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Business Address5080 RICHMOND RDBEDFORD HEIGHTS OH441462162923800

Mailing Address5096 RICHMOND RDBEDFORD HEIGHTS OH44146

SECURITIES AND EXCHANGE COMMISSION

FORM 10-QQuarterly report pursuant to sections 13 or 15(d)

Filing Date: 2012-08-09 | Period of Report: 2012-06-30SEC Accession No. 0001437749-12-008020

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FILEROLYMPIC STEEL INCCIK:917470| IRS No.: 341245650 | State of Incorp.:OH | Fiscal Year End: 1231Type: 10-Q | Act: 34 | File No.: 000-23320 | Film No.: 121019316SIC: 5051 Metals service centers & offices

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UNITED STATESSECURITIES 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 June 30, 2012

( ) 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 (I.R.S. Employerincorporation or organization) Identification No.)

5096 Richmond Road, Bedford Heights, Ohio 44146(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 SecuritiesExchange 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 InteractiveData File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12months (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 reportingcompany. See the definitions of “large accelerated filer” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of theExchange 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 August 9, 2012Common stock, without par value 10,917,340



Olympic Steel, Inc.Index to Form 10-Q

PageNo.

Part I. FINANCIAL INFORMATION 3

Item 1. Financial Statements 3

Consolidated Balance Sheets – June 30, 2012 (unaudited) and December 31, 2011 (audited) 3

Consolidated Statement of Comprehensive Income – for the three and six months ended June 30, 2012 and 2011(unaudited)

4

Consolidated Statement of Cash Flows – for the six months ended June 30, 2012 and 2011 (unaudited) 5

Supplemental Disclosures of Cash Flow information – for the six months ended June 30, 2012 and 2011 (unaudited) 6

Notes to Consolidated Financial Statements (unaudited) 7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19Item 3. Quantitative and Qualitative Disclosures About Market Risk 28Item 4. Controls and Procedures 30

Part II. OTHER INFORMATION 31Item 6. Exhibits 31

SIGNATURES 32

2



Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Olympic Steel, Inc.Consolidated Balance Sheets

(in thousands)

June 30,2012

December 31,2011

(unaudited) (audited)Assets

Cash and cash equivalents $ 2,816 $ 7,403Accounts receivable, net 158,853 122,579Inventories, net 312,275 277,765Prepaid expenses and other 10,354 13,112

Total current assets 484,298 420,859Property and equipment, at cost 343,279 329,116Accumulated depreciation (144,162) (135,703)

Net property and equipment 199,117 193,413Goodwill 47,370 47,254Intangible assets, net 35,868 36,313Other long-term assets 12,154 9,660

Total assets $ 778,807 $ 707,499

LiabilitiesCurrent portion of long-term debt $ 8,967 $ 9,662Accounts payable 116,682 104,425Accrued payroll 11,541 11,613Other accrued liabilities 14,610 13,875

Total current liabilities 151,800 139,575Credit facility revolver 219,915 170,405Long-term debt 59,624 64,149Other long-term liabilities 11,490 9,580Deferred income taxes 37,806 37,214

Total liabilities 480,635 420,923Shareholders' Equity

Preferred stock - -Common stock 121,496 119,816Accumulated other comprehensive loss, net of tax (403) -Retained earnings 177,079 166,760

Total shareholders' equity 298,172 286,576Total liabilities and shareholders' equity $ 778,807 $ 707,499

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

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Olympic Steel, Inc.Consolidated Statement of Comprehensive Income

(in thousands, except per share data)

Three Months EndedJune 30,

Six Months EndedJune 30,

2012 2011 2012 2011(unaudited) (unaudited)

Net sales $ 367,365 $ 299,000 $ 749,417 $ 593,381Costs and expenses

Cost of materials sold (excludes items shownseperately below) 295,878 238,618 602,556 469,580Warehouse and processing 21,003 16,371 42,225 31,961Administrative and general 17,508 13,667 35,882 26,878Distribution 9,219 6,139 18,278 12,347Selling 6,763 5,127 13,904 10,931Occupancy 2,115 1,667 4,438 3,493Depreciation 4,913 3,512 9,683 6,979Amortization 222 - 444 -

Total costs and expenses 357,621 285,101 727,410 562,169Operating income 9,744 13,899 22,007 31,212

Other income, net (5) - (39) -Income before interest and income taxes 9,749 13,899 22,046 31,212

Interest and other expense on debt 2,183 826 4,291 1,631Income before income taxes 7,566 13,073 17,755 29,581

Income tax provision 3,040 5,127 6,999 11,312Net income $ 4,526 $ 7,946 $ 10,756 $ 18,269

Net loss on interest rate hedge, net of tax (403) - (403) -Total comprehensive income $ 4,123 $ 7,946 $ 10,353 $ 18,269

Earnings per share:Net income per share - basic $ 0.41 $ 0.73 $ 0.98 $ 1.67Weighted average shares outstanding - basic 10,960 10,935 10,956 10,935Net income per share - diluted $ 0.41 $ 0.73 $ 0.98 $ 1.67Weighted average shares outstanding - diluted 10,989 10,947 10,987 10,947


4



Olympic Steel, Inc.Consolidated Statement of Cash Flows

(in thousands)


2012 2011(unaudited)

Cash flows from (used for) operating activities:Net income $ 10,756 $ 18,269

Adjustments to reconcile net income to net cash used for operating activities -Depreciation and amortization 10,753 7,132Loss on disposition of property and equipment 174 39Stock-based compensation 1,436 404Other long-term assets (2,032) (209)Other long-term liabilities 1,255 3,512

22,342 29,147Changes in working capital:

Accounts receivable (36,274) (57,629)Inventories (34,510) (6,972)Income taxes receivable and deferred 844 3,911Prepaid expenses and other 2,758 (967)Accounts payable 8,628 15,530Change in outstanding checks 3,629 4,277Accrued payroll and other accrued liabilities 782 (4,777)

(54,143) (46,627)Net cash used for operating activities (31,801) (17,480)

Cash flows from (used for) investing activities:Capital expenditures (15,683) (16,416)Proceeds from disposition of property and equipment 2 12

Net cash used for investing activities (15,681) (16,404)

Cash flows from (used for) financing activities:Credit facility revolver borrowings 303,470 231,475Credit facility revolver repayments (253,960) (195,520)Principal payments under capital lease obligations (90) -Term loan repayments (4,375) -Industrial revenue bond repayments (755) -Credit facility fees and expenses (1,203) (760)Proceeds from exercise of stock options (including tax benefits) and employee stockpurchases 244 20Dividends paid (436) (436)

Net cash from financing activities 42,895 34,779

Cash and cash equivalents:Net change (4,587) 895Beginning balance 7,403 1,492Ending balance $ 2,816 $ 2,387




5



Olympic Steel, Inc.Supplemental Disclosures of Cash Flow Information

(in thousands)


2012 2011(unaudited)

Cash paid during the period

Interest paid $ 3,816 $ 1,473Income taxes paid $ 3,344 $ 6,688


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Olympic Steel, Inc.

Notes to Consolidated Financial Statements

(unaudited)

June 30, 2012

(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 resultsare not necessarily indicative of 2012 annual results and these financial statements should be read in conjunction with the Company’sAnnual Report on Form 10-K for the year ended December 31, 2011. All significant intercompany transactions and balances have beeneliminated in consolidation.

Commencing with the July 1, 2011 acquisition of Chicago Tube and Iron Company (CTI), the Company operates in two reportablesegments; flat products and tubular and pipe products. Through its flat products segment, the Company sells and distributes largevolumes of processed carbon, coated, aluminum and stainless flat-rolled sheet, coil and plate products. Through its tubular and pipeproducts segment, the Company distributes metal tubing, pipe, bar, valve and fittings and the fabrication of pressure parts supplied tovarious industrial markets.

(2) Acquisition of Chicago Tube and Iron Company:

On July 1, 2011, the Company acquired all of the outstanding common shares of CTI pursuant to the terms of an Agreement and Plan ofMerger dated May 18, 2011. CTI stocks, processes and fabricates metal tubing, pipe, bar, valves and fittings and pressure parts at nineoperating facilities located primarily throughout the Midwestern United States. The Company paid for goodwill in conjunction with theacquisition, as CTI enhances the Company’s commercial opportunities by adding new product offerings to an expanded customer baseand by increasing the Company’s distribution footprint.

The Company paid total cash consideration of $159.9 million, consisting of a base purchase price of $150.0 million, plus the closingcash, working capital and McNeeley purchase agreement payments (as disclosed in the Current Report on Form 8-K filed on May 20,2011) totaling approximately $9.9 million. In addition, the Company assumed approximately $5.9 million of indebtedness and acquired$11.1 million of cash from CTI. Olympic funded its acquisition of CTI primarily with borrowings under its amended asset-based creditfacility. During the second and third quarters of 2011, the Company incurred $919 thousand of direct acquisition-related costs in theaggregate.

Purchase Price Allocation

The acquisition of CTI was accounted for under the acquisition method of accounting and, accordingly, the purchase price of $159.9million has been allocated to the assets acquired and liabilities assumed at July 1, 2011, the date of acquisition. There were no materialchanges to the purchase price allocation since December 31, 2011.

Pro Forma Financial Information

The following unaudited pro forma summary of financial results presents the consolidated results of operations as if the CTI acquisitionhad occurred on January 1, 2010, after the effect of certain adjustments, including increased depreciation expense resulting from recordingfixed assets at fair value, interest expense on the acquisition debt and amortization of customer relationships, with the related taxeffects. The pro forma results for the three and six months ended June 30, 2011 does not include any transactions costs and other non-recurring acquisition related expenses. The pro forma results have been presented for comparative purposes only and are not indicativeof what would have occurred had the acquisition been made on January 1, 2010, or of any potential results that may occur in the future.



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Three monthsended

June 30, 2011

Six monthsended

June 30, 2011(in thousands, except per share amounts)Pro forma (unaudited):Net sales $ 358,789 $ 713,888Net income $ 9,602 $ 20,917

Basic earnings per common share $ 0.88 $ 1.91Diluted earnings per common share $ 0.88 $ 1.91

(3) Accounts Receivable:

The Company maintained allowances for doubtful accounts and unissued credits of $3.5 million and $2.9 million at June 30, 2012 andDecember 31, 2011, respectively. The allowance for doubtful accounts is maintained at a level considered appropriate based on historicalexperience and specific customer collection issues that have been identified. Estimations are based upon a calculated percentage ofaccounts receivable, which remains fairly level from year to year, and judgments about the probable effects of economic conditions oncertain customers, which can fluctuate significantly from year to year. The Company cannot guarantee that the rate of future credit losseswill be similar to past experience. The Company considers all available information when assessing the adequacy of its allowance fordoubtful accounts and unissued credits each quarter.

(4) Inventories:

Inventories are stated at the lower of cost or market and include the costs of purchased metal, inbound freight, external processingand applicable labor and overhead costs. Cost for the Company’s flat products segment (flat-rolled sheet, coil and plate products) isdetermined using the specific identification method.

As a result of the acquisition of CTI, certain of the Company’s tubular and pipe products inventory is stated under the last-in, first-out(LIFO) method, which is not in excess of market. At June 30, 2012, approximately $46.1 million, or 14.8% of consolidated inventory,was reported under the LIFO method of accounting. The cost of the remainder of CTI’s inventory is determined using a weighted averagefirst-in, first-out method.

An actual valuation of the inventory under the LIFO method is made at the end of each year based on the inventory levels andcosts at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventorylevels and costs. Because estimates are subject to many factors beyond management’s control, annual results may differ from interimresults. Interim LIFO estimates are subject to a final year-end LIFO inventory valuation. The Company did not record a LIFOadjustment in its second quarter of 2012 because its full-year LIFO estimate anticipates prices and quantities to be below July 1, 2011levels. As a result, there was no LIFO reserve at June 30, 2012.

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Metal inventories consist of the following:

June 30,2012

December31,

2011(in thousands)Unprocessed $ 229,275 $ 207,301Processed and finished 83,000 70,464Totals $ 312,275 $ 277,765

(5) Intangible Assets:

Intangible assets, net, consisted of the following as of June 30, 2012:

Gross CarryingAmount

AccumulatedAmortization

IntangibleAssets,

Net(in thousands)Customer relationships - subject to amortization $ 13,332 $ (889) $ 12,443Trade name - not subject to amortization 23,425 - 23,425

$ 36,757 $ (889) $ 35,868

The Company estimates that amortization expense for its intangible assets subject to amortization will be $889 thousand for the yearended December 31, 2012 and $889 thousand per year in each of the next five years.

(6) Goodwill:

The carrying amount of goodwill, by reportable segment, is as follows:

June 30,2012

December31,

2011(in thousands)Flat products $ 7,083 $ 7,083Tubular and pipe products 40,287 40,171Total $ 47,370 $ 47,254

The goodwill of $47.4 million is not deductible for income tax purposes. The goodwill represents the excess of cost over the fair valueof net tangible and intangible assets acquired. The Company paid for goodwill in conjunction with the acquisitions, as they enhance theCompany’s commercial opportunities by adding new product offerings to an expanded customer base and by increasing the Company’sdistribution footprint.

In accordance with the Accounting Standards Codification, on an annual basis, an impairment test of goodwill is performed in the fourthquarter, or more frequently if changes in circumstances or the occurrence of events indicate potential impairment. Events or changes incircumstances that could trigger an impairment review include significant nonperformance relative to the expected historical or projectedfuture operating results, significant changes in the manner of the use of the acquired assets or the strategy for the overall business orsignificant negative industry or economic trends.

Due to the Company’s book value exceeding the Company’s market capitalization a triggering event review of potential goodwillimpairment was performed in the second quarter as of June 1, 2012. For the goodwill related to the tubular and pipe products segment



a qualitative assessment was performed. For the Company’s reportable units within the flat products segment, a discounted cash flowanalysis was performed, which contains significant unobservable inputs, based upon average earnings before interest, taxes, depreciationand amortization and cash flow multiples. In all cases, the fair values of the entities were substantially in excess of the carrying valuesof the entities and there were no indications of impairment.

9



(7) Investments in Joint Ventures:

The Company and the United States Steel Corporation each own 50% of Olympic Laser Processing (OLP), a company that producedlaser welded sheet steel blanks for the automotive industry. OLP ceased operations in 2006. In December 2006, the Company advanced$3.2 million to OLP to cover a loan guarantee. As of December 31, 2011, the investment in and advance to OLP was valued at $1.6million on the Company’s Consolidated Balance Sheet.

In May 2012 the real estate associated with OLP was sold. The sale of the OLP real estate was completed on May 18, 2012, resulting ina pre-tax loss on sale to the Company of $9 thousand. The Company is in the process of finalizing all of the transactions related to thesale of the real estate and dissolving OLP.

(8) Debt:

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

(in thousands)June 30,

2012December 31,

2011Asset-based revolving credit facility due June 30, 2016 $ 219,915 $ 170,405Term loan due June 30, 2016 61,979 66,354Industrial revenue bond due April 1, 2018 5,125 5,880Capital lease 1,487 1,577Total debt 288,506 244,216

Less current amount (8,967) (9,662)Total long-term debt $ 279,539 $ 234,554

On March 16, 2012, the Company amended its existing asset-based revolving credit facility. The amendment provided, among otherthings: (i) a reduction in the applicable margin for loans under the Company’s Loan and Security Agreement; (ii) additional revolvingcommitments to the borrowers in an aggregate principal amount of $50 million, which additional revolving commitments do not impactthe borrowers’ incremental facilities; and (iii) permits certain transactions among the borrowers and Metales de Olympic, S. de R.L. deC.V., an indirect subsidiary of the Company. The amended asset-based credit facility (the ABL Credit Facility) consists of a revolvingcredit line of $315 million and a $64 million term loan. Revolver borrowings are limited to the lesser of a borrowing base, comprised ofeligible receivables and inventories, or $315 million in the aggregate. The ABL Credit Facility matures on July 1, 2016.

