Michael Siegal - Chairman and CEO Richard Marabito - CFO David Wolfort - President Andrew Greiff - EVP and COO Don McNeeley - EVP.

Martin Englert - Jefferies Phil Gibbs - KeyBanc Aldo Mazzaferro - Macquarie.

Good day ladies and gentlemen, and welcome to the Olympic Steel 2017 First Quarter Results Conference Call. 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 broadcasts will be archived and available for replay on Olympic Steel’s website.

At this time, I’d like to introduce your host for today’s call, 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 Olympic Steel’s improved first quarter 2017 results.

On the call with me this morning are Olympic Steel’s President, David Wolfort; Chief Financial Officer, Rick Marabito; President of our Chicago Tube and Iron Business, Don McNeeley; and Executive Vice President and Chief Operating Officer, Andrew Greiff.

As we now know, sustained price increases began in late fourth quarter and accelerated to the first quarter of 2017. As important, various end markets and products began seasonal demand improvements.

Olympic Steel which is very much aligned with GDP growth of the United States particularly in markets related to food, energy, infrastructure and housing accelerated beyond the norm, demonstrating the earnings power we can generate when all three of our business segments carbon, specialty, and tubing perform well.

We are optimistic of these demand conditions continue and will remain strong into the second quarter. In addition, continued low inventories in a supply channel allows significant opportunities to take advantage of an increased spot market.

The metals service center institute data indicates that Olympic Steel is growing market share in nearly all of the products in our portfolio and certainly strong overall.

Our strong customer focus with the commitment to ongoing direct representative sales to the market is harvesting relationship capital that we have built during the last recessionary industrial cycle.

Along with our strong on-time delivery and quality performance metrics, we are confident that the positive financial performance can and will carry forward. We have the people, and the capital, and the commitment to drive sustained growth, as we move through the year.

For the last 8 years, many of our customers and their businesses faced repressive regulatory and uncertainty tax and trade policies that diminished their ability to compete and more importantly expanded in the United States market. We have built Olympic Steel for growth and strategically aligned ourselves with the U.S.

based industrial manufacturing and equipment manufacturers and with fabricators this business correlate with the GDP style growth. Many of these industrial sectors have been at low production levels in recent years hovering sales of carbon flat products. For too long, U.S.

businesses have tolerated no-tax reform, a country should have a tax policy that actually encourages capital spending. They had not infrastructure investment that is obviously sadly insufficient.

We had uncertain trade policies that were either not enforced, nor duties collected, did not level the playing field for our shores and that we certainly had an overzealous EPA just to name a few of the conditions we've dealt with over the last decade. Reason any one, or more of these areas can propel growth for our customers internal Olympic Steel.

We have 20 of working capital and operating capacity and our disposal to efficiently flex operations to meet higher demand. And before we move on from this topic, we wholeheartedly support the self initiated Section 232 Investigation launched last week by the U.S.

Department of Commerce, a healthy domestic steel industry as well out of doubt, a vital component of national security. We applaud the proactive position of the current administration.

This afternoon or this morning we also announced that the Board of Directors approved a regular quarterly cash dividend of $0.02 per share payable on June 15 to shareholders of record on June 1.

And lastly before I turn the call over to Rick, I hope to see some of you at our annual shareholder meeting taking place this morning here at beautiful Cleveland, Ohio. And so with that, I will turn the call to Rick..

Thank you, Michael and good morning everyone. Strong shipments powered our best earnings quarter in five years. Higher volume in combination with higher prices resulted in a 30% increase in net sales during the first quarter and arrived in earnings for all three of our segments.

First quarter tons sold improved 14% year-over-year in carbon flat products segment to 303,000 ton. According to the Metals Activity Report, industry-wide shipments from U.S. service centers rose 5.9% over last year's first quarter indicating we grew more than twice as fast as the market during the quarter.

Recovering industrial demand and our continued investment in direct sales representation contributed to the strong carbon flat sales volume. Average selling prices were up 18% in the carbon flat products segment. Our specialty metals volume increased 17% to a record 23,000 tons in the first quarter.

