	)	$	470
Specialty metals flat products		1,756			590
Tubular and pipe products		2,243			4,254
Corporate expenses		(1,786	)		(1,969	)
Total operating income	$	35		$	3,345
Other income (loss), net		(5	)		(31	)
Income before interest and income taxes		30			3,314
Interest and other expense on debt		1,285			1,563
Income (loss) before income taxes	$	(1,255	)	$	1,751

	For the Three Months Ended
	March 31,
(in thousands)	2016		2015
Capital expenditures
Flat products segments	$	1,234	$	1,188
Tubular and pipe products		162		503
Corporate		-		-
Total capital expenditures	$	1,396	$	1,691

	As of
	March 31,		December 31,
(in thouands)	2016		2015
Assets
Flat products segments	$	324,344	$	329,885
Tubular and pipe products		192,870		183,129
Corporate		431		456
Total assets	$	517,645	$	513,470

There were no material revenue transactions between the carbon flat products, specialty metals products, and tubular and pipe products segments.

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

11. Recently Issued Accounting Updates:

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

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In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”. This ASU is part of the FASB’s Simplification Initiative and has been issued to reduce complexity in the presentation of employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance will be effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. We are evaluating the impact of the future adoption of this standard on our consolidated financial statements.

In November, 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes.” This ASU is part of the FASB’s Simplification Initiative and has been issued to reduce complexity in the presentation of deferred taxes. This new guidance eliminates the requirement for entities that present a classified statement of financial position to classify deferred tax assets and liabilities as current and noncurrent, and instead require that they classify all deferred tax assets and liabilities as noncurrent. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. However, the guidance does not change the existing requirement that only permits offsetting within a jurisdiction. Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with early adoption permitted. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively (i.e., by reclassifying the comparative balance sheet). If applied prospectively, entities are required to include a statement that prior periods were not retrospectively adjusted. If applied retrospectively, entities are also required to include quantitative information about the effects of the change on prior periods. The prospective adoption of this guidance on January 1, 2016 did not have a material impact on the Company’s consolidated financial statements and the prior periods were not retrospectively adjusted.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” This ASU is part of the FASB’s Simplification Initiative and has been issued to reduce the complexity in the presentation of debt issuance costs. This new guidance requires companies to present debt issuance costs the same way they currently present debt discounts, as a direct deduction from the carrying value of that debt liability. The guidance is limited to simplifying the presentation of debt issuance costs and does not impact the recognition and measurement guidance for debt issuance costs. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, with early adoption permitted. The amendments of ASU No. 2015-03 must be applied retrospectively, where the balance sheet of each presented individual period is adjusted to indicate the period-specific impact of using the new guidance. The FASB considered that because both debt issuance costs and debt discounts are amortized using the effective interest method, there would be no effect on the income statement upon adoption of the amendments. The adoption of this guidance on January 1, 2016 did not have an impact on the Company’s consolidated financial statements because it does not apply to revolving credit agreements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This ASU is a joint project initiated by the FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. generally accepted accounting principles and International Financial Reporting Standards that will: remove inconsistencies and weaknesses in revenue requirements; provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets; provide more useful information to users of financial statements through improved disclosure requirements; and simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. As originally proposed, the guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is in the process of determining the method of adoption and assessing the impact of this ASU on its consolidated financial statements, and interim periods within those fiscal years, with early adoption permitted. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from contracts with customers.” This ASU deferred the effective date of ASU No. 2014-09 by one year.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and accompanying notes contained herein and our consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2015. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contain 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 our Annual Report on Form 10-K for the year ended December 31, 2015. The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appear elsewhere in this Quarterly Report on Form 10-Q.

Forward-Looking Information

This Quarterly Report on Form 10-Q 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 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:

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

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

● cyclicality and volatility within the metals industry;

● the strengthening of the U.S. dollar and the related impact on foreign steel pricing, U.S. exports, and foreign imports to the United States;

● the levels of imported steel in the United States;

● the availability and costs of transportation and logistical services;

● the successes of our strategic efforts and initiatives to increase sales volumes, maintain or improve working capital turnover and free cash flows, improve our customer service, and achieve cost savings, including our internal program to improve earnings;

● our ability to generate free cash flow through operations and limited future capital expenditures, reduce inventory and repay debt within anticipated time frames;

● events or circumstances that could impair or adversely impact the carrying value of any of our assets;

● risks and uncertainties associated with intangible assets, including additional impairment charges related to indefinite lived intangible assets;

● events or circumstances that could adversely impact the successful operation of our processing equipment and operations;

● the amounts, successes and our ability to continue our capital investments and strategic growth initiatives, including our business information system implementations;

● the successes of our operational excellence initiatives to improve our operating, cultural and management systems and reduce our costs;

● the ability to comply with the terms of our asset-based credit facility;

● the ability of our customers and third parties to honor their agreements related to derivative instruments;

● customer, supplier and competitor consolidation, bankruptcy or insolvency;

● reduced production schedules, layoffs or work stoppages by our own, our suppliers’ or customers’ personnel;

● the impacts of union organizing activities and the success of union contract renewals;

● the timing and outcomes of inventory lower of cost or market adjustments and last-in, first-out, or LIFO, income, especially during periods of declining market pricing;

● the ability of our customers (especially those that may be highly leveraged, and those with inadequate liquidity) to maintain their credit availability;

● the inflation or deflation existing within the metals industry, as well as our product mix and inventory levels on hand, which can impact our cost of materials sold as a result of the fluctuations in the LIFO inventory valuation;

● the adequacy of our existing information technology and business system software, including duplication and security processes;

● the adequacy of our efforts to mitigate cyber security risks and threats;

● access to capital and global credit markets;

● our ability to pay regular quarterly cash dividends and the amounts and timing of any future dividends;

● our ability to repurchase shares of our common stock and the amounts and timing of repurchases, if any; and

● unanticipated developments that could occur with respect to contingencies such as litigation and environmental matters, including any developments that would require any increase in our costs for such contingencies.

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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.

Overview

We are a leading metals service center that operates in three reportable segments; carbon flat products, specialty metals flat products, and tubular and pipe products. We provide metals processing and distribution services for a wide range of customers. Our carbon flat products segment’s focus is on the direct sale and distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products and fabricated parts. Our specialty metals flat products segment’s focus is on the direct sale and distribution of processed aluminum and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. In addition, we distribute metal tubing, pipe, bar, valves and fittings and fabricate pressure parts supplied to various industrial markets. Products that require more value-added processing generally have a higher gross profit. Accordingly, our overall gross profit is affected by, among other things, product mix, the amount of processing performed, the demand for and availability of metals, and volatility in selling prices and material purchase costs. We also perform toll processing of customer-owned metals. We sell certain products internationally, primarily in Canada, Puerto Rico 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; energy prices; pricing and availability of raw materials used in the production of metals; global supply, the level of metals imported into the United States, and inventory held in the supply chain; customers’ ability to manage their credit line availability; and layoffs or work stoppages by our own, our suppliers’ or our customers’ personnel. The metals industry also continues to be affected by the global consolidation of our suppliers, competitors and end-use customers.

Like other metals service centers, we maintain substantial inventories of metals to accommodate the short lead times and just-in-time delivery requirements of our customers.  Accordingly, we purchase metals in an effort to maintain our inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon customer forecasts, historic buying practices, supply agreements with customers and market conditions.  Our commitments to purchase metals are generally at prevailing market prices in effect at the time we place our orders.  We have entered into nickel and carbon swaps at the request of our customers in order to mitigate our customers’ risk of volatility in the price of metals, and we have entered into metals hedges to mitigate our risk of volatility in the price of metals.  We have no long-term, fixed-price metals purchase contracts.  When metals prices decline, customer demands for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently, lower gross profits and earnings as we use existing metals inventory.  When metals prices increase, competitive conditions will influence how much of the price increase we can pass on to our customers.  To the extent we are unable to pass on future price increases in our raw materials to our customers, the net sales and gross profits of our business could be adversely affected.

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At March 31, 2016, we employed approximately 1,716 people. Approximately 311 of the hourly plant personnel at the facilities listed below are represented by nine separate collective bargaining units. The table below shows the expiration dates of the collective bargaining agreements.

Facility	Expiration date
Minneapolis plate, Minnesota	March 31, 2017
Detroit, Michigan	August 31, 2017
Duluth, Minnesota	December 21, 2017
St. Paul, Minnesota	May 25, 2018
Milan, Illinois	August 12, 2018
Locust, North Carolina	March 4, 2020
Romeoville, Illinois	May 31, 2020
Minneapolis coil, Minnesota	September 30, 2020
Indianapolis, Indiana	January 29, 2021

We have never experienced a work stoppage and we believe that our relationship with employees is good. However, any prolonged work stoppages by our personnel represented by collective bargaining units could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Reportable Segments

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

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

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

Due to the differences in average selling prices, gross profit and gross profit percentage among the segments, a change in the mix of sales could impact total net sales, gross profit, and gross profit percentage. In addition, certain inventory in the tubular and pipe products segment is valued under the LIFO method. Adjustments to the LIFO inventory value are recorded to cost of materials sold and may impact the gross margin and gross margin percentage at the consolidated Company and tubular and pipe products segment levels.

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.

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.

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Specialty metals flat products

The primary focus of our specialty metals flat products segment is on the direct sale and distribution of processed stainless and aluminum flat-rolled sheet and coil products, flat bar products and fabricated parts. We act as an intermediary between metals producers and manufacturers that require processed metals for their operations. We serve customers in various industries, including manufacturers of food service and commercial appliances, agriculture equipment, transportation and automotive equipment. We distribute these products primarily through a direct sales force.

Combined, the carbon and specialty metals flat products segments have 23 strategically-located processing and distribution facilities in the United States and one in Monterrey, Mexico. Many of our facilities service both the carbon and the specialty metals flat products segments, and certain assets and resources are shared by the segments. Our geographic footprint allows us to focus on regional customers and larger national and multi-national accounts, primarily located throughout the midwestern, eastern and southern United States.