The ABL Credit Facility requires the Company to comply with various covenants, the most significant of which include: (i) until maturityof the ABL Credit Facility, if any commitments or obligations are outstanding and the Company’s availability is less than the greater of$20 million, 12.5% of the aggregate amount of revolver commitments, or 60% of the principal balance of the term loan then outstanding,then the Company must maintain a ratio of EBITDA minus certain capital expenditures and cash taxes paid to fixed charges of atleast 1.10 to 1.00 for the most recent twelve fiscal month period; (ii) limitations on dividend payments; (iii) restrictions on additionalindebtedness; and (iv) limitations on investments and joint ventures. Effective with the March 16, 2012 amendment, the Company hasthe option to borrow under its revolver based on the agent’s base rate plus a premium ranging from 0.00% to 0.50% or the LondonInterbank Offered Rate (LIBOR) plus a premium ranging from 1.50% to 2.00%. The interest rate under the term loan is based on theagent’s base rate plus a premium ranging from 0.25% to 0.75% or LIBOR plus a premium ranging from 1.75% to 2.25%.

10



In June 2012, the Company entered into a forward starting fixed rate interest rate hedge commencing July 2013 in order to eliminatethe variability of cash interest payments on $53 million of the outstanding LIBOR based borrowings under the ABL credit facility. Thehedge matures on June 1, 2016 and is reduced monthly by the principal payments on the term loan. The interest rate hedge fixed the rateat 1.21%. Although the Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate hedgeagreement, the Company anticipates performance by the counterparties.

As of June 30, 2012, $5.4 million of bank financing fees were included in “Prepaid expenses and other” and “Other long-termassets” on the accompanying Consolidated Balance Sheet. This includes $1.2 million of financing fees paid for the March 16, 2012amendment. The financing fees are being amortized over the remaining term of the ABL Credit Facility.

As of June 30, 2012, the Company was in compliance with its covenants and had approximately $85 million of availability under theABL Credit Facility.

As part of the CTI acquisition, the Company assumed approximately $5.9 million of Industrial Revenue Bond indebtedness issuedthrough the Stanly County, North Carolina Industrial Revenue and Pollution Control Authority (IRB). The bond matures in April 2018,with the option to provide principal payments annually on April 1st. On April 1, 2012, the Company paid an optional principal paymentof $755 thousand. Interest is payable monthly, with a variable rate that resets weekly. As security for payment of the bonds, theCompany obtained a direct pay letter of credit issued by JPMorgan Chase Bank, N.A. The letter of credit reduces annually by theprincipal reduction amount. The interest rate at June 30, 2012 was 0.23% for the IRB debt.

The Company entered into an interest rate swap agreement to reduce the impact of changes in interest rates on the above IRB. At June30, 2012, the effect of the swap agreement on the bond was to fix the rate at 3.46 percent. The swap agreement matures April 2018,but is reduced annually by the amount of the optional principal payments on the bond. Although, the Company is exposed to credit lossin the event of nonperformance by the other parties to the interest rate swap agreement, the Company anticipates performance by thecounterparties.

(9) Derivative Instruments:

Nickel swaps

During 2012 and 2011, the Company entered into nickel swaps indexed to the London Metal Exchange (LME) price of nickel with third-party brokers. The nickel swaps are treated as derivatives for accounting purposes. The Company entered into the swaps to mitigateits customers’ risk of volatility in the price of nickel. The nickel swaps vary in length from nine to 21 months and are settled with thebroker at maturity. The economic benefit or loss arising from the changes in fair value of the swaps is contractually passed through to thecustomer. The primary risk associated with the nickel swaps is the ability of customers or third-party brokers to honor their agreementswith the Company related to derivative instruments. If the customer or third-party brokers are unable to honor their agreements, theCompany’s risk of loss is the fair value of the nickel swap.

While these derivatives are intended to help the Company manage risk, they have not been designated as hedging instruments. Theperiodic changes in fair value of the nickel and embedded customer derivative instruments are included in “Cost of materials sold” inthe Consolidated Statement of Comprehensive Income. We recognize derivative positions with both the customer and the third partyfor the derivatives and we classify cash settlement amounts associated with them as part of “Cost of materials sold” in the ConsolidatedStatements of Comprehensive Income. The periodic changes in fair value of the interest rate swap are included in “Other income andexpense, net” in the Consolidated Statement of Comprehensive Income. Cash settlement amounts associated with the interest rate swapare included in “Interest and other expense on debt” in the Consolidated Statements of Comprehensive Income.

11



The embedded customer derivatives are included in “Accounts receivable, net”, and the nickel and interest rate swaps are included in“Other accrued liabilities” and “Other long-term liabilities” on the Consolidated Balance Sheet at June 30, 2012 and December 31, 2011.

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 April2018, the same time as the IRB, but is reduced annually by the amount of the principal payments on the IRB. Although the Company isexposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreement, the Company anticipatesperformance by the counterparties. The interest rate swap is not treated as a hedging instrument for accounting purposes.

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 thevariability of cash interest payments on $53 million of the outstanding LIBOR-based borrowings under the ABL Credit Facility. Thehedge matures on June 1, 2016 and is reduced monthly by the principal payments on the term loan. The fixed rate interest rate hedge isaccounted for as a cash flow hedging instrument for accounting purposes.

The table below shows the total net gain or (loss) recognized in the Company’s Consolidated Statement of Comprehensive Income of thederivatives for the three and six months ended June 30, 2012 and 2011.

Three Months Ended June 30, Six Months Ended June 30,2012 2011 2012 2011

(in thousands)Interest rate swap $ (5) $ - $ 16 $ -Nickel swaps (164) (16) (229) 72Embedded customer derivatives 164 16 229 (72)Total (income) expense $ (5) $ - $ 16 $ -

(10) Fair Value of Financial Instruments:

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

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date. Fair value is an exit price concept that assumes an orderly transaction between willingmarket participants. Valuation techniques must maximize the use of observable inputs and minimize the use of unobservable inputs. Tomeasure fair value, the Company applies a fair value hierarchy that is based on three levels of input, of which the first two are consideredobservable and the last unobservable, as follows:

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

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

12



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

During the six months ended June 30, 2012, there were no transfers of financial assets between the levels in the fair valuehierarchy. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value as of June 30,2012 and December 31, 2011:

Nickel swaps and embedded customer derivatives – Determined by using Level 2 inputs that include the price of nickel indexed to theLME. The fair value is determined based on quoted market prices and reflects the estimated amounts the Company would pay or receiveto terminate the nickel swaps.

Interest rate swap and fixed rate interest rate hedge – Based on the present value of the expected future cash flows, considering the risksinvolved, and using discount rates appropriate for the maturity date. Market observable Level 2 inputs are used to determine the presentvalue 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 basisand indicates the fair value hierarchy of the valuation techniques utilized by the Company:

(in thousands)June 30, 2012 Level 1 Level 2 Level 3 Total

Assets:Embedded customer derivatives $ - $ 229 $ - $ 229

Liabilities:Nickel swaps - 284 - 284Interest rate swap 476 476Fixed interest rate hedge - 655 - 655Total liabilities at fair value $ - $ 1,415 $ - $ 1,415

(in thousands)December 31, 2011 Level 1 Level 2 Level 3 Total


Liabilities:Nickel swaps - 55 - 55Interest rate swap - 492 - 492Total liabilities at fair value $ - $ 547 $ - $ 547

Long-Term Financial Instruments

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 financialinstruments were both $4.3 million and $5.1 million at June 30, 2012 and December 31, 2011, respectively.

The fair values of the revolver and term loan are determined using Level 2 inputs. The carrying values of the revolver and the term loanwere $219.9 million and $54.0 million, at June 30, 2012, respectively. The carrying value of the revolver and the term loan were $170.4million and $57.6 million, at December 31, 2011, respectively. As the revolver and term loan were amended in 2012, refinanced in 2011,and carry variable interest rates, management believes that the amounts are carried at fair value at June 30, 2012 and December 31, 2011.



13



(11) Accumulated Other Comprehensive Loss:

In June 2012, the Company entered into a forward starting fixed rate interest rate hedge commencing July 2013 in order to eliminate thevariability of cash interest payments on $53 million of the outstanding LIBOR based borrowings under the ABL Credit Facility. Thehedge matures on June 1, 2016 and is reduced monthly by the principal payments on the term loan. The fixed rate interest rate hedge isaccounted for as a cash flow hedging instrument for accounting purposes. The fair value of the interest rate hedge of $655 thousand, netof tax of $252 thousand is included in “Accumulated other comprehensive loss” on the Consolidated Balance Sheets at June 30, 2012.

(12) Equity Plans:

Stock Options

The following table summarizes stock option activity during the six months ended June 30, 2012:

Number ofOptions

Weighted AverageExercise Price

WeightedAverage

RemainingContractual

Term

Aggregate IntrinsicValue

(in thousands)Outstanding at December 31, 2011 46,007 $ 20.90Granted - -Exercised (2,170) 4.18Canceled - -Outstanding at June 30, 2012 43,837 $ 21.73 3.3 years $ 143Exercisable at June 30, 2012 43,837 $ 21.73 3.3 years $ 143

There were 2,170 stock options exercised during the six months ended June 30, 2012. There were no stock options exercised during thesix months ended June 30, 2011. The total intrinsic value of stock options exercised during the six months ended June 30, 2012 was $52thousand. All options outstanding are vested as of June 30, 2012.

Restricted Stock Units and Performance Share Units

The Olympic Steel 2007 Omnibus Incentive Plan (the Plan) was approved by the Company’s shareholders in 2007. The Plan authorizesthe Company to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance shares, and otherstock- and cash-based awards to employees and Directors of, and consultants to, the Company and its affiliates. Under the Plan, 500,000shares of common stock are available for equity grants.

On January 3, 2012 and March 1, 2011, the Compensation Committee of the Company’s Board of Directors approved the grant of 1,800restricted stock units (RSUs) to each non-employee Director. Subject to the terms of the Plan and the RSU agreement, the RSUs vestafter one year of service (from the date of grant). The RSUs are not converted into shares of common stock until the director eitherresigns 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$25.55 and $26.91 for the grants on January 3, 2012 and March 1, 2011, respectively.

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In 2011, the Compensation Committee for the Company’s Board of Directors approved changes to the Senior Management CompensationProgram to include an equity component in order to encourage more ownership of Common Stock by the executives. Starting in2011, the Senior Management Compensation Program imposed stock ownership requirements upon the participants. Beginning in 2011,each participant is required to own at least 750 shares of Common Stock for each year that the participant participates in the SeniorManagement Compensation Program. Any participant that fails to meet to the stock ownership requirements will be ineligible to receiveany equity awards under the Company’s equity compensation plans, including the Plan, until the participant satisfies the ownershiprequirements. To assist participants in meeting the stock ownership requirements, on an annual basis, if a participant purchases 500shares of Common Stock on the open market, the Company will award that participant 250 shares of Common Stock. During the sixmonths ended June 30, 2102 the Company matched 6,750 shares. Additionally, any participant who continues to comply with the stockownership requirements as of the five-year, 10-year, 15-year, 20-year and 25-year anniversaries of the participant’s participation in theSenior 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 sharesof Common Stock upon a participant’s retirement, or earlier upon the executive’s death or disability or upon a change in control of theCompany.

In recognition of their performance and dedicated years of service, on December 31, 2011, the Compensation Committee of the Boardof Directors granted 81,475 RSUs to Messrs. Michael D. Siegal, Chairman and Chief Executive Officer, David A.Wolfort, President andChief Operating Officer, and Richard T. Marabito, Chief Financial Officer and Treasurer. The fair value of each RSU was estimated tobe the closing price of the Company’s common stock on the date of the grant, which was $23.32 on December 31, 2011. The RSUs vestin five years. Except in limited circumstances, the RSUs will not convert into shares of Common Stock until the retirements of Messrs.Siegal, Wolfort and Marabito, respectively. These RSUs are not a part of the 2011 Senior Management Compensation Program discussedabove.

Stock-based compensation expense recognized on RSUs for the three and six months ended June 30, 2012 and 2011, respectively, issummarized in the following table:



2012 2011 2012 2011(in thousands, except per share data)RSU expense before taxes $ 272 $ 129 $ 552 $ 216RSU expense after taxes $ 163 $ 78 $ 335 $ 133Impact per basic share $ 0.01 $ 0.01 $ 0.03 $ 0.01Impact per diluted share $ 0.01 $ 0.01 $ 0.03 $ 0.01

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

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The following table summarizes the activity related to RSUs for the six months ended June 30, 2012:

Number ofShares

Weighted AverageGranted Price

AggregateIntrinsic Value(in thousands)

Outstanding at December 31, 2011 147,603 $ 27.16Granted 40,368 23.97Converted into shares (375) 22.68Forfeited - -Outstanding at June 30, 2012 187,596 $ 26.48 -Vested at June 30, 2012 121,443 $ 25.95 -

During the six months ended June 30, 2012, 375 RSUs were converted into shares. No RSUs were converted into shares during the sixmonths ended June 30, 2011.

(13) Capital Lease:

The Company leases a warehouse in Streetsboro, Ohio under a capital lease agreement. The Company has signed a purchase agreementto purchase the facility at the end of the lease for $1.3 million. The capital lease obligation is included in “Current portion of short-termdebt” and “Long-term debt” on the accompanying Consolidated Balance Sheet.

The capital lease obligation is as follows:


2012

December31,

2011Total capital lease obligation $ 1,491 $ 1,587Less: interest (4) (10)Capital lease obligation 1,487 1,577Less: current (162) (157)Long term capital lease $ 1,325 $ 1,420

(14) Income Taxes:

For the three months ended June 30, 2012, the Company recorded an income tax provision of $3.0 million, or 40.2%, compared to$5.1 million, or 39.2%, for the three months ended June 30, 2011.

For the six months ended June 30, 2012, the Company recorded an income tax provision of $7.0 million, or 39.4%, compared to$11.3 million, or 38.2%, for the six months ended June 30, 2011.