This resulted in a further increase and our share of the stainless steel flat sheet and coil market. Average selling prices in this segment were up 8% over the first quarter of last year. As a reminder, we don't report tonnage for our pipe and tube segment because volume is not a meaningful metric for that segment.

As I previously indicated, consolidated net sales rose by 30% to $335 million in the quarter. Quarterly net sales were up significantly in all three of our reporting segments compared with both last year and sequentially versus the fourth quarter.

The largest revenue increase was in our carbon flat products segment which was up 34% to $270 million compared with $161 million last year. We are encouraged by the improving industrial demand scenario for carbon flat products.

Net sales increased 26% in our specialty metals segment to $58 million, that's up from $46 million in the first quarter of last year. Higher shipping volume provided 17% of the increase, while higher pricing provided 8% of the increase.

Pipe and tube sales increased 17% to $60 million in the first quarter of the year, that's compared with $51 million last year. Consolidated gross margin as a percentage of sales improved to 22.8% in the first quarter that's compared with 22.7% last year and 20.2% in the fourth quarter.

We recorded $375,000 of LIFO expense this year, while there was no LIFO impact recorded in last year's first quarter. Gross margin in the carbon segment increased to 22% of sales in the first quarter compared to 21.6% last year. Specialty metals gross margin expanded to 16.7% of sales in the quarter, that's compared to 14.5% last year.

This improvement is the testament of the success of our operating team achieved and appropriately managing inventory and maintaining price discipline, while simultaneously achieving record market share. On a per ton basis, gross margin and carbon flat products was up 20% in the first quarter to $157 per ton compared to $131 per ton last year.

Specialty metals gross margin per ton was $417 in the first quarter and that is up 24% from $335 in the first quarter last year. Gross margin in pipe and tube products was still our strongest segment at 31.7% of sales, that's compared to 33.3% in 2016s first quarter.

Traditionally a lag does exist for pricing changes to occur in pipe and tube products when compared to carbon flat product price changes. We are optimistic about the outlook for pipe and tube moving forward as the 17% increase in net sales led to a year-over-year 11% increase in first quarter operating income.

Operating income in the first quarter improved substantially to $11.1 million, that's up from breakeven last year and again that marks our highest earnings quarter since the first quarter of 2012.

Over the past two years we have made sustainable operating enhancements in all three of our segment which helped us produce positive leverage with operating expenses increasing less than shipping volume.

Interest expense of $1.6 million was $300,000 higher compared with the first quarter of last year that is due to higher LIBOR rates in 2017 and higher average borrowings to fund working capital requirement related to increased pricing and shipping activity.

Our income tax provision was reduced in the quarter by $1.9 million out of period income tax adjustment. We recorded a tax asset related to the future deductibility of certain distributions from one of our retirement plan. Moving forward, we still expect our normalized effective income tax rate to be in our historical range of 38% to 40%.

Net income improved to $7.7 million or $0.68 per diluted share in the first quarter compared with a loss of $800,000 or $0.07 per share last year. The income tax adjustment I just discussed increased net income by $1.9 million or $0.17 per share in the first quarter of 2017. Now let's turn to the balance sheet.

Working capital increased to support the higher sales activity in the quarter. At the end of March, accounts receivable increased $140 million compared with $102 million at the end of December. Days sales outstanding average less than 40 days in the first quarter.

This not only demonstrates the financial health of our customer base but also the hard work of our credit team. Consolidated inventory was $263 million at quarter end compared to $255 million at the end of the year. The increase was due to higher prices as we averaged 4.6 tons for flat products segment in the first quarter.

Our total debt increased to $195 million, that's up $28 million during the quarter. Despite the increased borrowings availability under our asset-based lending agreement grew from $94 million to $109 million during the first quarter and that’s due to the strong management of working capital I just discussed.

Shareholders' equity increased to $262 million or $23.86 per share in the first quarter and our tangible book value was $21.70 per share. We plan to file our 10-Q this afternoon which will have additional financial details on the quarter. Now I will turn the call over to David for his operating review..