Tubular and pipe products

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

Corporate expenses

Corporate expenses are reported as a separate line item for segment reporting purposes. Corporate expenses include the unallocated expenses related to managing the entire Company (i.e., all three segments), including 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.

Results of Operations

The metals industry experienced a significant decline in the price of metals during 2015 as a result of the strengthened U.S. dollar, a historically high level of imported materials arriving in the United States, low raw material costs to produce metals and a global oversupply of metals. The price of hot-rolled carbon flat steel decreased approximately 41% during 2015. Similarly, the price of stainless steel and aluminum decreased during 2015. During the first quarter of 2016, metals prices increased. The price of hot-rolled carbon flat steel increased approximately 19% over the December 2015 price during the first quarter of 2016. Although the price of hot-rolled carbon flat steel sequentially increased in the first quarter of 2016, the average price during the quarter was still 19% lower than the average price of hot-rolled carbon flat steel during the first quarter of 2015. Industry demand has also softened in the first quarter of 2016 compared to 2015 as evidenced by lower year over year shipments by metals service centers in the United States. Lower industry demand and pricing negatively impacted our first quarter 2016 net sales and earnings as compared to the first quarter of 2015. Net sales and earnings improved as the first quarter progressed, and we expect this trend to continue into the second quarter of 2016.

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Consolidated Operations

The following table presents consolidated operating results for the periods indicated (dollars are shown in thousands):

	For the Three Months Ended March 31,
	2016						2015
	$			% of net sales			$			% of net sales
Net sales	$	258,349			100.0		$	345,865			100.0
Cost of materials sold (a)		199,820			77.3			279,939			80.9
Gross profit (b)		58,529			22.7			65,926			19.1
Operating expenses (c)		58,494			22.7			62,581			18.1
Operating income		35			0.0			3,345			1.0
Other income (loss), net		(5	)		-			(31	)		-
Interest and other expense on debt		1,285			0.5			1,563			0.5
Income (loss) before income taxes		(1,255	)		(0.5	)		1,751			0.5
Income taxes		(488	)		(0.2	)		682			0.2
Net income (loss)	$	(767	)		(0.3	)	$	1,069			0.3

(a)	Includes $250 of LIFO income for 2015. There was no LIFO impact recorded in the first quarter of 2016.
(b)	Gross profit is calculated as net sales less the cost of materials sold.
(c)	Operating expenses are calculated as total costs and expenses from the Statement of Comprehensive Income less the cost of materials sold.

Net sales decreased 25.3% to $258.3 million in the first quarter of 2016 from $345.9 million in the first quarter of 2015. Carbon flat products net sales were 62.5% of total net sales in the first quarter of 2016 compared to 66.1% of total net sales in the first quarter of 2015. Specialty metals products net sales were 17.7% of total net sales in the first quarter of 2016 compared to 15.2% of total net sales in the first quarter of 2015. Tubular and pipe products net sales were 19.8% of total net sales in the first quarter of 2016 compared to 18.7% of total net sales in the first quarter of 2015. The decrease in net sales was due to a 2.8% decrease in sales volume and a 23.2% decrease in average selling prices during the first quarter of 2016 compared to the first quarter of 2015. Sales volumes decreased in the carbon flat products and tubular and pipe products segments and increased in the specialty metals flat products segment during the first quarter of 2016 compared to the first quarter of 2015. Average direct selling prices decreased in all segments during the first quarter of 2016 compared to the first quarter of 2015 as a result of year over year lower market pricing for metals.

Cost of materials sold decreased 28.6% to $199.8 million in the first quarter of 2016 from $279.9 million in the first quarter of 2015. The decrease in cost of materials sold in the first quarter of 2016 is primarily related to lower metals pricing discussed above as well as the 2.8% decrease in sales volume.

As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) increased to 22.7% in the first quarter of 2016 compared to 19.1% in the first quarter of 2015. The increase in the gross profit percentage is a result of metals prices sequentially increasing during the first quarter of 2016 compared to the fourth quarter of 2015, while our average cost of inventory contained lower-costed metal as we historically hold approximately three months of material in inventory. This compares to the declining metals pricing environment during the first quarter of 2015, when the average cost of inventory contained higher-costed metal.

Operating expenses in the first quarter of 2016 decreased $4.1 million, or 6.5%, to $58.5 million from $62.6 million in the first quarter of 2015. As a percentage of net sales, operating expenses increased to 22.7% for the first quarter of 2016 from 18.1% in the comparable 2015 period due to the decrease in net sales during the first quarter of 2016. Operating expenses in the flat products segment decreased $2.7 million, operating expenses in the specialty metals products segment increased $0.4 million, operating expenses in the tubular and pipe products segment decreased $1.6 million and Corporate expenses decreased $0.2 million. Operating expenses decreased in all categories as reported on the Company’s Consolidated Statements of Comprehensive Income, as we continue to execute on the profit improvement plan initiated in 2015. Variable operating expenses, such as distribution and warehouse and processing, decreased $2.1 million, or 6.7%, as a result of the 2.8% first quarter 2016 volume decrease, reductions in labor and personnel expenses and reduced warehouse consumables expenses. Occupancy expenses decreased $0.4 million, or 13.8%, as a result of operating with less warehouse space and lower utility and maintenance expenses. Selling expenses decreased $0.2 million, or 3.5%, as a result of lower bad debt expense. Administrative and general expenses decreased by $1.3 million, or 7.4%, primarily related to reductions in labor and personnel expenses, centralization of certain administrative functions, and lower variable based incentive compensation.

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Interest and other expense on debt totaled $1.3 million, or 0.5% of net sales, for the first quarter of 2016 compared to $1.6 million, or 0.5% of net sales, for the first quarter of 2015. Our effective borrowing rate, exclusive of deferred financing fees and commitment fees, was 2.5% for the first three months of 2016 compared to 2.1% for the first three months of 2015.

For the first quarter of 2016, loss before income taxes totaled $1.3 million compared to income before income taxes of $1.8 million in the first quarter of 2015.

An income tax benefit of 38.9% was recorded for the first quarter of 2016, compared to an income tax provision of 38.9% for the first quarter of 2015. Our tax benefit or provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items that are taken into account in the relevant period. Each quarter, we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment. We expect our effective tax rate to approximate 38% to 40% on an annual basis in 2016.

Net loss for the first quarter of 2016 totaled $0.8 million or $0.07 per basic and diluted share, compared to net income of $1.1 million or $0.10 per basic and diluted share for the first quarter of 2015.

Segment Operations

Carbon flat products

The following table presents selected operating results for our carbon flat products segment for the three months ended March 31, 2016 and 2015 (dollars are shown in thousands, except for per ton information):

	For the Three Months Ended March 31,
	2016						2015
				% of net sales					% of net sales
Direct tons sold		244,499						247,958
Toll tons sold		22,351						27,740
Total tons sold		266,850						275,698
Net sales	$	161,434			100.0		$	228,545		100.0
Average selling price per ton		605						829
Cost of materials sold		126,527			78.4			188,277		82.4
Gross profit (a)		34,907			21.6			40,268		17.6
Operating expenses (b)		37,085			23.0			39,798		17.4
Operating income (loss)	$	(2,178	)		(1.3	)	$	470		0.2

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

Tons sold by our flat products segment decreased 3.2% to 267 thousand in the first quarter of 2016 from 276 thousand in the first quarter of 2015. The decrease in tons sold is due to decreased customer demand and lower industry-wide shipments in the first quarter of 2016 compared to the first quarter of 2015.

Net sales in our carbon flat products segment decreased $67.1 million, or 29.4%, to $161.4 million in the first quarter of 2016 from $228.5 million in the first quarter of 2015. The decrease in sales was due to a 27.0% decrease in the average selling prices during the first quarter of 2016 compared to the first quarter of 2015 as well as a 3.2% decrease in sales volume. Average selling prices in the first quarter of 2016 were $605 per ton, compared with $829 per ton in the first quarter of 2015 and $658 per ton in the fourth quarter of 2015. The decrease in the average selling price is a result of the market pricing dynamics discussed in the overview of Results of Operations above.

Cost of materials sold decreased $61.9 million, or 32.8%, to $126.5 million in the first quarter of 2016 from $188.4 million in the first quarter of 2015. The decrease was due to lower pricing and shipments discussed above, which decreased the average cost of goods sold per ton by 30.6% in the first quarter of 2016 compared to the same period in 2015.

As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) increased to 21.6% in the first quarter of 2016 compared to 17.6% in the first quarter of 2015.    The increase in gross profit percentage in 2016 was primarily due to the cost of materials sold decreasing more than selling prices. Gross profit per ton decreased $15 per ton to $131 per ton in the first quarter of 2016 from $146 per ton in the first quarter of 2015.

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Operating expenses in the first quarter of 2016 decreased $2.7 million, or 6.8%, to $37.1 million from $39.8 million in the first quarter of 2015. Variable operating expenses, such as distribution and warehouse and processing, decreased as a result of lower sales volume. Occupancy expenses decreased as a result of decreased utility and maintenance expense due to operating with less warehouse space. Selling and administrative and general expenses decreased as a result of reductions in labor and personnel expenses, centralization of certain administrative functions, and lower variable based incentive compensation. As a percentage of net sales, operating expenses increased to 23.0% for the first quarter of 2016 compared to 17.4% for first quarter of 2015.

Operating loss for the first quarter of 2016 totaled $2.2 million, or 1.3% of net sales, compared to operating income of $0.5 million, or 0.2% of net sales, for the first quarter of 2015.