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(15) 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:



2012 2011 2012 2011(in thousands, except per share data)

Weighted average basic shares outstanding 10,960 10,935 10,956 10,935Assumed exercise of stock options and issuance ofstock awards 29 12 31 12Weighted average diluted shares outstanding 10,989 10,947 10,987 10,947

Net income $ 4,526 $ 7,946 $ 10,756 $ 18,269

Basic earnings per share $ 0.41 $ 0.73 $ 0.98 $ 1.67Diluted earnings per share $ 0.41 $ 0.73 $ 0.98 $ 1.67

Anti-dilutive securities outstanding 178 118 178 118

(16) Segment Information:

Since the July 1, 2011 acquisition of CTI, the Company operates in two reportable segments, flat products and tubular and pipeproducts. The following table summarizes financial information regarding segments:



(in thousands) 2012 2011 2012 2011Net sales

Flat products $ 307,887 $ 299,000 $ 624,516 $ 593,381Tubular and pipe products 59,478 - 124,901 -

Total net sales $ 367,365 $ 299,000 $ 749,417 $ 593,381

Operating incomeFlat products $ 5,299 $ 13,899 $ 11,118 $ 31,212Tubular and pipe products 4,445 - 10,889 -

Total operating income $ 9,744 $ 13,899 $ 22,007 $ 31,212

Depreciation and amortizationFlat products $ 3,952 $ 3,512 $ 7,822 $ 6,979Tubular and pipe products 1,183 - 2,305 -

Total depreciation and amortization $ 5,135 $ 3,512 $ 10,127 $ 6,979

Capital expendituresFlat products $ 5,286 $ 8,513 $ 10,732 $ 16,416Tubular and pipe products 2,428 - 4,951 -

Total capital expenditures $ 7,714 $ 8,513 $ 15,683 $ 16,416

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2012

December31,

2011Total assets

Flat products $ 556,182 $ 494,179Tubular and pipe products 222,625 213,320

Total assets $ 778,807 $ 707,499

There were no material intercompany revenue transactions between the flat products and tubular and pipe products segments.

The Company sells certain products internationally, primarily in North, Central and South America. International sales have beenimmaterial to the consolidated financial results and to the individual segment’s results.

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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 andaccompanying notes contained herein and our consolidated financial statements, accompanying notes and Management’s Discussion andAnalysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December31, 2011. 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, 2011. The following section is qualified in its entirety by the moredetailed information, including our financial statements and the notes thereto, which appear elsewhere in this Quarterly Report on Form10-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 arebased on current expectations, estimates, forecasts and projections about our future performance, business, our beliefs and management’sassumptions. 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 toidentify forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation ReformAct of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differmaterially from those implied by such statements including, but not limited to:

·general and global business, economic, financial and political conditions, including the ongoing effects of the global economicrecovery;

· access to capital and global credit markets;

·competitive factors such as the availability and pricing of metal, industry shipping and inventory levels and rapid fluctuations incustomer demand and metal pricing;

· the cyclicality and volatility within the metals industry;

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

·the success of our new facility startups in Gary, Indiana; Mount Sterling, Kentucky; Monterrey, Mexico; Roseville, Minnesota;Kansas City, Missouri; and Streetsboro, Ohio;

·the ability to successfully integrate the newly leased locations or newly acquired businesses into our operations and achieveexpected results;

· equipment installation delays or malfunctions, including the Streetsboro, Ohio facility;· the ability to comply with the terms of our asset-based credit facility and to make the required term loan payments;· the ability of our customers 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 or our suppliers’ or customers’ personnel;· the availability and costs of transportation and logistical services;

·the amounts, successes and our ability to continue our capital investments and strategic growth initiatives and our businessinformation system implementations;

·the successes of our strategic efforts and initiatives to increase sales volumes, maintain or improve working capital turnover andfree cash flows, improve inventory turnover and improve our customer service;

· the timing and outcome of inventory lower of cost or market adjustments;· the adequacy of our existing information technology and business system software;

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

·our ability to generate free cash flow through operations and decreased future capital expenditures, reduce inventory and repaydebt within anticipated time frames;

·the recently enacted federal healthcare legislation’s impact on the healthcare benefits required to be provided by us and theimpact of such legislation on our compensation and administrative costs;

·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; and

·those risks set forth in Item 1A (Risk Factors), as found in our Annual Report on Form 10-K for the year ended December 31,2011.

Should one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual resultsmay vary materially from those anticipated, intended, expected, believed, estimated, projected or planned. You are cautioned not to placeundue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to republishrevised forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date hereof, except asotherwise required by law.

Overview

We are a leading metals service center that operates in two reportable segments; flat products and tubular and pipe products. We providemetal processing and distribution services for a wide range of customers. Our primary focus is on the direct sale and distribution oflarge volumes of processed carbon, aluminum and stainless flat-rolled sheet, coil and plate products. Commencing with the July 1, 2011acquisition of CTI, we also distribute metal tubing, pipe, bar, valves and fittings and fabricate pressure parts supplied to various industrialmarkets. Products that require more value-added processing generally have a greater gross profit and higher margins. Accordingly,our overall gross profit is affected by, among other things, product mix, the amount of processing performed, the demand for andavailability of metal, volatility in selling prices and material purchase costs. We also perform toll processing of customer-owned metal.We sell certain products internationally, primarily in North, Central and South America. International sales have been immaterial to ourconsolidated financial 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; competition; metal pricing, demand and availability; energy prices; pricing and availabilityof raw materials used in the production of metals; inventory held in the supply chain; customer demand for metal; customers’ ability tomanage their credit line availability; and layoffs or work stoppages by our own, our suppliers’ or our customers’ personnel. The metalsindustry also continues to be affected by the global consolidation of our suppliers, competitors and end-use customers.

Like many other service centers, we maintain substantial inventories of metal to accommodate the short lead times and just-in-timedelivery requirements of our customers. Accordingly, we purchase metal in an effort to maintain our inventory at levels that we believeto be appropriate to satisfy the anticipated needs of our customers based upon customer forecasts, historic buying practices, supplyagreements with customers and market conditions. Our commitments to purchase metal are generally at prevailing market prices in effectat the time we place our orders. When metal prices increase, competitive conditions will influence how much of the price increase wecan 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 netsales and profitability of our business could be adversely affected. When metal prices decline, customer demands for lower prices andour competitors’ responses to those demands could result in lower sale prices and, consequently, lower margins as we use existing metalinventory.

At June 30, 2012, we employed approximately 1,850 people. Approximately 370 of the hourly plant personnel are represented by nineseparate collective bargaining units. The table below shows the expiration dates of the collective bargaining agreements.

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Facility Expiration date

Detroit, Michigan August 31, 2012Milan, Illinois August 12, 2013St. Paul, Minnesota May 25, 2013Duluth, Minnesota December 21, 2014Locust, North Carolina March 4, 2015Romeoville, Illinois May 31, 2015Minneapolis coil, Minnesota September 30, 2015Indianpolis, Indiana January 29, 2016Minneapolis plate, Minnesota March 31, 2017

We are in the process of re-negotiating the collective bargaining agreement for our Detroit, Michigan operation that expires on August31, 2012 and do not anticipate any impact to our business during this process. We have never experienced a work stoppage and webelieve that our relationship with employees is good. However, any prolonged work stoppages by our personnel represented by collectivebargaining units could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Reportable Segments

As a result of our July 1, 2011 acquisition of CTI, we operate two reportable segments; flat products and tubular and pipe products.

Flat products

The primary focus of our flat products segment is on the direct sale and distribution of large volumes of processed carbon, coated,aluminum and stainless flat-rolled sheet, coil and plate products. We act as an intermediary between metal producers and manufacturersthat require processed metal for their operations. We serve customers in most carbon steel consuming industries, including manufacturersand fabricators of transportation and material handling equipment, construction and farm machinery, storage tanks, environmental andenergy generation equipment, automobiles, food service and electrical equipment, military vehicles and equipment, as well as generaland plate fabricators and metals service centers. We distribute our products primarily through a direct sales force.

The flat products segment has 23 strategically-located processing and distribution facilities in the United States and one in Monterrey,Mexico. This geographic footprint allows us to focus on regional customers and larger national and multi-national accounts, primarilylocated throughout the midwestern, eastern and southern United States.

Tubular and pipe products

The tubular and pipe products segment consists of the acquired CTI business. Through our tubular and pipe products segment, wedistribute metal tubing, pipe, bar, valve and fittings and fabricate pressure parts supplied to various industrial markets. Founded in 1914,CTI operates nine facilities in the United States, primarily throughout the Midwest.

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Results of Operations

Consolidated Operations

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

For the Three Months Ended June 30, For the Six Months Ended June 30,2012 2011 2012 2011

$

% ofnet

sales $

% ofnet

sales $

% ofnet

sales $

% ofnet

salesNet sales $ 367,365 100.0% $ 299,000 100.0% $ 749,417 100.0% $ 593,381 100.0%

Cost of materials sold (1) 295,878 80.5% 238,618 79.8% 602,556 80.4% 469,580 79.1%

Gross profit (2) 71,487 19.5% 60,382 20.2% 146,861 19.6% 123,801 20.9%

Operating expenses (3) 61,743 16.8% 46,483 15.5% 124,854 16.7% 92,589 15.6%

Operating income $ 9,744 2.7% $ 13,899 4.6% $ 22,007 2.9% $ 31,212 5.3%

(1) Cost of materials sold includes the cost of purchased metals, inbound and internal transfer freight and external processing costs(2) Gross profit is calculated as net sales less the cost of materials sold.(3) Operating expenses are calculated as total costs and expenses less the cost of materials sold.

Net sales increased 22.9% to $367.4 million during the three months ended June 30, 2012 from $299.0 million during the three monthsended June 30, 2011. Net sales increased 26.3% to $749.4 million during the six months ended June 30, 2012 from $593.4 millionduring the six months ended June 30, 2011. The increase in sales was due to the July 1, 2011 acquisition of CTI and increased tonnagein the flat products segment. CTI sales for the three months ended June 30, 2012 totaled $59.5 million, accounting for 87.0% of thesales increase. CTI sales for the six months ended June 30, 2012 totaled $124.9 million, accounting for 80.0% of the sales increase. Weexpect our sales to decrease slightly in the third quarter as shipments typically decrease during the third quarter due to less ship days,seasonal shut-downs and the average sales price is expected to be lower in the third quarter compared to the second quarter of 2012.

Cost of materials sold increased 24.0% to $295.9 million during the three months ended June 30, 2012 from $238.6 million during thethree months ended June 30, 2011. Cost of materials sold increased 28.3% to $602.6 million during the first half of 2012 from $469.6million during the first half of 2011. The increase in cost of materials sold was due to the July 1, 2011 acquisition of CTI and increasedtonnage in the flat products segment. CTI cost of materials sold accounted for $43.1 million, or 75.3%, of the increase for the threemonths ended June 30, 2012 and $88.0 million, or 66.2%, of the increase for the six months ended June 30, 2012.

As a percentage of net sales, gross profit decreased to 19.5% in the second quarter of 2012 compared to 20.2% in the second quarterof 2011. As a percentage of net sales, gross profit decreased to 19.6% in the first half of 2012 compared to 20.9% in the first half of2011. The decreases in gross margin for both the three and six months ended June 30, 2012 were primarily due to margin pressures inthe flat products segment as metals prices continued to decline in the first half of 2012. The decline in flat products segment marginswas offset by the pipe and tube segment margins, which are typically higher than flat products margins. We expect our gross profit in thethird quarter of 2012 to continue to be pressured.

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Operating expenses in the second quarter of 2012 increased $15.2 million, or 32.8%, from the second quarter of 2011. As a percentageof net sales, operating expenses increased to 16.8% for the second quarter of 2012 from 15.5% in the comparable 2011 period. During2012, higher operating expenses were primarily attributable to the impact of the acquisition of CTI, which accounted for $11.9 million,or 78.2%, of the increase, and increased depreciation expense of $1.4 million or 9.2% of the increase related to the capital expenditurespending of the past 18 months. Operating expenses during the first half of 2012 increased $32.3 million, or 34.8%, from the first half of2011. As a percentage of net sales, operating expenses increased to 16.7% for the first half of 2012 from 15.6% in the comparable 2011period. During 2012, higher operating expenses were primarily attributable to the impact of the acquisition of CTI, which accounted for$26.0 million, or 80.7%, of the increase, and increased depreciation expense of $2.7 million, or 8.4%, of the increase related to the capitalexpenditure spending of the past 18 months.

Interest and other expense on debt totaled $2.2 million for the second quarter of 2012 compared to $826 thousand for the second quarterof 2011. Interest and other expense on debt totaled $4.3 million for the first half of 2012 compared to $1.6 million for the first half of2011. Our effective borrowing rate, exclusive of deferred financing fees and commitment fees, was 2.9% for the first six months of 2012compared to 4.4% for the first six months of 2011. The increase in interest and other expense on debt in 2012 was primarily attributableto the additional debt incurred for the acquisition of CTI, higher financing fee amortization and increased working capital borrowings,offset by the lower borrowing rate under our asset based credit facility.

For the second quarter of 2012, income before income taxes totaled $7.6 million compared to $13.1 million in the second quarter of2011. For the first six months of 2012, income before income taxes totaled $17.8 million, compared to $29.6 million in the first sixmonths of 2011. An income tax provision of 39.4% was recorded for the first six months of 2012, compared to an income tax provisionof 38.2% for the first six months of 2011. The increase in the tax rate during 2012 is a result of the impact of permanent non-deductibletax items applied to a lower pre-tax income level. We expect our full year 2012 income tax provision to approximate 39.4%.

Net income for the second quarter of 2012 totaled $4.5 million or $0.41 per basic and diluted share, compared to $7.9 million or $0.73per basic and diluted share, for the second quarter of 2011. Net income for the first six months of 2012 totaled $10.8 million or $0.98 perbasic and diluted share, compared to $18.3 million or $1.67 per basic and diluted share, for the first six months of 2011.

Segment Operations

Flat products

The following table presents operating results for our flat products segment for the three and six months ended June 30, 2012 and 2011(dollars are shown in thousands):

Three months ended June 30, Six months ended June 30,2012 2011 2012 2011

% of netsales

% of netsales

% of netsales

% of netsales

Direct tons sold 280,149 266,713 573,687 561,600Toll tons sold 22,205 18,692 39,844 41,147Total tons sold 302,354 285,405 613,531 602,747

Net sales $ 307,887 100.0% $ 299,000 100.0% $ 624,516 100.0% $ 593,381 100.0%

Average selling price 1,018 1,048 1,018 984

Cost of materials sold (1) 252,772 82.1% 238,618 79.8% 514,568 82.4% 469,580 79.1%

Gross profit (2) 55,116 17.9% 60,382 20.2% 109,948 17.6% 123,801 20.9%

Operating expenses (3) 49,817 16.2% 46,483 15.5% 98,830 15.8% 92,589 15.6%

Operating income 5,299 1.7% 13,899 4.6% 11,118 1.8% 31,212 5.3%




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Tons sold by our flat products segment increased 5.9% to 302 thousand in the second quarter of 2012, from 285 thousand in the secondquarter of 2011. Tons sold by our flat products segment increased 1.8% to 614 thousand during the six months ended June 30, 2012 from603 thousand during the six months ended June 30, 2011. Toll tons sold in the second quarter of 2012 was higher than the second quarterof 2011 as we performed additional toll business for one of our existing customers. Toll tons sold in the first six months of 2012 werelower as our automotive sales mix increased to more direct sales in the first half of 2012.

Net sales in our flat products segment increased 3.0% to $307.9 million in the second quarter of 2012 from $299.0 million in the secondquarter of 2011. Net sales in our flat products segment increased 5.2% to $624.5 million during the first six months of 2012 from $593.4million during the first six months of 2011. The 2012 increases in sales were due to increased average selling prices and increasedtonnage compared to 2011. Market prices for metals declined during the first half of 2012 compared to a rising price market in the firsthalf of 2011. We expect our flat products net sales to decrease during the third quarter of 2012 due to less ship days, seasonal shut-downs,and expected lower average selling prices compared to the second quarter of 2012.