Thank you, Rick. As both Mike and Rick described, we are pleased - actually thrilled with this quarter's improved financial results and our quick recognition of changing market conditions late last year and a strong operating execution during the quarter.

Our market positioning and the improving demand outlook for each of our three business segments as Rick described is even more satisfying.

The validation of the heavy lifting and the major capital investments we made over the last few years since the recession to expand our portfolio of products and processing services is indeed paying dividends today.

Between 2010 and 2014 we diversified our product portfolio by adding pipe and tube and specialty metals while expanding our geographic reach through acquisitions and organic investments in new facilities, a significant investment indeed.

Since then, we have been commercially integrating our selling efforts and servicing customers that consume carbon flat products, tubular and pipe products, and specialty metals. We have also internally developed sales and management talent and effectively recruited successful seasoned industry veterans as we continue to grow market share.

In addition to developing and enhancing our local management teams, we have focused on optimizing asset utilization. We continue to integrate, we continue to repurpose and to invest in our ongoing facilities. Additionally, we've focused on other operating enhancements such as scrap and yield improvements, rate optimization, and labor efficiency.

These initiatives have quietly been occurring and are now manifesting themselves in the financial results. Our strategy and vision for Olympic Steel has remained consistent despite protracted market challenges on the past year. Metal price volatility will always influence the service center business however with U.S.

industrial demand on the rise, we are well-positioned to do even more - even have greater growth. We are confident that our customers' service focus and commitment to direct sales representation together with our strong balance sheet will continue to drive sustained success for Olympic Steel. With that operator, let's open the call for questions..

[Operator Instructions] And we'll take our first question from Martin Englert with Jefferies. Please go ahead, sir..

Hi, good morning everyone.

Can you discuss a little bit more in detail about the market share gains what contributed to this and was this more spot business or did you have some contractual wins?.

The answer is yes to both. Certainly as we have seen low inventories in the sustained low levels of inventory, we've seen a significant increase in our spot business- a spot business will define mostly to other service centers. We probably seen a 20 plus percent increase year-over-year based on the numbers that we have on spot.

On the contract stuff the answer is yes, same kind of scenarios. I think we all emphasize the aspect - we are committed to direct sales representation. We think that is a strategic advantage and getting to know your customer well and their needs is really important to sustainability of your relationships.

So I think we are gaining market share on the contract side of our business because of our ability to perform and our commitment to try to understand their concerns in their markets. So we're seeing significant growth across both sides of the two that you mentioned both contract and spot and we're seeing it in all three segments of our business..

Any idea for the carbon segment what the overall spot mix looks like percentage of tons versus the contract?.

Martin, we'll give you lose figures of about 50% in each category, maybe tilting a little bit heavier on a contract side with larger OEMs.

But by enlarge, our market growth has resonated because of the investments we've made over the past six, seven years, greater geographical footprint, more product diversification and as Michael as well commented, direct sales relationships with our customers..

I would imagine purchasing power with the mills probably give you some advantage as well, yes..

Doesn't hurt..

And in the last quarter you had flagged that - you had built up some inventory in anticipation of improving prices, as well as demand heading into 1Q.

What do you think the estimated impact was from the favorable inventory cost based on 1Q results?.

Martin, we did talk about that. I think obviously as the prices moved up and you look at our margins, part of that margin enhancement is certainly due to strengthening price. I can't really quantify exactly how much that is.

What I would tell you though is we talked about purchasing a little bit heavier in the fourth quarter and really based upon our inventory turns you see that it was pretty well matched up with the sales volume that we had in the first quarter..

Okay. So would it be a fair assessment with that matching on the sales volume in the 1Q and that inventory build that I guess most of the tons out the door were associated with purchases prior to 1Q.

Is that how should understand it?.

Well that would always be the case. We are always going to buy before we saw.

But I think when you’re looking at what we said, which was rebuilt in front of the market price increases, when you look - again I want to reiterate what Rick said, I mean the reality is the demand of our customers exceeded maybe what we thought it was going to be in the first quarter.

And therefore, that build up actually just matched the actual demand. And there's a very little impact on the fact that we were heavy..