Specialty metals flat products

The following table presents selected operating results for our specialty metals flat products segment for the three months ended March 31, 2016 and 2015 (dollars are shown in thousands, except for per ton information):

	For the Three Months Ended March 31,
	2016				2015
			% of net sales				% of net sales
Total tons sold		19,823				18,560
Net sales	$	45,830		100.0	$	52,631		100.0
Average selling price per ton		2,312				2,836
Cost of materials sold		39,195		85.5		47,565		90.4
Gross profit (a)		6,635		14.5		5,066		9.6
Operating expenses (b)		4,879		10.6		4,476		8.5
Operating income	$	1,756		3.9	$	590		1.1

(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 by our specialty metals flat products segment increased 6.8% to 20 thousand in the first quarter of 2016 from 19 thousand in the first quarter of 2015. The increase in tons sold is due to increased demand from existing customers, from the impact of new business awards in the first quarter of 2016 compared to the first quarter of 2015 and our growth in market share in specialty metals.

Net sales in our specialty metals flat products segment decreased $6.8 million, or 12.9%, to $45.8 million in the first quarter of 2016 from $52.6 million in the first quarter of 2015. The decrease in sales was due to an 18.5% decline in the average selling price offset by the 6.8% increase in sales volume during the first quarter of 2016 compared to the first quarter of 2015. Average selling prices in the first quarter of 2016 were $2,312 per ton, compared with $2,836 per ton in the first quarter of 2015 and $2,464 per ton in the fourth quarter of 2015. The decrease in the year over year average selling price per ton is a result of the market pricing dynamics, which continue to pressure metals pricing in the specialty metals segment.

Cost of materials sold decreased $8.4 million, or 17.6%, to $39.2 million in the first quarter of 2016 from $47.6 million in the first quarter of 2015. The decrease was due to a 22.9% decrease in the average cost of materials sold offset by a 6.8% increase in sales volume during the first quarter of 2016 compared to the first quarter of 2015.

As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) increased to 14.5% in the first quarter of 2016 from 9.6% in the first quarter of 2015. The increase in the gross profit percentage is a result of our cost of materials sold decreasing more than the average selling price during the first quarter of 2016 compared to the first quarter of 2015.

Operating expenses in the first quarter of 2016 increased $0.4 million, or 9.0%, to $4.9 million from $4.5 million in the first quarter of 2015. Variable operating expenses, such as distribution and warehouse and processing increased 8.8% as a result of higher sales volumes. Selling and administrative and general expenses increased as a result of increased variable based incentive compensation related to the increased sales volume and gross profit. As a percentage of net sales, operating expenses increased to 10.6% for the first quarter of 2016 compared to 8.5% for the first quarter of 2015.

22

Operating income for the first quarter of 2016 totaled $1.8 million, or 3.9% of net sales, compared to $0.6 million, or 1.1% of net sales, for the first quarter of 2015.

Tubular and pipe products

The following table presents selected operating results for our tubular and pipe products segment for the three months ended March 31, 2016 and 2015 (dollars are shown in thousands):

	For the Three Months Ended March 31,
	2016				2015
			% of net sales				% of net sales
Net sales	$	51,085		100.0	$	64,689		100.0
Cost of materials sold (a)		34,098		66.7		44,097		68.2
Gross profit (b)		16,987		33.3		20,592		31.8
Operating expenses (c)		14,744		28.9		16,338		25.3
Operating income	$	2,243		4.4	$	4,254		6.5

(a)	Includes $250 of LIFO income for 2015. There was no LIFO impact recorded in the first quarter of 2016.
(b)	Gross profit is calculated as net sales less the cost of materials sold.
(c)	Operating expenses are calculated as total costs and expenses less the cost of materials sold.

Net sales decreased $13.6 million, or 21.0%, to $51.1 million in the first quarter of 2016 from $64.7 million in the first quarter of 2015. The decrease is a result of a 5.3% decrease in sales volume and a 16.6% decrease in the pipe and tube products segment average selling prices over the first quarter of 2015.

Cost of materials sold decreased $10.0 million, or 22.7%, to $34.1 million in the first quarter of 2016 from $44.1 million in the first quarter of 2015. The decrease in cost of materials sold is primarily a result of decreased metals pricing in the first quarter of 2016 compared to the first quarter of 2015 and decreased sales volumes. There was no LIFO income or expense recorded in the first quarter of 2016 compared to $250 thousand of LIFO income recorded in the first quarter of 2015.

As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) totaled 33.3% in the first quarter of 2016 compared to 31.8% in the first quarter of 2015. As a percentage of net sales, the $250 thousand LIFO income in 2015 increased current year gross profit by 0.4%.

Operating expenses in the first quarter of 2016 decreased $1.6 million, or 9.8%, to $14.7 million from $16.3 million in the first quarter of 2015. Variable operating expenses, such as distribution and warehouse and processing, decreased as a result of lower sales volumes and net sales. Operating expenses increased to 28.9% of net sales in the first quarter of 2016 compared to 25.3% in the first quarter of 2015.

Operating income for the first quarter 2016 totaled $2.2 million, or 4.4% of net sales, compared to $4.3 million, or 6.5% of net sales, for the first quarter of 2015.

Corporate expenses

Corporate expenses decreased $0.2 million to $1.8 million in the first quarter of 2016 compared to $2.0 million in the first quarter of 2015. 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.

Liquidity, Capital Resources and Cash Flows

Our principal capital requirements include funding working capital needs, purchasing, upgrading and acquiring processing equipment and facilities, making acquisitions and paying dividends. We use cash generated from operations, leasing transactions and borrowings under our credit facility to fund these requirements.

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

23

Operating Activities

For the three months ended March 31, 2016, we generated $2.8 million of net cash from operations, of which $3.3 million was generated from operating activities and $0.5 million was used for working capital. For the three months ended March 31, 2015, we generated $14.6 million of net cash from operations, of which $3.0 million was generated from operating activities and $11.6 million was generated from a smaller working capital investment.

Net cash from operations totaled $3.3 million during the first quarter of 2016 and was generated from depreciation and amortization of $5.0 million, and stock-based compensation of $0.8 million, offset by the net loss of $0.8 million and a decrease in net long-term assets and liabilities of $1.5 million. Net cash from operations totaled $3.0 million during the first quarter of 2015 and was primarily generated from net income of $1.1 million, depreciation and amortization of $5.0 million, and stock-based compensation of $1.0 million, offset by a decrease in net long-term assets and liabilities of $4.0 million.

Working capital at March 31, 2016 totaled $233.2 million, a $1.3 million increase from December 31, 2015. The increase was primarily attributable to a $21.8 million, or 23.5%, increase in accounts receivable (resulting from higher sales normally experienced in the first quarter compared to the lower sales in the fourth quarter) offset by a $16.8 million, or 8.1%, decrease in inventories (resulting from increased inventory turnover, lower average inventory costs and increased sales in the first quarter of 2016 compared to the fourth quarter of 2015) and a $4.2 million decrease in accrued payroll and other accrued liabilities.

Investing Activities

Net cash used for investing activities was $1.2 million during the three months ended March 31, 2016, compared to $1.7 million during the three months ended March 31, 2015. The $1.4 million of 2016 capital expenditures were primarily attributable to additional processing equipment at our existing facilities. During 2016, we expect to limit our capital spending to less than our annual depreciation expense (approximately $18 million in 2016).

Financing Activities

During the first three months of 2016, $0.8 million of cash was used for financing activities, which primarily consisted of $0.6 million of net repayments under our ABL Credit Facility and $0.2 million of dividends paid. 

Dividends paid were $0.2 million for both the three months ended March 31, 2016 and March 31, 2015. In April 2016, our Board of Directors approved a regular quarterly dividend of $0.02 per share, which will be paid on June 15, 2016 to shareholders of record as of June 1, 2016. Regular dividend distributions in the future are subject to the availability of cash, the $2.5 million annual limitation 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

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. Under the ABL Credit Facility, we may repurchase common stock and pay dividends up to $2.5 million in the aggregate during any trailing twelve months without restrictions. Purchases in excess of $2.5 million require us to (i) maintain availability in excess of 25% of the aggregate revolver commitments ($91.3 million at March 31, 2016) or (ii) to maintain availability equal to or greater than 15% of the aggregate revolver commitments ($54.8 million at March 31, 2016) 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. During 2016, we expect to be limited to the $2.5 million available without restrictions to repurchase common stock and pay dividends.

24

No share repurchases were made during the first quarter of 2016.

Debt Arrangements

Our ABL Credit Facility is collateralized by our accounts receivable and inventory. The ABL Credit Facility consists of a revolving credit line of $365 million. Revolver borrowings are limited to the lesser of a borrowing base, comprised of eligible receivables and inventories, or $365 million in the aggregate. The ABL Credit Facility matures on June 30, 2019.

The ABL Credit Facility requires us to comply with various covenants, the most significant of which include: (i) until maturity of the ABL Credit Facility, 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 ($36.5 million at March 31, 2016), 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; (ii) limitations on dividend payments and stock repurchases; and (iii) restrictions on additional indebtedness. We have the option to borrow under our 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 3.00%.

As of March 31, 2016, the Company was in compliance with its covenants and had approximately $93 million of availability under the ABL Credit Facility.

As of March 31, 2016, $2.6 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.

We entered into a forward starting fixed rate interest rate hedge that commenced June 2013, in order to eliminate the variability of cash interest payments on $53.2 million of then outstanding LIBOR-based borrowings under the ABL Credit Facility. The hedge matures on June 1, 2016 and the notional amount is reduced monthly by $729 thousand. The remaining hedged balance as of March 31, 2016 was $28.4 million. The interest rate hedge fixed the rate at 1.21% plus a premium ranging from 1.25% to 1.75%. Although we are exposed to credit loss in the event of nonperformance by the other parties to the interest rate hedge agreement, we anticipate performance by the counterparties.