Cost of materials sold in our flat products segment increased 5.9% to $252.8 million during the three months ended June 30, 2012 from$238.6 million during the three months ended June 30, 2011. Cost of materials sold was higher due to the increased tonnage as theaverage cost per ton stayed flat between the second quarter of 2012 and 2011. Cost of materials sold increased 9.6% to $514.6 millionduring the first half of 2012 from $469.6 million during the first half of 2011. Cost of materials sold was higher during the six monthsended June 30, 2012 than the comparable period in 2011 as the average cost of inventory was higher entering 2012 than it was entering2011.

As a percentage of net sales, gross profit totaled 17.9% in the second quarter of 2012 compared to 20.2% in the second quarter of2011. During the first six months of 2012, gross profit totaled 17.6% compared to 20.9% during the same time period last year. Thedecrease in gross margin during 2012 was primarily due to competitive market pressures associated with declining market prices formetals in 2012, lower gross profit in our start-up locations as we build market share, and the comparative effect to a rising price marketin the first half of 2011. Our gross profit in the beginning of the third quarter of 2012 is lower than the second quarter.

Operating expenses in the second quarter of 2012 increased $3.3 million, or 7.2%, from the second quarter of 2011. As a percentage ofnet sales, operating expenses increased to 16.2% for the second quarter of 2012 from 15.5% in the comparable 2011 period. Operatingexpenses during the first half of 2012 increased $6.2 million, or 6.7%, from the first half of 2011. As a percentage of net sales, operatingexpenses increased to 15.8% for the first half of 2012 from 15.6% in the comparable 2011 period. The increase in operating expensesduring 2012 is a result of six new start-up locations, which are at various stages of capacity. During the first half of the year ourGary, Indiana facility operatgd at about 30% of its capacity. The equipment at our Streetsboro, Ohio facility is expected to becomeoperational in the third quarter of 2012. The new facilities incurred $4.8 million of operating expenses in the first half, contributing tothe depreciation expense increase of $843 thousand for the flat rolled segment.

Operating income for the second quarter of 2012 totaled $5.3 million compared to $13.9 million in the comparable 2011period. Operating income for the first half of 2012 totaled $11.1 million compared to $31.2 million in the comparable 2011 period.

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Tubular and pipe products

The following table presents operating results for our tubular and pipe products segment for the three and six months ended June 30, 2012(dollars are shown in thousands):

Three months endedJune 30,2012

Six months ended June30,

2012

% of netsales

% of netsales

Net sales $ 59,478 100.0% $ 124,901 100.0%

Cost of materials sold (1) 43,107 72.5% 87,988 70.4%

Gross profit (2) 16,371 27.5% 36,913 29.6%

Operating expenses (3) 11,926 20.1% 26,024 20.8%

Operating income 4,445 7.5% 10,889 8.7%


Net sales in our tubular and pipe products segment were $59.5 million, or 16.2%, of consolidated net sales, in the three months endedJune 30, 2012. Net sales in our tubular and pipe products segment were $124.9 million, or 16.7%, of consolidated net sales, in the sixmonths ended June 30, 2012.

Cost of materials sold in our tubular and pipe products segment was $43.1 million, 14.6%, of consolidated cost of materials sold for thethree months ended June 30, 2012. Cost of materials sold was $88.0 million, or 14.6%, of consolidated cost of materials sold for the sixmonths ended June 30, 2012.

Tubular and pipe products segment gross margins are higher than our traditional flat products segment. As a percentage of net segmentsales, gross profit totaled 27.5% in the second quarter of 2012 and 29.6% for the first half of 2012. The decrease in gross margin during2012 was primarily due to competitive market pressures associated with declining market prices for metals in the second quarter of 2012and the mix of products sold during the second quarter.

Operating expenses for the tubular and pipe products segment were $11.9 million, or 20.1%, of net segment sales, in the three monthsended June 30, 2012, and $26.0 million, or 20.8%, for the six months ended June 30, 2012.

Operating income for the second quarter of 2012 totaled $4.4 million and operating income for the first half of 2012 totaled $10.9million. We expect similar sales and earnings results in the third quarter of 2012 as in the second quarter for the tubular and pipe productssegment.

Liquidity, Capital Resources and Cash Flows

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

Operating Activities



For the six months ended June 30, 2012, we used $31.8 million of net cash for operations, of which $22.3 million was generated fromoperating activities and $54.1 million was used for working capital.

Working capital at June 30, 2012 totaled $332.5 million, a $51.2 million increase from December 31, 2011. The increase was primarilyattributable to a $36.3 million increase in accounts receivable (resulting from higher sales prices from the fourth quarter of 2011 as ourdays of sales outstanding remained consistent), a $34.5 million increase in inventories (resulting from increased inventory purchasesand slower inventory turnover), partially offset by a $12.3 million increase in accounts payable (associated with the higher inventorylevels). We expect to decrease our inventory levels during the second half of 2012.

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Investing Activities

Net cash used for investing activities was $15.7 million during the six months ended June 30, 2012 compared to $16.4 million duringthe six months ended June 30, 2011. Capital expenditures were attributable to additional processing equipment at our existing facilitiesand building improvements to our new facilities in Gary, Indiana and Streetsboro, Ohio and expansion of our equipment capabilities inChambersburg, Pennsylvania in response to customer demands. In 2012, we expect to spend approximately $30 million to $35 million,depending on timing of payments, for capital expenditures; primarily related to final payments on the temper mill facility in Gary,Indiana and additional processing equipment at our existing facilities to meet our customers’ growing demand. Commencing in 2013,we anticipate our capital spending to decrease to less than our annual depreciation expense.

We continue to successfully implement our new business systems. During the first six months of 2012, we expensed $627 thousand andcapitalized $363 thousand associated with the implementation of the systems. Since the project began in 2006, we have expensed $11.4million and capitalized $16.9 million associated with the project.

Financing Activities

During the first six months of 2012, $42.9 million of cash was provided from financing activities, which primarily consisted ofborrowings under our revolver contained in our asset-based revolving credit facility (the ABL Credit Facility). During 2012, we paid$1.2 million of bank financing fees in connection with our March 16, 2012 amendment to our ABL Credit Facility. In addition, wepaid $4.4 million of scheduled principal payments on our term loan under our ABL Credit Facility and made a voluntary $755 thousandprincipal payment on our Industrial Revenue Bond indebtedness issued through the Stanly County, North Carolina Industrial Revenueand Pollution Control Authority (IRB).

Dividends paid were $436 thousand for each of the six months ended June 30, 2012 and 2011. In July 2012, our Board of Directorsapproved a regular quarterly dividend of $0.02 per share, which will be paid on September 18, 2012 to shareholders of record as ofSeptember 4, 2012. Regular dividend distributions in the future are subject to the availability of cash, the $2.5 million annual limitationon cash dividends under our ABL Credit Facility and continuing determination by our Board of Directors that the payment of dividendsremains in the best interest of our shareholders.

Debt Arrangements

On March 16, 2012 we amended our existing revolver under our ABL Credit Facility. The amendment provided, among other things:(i) a reduction in the applicable margin for loans under our Loan and Security Agreement; (ii) additional revolving commitments tothe borrowers in an aggregate principal amount of $50 million, which additional revolving commitments do not impact the borrowers’incremental facilities; and (iii) certain transactions among the borrowers and Metales de Olympic, S. de R.L. de C.V., an indirectsubsidiary of ours. As amended the ABL Credit Facility consists of a revolving credit line of $315 million and a $64 million termloan. Revolver borrowings are limited to the lesser of a borrowing base, comprised of eligible receivables and inventories, or $315million in the aggregate. The ABL Credit Facility matures on July 1, 2016.

The ABL Credit Facility requires us to comply with various covenants, the most significant of which include: (i) until maturity of theABL Credit Facility, if any commitments or obligations are outstanding and our availability is less than the greater of $20 million, 12.5%of the aggregate amount of revolver commitments, or 60% of the principal balance of the term loan then outstanding, then we mustmaintain a ratio of EBITDA minus certain capital expenditures and cash taxes paid to fixed charges of at least 1.10 to 1.00 for the mostrecent twelve fiscal month period; (ii) limitations on dividend payments; (iii) restrictions on additional indebtedness; and (iv) limitationson investments and joint ventures. Effective with the March 16, 2012 amendment, we have the option to borrow under our revolver basedon the agent’s base rate plus a premium ranging from 0.00% to 0.50% or the London Interbank Offered Rate (LIBOR) plus a premiumranging from 1.50% to 2.00%. The interest rate under the term loan is based on the agent’s base rate plus a premium ranging from 0.25%to 0.75% or LIBOR plus a premium ranging from 1.75% to 2.25%.

26



In June 2012, we entered into a forward starting fixed rate interest rate hedge commencing July 2013 in order to eliminate the variabilityof cash interest payments on $53 million of the outstanding LIBOR based borrowings under the ABL credit facility. The hedgematures on June 1, 2016 and is reduced monthly by the principal payments on the term loan. The interest rate hedge fixed the rate at1.21%. 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 of June 30, 2012, $5.4 million of bank financing fees were included in “Prepaid expenses and other” and “Other long-termassets” on the accompanying Consolidated Balance Sheet. This includes $1.2 million of financing fees paid for the March 16, 2012amendment. The financing fees are being amortized over the remaining term of the credit facility.

As of June 30, 2012, we were in compliance with our covenants and had approximately $85 million of availability under the ABL CreditFacility.

As part of the CTI acquisition, we assumed approximately $5.9 million of Industrial Revenue Bond indebtedness issued through theStanly County, North Carolina Industrial Revenue and Pollution Control Authority (IRB). The bond matures in April 2018, withthe option to provide principal payments annually on April 1st. On April 1, 2012, we paid an optional principal payment of $755thousand. Interest is payable monthly, with a variable rate that resets weekly. As security for payment of the bonds, we obtained a directpay letter of credit issued by JPMorgan Chase Bank, N.A. The letter of credit reduces annually by the principal reduction amount. Theinterest rate at June 30, 2012 was 0.23% for the IRB debt.

We believe that funds available under our ABL Credit Facility and lease arrangement proceeds, together with funds generated fromoperations, will be sufficient to provide us with the liquidity necessary to fund anticipated working capital requirements, capitalexpenditure requirements and our dividend payments over at least the next 12 months. In the future, we may, as part of our businessstrategy, acquire companies in the same or complementary lines of business, or enter into and exit strategic alliances and jointventures. Accordingly, the timing and size of our capital requirements are subject to change as business conditions warrant andopportunities arise.

Critical Accounting Policies

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on the consolidated financialstatements included in this Quarterly Report on Form 10-Q, which have been prepared in conformity with accounting principles generallyaccepted in the United States. The preparation of these financial statements requires management to make estimates and assumptionsthat affect the amounts reported in the financial statements. We monitor and evaluate our estimates and assumptions, based on historicalexperience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from theseestimates under different assumptions or conditions.

We review our financial reporting and disclosure practices and accounting practices quarterly to ensure they provide accurate andtransparent information relative to the current economic and business environment. For further information regarding the accountingpolicies that we believe to be critical accounting policies that affect our more significant judgments and estimates used in preparing ourconsolidated financial statements, see Management’s Discussion and Analysis of Financial Condition and Results of Operations containedin our Annual Report on Form 10-K for the year ended December 31, 2011.

27



Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our principal raw materials are carbon, stainless, and aluminum, pipe and tube, flat rolled sheet, coil and plate that we typically purchasefrom multiple primary metal producers. The metal industry as a whole is cyclical and, at times, pricing and availability of metal canbe 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 metal producers, new global capacityby metal producers, higher raw material costs for the producers of metal, import duties and tariffs and currency exchange rates. Thisvolatility can significantly affect the availability and cost of raw materials for us.

We, like many other metals service centers, maintain substantial inventories of metal to accommodate the short lead times and just-in-timedelivery requirements of our customers. Accordingly, we purchase metal in an effort to maintain our inventory at levels that we believe tobe appropriate to satisfy the anticipated needs of our customers based upon historic buying practices, supply agreements with customersand market conditions. Our commitments to purchase metal are generally at prevailing market prices in effect at the time we place ourorders. We have no long-term, fixed-price metal purchase contracts. When metal prices increase, competitive conditions will influencehow 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 ourraw materials to our customers, the net sales and profitability of our business could be adversely affected. When metal prices decline,customer demands for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently,lower margins and inventory lower of cost or market adjustments as we sell existing inventory. Significant or rapid declines in metalprices or reductions in sales volumes could adversely impact our ability to remain in compliance with certain financial covenants inour credit facility, as well as result in us incurring inventory or goodwill impairment charges. Changing metal prices therefore couldsignificantly impact our net sales, gross margins, operating income and net income.

Rising prices result in higher working capital requirements for us and our customers. Some customers may not have sufficient creditlines or liquidity to absorb significant increases in the price of metal. While we have generally been successful in the past in passing onproducers’ price increases and surcharges to our customers, there is no guarantee that we will be able to pass on price increases to ourcustomers in the future. Declining metal prices have generally adversely affected our net sales and net income, while increasing metalprices, have generally favorably affected our net sales and net income.

Approximately 8.9% of our consolidated net sales in the first half of 2012 were directly to automotive manufacturers or manufacturers ofautomotive components and parts. Historically, due to the concentration of customers in the automotive industry, our gross margins onthese sales have generally been less than our margins 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 distributionexpense, has not had a material effect on our financial results during the past two years.

We are exposed to the impact of fluctuating metal prices and interest rate changes. During 2012 and 2011, we entered into nickel swapsat the request of customers. While these derivatives are intended to be effective in helping us manage risk, they have not been designatedas hedging instruments. For certain customers, we enter into contractual relationships that entitle us to pass-through the economic effectof trading positions that we take with other third parties on our customers’ behalf. Although we are exposed to credit loss in the event ofnonperformance by the other parties to the nickel swap, we anticipate performance by the counterparties.

Our primary interest rate risk exposure results from variable rate debt. We have the option to enter into 30- to 180-day fixed base rateLIBOR loans under the ABL Credit Facility. In June 2012, we entered into a forward starting fixed rate interest rate hedge commencingJuly 2013 in order to eliminate the variability of cash interest payments on $53 million of the then outstanding LIBOR based borrowingsunder the ABL Credit Facility. The hedge matures on June 1, 2016 and is reduced monthly by the principal payments on the termloan. The fixed rate interest rate hedge is accounted for as a cash flow hedging instrument for accounting purposes. Although we areexposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreement, we anticipate performanceby the counterparties.

28



We assumed an interest rate swap agreement on the $5.9 million of CTI IRB. The swap agreement matures in April 2018, but may bereduced annually by the amount of the optional principal payments on the IRB. Although we are exposed to credit loss in the event ofnonperformance by the other parties to the interest rate swap agreement, we anticipate performance by the counterparties.

29



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 andprocedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by thisQuarterly Report on Form 10-Q has been carried out under the supervision and with the participation of management, including our ChiefExecutive Officer and Chief Financial Officer. These disclosure controls and procedures are designed to provide reasonable assurancethat information required to be disclosed in reports that are filed with or submitted to the SEC is: (i) accumulated and communicated tomanagement, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosuresand (ii) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based onthis evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2012, our disclosure controls andprocedures were effective.

There were no changes in our internal control over financial reporting that occurred during the second quarter of 2012 that have materiallyaffected, or are reasonably likely to materially affect, our internal control over financial reporting.

30



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 theinstructions to Part II.

