Michael Siegal – Chairman and CEO David Wolfort – President and COO Rick Marabito – CFO.

Edward Marshall – Sidoti and Company.

Good morning, and welcome to the Olympic Steel First Quarter 2014 Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded.

Some statements made on today’s call will be predictive and are intended to be made as forward-looking within the Safe Harbor protections of the Private Securities Litigation Reform Act of 1995 and may not reflect actual results.

The company does not undertake to update such statements, changes in assumptions or changes in other factors affecting such forward-looking statements.

Important assumptions, risks, uncertainties and other factors that could cause actual results to differ materially are set forth in the Company’s reports on Forms 10-K and 10-Q and press releases filed with the Securities and Exchange Commission. Today’s live broadcast will be archived and available for replay on Olympic Steel’s website.

At this time, I’d like to introduce to you your host for the call today, Olympic Steel’s Chairman and Chief Executive Officer, Michael Siegal. Please go ahead, Mr. Siegal..

Thank you, operator. Good morning and thank you all for joining us to discuss our first quarter 2014 results. Today we are broadcasting live from Lexington, Kentucky where we will host our Annual Meeting later this morning.

With me on the call today are David Wolfort, President and Chief Operating Officer; Rick Marabito, Chief Financial Officer; and Don McNeeley, President and Chief Operating Officer of Chicago Tube and Iron. We will provide highlights from our initial quarter this year and after that, we will open the call for questions.

During the first quarter of 2014, we concentrated on executing our strategic plan with a particular emphasis on growing sales volume. On that, we were successful.

Sales tonnage increased both year-over-year, as well as sequentially quarter-over-quarter; given that we lost several shipping days due to severe weather during the quarter increasing the sales volume is encouraging and reinforces our strategic direction.

Consolidated revenue increased to $347 million, up from $338 million last year entirely due to higher volume. Steel prices again came under pressure during the first quarter. We started January with firm prices. However, by the second week of the month, it started to deteriorate and proceeded to fall for the next 60 business days.

Fortunately, by the end of the first quarter, prices rebounded, since then, carbon steel, nickel and stainless steel base prices have all moved higher with additional increases announced in April. However the price recovery occurred too late in the quarter to positively impact our first quarter results.

As David will explain in a moment, prevailing market prices may have a beneficial effect on the second quarter.

Our Pipe and Tubular product segment turned in a solid quarter, volume was up, but not revenue, but the revenue, net revenue decreased slightly due to the lower prices compared with last year, especially metal sales also experienced increases.

Volume over last year was up, stainless and aluminum as part of our strategic growth area and we look forward to building on success in those product lines as we move forward. Again, based on the current business activity and the near-term outlook as we hear from our customers, we feel good about the second quarter and the coming year.

To maximize our potential, we need to remain focused with our cost reduction and operational efficiency initiatives. The combination of a pickup in volume, along with market strength bodes well for our business outlook. We also believe that the current marketplace is right for acquisitions.

This morning, we announced through our Board of Directors, a regular cash dividend of $0.02 per share payable on June 16, 2014 to the holders of record on June 2, 2014. And now, I will turn the call over to Rick Marabito for a financial overview of the first quarter.

Rick?.

Thank you, Michael and good morning everyone. Volume of flat product increased 3% to 299,000 tons, up from 292,000 tons in last year’s first quarter. Although we don’t report specific volume figures for the Tube and Pipe products segment, we did ship higher volume this year versus last year, just as lower average prices as dictated by the market.

This resulted in our Pipe and Tube revenues declining by a little more than $1 million year-over-year. Also pricing of Tubular and Pipe products tends to lag the price fluctuation in flat products. Consolidate net sales increased 3% over last year reaching $347 million, compared with $338 million in the first quarter of 2013.

On a sequential basis, net sales increased more than 19% over the fourth quarter. This is encouraging because first quarter 2014 shipments were hindered by adverse weather conditions. Consolidated gross margin declined 70 basis points to 20.6% of sales in the first quarter of 2014, versus 21.3% in 2013.

However, last year’s results included a pretax adjustment for the period LIFO income of $1.9 million related to Chicago Tube and Iron. This reduced last year’s reported cost of goods sold and resulted in higher reported gross margins by 60 basis points.

On a pre-LIFO basis, gross margins were comparable at 20.6% this year compared with 20.7% last year. There were no LIFO impacts recorded in our 2014 results. Margins on flat products were unchanged year-over-year. The remaining 10 basis point variance is primarily due to a lower proportion of Pipe and Tube product sales this year.

Our mix was 17.6% of consolidated sales for Pipes and Tubes this year, down from 18.4% of sales in last year’s first quarter. Operating expenses increased $2.9 million to $65.2 million from $62.3 million in 2013’s first quarter. This reflects higher fixed depreciation along with higher variable warehouse and processing and distribution expenses.