As part of the CTI acquisition in July 2011, we assumed approximately $5.9 million of Industrial Revenue Bond (IRB) indebtedness issued through the Stanly County, North Carolina Industrial Revenue and Pollution Control Authority. The bond matures in April 2018, with the option to provide principal payments annually on April 1st. On April 1, 2016, we paid an optional principal payment of $865 thousand. Since the IRB is remarketed annually, it is included in “Current portion of long-term debt” on the accompanying Consolidated Balance Sheets. Interest is payable monthly, with a variable rate that resets weekly. As a security for payment of the bonds, we obtained a direct pay letter of credit issued by JPMorgan Chase Bank, N.A. The letter of credit reduces annually by the principal reduction amount. The interest rate at March 31, 2016 was 0.6% for the IRB debt.

Critical Accounting Policies

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on the consolidated financial statements included in this Quarterly Report on Form 10-Q, 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. We monitor and evaluate our estimates and assumptions, based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.

We review our financial reporting and disclosure practices and accounting practices quarterly to ensure they provide accurate and transparent information relative to the current economic and business environment. For further information regarding the accounting policies that we believe to be critical accounting policies that affect our more significant judgments and estimates used in preparing our consolidated financial statements, see Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2015.

25

Item 3. 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, labor costs, sales levels, competition, levels of inventory held by other metals service centers, consolidation of metals producers, new global capacity by metals producers, volatility in 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, except for the metals hedges discussed in Note 5 to the Consolidated Financial Statements. 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 asset impairment charges. Changing metals prices therefore could significantly impact our net sales, gross profits, operating income and net income.

Rising 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 9.5% of our consolidated net sales in 2016 were directly related to automotive manufacturers or manufacturers of automotive components and parts. 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.

Inflation generally affects us by increasing the cost of employee wages and benefits, transportation services, processing equipment, energy and borrowings under our credit facility. General inflation, excluding increases in the price of steel and increased 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 2016 and 2015, we entered into metals swaps at the request of customers. While these derivatives are intended to be effective in helping us manage risk, they have not been designated as hedging instruments. 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. We have the option to enter into 30- to 180-day fixed base rate LIBOR loans under the ABL Credit Facility. The Company assumed an interest rate swap agreement on the $5.9 million of CTI IRB. The swap agreement matures in April 2018, but the notional amount may be reduced annually by the amount of the optional principal payments on the IRB. In June 2012, the Company entered into a forward starting fixed rate interest rate hedge commencing July 2013 in order to eliminate the variability of cash interest payments on approximately $53.2 million of the then outstanding LIBOR-based borrowings under the ABL Credit Facility. The balance as of March 31, 2016 was $28.4 million. The hedge matures on June 1, 2016 and the notional amount is reduced monthly by $729 thousand. The fixed rate interest rate hedge is accounted for as a cash flow hedging instrument for accounting purposes. The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate swap and fixed interest rate hedge agreements. However, the Company does not anticipate nonperformance by the counterparties.

26

Item 4. Controls and Procedures

The evaluation required by Rule 13a-15 of the Securities Exchange Act of 1934 of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-Q has been carried out under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. These disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in reports that are filed with or submitted to the SEC is: (i) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (ii) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2016, our disclosure controls and procedures were effective.

There were no changes in our internal control over financial reporting that occurred during the first quarter of 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

27

Part II. OTHER INFORMATION

Items 1, 1A, 2, 3, 4 and 5 of this Part II are either inapplicable or are answered in the negative and are omitted pursuant to the instructions to Part II.

Item 6. Exhibits

Exhibit	Description of Document	Reference
10.32	Donald McNeeley Employment Agreement effective as of July 1, 2016	Incorporated by reference to Exhibit 10.32 to Registrant’s Form 8-K filed with the Commission on March 31, 2016 (Commission File No. 0-23320)
31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
32.2	Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

28

SIGNATURES

Pursuant to the requirements 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.

	OLYMPIC STEEL, INC.
	(Registrant)
Date: April 29, 2016	By: /s/ Michael D. Siegal
	Michael D. Siegal Chairman of the Board and Chief Executive Officer
	By: /s/ Richard T. Marabito
	Richard T. Marabito Chief Financial Officer (Principal Financial and Accounting Officer)

29

EXHIBIT INDEX

Exhibit	Description of Document	Reference
10.32	Donald McNeeley Employment Agreement effective as of July 1, 2016	Incorporated by reference to Exhibit 10.32 to Registrant’s Form 8-K filed with the Commission on March 31, 2016 (Commission File No. 0-23320)
31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
32.2	Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

 30

EX-31.1

Exhibit 31.1

Certification of the Principal Executive Officer

Pursuant to 15 U.S.C. 78m(a) or 78o(d)

(Section 302 of the Sarbanes-Oxley Act of 2002)

I, Michael D. Siegal, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Olympic Steel, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

By: /s/ Michael D. Siegal

Michael D. Siegal
Olympic Steel, Inc.
Chairman and Chief Executive Officer

April 29, 2016

EX-31.2

Exhibit 31.2

Certification of the Principal Financial Officer

Pursuant to 15 U.S.C. 78m(a) or 78o(d)

(Section 302 of the Sarbanes-Oxley Act of 2002)

I, Richard T. Marabito, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Olympic Steel, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

By: /s/ Richard T. Marabito

Richard T. Marabito
Olympic Steel, Inc.
Chief Financial Officer

April 29, 2016

EX-32.1

Exhibit 32.1

Certification of the Principal Executive Officer

Pursuant to 18 U.S.C. 1350

(Section 906 of the Sarbanes-Oxley Act of 2002)

I, Michael D. Siegal, the Chairman & Chief Executive Officer of Olympic Steel, Inc. (the "Company"), certify that to the best of my knowledge, based upon a review of this report on Form 10-Q for the period ended March 31, 2016 of the Company (the “Report”):

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company, as of the dates and for the periods expressed in this Report.

By: /s/ Michael D. Siegal

Michael D. Siegal
Olympic Steel, Inc.
Chairman & Chief Executive Officer

April 29, 2016

EX-32.2

Exhibit 32.2

Certification of the Principal Financial Officer

Pursuant to 18 U.S.C. 1350

(Section 906 of the Sarbanes-Oxley Act of 2002)

I, Richard T. Marabito, the Chief Financial Officer of Olympic Steel, Inc. (the "Company"), certify that to the best of my knowledge, based upon a review of this report on Form 10-Q for the period ended March 31, 2016 of the Company (the “Report”):

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in this Report.

By: /s/ Richard T. Marabito

Richard T. Marabito
Olympic Steel, Inc.
Chief Financial Officer

April 29, 2016

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 29, 2016
Entity Registrant Name	OLYMPIC STEEL INC
Entity Central Index Key	0000917470
Trading Symbol	zeus
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		10,959,293
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Assets
Cash and cash equivalents	$ 2,430	$ 1,604
Accounts receivable, net	114,702	92,877
Inventories, net (includes LIFO debit of $6,555 as of March 31, 2016 and December 31, 2015)	189,814	206,645
Prepaid Expense and Other Assets, Current	7,847	7,820
Total current assets	314,793	308,946
Property and equipment, at cost	371,886	372,129
Accumulated depreciation	(208,461)	(205,591)
Net property and equipment	163,425	166,538
Intangible assets, net	24,535	24,757
Other long-term assets	14,892	13,229
Total assets	517,645	513,470
Liabilities
Current portion of long-term debt	2,690	2,690
Accounts payable	56,038	55,685
Accrued payroll	8,278	6,884
Other accrued liabilities	14,613	11,801
Total current liabilities	81,619	77,060
Credit facility revolver	145,214	145,800
Other long-term liabilities	12,792	11,419
Deferred income taxes	23,443	24,496
Total liabilities	$ 263,068	$ 258,775
Shareholders' Equity
Preferred stock
Common stock	$ 128,949	$ 128,129
Treasury stock	(699)	(699)
Accumulated other comprehensive loss	(23)	(70)
Retained earnings	126,350	127,335
Total shareholders' equity	254,577	254,695
Total liabilities and shareholders' equity	$ 517,645	$ 513,470

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
LIFO debit	$ 6,555	$ 6,555

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Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Net sales	$ 258,349	$ 345,865
Costs and expenses
Cost of materials sold (excludes items shown seperately below)	199,820	279,939
Warehouse and processing	20,492	22,537
Administrative and general	16,040	17,330
Distribution	9,207	9,301
Selling	5,687	5,891
Occupancy	2,337	2,710
Depreciation	4,509	4,590
Amortization	222	222
Total costs and expenses	258,314	342,520
Operating income	35	3,345
Other income (loss), net	(5)	(31)
Income before interest and income taxes	30	3,314
Interest and other expense on debt	1,285	1,563
Income (loss) before income taxes	(1,255)	1,751
Income tax provision (benefit)	(488)	682
Net income (loss)	(767)	1,069
Net gain (loss) on cash flow hedges, net of tax of $30 at March 31, 2016 and $397 at March 31, 2015.	48	(636)
Total comprehensive income (loss)	$ (719)	$ 433
Net income (loss) per share - basic (in dollars per share)	$ (0.07)	$ 0.10
Weighted average shares outstanding - basic (in shares)	11,182	11,195
Net income (loss) per share - diluted (in dollars per share)	$ (0.07)	$ 0.10
Weighted average shares outstanding - diluted (in shares)	11,182	11,195

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Consolidated Statements of Comprehensive Income (Unaudited) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Net gain (loss) on cash flow hedges, tax	$ 30	$ 397

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Net income (loss)	$ (767)	$ 1,069
Adjustments to reconcile net income to net cash from (used for) operating activities -
Depreciation and amortization	4,960	$ 5,007
Gain on disposition of property and equipment	(160)
Stock-based compensation	797	$ 953
Other long-term assets	1,857	230
Other long-term liabilities	(367)	3,783
	3,340	3,016
Changes in working capital:
Accounts receivable	(21,825)	(27,673)
Inventories	16,831	30,842
Prepaid expenses and other	(62)	5,075
Accounts payable	764	1,091
Change in outstanding checks	(411)	4,964
Accrued payroll and other accrued liabilities	4,208	(2,747)
	(495)	11,552
Net cash from operating activities	2,845	14,568
Cash flows from (used for) investing activities:
Capital expenditures	(1,396)	$ (1,691)
Proceeds from disposition of property and equipment	160
Net cash used for investing activities	(1,236)	$ (1,691)
Cash flows from (used for) financing activities:
Credit facility revolver borrowings	57,188	112,410
Credit facility revolver repayments	(57,775)	(122,400)
Proceeds from exercise of stock options (including tax benefits) and employee stock purchases	23	9
Dividends paid	(219)	(220)
Net cash used for financing activities	(783)	(10,201)
Cash and cash equivalents:
Net change	826	2,676
Beginning balance	1,604	2,238
Ending balance	2,430	4,914
Interest paid	1,026	1,413
Income taxes paid	$ 3	$ 39

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Note 1 - Basis of Presentation

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

1. 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), without audit and reflect all normal and recurring adjustments which are, in the opinion of management, necessary to fairly state the results of the interim periods covered by this report. Year-to-date results are not necessarily indicative of 2016 annual results and these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. All intercompany transactions and balances have been eliminated in consolidation.