Item 6. Exhibits

Exhibit Description of Document Reference31.1 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


Furnished herewith

101 XBRL Instance Document101 XBRL Taxonomy Extension Schema Document101 XBRL Taxonomy Extension Calculation Linkbase Document101 XBRL Taxonomy Extension Definition Linkbase Document101 XBRL Taxonomy Extension Label Linkbase Document101 XBRL Taxonomy Extension Presentation Linkbase Document

31



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned thereunto duly authorized.

OLYMPIC STEEL, INC.(Registrant)

Date: August 9, 2012 By: /s/ Michael D. SiegalMichael D. SiegalChairman of the Board and ChiefExecutive Officer

By: /s/ Richard T. MarabitoRichard T. MarabitoChief Financial Officer and Treasurer(Principal Financial and Accounting Officer)

32



EXHIBIT INDEX

Exhibit Description of Document Reference


Filed herewith


Filed herewith


Furnished herewith


Furnished herewith

101 XBRL Instance Document101 XBRL Taxonomy Extension Schema Document101 XBRL Taxonomy Extension Calculation Linkbase Document101 XBRL Taxonomy Extension Definition Linkbase Document101 XBRL Taxonomy Extension Label Linkbase Document101 XBRL Taxonomy Extension Presentation Linkbase Document

33



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 factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith 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 allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presentedin 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 inExchange 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 underour supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is madeknown 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 bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation 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 conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materiallyaffected, 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 overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):

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

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



By: /s/ Michael D. SiegalMichael D. SiegalOlympic Steel, Inc.Chairman and Chief Executive OfficerAugust 9, 2012



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 factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith 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 allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presentedin 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 inExchange 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 designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation 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 ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and

d.

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially 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 overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):

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

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



By: /s/ Richard T. MarabitoRichard T. MarabitoOlympic Steel, Inc.Chief Financial Officer and TreasurerAugust 9, 2012



Exhibit 32.1Certification 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 myknowledge, based upon a review of this report on Form 10-Q for the period ended June 30, 2012 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 ofthe Company, as of the dates and for the periods expressed in this Report.

By: /s/ Michael D. SiegalMichael D. SiegalOlympic Steel, Inc.Chairman & Chief Executive OfficerAugust 9, 2012



Exhibit 32.2Certification 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 and Treasurer of Olympic Steel, Inc. (the "Company"), certify that to the best of myknowledge, based upon a review of this report on Form 10-Q for the period ended June 30, 2012 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 ofthe Company as of the dates and for the periods expressed in this Report.

By: /s/ Richard T. MarabitoRichard T. MarabitoOlympic Steel, Inc.Chief Financial Officer and TreasurerAugust 9, 2012



Note 5 - Intangible Assets:(Detail) (USD $)

In Thousands, unlessotherwise specified

Jun. 30, 2012

Finite-Lived Intangible Assets, Amortization Expense, Remainder of Fiscal Year $ 889Finite-Lived Intangible Assets, Amortization Expense, Year Two 889Finite-Lived Intangible Assets, Amortization Expense, Year Three 889Finite-Lived Intangible Assets, Amortization Expense, Year Four 889Finite-Lived Intangible Assets, Amortization Expense, Year Five $ 889



6 Months Ended 12 Months EndedNote 12 - Equity Plans:(Detail) - Restricted Stock

Unit Activity (USD $) Jun. 30, 2012 Dec. 31, 2011 Jan. 03, 2012 Mar. 01, 2011

Outstanding at 147,603Outstanding at (in Dollars per share) $ 27.16 $ 25.55 $ 26.91Vested at June 30, 2012 121,443Vested at June 30, 2012 (in Dollars per share) $ 25.95Granted 40,368 81,475Granted (in Dollars per share) $ 23.97Converted into shares (375)Converted into shares (in Dollars) $ 22,680Forfeited 0Forfeited (in Dollars per share) $ 0Outstanding at 187,596 147,603Outstanding at (in Dollars per share) $ 26.48 $ 27.16 $ 25.55 $ 26.91



Note 10 - Fair Value ofFinancial Instruments:

(Detail) (USD $)In Thousands, unlessotherwise specified

Jun. 30, 2012 Dec. 31, 2011

Industrial Revenue Bond [Member]Long-term Debt, Fair Value $ 4,300 $ 5,100Line of Credit [Member]Long-term Debt, Fair Value 219,900 170,400Term Loan [Member]Long-term Debt, Fair Value $ 54,000 $ 57,600



6 Months EndedNote 13 - Capital Lease:(Detail) (USD $)

In Millions, unless otherwisespecified

Jun. 30, 2012

Loans and Leases Receivable, Commitments to Purchase or Sell $ 1.3



6 Months Ended 18 Months EndedNote 9 - DerivativeInstruments: (Detail) (USD

$)In Millions, unless otherwise

specified

Jun. 30, 2012 Jun. 30, 2012

Nickel Swap During 2012 and 2011, the Company entered into nickelswaps indexed to the London Metal Exchange (LME) price ofnickel with third-party brokers.The nickel swaps are treated asderivatives for accounting purposes.The Company enteredinto the swaps to mitigate its customers' risk of volatility inthe price of nickel.The nickel swaps vary in length from nineto 21 months and are settled with the broker at maturity.Theeconomic benefit or loss arising from the changes in fair valueof the swaps is contractually passed through to thecustomer.The primary risk associated with the nickel swaps isthe ability of customers or third-party brokers to honor theiragreements with the Company related to derivativeinstruments.If the customer or third-party brokers are unableto honor their agreements, the Company's risk of loss is thefair value of the nickel swap. While these derivatives areintended to help the Company manage risk, they have notbeen designated as hedging instruments. The periodic changesin fair value of the nickel and embedded customer derivativeinstruments are included in "Cost of materials sold" in theConsolidated Statement of Comprehensive Income.Werecognize derivative positions with both the customer and thethird party for the derivatives and we classify cash settlementamounts associated with them as part of "Cost of materialssold" in the Consolidated Statements of ComprehensiveIncome.The periodic changes in fair value of the interest rateswap are included in "Other income and expense, net" in theConsolidated Statement of Comprehensive Income.Cashsettlement amounts associated with the interest rate swap areincluded in "Interest and other expense on debt" in theConsolidated Statements of Comprehensive Income. Theembedded customer derivatives are included in "Accountsreceivable, net", and the nickel and interest rate swaps areincluded in "Other accrued liabilities" and "Other long-termliabilities" on the Consolidated Balance Sheet at June 30,2012 and December 31, 2011

Interest Rate Swap CTI entered intoan interest rateswap to reducethe impact ofchanges in interestrates on itsIRB.The swapagreement



matures April2018, the sametime as the IRB,but is reducedannually by theamount of theprincipalpayments on theIRB.Although theCompany isexposed to creditloss in the eventofnonperformanceby the otherparties to theinterest rate swapagreement, theCompanyanticipatesperformance bythecounterparties.Theinterest rate swapis not treated as ahedginginstrument foraccountingpurposes

Line of Credit Facility,Amount Outstanding (inDollars)

$ 53 $ 53



3 Months EndedNote 1 - Basis ofPresentation: (Detail) Jun. 30, 2012

Number of Reportable Segments 2



3 Months Ended 6 Months EndedNote 14 - Income Taxes:(Detail) (USD $)


Jun. 30, 2012 Jun. 30, 2011 Jun. 30, 2012 Jun. 30, 2011

Income Tax Expense (Benefit) (in Dollars) $ 3,040 $ 5,127 $ 6,999 $ 11,312Income Tax Provision Percentage 40.20% 39.20% 39.40% 38.20%Value Rounded [Member]Income Tax Expense (Benefit) (in Dollars) $ 3,000 $ 5,100



6 Months EndedNote 6 - Goodwill: (Tables) Jun. 30, 2012Schedule of Goodwill [Table Text Block] June

30,2012

December31,

2011(in thousands)Flat products $ 7,083 $ 7,083Tubular and pipeproducts 40,287 40,171Total $47,370 $ 47,254



Note 11 - Accumulated OtherComprehensive Loss:

(Detail) (USD $)In Thousands, unlessotherwise specified

Jun. 30, 2012

Fixed Interest Rate HedgeDescription

In June 2012, the Company entered into a forward starting fixed rate interest ratehedge commencing July 2013 in order to eliminate the variability of cash interestpayments on $53 million of the outstanding LIBOR based borrowings under theABL Credit Facility.The hedge matures on June 1, 2016 and is reduced monthlyby the principal payments on the term loan.The fixed rate interest rate hedge isaccounted for as a cash flow hedging instrument for accounting purposes.The fairvalue of the interest rate hedge of $655 thousand, net of tax of $252 thousand isincluded in "Accumulated other comprehensive loss" on the ConsolidatedBalance Sheets at June 30, 2012

Fixed Interest Rate Hedge (inDollars) $ 655



Note 6 - Goodwill: (Detail) -Carrying Amount of

Goodwill by Segment (USD$)


Jun. 30, 2012 Dec. 31, 2011

Goodwill $ 47,370 $ 47,254Flat Products [Member]Goodwill 7,083 7,083Tubular and Pipe Products [Member]Goodwill $ 40,287 $ 40,171



Note 4 - Inventories: (Detail)(USD $)

In Millions, unless otherwisespecified

Jun. 30, 2012

LIFO Inventory Amount (in Dollars) $ 46.1Percentage of LIFO Inventory 14.80%



6 Months EndedNote 12 - Equity Plans:(Detail) - Stock Option

Activity (USD $)In Thousands, except Share

data, unless otherwisespecified

Jun. 30, 2012

Outstanding at 46,007Outstanding at (in Dollars per share) $ 20.90Outstanding at 3 years 109 daysExercisable at June 30, 2012 43,837Exercisable at June 30, 2012 (in Dollars per share) $ 21.73Exercisable at June 30, 2012 3 years 109 daysExercisable at June 30, 2012 (in Dollars) $ 143Granted 0Exercised (2,170)Exercised (in Dollars per share) $ 4.18Canceled 0Outstanding at 43,837Outstanding at (in Dollars per share) $ 21.73Outstanding at 3 years 109 daysOutstanding at (in Dollars) $ 143



3 Months Ended 6 Months EndedNote 9 - DerivativeInstruments: (Detail) -

Effects of Derivatives on theFinancial Statments (USD $)


Jun. 30, 2012 Jun. 30, 2011Jun. 30, 2012 Jun. 30, 2011

Derivative $ (5) $ 16Interest Rate Swap [Member]Derivative (5) 16Nickel Swap [Member]Derivative (164) (16) (229) 72Embedded Customer [Member]Derivative $ 164 $ 16 $ 229 $ (72)



6 Months EndedNote 4 - Inventories: Jun. 30, 2012Inventory Disclosure [TextBlock]

(4) Inventories:

Inventories are stated at the lower of cost or market and include the costs of purchased metal,inbound freight, external processing and applicable labor and overhead costs. Cost for theCompany’s flat products segment (flat-rolled sheet, coil and plate products) is determined usingthe specific identification method.

As a result of the acquisition of CTI, certain of the Company’s tubular and pipe products inventoryis stated under the last-in, first-out (LIFO) method, which is not in excess of market. At June 30,2012, approximately $46.1 million, or 14.8% of consolidated inventory, was reported under theLIFO method of accounting. The cost of the remainder of CTI’s inventory is determined using aweighted average first-in, first-out method.

An actual valuation of the inventory under the LIFO method is made at the end of each year basedon the inventory levels and costs at that time. Accordingly, interim LIFO calculations are basedon management’s estimates of expected year-end inventory levels and costs. Because estimatesare subject to many factors beyond management’s control, annual results may differ from interimresults. Interim LIFO estimates are subject to a final year-end LIFO inventory valuation. TheCompany did not record a LIFO adjustment in its second quarter of 2012 because its full-yearLIFO estimate anticipates prices and quantities to be below July 1, 2011 levels. As a result, therewas no LIFO reserve at June 30, 2012.

Metal inventories consist of the following:

June 30,2012

December31,

2011(in thousands)Unprocessed $ 229,275 $ 207,301Processed and finished 83,000 70,464Totals $ 312,275 $ 277,765



1 MonthsEndedNote 7 - Investments in Joint

Ventures: (Detail) (USD $) May 31,2012

Mar. 31,2012

Dec. 31,2011

Dec. 31,2006

Equity Method Investment, Ownership Percentage 50.00%Investments in and Advance to Affiliates, Subsidiaries,Associates, and Joint Ventures

$1,600,000

$3,200,000

Gain (Loss) on Disposition of Assets $ 9,000



6 Months EndedNote 12 - Equity Plans:(Tables) Jun. 30, 2012

Schedule of Share-basedCompensation, Stock Options,Activity [Table Text Block]

Number ofOptions


WeightedAverage


Term


(in thousands)OutstandingatDecember31, 2011 46,007

$ 20.90

Granted - -Exercised (2,170) 4.18Canceled - -Outstandingat June 30,2012 43,837

$ 21.73

3.3 years $ 143Exercisableat June 30,2012 43,837

$ 21.73

3.3 years $ 143

Schedule of Employee Service Share-based Compensation, Allocation ofRecognized Period Costs [Table TextBlock]




Schedule of Share-basedCompensation, Restricted StockUnits Award Activity [Table TextBlock]

Number ofShares



Outstandingat December31, 2011 147,603

$ 27.16

Granted 40,368 23.97Convertedinto shares (375)

22.68

Forfeited - -Outstandingat June 30,2012 187,596

$ 26.48

-Vested at June30, 2012 121,443

$ 25.95-



6 Months EndedNote 10 - Fair Value ofFinancial Instruments:

(Tables) Jun. 30, 2012

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

(in thousands)

June 30, 2012Level

1Level

2Level

3 Total

Assets:Embeddedcustomerderivatives $ - $ 229 $ - $ 229

Liabilities:Nickel swaps - 284 - 284Interest rate swap 476 476Fixed interest ratehedge - 655 - 655Total liabilities atfair value $ - $1,415 $ - $1,415(in thousands)December 31,2011

Level1

Level2

Level3 Total

Assets:Embeddedcustomerderivatives $ - $ 55 $ - $ 55

Liabilities:Nickel swaps - 55 - 55Interest rate swap - 492 - 492Total liabilities atfair value $ - $ 547 $ - $ 547



6 Months Ended 6 Months EndedNote 13 - Capital Lease:(Detail) - Capital Lease

Obligation (USD $)In Thousands, unlessotherwise specified

Jun. 30,2012

Jun. 30,2011

Dec. 31,2011

Jun. 30, 2012Capital Lease

[Member]

Dec. 31, 2011Capital Lease

[Member]

Total capital lease obligation $ 1,491 $ 1,587Less: interest 3,816 1,473 (4) (10)Capital lease obligation 1,487 1,577Less: current (162) (157)Long term capital lease $ 1,325 $ 1,420



6 Months EndedNote 8 - Debt: (Detail) (USD$) Jun. 30, 2012 Jun. 30, 2011 Apr. 30,

2012Dec. 31,

2011Jul. 31,

2011Line of Credit Facility, Increase, AdditionalBorrowings (in Dollars)

$(303,470,000)

$(231,475,000)

Line of Credit Facility, Maximum BorrowingCapacity (in Dollars) 315,000,000

Other Long-term Debt (in Dollars) 64,000,000Line of Credit Facility, Current Borrowing Capacity(in Dollars) 315,000,000

Description of Interest Rate Cash Flow HedgeActivities 1.21%

Prepaid Expense and Other Assets, Current (inDollars) 10,354,000 13,112,000

Debt Instrument, Fee Amount (in Dollars) 1,200,000Line of Credit Facility, Remaining BorrowingCapacity (in Dollars) 85,000,000