Utility and occupancy costs were also up from last year due to the inclement weather. Operating income in the first quarter was $6.3 million, down from the $9.6 million reported last year.

One of the themes you will be hearing more about involves our operational excellence initiatives designed to drive permanent structural savings in our operating expenses. David will talk more about this in a moment.

Interest expense was up $60,000 in the quarter on higher average borrowing rates associated with our fixed rate interest tax that was initiated in mid-year 2013. Our credit facility revolver borrowings increased by approximately $35 million during the first quarter of 2014 to finance inventory and accounts receivable increases.

Consequently, total debt was up $32.6 million since December 31 and stood at $232 million. Our effective income tax rate was 38.0% in the first quarter, that’s compared with 34.7% last year.

Last year’s rate included the one-time effect of a tax law change for research and development credits which lowered our first quarter 2013 effective rate by about 2.3%. For modeling purposes, we expect our effective tax rate to be between 37% and 39% for 2014. Diluted earnings per share were $0.25 compared with $0.47 last year.

Last year’s LIFO adjustment increased diluted EPS in the first quarter of 2013 by $0.11. Turning to cash flow and the balance sheet. Inventory stood at $283.9 million at the end of March. This is down from $286.4 million at the end of December 2013. Our inventory turnover remained unchanged versus last year’s first quarter at 4.2 turns.

We continue to reduce aged inventory to further compress our cash conversion cycle. Accounts receivable increased $35 million during the quarter. This is normal seasonality as well as due to the increase in sales as our receivables typically do dip at the end of December. The credit quality of our customers remains very healthy.

Days sales outstanding were 41 days in the first quarter which is consistent with last year. Capital expenditures in the first quarter were only $2.3 million. This is much lower than the $5.5 million of fixed depreciation for the first quarter.

For the full year of 2014, our CapEx budget is approximately $18 million, which is well below the depreciation rate for the entire year. The majority of this year’s investments will fund new equipment at our Winder, Georgia facility.

At that facility, we are currently on-boarding work to service Caterpillar’s new manufacturing plant in Athens, Georgia. At March 31, shareholders’ equity increased to 302.3 million, or $27.53 per share, compared to 298.6 million or $27.24 per share at the end of last year. Now, I will turn the call over to David for the operating review..

Thank you, Rick. Entering January, we felt pretty good about the market conditions with the year approaching $680 a ton which was high watermark for the quarter.

But that euphoria was short lived and from mid-January, through the – pretty much the end of March, prices declined steadily before reaching a bottom, almost down 10% tipping down to $620 a ton range.

Near the middle of March, the mills announced an increase for hot rolled coil, up to $660 a ton, abating the decline and with some positive signs of slow but steady expansion. This increase held and was quickly followed by additional price increases in the first ten days of April.

Prices currently being – prices have recovered the entire first quarter dip, and now offers are currently being made at the highest levels of the year. Channels remain tight with reasonable to lean service center inventories as a result well publicized supply side disruptions, further supporting higher market prices.

Echoing the sentiments that Michael spoke about and Rick, the set up for the next few months looks promising. We are well positioned with inventory and available capacity through our facility network and a healthy pricing environment. This is the perfect recipe for us to validate the operating leverage in our business model.

While we endured the recession and nominal economic growth during the protracted recovery, we always have an eye on the long-term success of our business and its sustainable growth. During recent years, when many of our competitors were cutting to the bone, we invested significantly in the company.

We believe this long-term perspective will bear significant proof in the form of future earnings growth and we look forward to the balance of the year.

At this point, business seasonality appears to be much more traditional in 2014, but for the past couple of years, our sales, as well as those of our contemporaries sequentially declined from the first quarter to the second quarter of the year.

This year we are experiencing a reversion back to what feels much more like a typical spring selling season prior to the great recession. So second quarter looks to be stronger than first quarter. Our operational excellence initiatives complement our improving business outlook.

We are identifying opportunities to reduce cost, improve our internal processes and enhance efficiencies. Under John Howard’s guidance, we recently sent our first class of employees to Six-Sigma training and anticipate the preparations they receive will further promote best practices and reduce our operating cost across all of our facilities.

Multiple Six-Sigma projects were initiated in April in areas such as safety, quality, plant throughput and automation. Again, we anticipate these efforts will begin to reward in the second half of 2014. Also this month, we announced Steve Reyes was promoted to Vice President of Sales and Marketing for our Flat Rolled segment.

Steve has been with Olympic Steel for 15 years and most recently served as General Manager of our Flat Rolled operations in Minneapolis as well as some satellite operations. In his new role, he now leads our Flat Rolled sales and marketing efforts on a company-wide basis.