The Company operates in three reportable segments; carbon flat products, specialty metals flat products, and tubular and pipe products. Through its carbon flat products segment, the Company sells and distributes large volumes of processed carbon and coated flat-rolled sheet, coil and plate products. Through its specialty metals flat products segment, the Company sells and distributes processed aluminum and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. Through its tubular and pipe products segment, the Company distributes metal tubing, pipe, bar, valve and fittings and fabricates pressure parts supplied to various industrial markets.

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.

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Note 2 - Accounts Receivable

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Financing Receivables [Text Block]

2. Accounts Receivable :

Accounts receivable are presented net of allowances for doubtful accounts and unissued credits of $2.2 million as of March 31, 2016 and $3.1 million as of December 31, 2015. The allowance for doubtful accounts is maintained at a level considered appropriate based on historical experience and specific customer collection issues that have been identified. Estimations are based upon a calculated percentage of accounts receivable, which remains fairly level from year to year, and judgments about the probable effects of economic conditions on certain customers, which can fluctuate significantly from year to year. The Company cannot guarantee that the rate of future credit losses will be similar to past experience. The Company considers all available information when assessing the adequacy of its allowance for doubtful accounts and unissued credits each quarter.

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Note 3 - Inventories

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Inventory Disclosure [Text Block]

3. Inventories:

Inventories consisted of the following:

	Inventory as of
(in thousands)	March 31, 2016		December 31, 2015
Unprocessed	$	151,019	$	163,942
Processed and finished		38,795		42,703
Totals	$	189,814	$	206,645

The Company values certain of its tubular and pipe products inventory at the last-in, first-out (LIFO) method. At March 31, 2016 and December 31, 2015, approximately $40.8 million, or 21.5% of consolidated inventory, and $42.7 million, or 20.7% of consolidated inventory, respectively, was reported under the LIFO method of accounting. The cost of the remainder of the tubular and pipe products inventory is determined using a weighted average rolling first-in, first-out (FIFO) method.

During the three months ended March 31, 2016, the Company did not record an adjustment to LIFO inventory as the current projections anticipate comparative levels and pricing of inventory for the remainder of the year. During the three months ended March 31, 2015, the Company recorded $250 thousand of LIFO income.

If the FIFO method had been in use, inventories would have been $6.6 million lower than reported at March 31, 2016 and December 31, 2015.

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Note 4 - Debt

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Debt Disclosure [Text Block]

4. Debt :

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

	As of
	March 31,			December 31,
(in thousands)	2016			2015
Asset-based revolving credit facility due June 30, 2019	$	145,214		$	145,800
Industrial revenue bond due April 1, 2018		2,690			2,690
Total debt		147,904			148,490
Less current amount		(2,690	)		(2,690	)
Total long-term debt	$	145,214		$	145,800

The Company’s existing asset-based credit facility (the ABL Credit Facility) is collateralized by the Company’s accounts receivable and inventory. The ABL Credit Facility consists of a revolving credit line of $365 million. Revolver borrowings are limited to the lesser of a borrowing base, comprised of eligible receivables and inventories, or $365 million in the aggregate. The ABL Credit Facility matures on June 30, 2019.

The ABL Credit Facility requires the Company to comply with various covenants, the most significant of which include: (i) until maturity of the ABL Credit Facility, 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 ($36.5 million at March 31, 2016), then the Company 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; (ii) limitations on dividend payments and common stock repurchases; and (iii) restrictions on additional indebtedness. 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 3.00%.

As of March 31, 2016, the Company was in compliance with its covenants and had approximately $93 million of availability under the ABL Credit Facility.

As of March 31, 2016, $2.6 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.

In June 2012, the Company entered into a forward starting fixed rate interest rate hedge that commenced June 2013, in order to eliminate the variability of cash interest payments on $53.2 million of then outstanding LIBOR-based borrowings under the ABL Credit Facility. The hedge matures on June 1, 2016 and the notional amount is reduced monthly by $729 thousand. The hedged balance as of March 31, 2016 was $28.4 million. The interest rate hedge fixed the rate at 1.21% plus a premium ranging from 1.25% to 1.75%. Although the Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate hedge agreement, the Company anticipates performance by the counterparties.

As part of the Chicago Tube and Iron (CTI) acquisition in July 2011, the Company assumed approximately $5.9 million of Industrial Revenue Bond (IRB) indebtedness issued through the Stanly County, North Carolina Industrial Revenue and Pollution Control Authority. The bond matures in April 2018, with the option to provide principal payments annually on April 1st. On April 1, 2016, the Company paid an optional principal payment of $865 thousand. Since the IRB is remarketed annually, it is included in “Current portion of long-term debt” on the accompanying Consolidated Balance Sheets. Interest is payable monthly, with a variable rate that resets weekly. As a security for payment of the bonds, the Company obtained a direct pay letter of credit issued by JPMorgan Chase Bank, N.A. The letter of credit reduces annually by the principal reduction amount. The interest rate at March 31, 2016 was 0.6% for the IRB debt.

CTI entered into an interest rate swap agreement to reduce the impact of changes in interest rates on the above IRB. At March 31, 2016, the effect of the swap agreement on the bond was to fix the rate at 3.46%. The swap agreement matures in April 2018, and is reduced annually by the amount of the optional principal payments on the bond. The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreement. However, the Company does not anticipate nonperformance by the counterparties.

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Note 5 - Derivative Instruments

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

5. Derivative Instruments :

Metals swaps

and embedded customer derivatives

During 2016 and 2015, the Company entered into nickel swaps indexed to the London Metal Exchange (LME) price of nickel with third-party brokers. The nickel swaps are accounted for as derivatives for accounting purposes. The Company entered into them to mitigate its customers’ risk of volatility in the price of metals. The outstanding nickel swaps have one to eight months remaining. The swaps are settled with the brokers at maturity. The economic benefit or loss arising from the changes in fair value of the swaps is contractually passed through to the customer. The primary risk associated with the metals swaps is the ability of customers or third-party brokers to honor their agreements with the Company related to derivative instruments. If the customer or third-party brokers are unable to honor their agreements, the Company’s risk of loss is the fair value of the metals swaps.

While these derivatives are intended to help the Company manage risk, they have not been designated as hedging instruments. The periodic changes in fair value of the metals and embedded customer derivative instruments are included in “Cost of materials sold” in the Consolidated Statements of Comprehensive Income. The Company recognizes derivative positions with both the customer and the third party for the derivatives and classifies cash settlement amounts associated with them as part of “Cost of materials sold” in the Consolidated Statements of Comprehensive Income. The cumulative change in fair value of the metals swaps that have not yet been settled are included in “Other accrued liabilities”, and the embedded customer derivatives are included in “Accounts receivable, net” on the Consolidated Balance Sheets at March 31, 2016 and December 31, 2015.

Interest rate swap

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

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

Fixed rate interest rate hedge

In June 2012, the Company entered into a forward starting fixed rate interest rate hedge commencing July 2013 in order to eliminate the variability of cash interest payments on $53.2 million of the outstanding LIBOR-based borrowings under the ABL Credit Facility. The hedged balance as of March 31, 2016 was $28.4 million. The hedge matures on June 1, 2016 and the notional amount is reduced monthly by $729 thousand. The interest rate hedge fixed the rate at 1.21% plus a premium ranging from 1.25% to 1.75%. Although the Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate hedge agreement, the Company anticipates performance by the counterparties. The fixed rate interest rate hedge is accounted for as a cash flow hedging instrument for accounting purposes.

There was no net impact from the nickel swaps or embedded customer derivative agreements to the Company’s Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and 2015. The table below shows the total impact to the Company’s Consolidated Statements of Comprehensive Income through net income of the derivatives for the three months ended March 31, 2016 and 2015.