Business Acquisition, Cost of Acquired Entity,Liabilities Incurred (in Dollars) 5,900,000 5,900,000

Debt Instrument, Annual Principal Payment (inDollars) 755,000

Debt Instrument, Interest Rate at Period End 0.23%Agent Base Rate Plus Premium [Member] |Minimum [Member] | Term Loan [Member]Line of Credit Facility, Interest Rate Description 0.25%Agent Base Rate Plus Premium [Member] |Minimum [Member]Line of Credit Facility, Interest Rate Description 0.00%Agent Base Rate Plus Premium [Member] |Maximum [Member] | Term Loan [Member]Line of Credit Facility, Interest Rate Description 0.75%Agent Base Rate Plus Premium [Member] |Maximum [Member]Line of Credit Facility, Interest Rate Description 0.50%LIBOR Rate [Member] | Minimum [Member] | TermLoan [Member]Line of Credit Facility, Interest Rate Description 1.75%LIBOR Rate [Member] | Minimum [Member]Line of Credit Facility, Interest Rate Description 1.50%LIBOR Rate [Member] | Maximum [Member] | TermLoan [Member]Line of Credit Facility, Interest Rate Description 2.25%LIBOR Rate [Member] | Maximum [Member]Line of Credit Facility, Interest Rate Description 2.00%Availability Dollar Amount [Member]



Line of Credit Facility, Covenant Terms $20Percentage of Commitments [Member]Line of Credit Facility, Covenant Terms 12.5%Amended [Member]Line of Credit Facility, Increase, AdditionalBorrowings (in Dollars) 50,000,000

Amortized Banking Fees [Member]Prepaid Expense and Other Assets, Current (inDollars) $ 5,400,000



6 Months EndedNote 13 - Capital Lease:(Tables) Jun. 30, 2012

Schedule of Capital Leased Assets [Table Text Block]

(in thousands)

June30,

2012

December31,

2011Total capital leaseobligation $1,491 $ 1,587Less: interest (4) (10)Capital lease obligation 1,487 1,577Less: current (162) (157)Long term capital lease $1,325 $ 1,420



6 Months EndedNote 15 - SharesOutstanding and Earnings

Per Share: (Tables) Jun. 30, 2012

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

Three MonthsEnded

June 30,Six Months Ended

June 30,2012 2011 2012 2011

(in thousands, except pershare data)

Weighted average basicshares outstanding 10,960 10,935 10,956 10,935Assumed exercise of stockoptions and issuance of stockawards 29 12 31 12Weighted average dilutedshares outstanding 10,989 10,947 10,987 10,947

Net income $ 4,526 $ 7,946 $ 10,756 $ 18,269


Anti-dilutive securitiesoutstanding 178 118 178 118



6 Months EndedNote 3 - AccountsReceivable: Jun. 30, 2012

Accounts Receivable [TextBlock] (3) Accounts Receivable:

The Company maintained allowances for doubtful accounts and unissued credits of $3.5 millionand $2.9 million at June 30, 2012 and December 31, 2011, respectively. The allowance fordoubtful accounts is maintained at a level considered appropriate based on historical experienceand specific customer collection issues that have been identified. Estimations are based upon acalculated percentage of accounts receivable, which remains fairly level from year to year, andjudgments about the probable effects of economic conditions on certain customers, which canfluctuate significantly from year to year. The Company cannot guarantee that the rate of futurecredit losses will be similar to past experience. The Company considers all available informationwhen assessing the adequacy of its allowance for doubtful accounts and unissued credits eachquarter.



6 Months EndedNote 16 - SegmentInformation: (Tables) Jun. 30, 2012

Schedule of Segment Reporting Information, by Segment[Table Text Block]

Three MonthsEnded

June 30,Six Months Ended

June 30,(in thousands) 2012 2011 2012 2011Net sales

Flat products $307,887 $299,000 $624,516 $593,381Tubular and pipeproducts 59,478 - 124,901 -

Total net sales $367,365 $299,000 $749,417 $593,381

Operating incomeFlat products $ 5,299 $ 13,899 $ 11,118 $ 31,212Tubular and pipeproducts 4,445 - 10,889 -

Total operatingincome $ 9,744 $ 13,899 $ 22,007 $ 31,212

Depreciation andamortization

Flat products $ 3,952 $ 3,512 $ 7,822 $ 6,979Tubular and pipeproducts 1,183 - 2,305 -

Total depreciationand amortization $ 5,135 $ 3,512 $ 10,127 $ 6,979

Capital expendituresFlat products $ 5,286 $ 8,513 $ 10,732 $ 16,416Tubular and pipeproducts 2,428 - 4,951 -

Total capitalexpenditures $ 7,714 $ 8,513 $ 15,683 $ 16,416



Note 5 - Intangible Assets:(Detail) - Schedule of

Intangible Assets (USD $)In Thousands, unlessotherwise specified

Jun. 30, 2012 Dec. 31, 2011

Gross Carrying Amount $ 36,757Accumulated Amortization (889)Intangible Assets, Net 35,868 36,313Customer Relationships [Member]Gross Carrying Amount 13,332Accumulated Amortization (889)Intangible Assets, Net 12,443Trade Names [Member]Gross Carrying Amount 23,425Accumulated Amortization 0Intangible Assets, Net $ 23,425



3 Months Ended 6 Months EndedNote 12 - Equity Plans:(Detail) - Stock Based

Compensation ExpenseRecognized on Restricted

Stock Units (USD $)In Thousands, except Per

Share data, unless otherwisespecified

Jun. 30, 2012 Jun. 30, 2011 Jun. 30, 2012 Jun. 30, 2011

Impact per basic share $ 0.41 $ 0.73 $ 0.98 $ 1.67Impact per diluted share $ 0.41 $ 0.73 $ 0.98 $ 1.67Impact Share Type [Member]Impact per basic share $ 0.01 $ 0.01 $ 0.03 $ 0.01Impact per diluted share $ 0.01 $ 0.01 $ 0.03 $ 0.01Expense Before Tax [Member]Share Based Compensation Expense (in Dollars) $ 272 $ 129 $ 552 $ 216Expense After Tax [Member]Share Based Compensation Expense (in Dollars) $ 163 $ 78 $ 335 $ 133



Consolidated Balance Sheets(June 30, 2012 unaudited,

December 31, 2011 audited)(USD $)


Jun. 30, 2012 Dec. 31, 2011

AssetsCash and cash equivalents $ 2,816 $ 7,403Accounts receivable, net 158,853 122,579Inventories, net 312,275 277,765Prepaid expenses and other 10,354 13,112Total current assets 484,298 420,859Property and equipment, at cost 343,279 329,116Accumulated depreciation (144,162) (135,703)Net property and equipment 199,117 193,413Goodwill 47,370 47,254Intangible assets, net 35,868 36,313Other long-term assets 12,154 9,660Total assets 778,807 707,499LiabilitiesCurrent portion of long-term debt 8,967 9,662Accounts payable 116,682 104,425Accrued payroll 11,541 11,613Other accrued liabilities 14,610 13,875Total current liabilities 151,800 139,575Credit facility revolver 219,915 170,405Long-term debt 59,624 64,149Other long-term liabilities 11,490 9,580Deferred income taxes 37,806 37,214Total liabilities 480,635 420,923Shareholders' EquityPreferred stock 0 0Common stock 121,496 119,816Accumulated other comprehensive loss, net of tax (403)Retained earnings 177,079 166,760Total shareholders' equity 298,172 286,576Total liabilities and shareholders' equity $ 778,807 $ 707,499



Note 8 - Debt: (Detail) - DebtComponents (USD $)In Thousands, unlessotherwise specified

Jun. 30, 2012 Dec. 31, 2011

Asset-based revolving credit facility due June 30, 2016 $ 219,915 $ 170,405Capital lease 1,487 1,577Total debt 288,506 244,216Less current amount (8,967) (9,662)Term Loan [Member]Long Term Debt 61,979 66,354Total long-term debt 54,000 57,600Industrial Revenue Bond [Member]Long Term Debt 5,125 5,880Total long-term debt 4,300 5,100Gross [Member]Total long-term debt $ 279,539 $ 234,554



6 Months EndedNote 1 - Basis ofPresentation: Jun. 30, 2012

Organization, Consolidationand Presentation of FinancialStatements Disclosure [TextBlock]

(1) Basis of Presentation:

The accompanying consolidated financial statements have been prepared from the financialrecords of Olympic Steel, Inc. and its wholly-owned subsidiaries (collectively, Olympic or theCompany), without audit and reflect all normal and recurring adjustments which are, in theopinion of management, necessary to fairly state the results of the interim periods covered by thisreport. Year-to-date results are not necessarily indicative of 2012 annual results and these financialstatements should be read in conjunction with the Company’s Annual Report on Form 10-K for theyear ended December 31, 2011. All significant intercompany transactions and balances have beeneliminated in consolidation.

Commencing with the July 1, 2011 acquisition of Chicago Tube and Iron Company (CTI),the Company operates in two reportable segments; flat products and tubular and pipeproducts. Through its flat products segment, the Company sells and distributes large volumesof processed carbon, coated, aluminum and stainless flat-rolled sheet, coil and plateproducts. Through its tubular and pipe products segment, the Company distributes metal tubing,pipe, bar, valve and fittings and the fabrication of pressure parts supplied to various industrialmarkets.



3 Months Ended 6 Months EndedNote 16 - SegmentInformation: (Detail) -

Segment ReportingInformation (USD $)In Thousands, unlessotherwise specified

Jun. 30, 2012 Jun. 30, 2011 Jun. 30, 2012 Jun. 30, 2011

Net salesTotal net sales $ 367,365 $ 299,000 $ 749,417 $ 593,381Operating incomeTotal operating income 9,744 13,899 22,007 31,212Depreciation and amortizationTotal depreciation and amortization 5,135 3,512 10,127 6,979Capital expendituresTotal capital expenditures 7,714 8,513 15,683 16,416Flat Products [Member]Net salesTotal net sales 307,887 299,000 624,516 593,381Operating incomeTotal operating income 5,299 13,899 11,118 31,212Depreciation and amortizationTotal depreciation and amortization 3,952 3,512 7,822 6,979Capital expendituresTotal capital expenditures 5,286 8,513 10,732 16,416Tubular and Pipe Products [Member]Net salesTotal net sales 59,478 124,901Operating incomeTotal operating income 4,445 10,889Depreciation and amortizationTotal depreciation and amortization 1,183 2,305Capital expendituresTotal capital expenditures $ 2,428 $ 4,951



3 Months Ended 6 Months EndedNote 2 - Acquisition ofChicago Tube and IronCompany: (Detail) - ProForma Results (USD $)

In Thousands, except PerShare data, unless otherwise

specified

Jun. 30, 2011 Jun. 30, 2011

Net sales (in Dollars) $ 358,789 $ 713,888Net income (in Dollars) $ 9,602 $ 20,917Basic earnings per common share $ 0.88 $ 1.91Diluted earnings per common share $ 0.88 $ 1.91



6 Months EndedNote 2 - Acquisition ofChicago Tube and Iron

Company: (Tables) Jun. 30, 2012

Business Acquisition, Pro Forma Information [TableText Block]

Pro Forma ResultsThree

monthsended

June 30,2011

Sixmonthsended

June 30,2011

(in thousands, except per share amounts)Pro forma (unaudited):Net sales $ 358,789 $ 713,888Net income $ 9,602 $ 20,917




Note 3 - AccountsReceivable: (Detail) (USD $)In Millions, unless otherwise

specified

Jun. 30, 2012 Dec. 31, 2011

Allowance for Doubtful Accounts Receivable, Current $ 3.5 $ 2.9



6 Months EndedNote 5 - Intangible Assets:(Tables) Jun. 30, 2012

Schedule of Finite-Lived Intangible Assets[Table Text Block]

Processed and Finished [Member]Gross

CarryingAmount


IntangibleAssets,

Net(in thousands)Customer relationships - subject toamortization $ 13,332 $ (889) $ 12,443Trade name - not subject toamortization 23,425 - 23,425

$ 36,757 $ (889) $ 35,868



6 Months EndedNote 2 - Acquisition ofChicago Tube and Iron

Company: Jun. 30, 2012

Business CombinationDisclosure [Text Block]

(2) Acquisition of Chicago Tube and Iron Company:

On July 1, 2011, the Company acquired all of the outstanding common shares of CTI pursuant tothe terms of an Agreement and Plan of Merger dated May 18, 2011. CTI stocks, processes andfabricates metal tubing, pipe, bar, valves and fittings and pressure parts at nine operating facilitieslocated primarily throughout the Midwestern United States. The Company paid for goodwill inconjunction with the acquisition, as CTI enhances the Company’s commercial opportunities byadding new product offerings to an expanded customer base and by increasing the Company’sdistribution footprint.

The Company paid total cash consideration of $159.9 million, consisting of a base purchaseprice of $150.0 million, plus the closing cash, working capital and McNeeley purchase agreementpayments (as disclosed in the Current Report on Form 8-K filed on May 20, 2011) totalingapproximately $9.9 million. In addition, the Company assumed approximately $5.9 million ofindebtedness and acquired $11.1 million of cash from CTI. Olympic funded its acquisition of CTIprimarily with borrowings under its amended asset-based credit facility. During the second andthird quarters of 2011, the Company incurred $919 thousand of direct acquisition-related costs inthe aggregate.

Purchase Price Allocation

The acquisition of CTI was accounted for under the acquisition method of accounting and,accordingly, the purchase price of $159.9 million has been allocated to the assets acquired andliabilities assumed at July 1, 2011, the date of acquisition. There were no material changes to thepurchase price allocation since December 31, 2011.

Pro Forma Financial Information

The following unaudited pro forma summary of financial results presents the consolidated resultsof operations as if the CTI acquisition had occurred on January 1, 2010, after the effect of certainadjustments, including increased depreciation expense resulting from recording fixed assets at fairvalue, interest expense on the acquisition debt and amortization of customer relationships, with therelated tax effects. The pro forma results for the three and six months ended June 30, 2011 doesnot include any transactions costs and other non-recurring acquisition related expenses. The proforma results have been presented for comparative purposes only and are not indicative of whatwould have occurred had the acquisition been made on January 1, 2010, or of any potential resultsthat may occur in the future.