Succeeding him is Thomas Ehlers, he is taking over as General Manager, the General Manager role in Minneapolis and he is another Olympic Steel veteran, who has worked closely with Steve and will ensure smooth transition.

To summarize, we are looking forward to demonstrating the strength of our multi-year strategic growth plans with underlying trends in manufacturing turning upward to North America, we feel that Olympic Steel is ideally positioned from a geographic reach and sophisticated processing capabilities to the experienced personnel throughout the organization who will understand what it takes to make the metal service center of choice.

We are growing our market share in chosen sectors and by initiating continuous operational enhancements, we are well on our way to reaching our full potential. On top of that, we also have a healthy balance sheet to support our growth and to provide the financial wherewithal for long-term strategic perspectives.

With that operator, let’s open the call for questions..

Absolutely, we will now begin the question and answer session. (Operator Instructions) Our first question comes from Ed Marshall of Sidoti. Please go ahead..

Hey guys. Good morning.

Good morning Ed.

So, you talked about, the momentum I guess that you have going into April and I am curious if you can, in any way, quantify what maybe, I know we have not finished the month quite yet, but any kind of discussion or maybe you can quantify the momentum year-over-year, or the growth year-over-year or even sequentially in that business either from a price or a volume perspective?.

Ed, I think it’s a little preliminary to try and look at the overall quarter based upon one month. Clearly what happened is some of the weather conditions, get every single day to ship out.

So we are seeing just almost across the board from every customer segment that they are feeling better about the order book and second quarter is typically the largest consuming quarter of the year.

We are not seeing anything to basically change our opinion about that, but, I think it’s too early to comment about what the quarter is going to look like based on April..

Yes, I don’t want to extrapolate it, but I am just kind of curious with this momentum kind of picking up a little bit.

Is it, double-digit kind of growth that you are seeing April from March?.

That’s correct..

Okay.

So, when I look at kind of weather in the quarter in particular I am kind of curious about if you could quantify from a revenue perspective what you think weather cost is in the quarter from a revenue perspective?.

Ed, it’s Rick. That’s really hard to quantify. We obviously tried to do that internally.

What we do know is, we had multiple days where we had operations closed pretty much throughout the country including in the southeast and the issue is, the business that you have that is sort of recurring and contractual, I think in makeup some of the things that would be more spot business.

It don’t, because we have a site from us being closed we had multiple days where customers could not take steel as well. So, it’s a hard question to answer. I really don’t have a quantification for you, but it absolutely did impact us..

Okay.

And then aside from maybe the obvious absorption kind of behavior, that reflection on the P&L, I am curious if there are other costs you may have incurred because of it? Were there over time an employment cost? Were there accelerated transportation cost that may have actually been eaten by you and they are therefore showing up in the quarter that wouldn’t have necessarily been recorded if there wasn’t further weather shut down?.

Yes, there – we are at and I can help you on a few of those areas. Certainly, if you look at our distribution costs, our distribution cost did increased. Again, it’s hard to quantify exactly how much was due to the weather.

But what we do know on the weather, if you look at our occupancy cost, we’ve got over $300,000 of incremental cost that were associated with snow falling and heat and building maintenance cost associated with the weather.

So, the transportation cost and the occupancy would be the two principal areas and then obviously lots of efficiency where, those days where we were closed, we pay our full complement of people and really didn’t have any productivity..

Right, and then finally, you mentioned acquisitions in your prepared remarks and I was just kind of curious about what, obviously it sounds like you might be thinking about specific targets. I think that’s part of your growth strategy longer-term.

Are you considering – can you just remind us whether you‘d be looking at acquisitions from a market perspective, from a product mix perspective, new alloys, how would you come at it?.

Yes, the answer is all of the above, but I would say, we are obviously not looking, I would tell you we are looking for more value-added kinds of opportunities to look at our core distribution. Obviously, more geography helps the core distribution by mitigating distribution cost. So that’s a possibility.

But as we look at targeting what would be most beneficial for us and our shareholders, we are looking to enhance the value of what we do through downstream applications. So, value – a high value-added entity would be much more preferable for Olympic..

And you are not specifically talking about, an outright fabricator but kind of the intermediary between the service center and the fabricator?.

No, I wouldn’t agree with that statement..

And you go further downstream towards fabrication?.

I always do a lot of fabrication now, Ed..

Yes, okay, thanks guys..

(Operator Instructions) At this time, I am showing no further questions..

Okay, well, then thank you everyone and thank you operator. Again we thank you for joining us this morning and your interest in Olympic Steel. We will look forward to sharing our comments for – with all of you for the second quarter results in early August. Okay thanks everybody. Bye..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..