	Net Loss Recognized
	For the Three Months Ended March 31,
(in thousands)	2016			2015
Interest rate swap (CTI)	$	(20	)	$	(17	)
Fixed interest rate swap (ABL)		(61	)		(99	)
Metals swaps		(76	)		(1,117	)
Embedded customer derivatives		76			1,117
Total loss	$	(81	)	$	(116	)

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Note 6 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

6. Fair Value of Financial Instruments :

During the three months ended March 31, 2016, there were no transfers of financial assets between Levels 1, 2 or 3 fair value measurements. There have been no changes in the methodologies used at March 31, 2016 since December 31, 2015. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value as of March 31, 2016 and December 31, 2015:

Metals swaps and embedded customer derivatives

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

Interest rate swaps

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

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

	Value of Items Recorded at Fair Value
	As of March 31, 2016
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Embedded customer derivative	$	-	$	204	$	-	$	204
Total assets at fair value	$	-	$	204	$	-	$	204
Liabilities:
Metals swaps	$	-	$	204	$	-	$	204
Interest rate swap (CTI)		-		82		-		82
Fixed interest rate swap (ABL)		-		37		-		37
Total liabilities recorded at fair value	$	-	$	323	$	-	$	323

	Value of Items Not Recorded at Fair Value
	As of March 31, 2016
(in thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
IRB	$	2,690	$	-	$	-	$	2,690
Revolver		-		145,214		-		145,214
Total liabilities not recorded at fair value	$	2,690	$	145,214	$	-	$	147,904

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

	Value of Items Recorded at Fair Value
	As of December 31, 2015
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Embedded customer derivative	$	-	$	384	$	-	$	384
Total assets at fair value	$	-	$	384	$	-	$	384
Liabilities:
Metals swaps	$	-	$	384	$	-	$	384
Interest rate swap (CTI)		-		102		-		102
Fixed interest rate swap (ABL)		-		114		-		114
Total liabilities recorded at fair value	$	-	$	600	$	-	$	600

	Value of Items Not Recorded at Fair Value
	As of December 31, 2015
(in thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
IRB	$	2,690	$	-	$	-	$	2,690
Revolver		-		145,800		-		145,800
Total liabilities not recorded at fair value	$	2,690	$	145,800	$	-	$	148,490

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

The fair value of the IRB is determined using Level 1 inputs. The carrying value and the fair value of the IRB that qualify as financial instruments were $2.7 million at both March 31, 2016 and December 31, 2015.

The fair value of the revolver is determined using Level 2 inputs. The Level 2 fair value of the Company's long-term debt was estimated using prevailing market interest rates on debt with similar credit worthiness, terms and maturities.

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Note 7 - Equity Plans

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

7. Equity Plans :

Restricted Stock Units and Performance Share Units

Pursuant to the Olympic Steel 2007 Omnibus Incentive Plan (Plan), the Company may grant stock options, stock appreciation rights, restricted shares, restricted share units, performance shares, and other stock- and cash-based awards to employees and Directors of, and consultants to, the Company and its affiliates. Under the Plan, 500,000 shares of common stock are available for equity grants.

On March 1, 2015, the Compensation Committee of the Company’s Board of Directors approved the grant of 4,639 restricted stock units (RSUs), respectively, to each non-employee Director. Subject to the terms of the Plan and the RSU agreement, the RSUs vest after one year of service (from the date of grant). The RSUs are not converted into shares of common stock until the director either resigns or is terminated from the Board of Directors.

The fair value of each RSU was estimated to be the closing price of the Company’s common stock on the date of the grant, which was $15.09 on March 1, 2015.

The Company’s Senior Management Compensation Program includes an equity component in order to encourage more ownership of common stock by the senior management. The Senior Management Compensation Program imposes stock ownership requirements upon the participants. Each participant is required to own at least 750 shares of common stock for each year that the participant participates in the Senior Management Compensation Program. Any participant that fails to meet the stock ownership requirements will be ineligible to receive any equity awards under the Company’s equity compensation plans, including the Plan, until the participant satisfies the ownership requirements. To assist participants in meeting the stock ownership requirements, on an annual basis, if a participant purchases 500 shares of common stock on the open market, the Company will award that participant 250 shares of common stock. During the three months ended March 31, 2016 and 2015, the Company matched 2,500 and 6,500 shares, respectively. Additionally, any participant who continues to comply with the stock ownership requirements as of the five-year, 10-year, 15-year, 20-year and 25-year anniversaries of the participant’s participation in the Senior Management Compensation Program will receive a restricted stock unit award with a dollar value of $25 thousand, $50 thousand, $75 thousand, $100 thousand and $100 thousand, respectively. Restricted stock unit awards 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.

Stock-based compensation expense recognized on RSUs for the three months ended March 31, 2016 and 2015, respectively, is summarized in the following table:

	For the Three Months Ended
	March 31,
(in thousands, except per share data)	2016		2015
RSU expense before taxes	$	239	$	231
RSU expense after taxes	$	146	$	141

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

The following table summarizes the activity related to RSUs for the three months ended March 31, 2016:

					Aggregate
	Number of		Weighted Average		Intrinsic Value
	Shares		Granted Price		(in thousands)
Outstanding at December 31, 2015		287,894	$	22.39
Granted		92,077		10.88
Converted into shares		-		-
Forfeited		-		-
Outstanding at March 31, 2016		379,971	$	19.60	$	788
Vested at March 31, 2016		367,750	$	19.48	$	788

No RSUs were converted into shares during the three months ended March 31, 2016. During the three months ended March 31, 2015, 1,582 RSUs were converted into shares.

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Note 8 - Income Taxes

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

8. Income Taxes :

For the three months ended March 31, 2016, the Company recorded an income tax benefit of $488 thousand, or 38.9%, compared to an income tax provision of $682 thousand, or 38.9%, for the three months ended March 31, 2015.

Our tax benefit or provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.

Our quarterly tax provision and our quarterly estimate of our annual effective tax rate is subject to significant volatility due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, changes in law and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

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Note 9 - Shares Outstanding and Earnings Per Share

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

9. 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:

	For the Three Months Ended
	March 31,
(in thousands, except per share data)	2016			2015
Weighted average basic shares outstanding		11,182			11,195
Assumed exercise of stock options and issuance of stock awards		-			-
Weighted average diluted shares outstanding		11,182			11,195
Net income (loss)	$	(767	)	$	1,069
Basic earnings (loss) per share	$	(0.07	)	$	0.10
Diluted earnings (loss) per share	$	(0.07	)	$	0.10
Anti-dilutive securities outstanding		147			283

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Note 10 - Segment Information

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

10. Segment Information :

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

The Company operates in three reportable segments; carbon flat products, specialty metals flat products, and tubular and pipe products. Through its carbon flat products segment, the Company sells and distributes large volumes of processed carbon and coated flat-rolled sheet, coil and plate products. Through its specialty metals flat products segment, the Company sells and distributes processed aluminum and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. Through its tubular and pipe products segment, the Company distributes metal tubing, pipe, bar, valve and fittings and fabricates pressure parts supplied to various industrial markets.

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.

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

	For the Three Months Ended
	March 31,
(in thousands)	2016			2015
Net sales
Carbon flat products	$	161,434		$	228,545
Specialty metals flat products		45,830			52,631
Tubular and pipe products		51,085			64,689
Total net sales	$	258,349		$	345,865
Depreciation and amortization
Carbon flat products	$	2,954		$	3,161
Specialty metals flat products		193			160
Tubular and pipe products		1,559			1,466
Corporate		25			25
Total depreciation and amortization	$	4,731		$	4,812
Operating income (loss)
Carbon flat products	$	(2,178	)	$	470
Specialty metals flat products		1,756			590
Tubular and pipe products		2,243			4,254
Corporate expenses		(1,786	)		(1,969	)
Total operating income	$	35		$	3,345
Other income (loss), net		(5	)		(31	)
Income before interest and income taxes		30			3,314
Interest and other expense on debt		1,285			1,563
Income (loss) before income taxes	$	(1,255	)	$	1,751

	For the Three Months Ended
	March 31,
(in thousands)	2016		2015
Capital expenditures
Flat products segments	$	1,234	$	1,188
Tubular and pipe products		162		503
Corporate		-		-
Total capital expenditures	$	1,396	$	1,691

	As of
	March 31,		December 31,
(in thouands)	2016		2015
Assets
Flat products segments	$	324,344	$	329,885
Tubular and pipe products		192,870		183,129
Corporate		431		456
Total assets	$	517,645	$	513,470

There were no material revenue transactions between the carbon flat products, specialty metals products, and tubular and pipe products segments.

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

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Note 11 - Recent Issued Accounting Updates

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

11. Recently Issued Accounting Updates :

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

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”. This ASU is part of the FASB’s Simplification Initiative and has been issued to reduce complexity in the presentation of employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance will be effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. We are evaluating the impact of the future adoption of this standard on our consolidated financial statements.

In November, 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes.” This ASU is part of the FASB’s Simplification Initiative and has been issued to reduce complexity in the presentation of deferred taxes. This new guidance eliminates the requirement for entities that present a classified statement of financial position to classify deferred tax assets and liabilities as current and noncurrent, and instead require that they classify all deferred tax assets and liabilities as noncurrent. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. However, the guidance does not change the existing requirement that only permits offsetting within a jurisdiction. Companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with early adoption permitted. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively (i.e., by reclassifying the comparative balance sheet). If applied prospectively, entities are required to include a statement that prior periods were not retrospectively adjusted. If applied retrospectively, entities are also required to include quantitative information about the effects of the change on prior periods. The prospective adoption of this guidance on January 1, 2016 did not have a material impact on the Company’s consolidated financial statements and the prior periods were not retrospectively adjusted.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” This ASU is part of the FASB’s Simplification Initiative and has been issued to reduce the complexity in the presentation of debt issuance costs. This new guidance requires companies to present debt issuance costs the same way they currently present debt discounts, as a direct deduction from the carrying value of that debt liability. The guidance is limited to simplifying the presentation of debt issuance costs and does not impact the recognition and measurement guidance for debt issuance costs. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, with early adoption permitted. The amendments of ASU No. 2015-03 must be applied retrospectively, where the balance sheet of each presented individual period is adjusted to indicate the period-specific impact of using the new guidance. The FASB considered that because both debt issuance costs and debt discounts are amortized using the effective interest method, there would be no effect on the income statement upon adoption of the amendments. The adoption of this guidance on January 1, 2016 did not have an impact on the Company’s consolidated financial statements because it does not apply to revolving credit agreements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This ASU is a joint project initiated by the FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. generally accepted accounting principles and International Financial Reporting Standards that will: remove inconsistencies and weaknesses in revenue requirements; provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets; provide more useful information to users of financial statements through improved disclosure requirements; and simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. As originally proposed, the guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is in the process of determining the method of adoption and assessing the impact of this ASU on its consolidated financial statements, and interim periods within those fiscal years, with early adoption permitted. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from contracts with customers.” This ASU deferred the effective date of ASU No. 2014-09 by one year.