Threemonthsended

June 30,2011

Six monthsended

June 30,2011

(in thousands, except per share amounts)



Pro forma (unaudited):Net sales $ 358,789 $ 713,888Net income $ 9,602 $ 20,917




3 Months Ended 6 Months EndedConsolidated Statements ofComprehensive Income

(Unaudited) (USD $)In Thousands, except Per


Jun. 30,2012

Jun. 30,2011

Jun. 30,2012

Jun. 30,2011

Net sales $ 367,365 $ 299,000 $ 749,417 $ 593,381Costs and expensesCost of materials sold (excludes items shown seperatelybelow) 295,878 238,618 602,556 469,580

Warehouse and processing 21,003 16,371 42,225 31,961Administrative and general 17,508 13,667 35,882 26,878Distribution 9,219 6,139 18,278 12,347Selling 6,763 5,127 13,904 10,931Occupancy 2,115 1,667 4,438 3,493Depreciation 4,913 3,512 9,683 6,979Amortization 222 444Total costs and expenses 357,621 285,101 727,410 562,169Operating income 9,744 13,899 22,007 31,212Other income, net (5) (39)Income before interest and income taxes 9,749 13,899 22,046 31,212Interest and other expense on debt 2,183 826 4,291 1,631Income before income taxes 7,566 13,073 17,755 29,581Income tax provision 3,040 5,127 6,999 11,312Net income 4,526 7,946 10,756 18,269Net loss on interest rate hedge, net of tax (403) (403)Total comprehensive income $ 4,123 $ 7,946 $ 10,353 $ 18,269Earnings per share:Net income per share - basic (in Dollars per share) $ 0.41 $ 0.73 $ 0.98 $ 1.67Weighted average shares outstanding - basic (in Shares) 10,960 10,935 10,956 10,935Net income per share - diluted (in Dollars per share) $ 0.41 $ 0.73 $ 0.98 $ 1.67Weighted average shares outstanding - diluted (in Shares) 10,989 10,947 10,987 10,947



6 Months EndedNote 12 - Equity Plans: Jun. 30, 2012Disclosure of CompensationRelated Costs, Share-basedPayments [Text Block]

(12) Equity Plans:

Stock Options

The following table summarizes stock option activity during the six months ended June 30, 2012:

Number ofOptions


WeightedAverage


Term


(in thousands)Outstanding atDecember 31, 2011 46,007

$ 20.90

Granted - -Exercised (2,170) 4.18Canceled - -Outstanding at June30, 2012 43,837

$ 21.733.3 years $ 143

Exercisable at June30, 2012 43,837

$ 21.733.3 years $ 143

There were 2,170 stock options exercised during the six months ended June 30, 2012. There wereno stock options exercised during the six months ended June 30, 2011. The total intrinsic value ofstock options exercised during the six months ended June 30, 2012 was $52 thousand. All optionsoutstanding are vested as of June 30, 2012.

Restricted Stock Units and Performance Share Units

The Olympic Steel 2007 Omnibus Incentive Plan (the Plan) was approved by the Company’sshareholders in 2007. The Plan authorizes the Company to grant stock options, stock appreciationrights, restricted shares, restricted share units, performance shares, and other stock- and cash-basedawards to employees and Directors of, and consultants to, the Company and its affiliates. Underthe Plan, 500,000 shares of common stock are available for equity grants.

On January 3, 2012 and March 1, 2011, the Compensation Committee of the Company’s Boardof Directors approved the grant of 1,800 restricted stock units (RSUs) to each non-employeeDirector. Subject to the terms of the Plan and the RSU agreement, the RSUs vest after one year ofservice (from the date of grant). The RSUs are not converted into shares of common stock untilthe 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 stockon the date of the grant, which was $25.55 and $26.91 for the grants on January 3, 2012 and March1, 2011, respectively.

In 2011, the Compensation Committee for the Company’s Board of Directors approved changesto the Senior Management Compensation Program to include an equity component in order to



encourage more ownership of Common Stock by the executives. Starting in 2011, the SeniorManagement Compensation Program imposed stock ownership requirements upon theparticipants. Beginning in 2011, each participant is required to own at least 750 shares of CommonStock for each year that the participant participates in the Senior Management CompensationProgram. Any participant that fails to meet to the stock ownership requirements will be ineligibleto receive any equity awards under the Company’s equity compensation plans, including thePlan, until the participant satisfies the ownership requirements. To assist participants in meetingthe stock ownership requirements, on an annual basis, if a participant purchases 500 sharesof Common Stock on the open market, the Company will award that participant 250 sharesof Common Stock. During the six months ended June 30, 2102 the Company matched 6,750shares. Additionally, any participant who continues to comply with the stock ownershiprequirements as of the five-year, 10-year, 15-year, 20-year and 25-year anniversaries of theparticipant’s participation in the Senior Management Compensation Program will receive arestricted stock unit award with a dollar value of $25 thousand, $50 thousand, $75 thousand, $100thousand and $100 thousand, respectively. Restricted stock unit awards will convert into the rightto receive shares of Common Stock upon a participant’s retirement, or earlier upon the executive’sdeath or disability or upon a change in control of the Company.

In recognition of their performance and dedicated years of service, on December 31, 2011, theCompensation Committee of the Board of Directors granted 81,475 RSUs to Messrs. Michael D.Siegal, Chairman and Chief Executive Officer, David A.Wolfort, President and Chief OperatingOfficer, and Richard T. Marabito, Chief Financial Officer and Treasurer. The fair value of eachRSU was estimated to be the closing price of the Company’s common stock on the date of thegrant, which was $23.32 on December 31, 2011. The RSUs vest in five years. Except in limitedcircumstances, the RSUs will not convert into shares of Common Stock until the retirements ofMessrs. Siegal, Wolfort and Marabito, respectively. These RSUs are not a part of the 2011 SeniorManagement Compensation Program discussed above.

Stock-based compensation expense recognized on RSUs for the three and six months ended June30, 2012 and 2011, respectively, is summarized in the following table:




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

The following table summarizes the activity related to RSUs for the six months ended June 30,2012:

Number ofShares





Outstanding atDecember 31, 2011 147,603

$ 27.16

Granted 40,368 23.97Converted intoshares (375)

22.68

Forfeited - -Outstanding at June30, 2012 187,596

$ 26.48-

Vested at June 30,2012 121,443

$ 25.95-

During the six months ended June 30, 2012, 375 RSUs were converted into shares. No RSUs wereconverted into shares during the six months ended June 30, 2011.



6 Months EndedDocument And EntityInformation Jun. 30, 2012 Aug. 09, 2012

Document and Entity Information [Abstract]Entity Registrant Name OLYMPIC STEEL INCDocument Type 10-QCurrent Fiscal Year End Date --12-31Entity Common Stock, Shares Outstanding 10,917,340Amendment Flag falseEntity Central Index Key 0000917470Entity Current Reporting Status YesEntity Voluntary Filers NoEntity Filer Category Accelerated FilerEntity Well-known Seasoned Issuer NoDocument Period End Date Jun. 30, 2012Document Fiscal Year Focus 2012Document Fiscal Period Focus Q2



6 Months EndedNote 13 - Capital Lease: Jun. 30, 2012Lease, Policy [Policy TextBlock]

(13) Capital Lease:

The Company leases a warehouse in Streetsboro, Ohio under a capital lease agreement. TheCompany has signed a purchase agreement to purchase the facility at the end of the lease for$1.3 million. The capital lease obligation is included in “Current portion of short-term debt” and“Long-term debt” on the accompanying Consolidated Balance Sheet.

The capital lease obligation is as follows:


2012

December31,

2011Total capital lease obligation $ 1,491 $ 1,587Less: interest (4) (10)Capital lease obligation 1,487 1,577Less: current (162) (157)Long term capital lease $ 1,325 $ 1,420



6 Months EndedConsolidated Statements ofCash Flows (Unaudited)

(USD $)In Thousands, unlessotherwise specified

Jun. 30,2012

Jun. 30,2011

Cash flows from (used for) operating activities:Net income $ 10,756 $ 18,269Adjustments to reconcile net income to net cash used for operating activities -Depreciation and amortization 10,753 7,132Loss on disposition of property and equipment 174 39Stock-based compensation 1,436 404Other long-term assets (2,032) (209)Other long-term liabilities 1,255 3,512

22,342 29,147Changes in working capital:Accounts receivable (36,274) (57,629)Inventories (34,510) (6,972)Income taxes receivable and deferred 844 3,911Prepaid expenses and other 2,758 (967)Accounts payable 8,628 15,530Change in outstanding checks 3,629 4,277Accrued payroll and other accrued liabilities 782 (4,777)

(54,143) (46,627)Net cash used for operating activities (31,801) (17,480)Cash flows from (used for) investing activities:Capital expenditures (15,683) (16,416)Proceeds from disposition of property and equipment 2 12Net cash used for investing activities (15,681) (16,404)Cash flows from (used for) financing activities:Credit facility revolver borrowings 303,470 231,475Credit facility revolver repayments (253,960) (195,520)Principal payments under capital lease obligations (90)Term loan repayments (4,375)Industrial revenue bond repayments (755)Credit facility fees and expenses (1,203) (760)Proceeds from exercise of stock options (including tax benefits) and employee stockpurchases 244 20

Dividends paid (436) (436)Net cash from financing activities 42,895 34,779Cash and cash equivalents:Net change (4,587) 895Beginning balance 7,403 1,492Ending balance $ 2,816 $ 2,387



Note 7 - Investments in JointVentures: Jun. 30, 2012

Investments In Joint Ventures (7) Investments in Joint Ventures:

The Company and the United States Steel Corporation each own 50% of Olympic Laser Processing(OLP), a company that produced laser welded sheet steel blanks for the automotive industry. OLPceased operations in 2006. In December 2006, the Company advanced $3.2 million to OLP tocover a loan guarantee. As of December 31, 2011, the investment in and advance to OLP wasvalued at $1.6 million on the Company’s Consolidated Balance Sheet.

In May 2012 the real estate associated with OLP was sold. The sale of the OLP real estatewas completed on May 18, 2012, resulting in a pre-tax loss on sale to the Company of $9thousand. The Company is in the process of finalizing all of the transactions related to the sale ofthe real estate and dissolving OLP.



6 Months EndedNote 6 - Goodwill: Jun. 30, 2012Goodwill Disclosure [TextBlock]

(6) Goodwill:

The carrying amount of goodwill, by reportable segment, is as follows:

June 30,2012

December31,

2011(in thousands)Flat products $ 7,083 $ 7,083Tubular and pipe products 40,287 40,171Total $ 47,370 $ 47,254

The goodwill of $47.4 million is not deductible for income tax purposes. The goodwill representsthe excess of cost over the fair value of net tangible and intangible assets acquired. The Companypaid for goodwill in conjunction with the acquisitions, as they enhance the Company’s commercialopportunities by adding new product offerings to an expanded customer base and by increasing theCompany’s distribution footprint.

In accordance with the Accounting Standards Codification, on an annual basis, an impairment testof goodwill is performed in the fourth quarter, or more frequently if changes in circumstances orthe occurrence of events indicate potential impairment. Events or changes in circumstances thatcould trigger an impairment review include significant nonperformance relative to the expectedhistorical or projected future operating results, significant changes in the manner of the use of theacquired assets or the strategy for the overall business or significant negative industry or economictrends.

Due to the Company’s book value exceeding the Company’s market capitalization a triggeringevent review of potential goodwill impairment was performed in the second quarter as of June 1,2012. For the goodwill related to the tubular and pipe products segment a qualitative assessmentwas performed. For the Company’s reportable units within the flat products segment, a discountedcash flow analysis was performed, which contains significant unobservable inputs, based uponaverage earnings before interest, taxes, depreciation and amortization and cash flow multiples. Inall cases, the fair values of the entities were substantially in excess of the carrying values of theentities and there were no indications of impairment.



6 Months EndedNote 4 - Inventories: (Tables) Jun. 30, 2012Schedule of Inventory, Current [Table Text Block] Metal Inventories

June 30,2012

December31,

2011(in thousands)Unprocessed $229,275 $ 207,301Processed andfinished 83,000 70,464Totals $312,275 $ 277,765



6 Months EndedNote 14 - Income Taxes: Jun. 30, 2012Income Tax Disclosure [TextBlock]

(14) Income Taxes:

For the three months ended June 30, 2012, the Company recorded an income tax provision of$3.0 million, or 40.2%, compared to $5.1 million, or 39.2%, for the three months ended June 30,2011.

For the six months ended June 30, 2012, the Company recorded an income tax provision of$7.0 million, or 39.4%, compared to $11.3 million, or 38.2%, for the six months ended June 30,2011.



6 Months EndedNote 10 - Fair Value ofFinancial Instruments: Jun. 30, 2012

Fair Value Disclosures [TextBlock]

(10) Fair Value of Financial Instruments:

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

Fair value is defined as the price that would be received to sell an asset or paid to transfera liability in an orderly transaction between market participants at the measurement date. Fairvalue is an exit price concept that assumes an orderly transaction between willing marketparticipants. Valuation techniques must maximize the use of observable inputs and minimize theuse of unobservable inputs. To measure fair value, the Company applies a fair value hierarchythat is based on three levels of input, of which the first two are considered observable and the lastunobservable, as follows:

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

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

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

During the six months ended June 30, 2012, there were no transfers of financial assets between thelevels in the fair value hierarchy. Following is a description of the valuation methodologies usedfor assets and liabilities measured at fair value as of June 30, 2012 and December 31, 2011:

Nickel swaps and embedded customer derivatives – Determined by using Level 2 inputs thatinclude the price of nickel indexed to the LME. The fair value is determined based on quotedmarket prices and reflects the estimated amounts the Company would pay or receive to terminatethe nickel swaps.

Interest rate swap and fixed rate interest rate hedge – Based on the present value of the expectedfuture cash flows, considering the risks involved, and using discount rates appropriate for thematurity date. Market observable Level 2 inputs are used to determine the present value of futurecash flows.

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



(in thousands)June 30, 2012 Level 1 Level 2 Level 3 Total


Liabilities:Nickel swaps - 284 - 284Interest rate swap 476 476Fixed interest rate hedge - 655 - 655Total liabilities at fair value $ - $ 1,415 $ - $ 1,415

(in thousands)December 31, 2011 Level 1 Level 2 Level 3 Total


Liabilities:Nickel swaps - 55 - 55Interest rate swap - 492 - 492Total liabilities at fair value $ - $ 547 $ - $ 547

Long-Term Financial Instruments

The fair value of the IRB is determined using Level 1 inputs. The carrying value and the fair valueof the IRB that qualify as financial instruments were both $4.3 million and $5.1 million at June 30,2012 and December 31, 2011, respectively.

The fair values of the revolver and term loan are determined using Level 2 inputs. The carryingvalues of the revolver and the term loan were $219.9 million and $54.0 million, at June 30, 2012,respectively. The carrying value of the revolver and the term loan were $170.4 million and $57.6million, at December 31, 2011, respectively. As the revolver and term loan were amended in 2012,refinanced in 2011, and carry variable interest rates, management believes that the amounts arecarried at fair value at June 30, 2012 and December 31, 2011.



6 Months EndedNote 8 - Debt: Jun. 30, 2012Debt Disclosure [Text Block] (8) Debt:

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


2012

December31,



On March 16, 2012, the Company amended its existing asset-based revolving credit facility. Theamendment provided, among other things: (i) a reduction in the applicable margin for loansunder the Company’s Loan and Security Agreement; (ii) additional revolving commitments tothe borrowers in an aggregate principal amount of $50 million, which additional revolvingcommitments do not impact the borrowers’ incremental facilities; and (iii) permits certaintransactions among the borrowers and Metales de Olympic, S. de R.L. de C.V., an indirectsubsidiary of the Company. The amended asset-based credit facility (the ABL Credit Facility)consists of a revolving credit line of $315 million and a $64 million term loan. Revolverborrowings are limited to the lesser of a borrowing base, comprised of eligible receivables andinventories, or $315 million in the aggregate. The ABL Credit Facility matures on July 1, 2016.