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Note 3 - Inventories (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	Inventory as of
(in thousands)	March 31, 2016		December 31, 2015
Unprocessed	$	151,019	$	163,942
Processed and finished		38,795		42,703
Totals	$	189,814	$	206,645

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Note 4 - Debt (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Debt [Table Text Block]

	As of
	March 31,			December 31,
(in thousands)	2016			2015
Asset-based revolving credit facility due June 30, 2019	$	145,214		$	145,800
Industrial revenue bond due April 1, 2018		2,690			2,690
Total debt		147,904			148,490
Less current amount		(2,690	)		(2,690	)
Total long-term debt	$	145,214		$	145,800

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Note 5 - Derivative Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss) [Table Text Block]

	Net Loss Recognized
	For the Three Months Ended March 31,
(in thousands)	2016			2015
Interest rate swap (CTI)	$	(20	)	$	(17	)
Fixed interest rate swap (ABL)		(61	)		(99	)
Metals swaps		(76	)		(1,117	)
Embedded customer derivatives		76			1,117
Total loss	$	(81	)	$	(116	)

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Note 6 - Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	Value of Items Recorded at Fair Value
	As of March 31, 2016
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Embedded customer derivative	$	-	$	204	$	-	$	204
Total assets at fair value	$	-	$	204	$	-	$	204
Liabilities:
Metals swaps	$	-	$	204	$	-	$	204
Interest rate swap (CTI)		-		82		-		82
Fixed interest rate swap (ABL)		-		37		-		37
Total liabilities recorded at fair value	$	-	$	323	$	-	$	323

	Value of Items Recorded at Fair Value
	As of December 31, 2015
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Embedded customer derivative	$	-	$	384	$	-	$	384
Total assets at fair value	$	-	$	384	$	-	$	384
Liabilities:
Metals swaps	$	-	$	384	$	-	$	384
Interest rate swap (CTI)		-		102		-		102
Fixed interest rate swap (ABL)		-		114		-		114
Total liabilities recorded at fair value	$	-	$	600	$	-	$	600

Fair Value, by Balance Sheet Grouping [Table Text Block]

	Value of Items Not Recorded at Fair Value
	As of March 31, 2016
(in thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
IRB	$	2,690	$	-	$	-	$	2,690
Revolver		-		145,214		-		145,214
Total liabilities not recorded at fair value	$	2,690	$	145,214	$	-	$	147,904

	Value of Items Not Recorded at Fair Value
	As of December 31, 2015
(in thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
IRB	$	2,690	$	-	$	-	$	2,690
Revolver		-		145,800		-		145,800
Total liabilities not recorded at fair value	$	2,690	$	145,800	$	-	$	148,490

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Note 7 - Equity Plans (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	For the Three Months Ended
	March 31,
(in thousands, except per share data)	2016		2015
RSU expense before taxes	$	239	$	231
RSU expense after taxes	$	146	$	141

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

					Aggregate
	Number of		Weighted Average		Intrinsic Value
	Shares		Granted Price		(in thousands)
Outstanding at December 31, 2015		287,894	$	22.39
Granted		92,077		10.88
Converted into shares		-		-
Forfeited		-		-
Outstanding at March 31, 2016		379,971	$	19.60	$	788
Vested at March 31, 2016		367,750	$	19.48	$	788

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Note 9 - Shares Outstanding and Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	For the Three Months Ended
	March 31,
(in thousands, except per share data)	2016			2015
Weighted average basic shares outstanding		11,182			11,195
Assumed exercise of stock options and issuance of stock awards		-			-
Weighted average diluted shares outstanding		11,182			11,195
Net income (loss)	$	(767	)	$	1,069
Basic earnings (loss) per share	$	(0.07	)	$	0.10
Diluted earnings (loss) per share	$	(0.07	)	$	0.10
Anti-dilutive securities outstanding		147			283

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Note 10 - Segment Information (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Reconciliation of Revenue from Segments to Consolidated [Table Text Block]

	For the Three Months Ended
	March 31,
(in thousands)	2016			2015
Net sales
Carbon flat products	$	161,434		$	228,545
Specialty metals flat products		45,830			52,631
Tubular and pipe products		51,085			64,689
Total net sales	$	258,349		$	345,865
Depreciation and amortization
Carbon flat products	$	2,954		$	3,161
Specialty metals flat products		193			160
Tubular and pipe products		1,559			1,466
Corporate		25			25
Total depreciation and amortization	$	4,731		$	4,812
Operating income (loss)
Carbon flat products	$	(2,178	)	$	470
Specialty metals flat products		1,756			590
Tubular and pipe products		2,243			4,254
Corporate expenses		(1,786	)		(1,969	)
Total operating income	$	35		$	3,345
Other income (loss), net		(5	)		(31	)
Income before interest and income taxes		30			3,314
Interest and other expense on debt		1,285			1,563
Income (loss) before income taxes	$	(1,255	)	$	1,751

Reconciliation of Other Significant Reconciling Items from Segments to Consolidated [Table Text Block]

	For the Three Months Ended
	March 31,
(in thousands)	2016		2015
Capital expenditures
Flat products segments	$	1,234	$	1,188
Tubular and pipe products		162		503
Corporate		-		-
Total capital expenditures	$	1,396	$	1,691

Reconciliation of Assets from Segment to Consolidated [Table Text Block]

	As of
	March 31,		December 31,
(in thouands)	2016		2015
Assets
Flat products segments	$	324,344	$	329,885
Tubular and pipe products		192,870		183,129
Corporate		431		456
Total assets	$	517,645	$	513,470

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Note 1 - Basis of Presentation (Details Textual)	3 Months Ended
	Mar. 31, 2016
Number of Reportable Segments	3

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Note 2 - Accounts Receivable (Details Textual) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Allowance for Doubtful Accounts Receivable, Current	$ 2.2	$ 3.1

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Note 3 - Inventories (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2016	Dec. 31, 2015
LIFO Inventory Amount		$ 40,800	$ 42,700
Percentage of LIFO Inventory		21.50%	20.70%
Inventory, LIFO Reserve, Period Charge	$ 250
Inventory Difference Using FIFO Basis		$ 6,600	$ 6,600

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Note 3 - Steel Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Unprocessed	$ 151,019	$ 163,942
Processed and finished	38,795	42,703
Totals	$ 189,814	$ 206,645

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Note 4 - Debt (Details Textual) - USD ($) $ in Thousands		3 Months Ended
	Apr. 02, 2016	Mar. 31, 2016	Dec. 31, 2015	Jun. 30, 2013
Asset Based Revolving Credit Facility Due June 30, 2019 [Member] | A B L Credit Facility [Member] | Availability Dollar Amount [Member]
Line Of Credit Facility Covenant Terms Monetary		$ 30,000
Asset Based Revolving Credit Facility Due June 30, 2019 [Member] | A B L Credit Facility [Member] | Minimum [Member] | Base Rate [Member]
Debt Instrument, Basis Spread on Variable Rate		0.00%
Asset Based Revolving Credit Facility Due June 30, 2019 [Member] | A B L Credit Facility [Member] | Minimum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate		1.25%
Asset Based Revolving Credit Facility Due June 30, 2019 [Member] | A B L Credit Facility [Member] | Maximum [Member] | Base Rate [Member]
Debt Instrument, Basis Spread on Variable Rate		0.25%
Asset Based Revolving Credit Facility Due June 30, 2019 [Member] | A B L Credit Facility [Member] | Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate		3.00%
Asset Based Revolving Credit Facility Due June 30, 2019 [Member] | A B L Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 365,000
Line of Credit Facility, Current Borrowing Capacity		$ 365,000
Line of Credit Facility Covenant Terms Percentage of Revolver Commitments		10.00%
Balance Required for Compliance with Revolver Commitments		$ 36,500
A B L Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Term Loan Member [Member]
Long-term Line of Credit				$ 53,200
A B L Credit Facility [Member]
Line of Credit Facility Covenant Terms EBITDA Ratio		1
Line of Credit Facility, Remaining Borrowing Capacity		$ 93,000
Debt Instrument, Periodic Payment, Principal	$ 865
Minimum [Member]
Derivative Premium Rate		1.25%
Maximum [Member]
Derivative Premium Rate		1.75%
Amortized Banking Fees [Member]
Prepaid Expense and Other Assets, Current		$ 2,600
Industrial Revenue Bonds [Member] | Chicago Tube and Iron Company Acquisition [Member]
Business Combination, Consideration Transferred, Liabilities Incurred		$ 5,900
Debt Instrument, Interest Rate, Effective Percentage		0.60%
Industrial Revenue Bonds [Member]
Effectof Swap Interest Rate Agreement		3.46%
Interest Rate Swap [Member]
Long-term Line of Credit		$ 28,400
Fixed Rate Interest Hedge Notional Monthly Decrease		729
Prepaid Expense and Other Assets, Current		$ 7,847	$ 7,820
Derivative, Fixed Interest Rate		1.21%

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Note 4 - Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Asset Based Revolving Credit Facility Due June 30, 2019 [Member]
Asset-based revolving credit facility	$ 145,214	$ 145,800
Industrial Revenue Bond Member [Member]
Industrial revenue bond	2,690	2,690
Asset-based revolving credit facility	145,214	145,800
Total debt	147,904	148,490
Less current amount	(2,690)	(2,690)
Total long-term debt	$ 145,214	$ 145,800

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Note 5 - Derivative Instruments (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Jun. 30, 2013
Nickel Swaps [Member] | Minimum [Member]
Derivative, Remaining Maturity	30 days
Nickel Swaps [Member] | Maximum [Member]
Derivative, Remaining Maturity	240 days
Interest Rate Swap [Member] | Cash Flow Hedging [Member]
Long-term Line of Credit	$ 28,400
Interest Rate Swap [Member]
Long-term Line of Credit	28,400
Fixed Rate Interest Hedge Notional Monthly Decrease	$ 729
Minimum [Member] | Cash Flow Hedging [Member]
Derivative Premium Rate	1.25%
Minimum [Member]
Derivative Premium Rate	1.25%
Maximum [Member] | Cash Flow Hedging [Member]
Derivative Premium Rate	1.75%
Maximum [Member]
Derivative Premium Rate	1.75%
A B L Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Term Loan Member [Member]
Long-term Line of Credit		$ 53,200
Cash Flow Hedging [Member]
Derivative, Fixed Interest Rate	1.21%
Derivative, Fixed Interest Rate	1.21%

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Note 5 - Impact to Consolidated Statements of Operations of Derivatives (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Interest Rate Swap [Member] | Chicago Tube and Iron Company Acquisition [Member]
Derivatives	$ (20)	$ (17)
Interest Rate Swap [Member] | A B L Credit Facility [Member]
Derivatives	(61)	(99)
Metals Swap [Member]
Derivatives	(76)	(1,117)
Embedded Customer Derivatives [Member]
Derivatives	76	1,117
Derivatives	$ (81)	$ (116)

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Note 6 - Fair Value of Financial Instruments (Details Textual) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Industrial Revenue Bonds [Member]
Long-term Debt, Fair Value	$ 2.7	$ 2.7

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Note 6 - Fair Value Measurements, Recorded (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Metals Swap [Member]
Liabilities
Metals swaps
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Interest Rate Swap [Member] | Chicago Tube and Iron Company Acquisition [Member]
Liabilities
Interest rate swap (CTI)
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Fixed Interest Rate Swap [Member] | A B L Credit Facility [Member]
Liabilities
Interest rate swap (CTI)
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Assets
Total assets at fair value
Liabilities
Total liabilities recorded at fair value
Fair Value, Inputs, Level 1 [Member]
Assets
Embedded customer derivative
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Metals Swap [Member]
Liabilities
Metals swaps	$ 204	$ 384
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Interest Rate Swap [Member] | Chicago Tube and Iron Company Acquisition [Member]
Liabilities
Interest rate swap (CTI)	82	102
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Fixed Interest Rate Swap [Member] | A B L Credit Facility [Member]
Liabilities
Interest rate swap (CTI)		114
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Assets
Total assets at fair value	204	384
Liabilities
Total liabilities recorded at fair value	323	600
Fair Value, Inputs, Level 2 [Member]
Assets
Embedded customer derivative	$ 204	$ 384
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Metals Swap [Member]
Liabilities
Metals swaps
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Interest Rate Swap [Member] | Chicago Tube and Iron Company Acquisition [Member]
Liabilities
Interest rate swap (CTI)
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Fixed Interest Rate Swap [Member] | A B L Credit Facility [Member]
Liabilities
Interest rate swap (CTI)
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Assets
Total assets at fair value
Liabilities
Total liabilities recorded at fair value
Fair Value, Inputs, Level 3 [Member]
Assets
Embedded customer derivative
Fair Value, Measurements, Recurring [Member] | Fixed Interest Rate Swap [Member] | A B L Credit Facility [Member]
Liabilities
Interest rate swap (CTI)	$ 37
Metals Swap [Member]
Liabilities
Metals swaps	204	$ 384
Interest Rate Swap [Member] | Chicago Tube and Iron Company Acquisition [Member]
Liabilities
Interest rate swap (CTI)	82	102
Fixed Interest Rate Swap [Member] | A B L Credit Facility [Member]
Liabilities
Interest rate swap (CTI)	37	114
Embedded customer derivative	204	384
Total assets at fair value	204	384
Total liabilities recorded at fair value	$ 323	$ 600

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Note 6 - Fair Value Measurements, Not Recorded (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Industrial Revenue Bonds [Member] | Fair Value, Inputs, Level 1 [Member]
Liabilities
IRB	$ 2,690	$ 2,690
Industrial Revenue Bonds [Member] | Fair Value, Inputs, Level 2 [Member]
Liabilities
IRB
Industrial Revenue Bonds [Member] | Fair Value, Inputs, Level 3 [Member]
Liabilities
IRB
Industrial Revenue Bonds [Member]
Liabilities
IRB	$ 2,690	$ 2,690
Fair Value, Inputs, Level 1 [Member] | Revolver Member [Member]
Liabilities
Revolver
Fair Value, Inputs, Level 1 [Member] | Carrying Value [Member]
Liabilities
Total liabilities not recorded at fair value	$ 2,690	$ 2,690
Fair Value, Inputs, Level 2 [Member] | Revolver Member [Member]
Liabilities
Revolver	145,214	145,800
Fair Value, Inputs, Level 2 [Member] | Carrying Value [Member]
Liabilities
Total liabilities not recorded at fair value	$ 145,214	$ 145,800
Fair Value, Inputs, Level 3 [Member] | Revolver Member [Member]
Liabilities
Revolver
Fair Value, Inputs, Level 3 [Member] | Carrying Value [Member]
Liabilities
Total liabilities not recorded at fair value
Revolver Member [Member]
Liabilities
Revolver	$ 145,214	$ 145,800
Carrying Value [Member]
Liabilities
Total liabilities not recorded at fair value	147,904	148,490
Revolver	$ 145,214	$ 145,800

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Note 7 - Equity Plans (Details Textual) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended
	Mar. 01, 2015	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2014
Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		500,000
Share Price	$ 15.09
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	4,639
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		1 year
Match [Member]
Shares Matched		2,500	6,500
Restricted Stock Units (RSUs) [Member] | Five Year Anniversary [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested		$ 25
Restricted Stock Units (RSUs) [Member] | Ten Year Anniversary [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested		50
Restricted Stock Units (RSUs) [Member] | Fifteen Year Anniversary [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested		75
Restricted Stock Units (RSUs) [Member] | Twenty Five Year Anniversary [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested		100
Restricted Stock Units (RSUs) [Member] | Twenty Year Anniversary [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested		$ 100
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		92,077
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested		$ 788
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period		0	0
ShareBased Compensation Arrangement by ShareBased Payment Award Minimum Number of Shares Per Employee		750
Sharebased Compensation Arrangement bySharebasedPaymentAwardMatchingPurchaseRequirement		500
Sharebased Compensation Arrangement by Sharebased Payment Award Award Match		250
Restricted Stock Units Units Number Converted			1,582	0

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Note 7 - Stock Based Compensation Expense Recognized on Restricted Stock Units (Details) - Restricted Stock Units (RSUs) [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Expense Before Tax [Member]
RSU expense before taxes	$ 239	$ 231
Expense After Tax [Member]
RSU expense after taxes	$ 146	$ 141

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Note 7 - Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs) [Member] $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) $ / shares shares
Outstanding, Number of Shares (in shares) | shares	287,894
Outstanding, Weighted Average Exercise Price (in dollars per share) | $ / shares	$ 22.39
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares	92,077
Granted (in dollars per share) | $ / shares	$ 10.88
Outstanding, Number of Shares (in shares) | shares	379,971
Outstanding, Weighted Average Exercise Price (in dollars per share) | $ / shares	$ 19.60
Outstanding, Aggregate Intrinsic Value | $	$ 788
Vested at March 31, 2016 (in shares) | shares	367,750
Vested at March 31, 2016 (in dollars per share) | $ / shares	$ 19.48
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested | $	$ 788

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Note 8 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Tax Expense (Benefit)	$ (488)	$ 682
Effective Income Tax Rate Reconciliation, Percent	38.90%	38.90%

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Note 9 - Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Weighted average basic shares outstanding (in shares)	11,182	11,195
Assumed exercise of stock options and issuance of stock awards (in shares)
Weighted average diluted shares outstanding (in shares)	11,182	11,195
Net income (loss)	$ (767)	$ 1,069
Basic earnings (loss) per share (in dollars per share)	$ (0.07)	$ 0.10
Diluted earnings (loss) per share (in dollars per share)	$ (0.07)	$ 0.10
Anti-dilutive securities outstanding (in shares)	147	283

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Note 10 - Segment Information (Details Textual)	3 Months Ended
	Mar. 31, 2016
Number of Reportable Segments	3

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Note 10 - Segment Reporting Information by Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Carbon Flat Products [Member]
Net sales
Net sales	$ 161,434	$ 228,545
Depreciation and amortization
Depreciation and Amortization	2,954	3,161
Operating income (loss)
Operating Income	(2,178)	470
Specialty Metal Flat Products [Member]
Net sales
Net sales	45,830	52,631
Depreciation and amortization
Depreciation and Amortization	193	160
Operating income (loss)
Operating Income	1,756	590
Tubular And Pipe Products [Member]
Net sales
Net sales	51,085	64,689
Depreciation and amortization
Depreciation and Amortization	1,559	1,466
Operating income (loss)
Operating Income	2,243	4,254
Corporate Segment [Member]
Depreciation and amortization
Depreciation and Amortization	25	25
Operating income (loss)
Operating Income	(1,786)	(1,969)
Net sales	258,349	345,865
Depreciation and Amortization	4,731	4,812
Operating Income	35	3,345
Other income (loss), net	(5)	(31)
Income before interest and income taxes	30	3,314
Interest and other expense on debt	1,285	1,563
Income (loss) before income taxes	$ (1,255)	$ 1,751

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Note 10 - Segment Reporting Information by Capital Expenditures (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Specialty Metal Flat Products [Member]
Capital expenditures
Capital expenditures	$ 1,234	$ 1,188
Tubular And Pipe Products [Member]
Capital expenditures
Capital expenditures	$ 162	$ 503
Corporate Segment [Member]
Capital expenditures
Capital expenditures
Capital expenditures	$ 1,396	$ 1,691

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Note 10 - Segment Reporting Information by Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Flat Products [Member]
Assets
Assets	$ 324,344	$ 329,885
Tubular And Pipe Products [Member]
Assets
Assets	192,870	183,129
Corporate Segment [Member]
Assets
Assets	431	456
Assets	$ 517,645	$ 513,470