The ABL Credit Facility requires the Company to comply with various covenants, the mostsignificant of which include: (i) until maturity of the ABL Credit Facility, if any commitments orobligations are outstanding and the Company’s availability is less than the greater of $20 million,12.5% of the aggregate amount of revolver commitments, or 60% of the principal balance of theterm loan then outstanding, then the Company must maintain a ratio of EBITDA minus certaincapital expenditures and cash taxes paid to fixed charges of at least 1.10 to 1.00 for the most recenttwelve fiscal month period; (ii) limitations on dividend payments; (iii) restrictions on additionalindebtedness; and (iv) limitations on investments and joint ventures. Effective with the March 16,2012 amendment, the Company has the option to borrow under its revolver based on the agent’sbase rate plus a premium ranging from 0.00% to 0.50% or the London Interbank Offered Rate(LIBOR) plus a premium ranging from 1.50% to 2.00%. The interest rate under the term loan isbased on the agent’s base rate plus a premium ranging from 0.25% to 0.75% or LIBOR plus apremium ranging from 1.75% to 2.25%.

In June 2012, the Company entered into a forward starting fixed rate interest rate hedgecommencing July 2013 in order to eliminate the variability of cash interest payments on $53million of the outstanding LIBOR based borrowings under the ABL credit facility. The hedgematures on June 1, 2016 and is reduced monthly by the principal payments on the term loan. Theinterest rate hedge fixed the rate at 1.21%. Although the Company is exposed to credit loss in the



event of nonperformance by the other parties to the interest rate hedge agreement, the Companyanticipates performance by the counterparties.

As of June 30, 2012, $5.4 million of bank financing fees were included in “Prepaid expensesand other” and “Other long-term assets” on the accompanying Consolidated Balance Sheet. Thisincludes $1.2 million of financing fees paid for the March 16, 2012 amendment. The financingfees are being amortized over the remaining term of the ABL Credit Facility.

As of June 30, 2012, the Company was in compliance with its covenants and had approximately$85 million of availability under the ABL Credit Facility.

As part of the CTI acquisition, the Company assumed approximately $5.9 million of IndustrialRevenue Bond indebtedness issued through the Stanly County, North Carolina Industrial Revenueand Pollution Control Authority (IRB). The bond matures in April 2018, with the option toprovide principal payments annually on April 1st. On April 1, 2012, the Company paid an optionalprincipal payment of $755 thousand. Interest is payable monthly, with a variable rate that resetsweekly. As security for payment of the bonds, the Company obtained a direct pay letter of creditissued by JPMorgan Chase Bank, N.A. The letter of credit reduces annually by the principalreduction amount. The interest rate at June 30, 2012 was 0.23% for the IRB debt.

The Company entered into an interest rate swap agreement to reduce the impact of changes ininterest rates on the above IRB. At June 30, 2012, the effect of the swap agreement on the bondwas to fix the rate at 3.46 percent. The swap agreement matures April 2018, but is reducedannually by the amount of the optional principal payments on the bond. Although, the Company isexposed to credit loss in the event of nonperformance by the other parties to the interest rate swapagreement, the Company anticipates performance by the counterparties.



6 Months EndedNote 9 - DerivativeInstruments: Jun. 30, 2012

Derivative Instruments andHedging Activities Disclosure[Text Block]

(9) Derivative Instruments:

Nickel swaps

During 2012 and 2011, the Company entered into nickel swaps indexed to the London MetalExchange (LME) price of nickel with third-party brokers. The nickel swaps are treated asderivatives for accounting purposes. The Company entered into the swaps to mitigate itscustomers’ risk of volatility in the price of nickel. The nickel swaps vary in length from nine to 21months and are settled with the broker at maturity. The economic benefit or loss arising from thechanges in fair value of the swaps is contractually passed through to the customer. The primaryrisk associated with the nickel swaps is the ability of customers or third-party brokers to honortheir 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 ofthe nickel swap.

While these derivatives are intended to help the Company manage risk, they have not beendesignated as hedging instruments. The periodic changes in fair value of the nickel and embeddedcustomer derivative instruments are included in “Cost of materials sold” in the ConsolidatedStatement of Comprehensive Income. We recognize derivative positions with both the customerand the third party for the derivatives and we classify cash settlement amounts associated withthem as part of “Cost of materials sold” in the Consolidated Statements of ComprehensiveIncome. The periodic changes in fair value of the interest rate swap are included in “Other incomeand expense, net” in the Consolidated Statement of Comprehensive Income. Cash settlementamounts associated with the interest rate swap are included in “Interest and other expense on debt”in the Consolidated Statements of Comprehensive Income.

The embedded customer derivatives are included in “Accounts receivable, net”, and the nickel andinterest rate swaps are included in “Other accrued liabilities” and “Other long-term liabilities” onthe Consolidated Balance Sheet at June 30, 2012 and December 31, 2011.

Interest rate swap

CTI entered into an interest rate swap to reduce the impact of changes in interest rates on itsIRB. The swap agreement matures April 2018, the same time as the IRB, but is reduced annuallyby the amount of the principal payments on the IRB. Although the Company is exposed to creditloss in the event of nonperformance by the other parties to the interest rate swap agreement, theCompany anticipates performance by the counterparties. The interest rate swap is not treated as ahedging instrument for accounting purposes.

Fixed rate interest rate hedge

In June 2012, the Company entered into a forward starting fixed rate interest rate hedgecommencing July 2013 in order to eliminate the variability of cash interest payments on $53million of the outstanding LIBOR-based borrowings under the ABL Credit Facility. The hedge



matures on June 1, 2016 and is reduced monthly by the principal payments on the term loan. Thefixed rate interest rate hedge is accounted for as a cash flow hedging instrument for accountingpurposes.

The table below shows the total net gain or (loss) recognized in the Company’s ConsolidatedStatement of Comprehensive Income of the derivatives for the three and six months ended June30, 2012 and 2011.


Six Months Ended June30,

2012 2011 2012 2011(in thousands)Interest rate swap $ (5) $ - $ 16 $ -Nickel swaps (164) (16) (229) 72Embedded customer derivatives 164 16 229 (72)Total (income) expense $ (5) $ - $ 16 $ -



6 Months EndedNote 11 - Accumulated OtherComprehensive Loss: Jun. 30, 2012

Comprehensive Income (Loss)Note [Text Block]

(11) Accumulated Other Comprehensive Loss:

In June 2012, the Company entered into a forward starting fixed rate interest rate hedgecommencing July 2013 in order to eliminate the variability of cash interest payments on $53million of the outstanding LIBOR based borrowings under the ABL Credit Facility. The hedgematures on June 1, 2016 and is reduced monthly by the principal payments on the term loan. Thefixed rate interest rate hedge is accounted for as a cash flow hedging instrument for accountingpurposes. The fair value of the interest rate hedge of $655 thousand, net of tax of $252 thousand isincluded in “Accumulated other comprehensive loss” on the Consolidated Balance Sheets at June30, 2012.



6 MonthsEndedNote 2 - Acquisition of

Chicago Tube and IronCompany: (Detail) (USD $) Sep. 30, 2011 Jun. 30,

2012Jul. 31,

2011Business Acquisition, Cost of Acquired Entity, Purchase Price $

159,900,000Business Acquisition, Cost of Acquired Entity, Liabilities Incurred (inDollars) 5,900,000 5,900,000

Business Acquisition, Purchase Price Allocation, Current Assets, Cashand Cash Equivalents 11,100,000

Business Combination, Acquisition Related Costs 919,000Acquistion Costs Gross [Member]Business Acquisition, Cost of Acquired Entity, Purchase Price 159,900,000Base Purchase Price [Member]Business Acquisition, Cost of Acquired Entity, Purchase Price 150,000,000Ancillary Acquisition Costs [Member]Business Acquisition, Cost of Acquired Entity, Cash Paid $ 9,900,000



6MonthsEnded

12MonthsEnded

12 MonthsEnded 6 Months Ended

Note 12 - Equity Plans:(Detail) (USD $)

In Thousands, except Sharedata, unless otherwise

specified

Jun.30,

2012

Dec.31,

2011

Jan.03,

2012

Mar.01,

2011

Jan. 02, 2012Purchase

Requirement[Member]

Jun. 30,2012

MatchingPurchase

Requirement[Member]

Jun. 30,2012

Match[Member]

Jun. 30,2012

SharesMatched

forQuarter

[Member]

Jun. 30,2012

Five YearAnniversary

[Member]

Jun. 30,2012

Ten YearAnniversary

[Member]

Jun. 30,2012

Fifteen YearAnniversary

[Member]

Jun. 30,2012

TwentyYear

Anniversary[Member]

Jun. 30,2012

Twenty FiveYear

Anniversary[Member]

Share-based CompensationArrangement by Share-basedPayment Award, Options,Exercises in Period (in Shares)

2,170

Share-based CompensationArrangement by Share-basedPayment Award, Options,Exercises in Period, TotalIntrinsic Value (in Dollars)

$ 52

Share-based CompensationArrangement by Share-basedPayment Award, Number ofShares Available for Grant (inShares)

500,000

Share-based CompensationArrangement by Share-basedPayment Award, Number ofShares Authorized (in Shares)

1,8001,800

Share-based CompensationArrangement by Share-basedPayment Award, EquityInstruments Other thanOptions, Nonvested, WeightedAverage Grant Date Fair Value

$ 26.48 $ 27.16 $25.55

$26.91

Share-based CompensationArrangement by Share-basedPayment Award, Description

750 500 250 6,750

Share-based CompensationArrangement by Share-basedPayment Award, EquityInstruments Other thanOptions, Vested in Period,Intrinsic Value

$ 25 $ 50 $ 75 $ 100 $ 100

Share-based CompensationArrangement by Share-basedPayment Award, EquityInstruments Other thanOptions, Grants in Period (inShares)

40,368 81,475

Share Price $ 23.32Share-based CompensationArrangement by Share-basedPayment Award, Shares Issuedin Period (in Shares)

(375)



6 Months EndedNote 16 - SegmentInformation: Jun. 30, 2012

Segment Reporting Disclosure[Text Block]

(16) Segment Information:

Since the July 1, 2011 acquisition of CTI, the Company operates in two reportable segments, flatproducts and tubular and pipe products. The following table summarizes financial informationregarding segments:



(in thousands) 2012 2011 2012 2011Net sales

Flat products $ 307,887 $ 299,000 $ 624,516 $ 593,381Tubular and pipe products 59,478 - 124,901 -

Total net sales $ 367,365 $ 299,000 $ 749,417 $ 593,381

Operating incomeFlat products $ 5,299 $ 13,899 $ 11,118 $ 31,212Tubular and pipe products 4,445 - 10,889 -

Total operating income $ 9,744 $ 13,899 $ 22,007 $ 31,212

Depreciation and amortizationFlat products $ 3,952 $ 3,512 $ 7,822 $ 6,979Tubular and pipe products 1,183 - 2,305 -

Total depreciation and amortization $ 5,135 $ 3,512 $ 10,127 $ 6,979

Capital expendituresFlat products $ 5,286 $ 8,513 $ 10,732 $ 16,416Tubular and pipe products 2,428 - 4,951 -

Total capital expenditures $ 7,714 $ 8,513 $ 15,683 $ 16,416

There were no material intercompany revenue transactions between the flat products and tubularand pipe products segments.

The Company sells certain products internationally, primarily in North, Central and SouthAmerica. International sales have been immaterial to the consolidated financial results and to theindividual segment’s results.



6 Months EndedNote 8 - Debt: (Tables) Jun. 30, 2012Schedule of Debt [Table Text Block] Debt Components


2012

December31,





Note 10 - Fair Value ofFinancial Instruments:

(Detail) - Fair ValueHeirarchy (USD $)


Jun. 30, 2012 Dec. 31, 2011

Assets:Embedded customer derivatives $ 229 $ 55Liabilities:Nickel swaps 284 55Interest rate swap 476 492Fixed interest rate hedge 655Total liabilities at fair value 1,415 547Fair Value, Inputs, Level 1 [Member]Assets:Embedded customer derivatives 0 0Liabilities:Nickel swaps 0 0Interest rate swap 0 0Total liabilities at fair value 0 0Fair Value, Inputs, Level 2 [Member]Assets:Embedded customer derivatives 229 55Liabilities:Nickel swaps 284 55Interest rate swap 476 492Fixed interest rate hedge 655Total liabilities at fair value 1,415 547Fair Value, Inputs, Level 3 [Member]Assets:Embedded customer derivatives 0 0Liabilities:Nickel swaps 0 0Interest rate swap 0 0Total liabilities at fair value $ 0 $ 0



Note 6 - Goodwill: (Detail)(USD $)


Jun. 30, 2012 Dec. 31, 2011

Goodwill $ 47,370 $ 47,254



6 Months EndedSupplemental Disclosure ofCash Flow Information

(unaudited) (USD $)In Thousands, unlessotherwise specified

Jun. 30, 2012 Jun. 30, 2011

Cash paid during the periodInterest paid $ 3,816 $ 1,473Income taxes paid $ 3,344 $ 6,688



6 Months EndedNote 5 - Intangible Assets: Jun. 30, 2012Goodwill and IntangibleAssets Disclosure [Text Block]

(5) Intangible Assets:

Intangible assets, net, consisted of the following as of June 30, 2012:

GrossCarryingAmount


IntangibleAssets,

Net(in thousands)Customer relationships - subject to amortization $ 13,332 $ (889) $ 12,443Trade name - not subject to amortization 23,425 - 23,425

$ 36,757 $ (889) $ 35,868

The Company estimates that amortization expense for its intangible assets subject to amortizationwill be $889 thousand for the year ended December 31, 2012 and $889 thousand per year in eachof the next five years.



3 Months Ended 6 Months EndedNote 15 - SharesOutstanding and Earnings

Per Share: (Detail) -Schedule of Earnings Per

Share (USD $)In Thousands, except Per


Jun. 30,2012

Jun. 30,2011

Jun. 30,2012

Jun. 30,2011

Weighted average basic shares outstanding 10,960 10,935 10,956 10,935Assumed exercise of stock options and issuance of stockawards 29 12 31 12

Weighted average diluted shares outstanding 10,989 10,947 10,987 10,947Net income (in Dollars) $ 4,526 $ 7,946 $ 10,756 $ 18,269Basic earnings per share (in Dollars per share) $ 0.41 $ 0.73 $ 0.98 $ 1.67Diluted earnings per share (in Dollars per share) $ 0.41 $ 0.73 $ 0.98 $ 1.67Anti-dilutive securities outstanding 178 118 178 118



6 Months EndedNote 9 - DerivativeInstruments: (Tables) Jun. 30, 2012

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

Three MonthsEnded June 30,

Six MonthsEnded June 30,

2012 2011 2012 2011(in thousands)Interest rate swap $ (5) $ - $ 16 $ -Nickel swaps (164) (16) (229) 72Embedded customerderivatives 164 16 229 (72)Total (income)expense $ (5) $ - $ 16 $ -



Note 4 - Inventories: (Detail)- Metal Inventories (USD $)


Jun. 30, 2012 Dec. 31, 2011

Inventory $ 312,275 $ 277,765Unprocessed [Member]Inventory 229,275 207,301Processed and Finished [Member]Inventory $ 83,000 $ 70,464



6 Months EndedNote 15 - SharesOutstanding and Earnings

Per Share: Jun. 30, 2012

Earnings Per Share [TextBlock]

(15) Shares Outstanding and Earnings Per Share:

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



2012 2011 2012 2011(in thousands, except per share data)

Weighted average basic sharesoutstanding 10,960 10,935 10,956 10,935Assumed exercise of stock optionsand issuance of stock awards 29 12 31 12Weighted average diluted sharesoutstanding 10,989 10,947 10,987 10,947

Net income $ 4,526 $ 7,946 $ 10,756 $ 18,269


Anti-dilutive securities outstanding 178 118 178 118



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