Martin, Dave Wolfort here. Let me just add a little bit of color to Michael's comments. We turn our inventory at 4.6 tons and so obviously we're buying into '17 as our market price is growing.

As Michael had indicated earlier in his comments as we opened up the call, we thoroughly embrace the direction of the current administration from the onset of the election, and that compelled us to lever up our inventory recognizing that our customers, the bias had changed dramatically and was quite positive.

That hasn't really enabled us to move more product through the system. That drives our earnings today.

It's the velocity of tons moving through and our ability with Rick's borrowing capabilities to grow that inventory, and recognize all the efforts that we've had over the last few years of growing the geographic footprint and adding Chicago Tube and Iron and growing the specialty metals. .

Excellent. And one more if I could. Within the SG&A items, it seems like there is some sequential pick up there. Warehouse cost was up about 5.5 million quarter-on-quarter, admin up about 3.2. I think in aggregate, looked around like 61 million.

I guess can you speak to some of those increases whether we should - I guess assume that those are largely fixed through the course of this year, and if like on a similar sales volume at the 60 million, 61 million SG&A is the correct kind of run rate going forward?.

Yes. So I’ll answer in reverse order, Martin. This is Rick. Yes, I would use the first quarter as a good proxy for future quarters with similar volume. To speak to the increases, part of the increase obviously as we had a very good earnings quarter, certain performance based compensation is higher year-over-year.

In terms of the warehouse, what we've really done is try to match up our labor in terms of flexing with the increased volume without really adding headcount. So we're pretty successful at that. And so the distribution costs, the warehouse costs are primarily variable and driven off of the ton sold.

The admin is primarily driven off in the selling cost as well, primarily driven off of increased compensation around performance..

Okay. In the warehouse cost, when we see deltas like that, you noted that's variable.

So that is something that would be allocated to rent or something, but it would be like employees staffing up to support the higher tons sold as opposed to like a step up in like what you search something like that, right?.

Correct. It's labor and it would be the product support cost. Scrap and lumber those types of things that go with the volume..

Got it. I appreciate it. Thanks for all the detail..

And moving on we'll take our next question from Phil Gibbs with KeyBanc. Please go ahead..

Hi, good morning. Well, it’s Friday, beautiful day in Cleveland..

That's not 10 O'clock at night. Go ahead..

No, it isn't 10 O'clock at night, you're right. The outlook for the specialty products business, is that a bit different than maybe the outlook for the flat-rolled business? I’m not talking about near-term. I'm talking about longer term aspirations in terms of growing that footprint. You obviously had a really good quarter, strong growth.

Where can that go given how under penetrated you are relative to maybe where you were five years ago? And just remind us in what aspirations you have there to grow the business..

So Phil, Dave Wolfort here.

We'll let Andrew Greiff comment on that since he is the chief architect of the growth early on and of course has assumed new role of Executive Vice President and Chief Operating Officer for the Corporation back in August of last year and our Specialty Metals is now run by Andy Markowitz but Andrew Greiff will comment on your question..

So Phil, we think in line with carbon that there is enormous potential so Specialty Metals we certainly think we can double what we're doing and go beyond.

We look at couple of industries that we have penetrated and we have had great success transportation, automotive we've done very well in and we’ll continue to penetrate the automotive in particular as aluminum has become a much stronger part of automotive sales.

The restaurant food equipment industry is still very important to us and will continue to be and as we continue to expand will do more with the tank business as well..

That doesn't preclude the fact that we intend to grow concurrent in the carbon side of the business as we concentrate more asset probably deployment towards the Specialty Metals Group. So we have no strategy to lower our desire to take more market share in carbon..

Andrew, you talked about the potential of a double sales or long-term aspirations to double sales or double volume in that business, do you have to add any just to add any capability or capacity or assets to do that or do you have the existing footprint in assets we to do that..

The footprint we probably have assets will continue to invest themselves..

Okay, perfect. And then Rick as we looking in the second quarter I sense here that spot margins were pretty high in Q1 for obvious reasons, but you also have a decent part of the business on lagging contracts which I would imagine should move higher as well.

How do we think about that that interplay in Q2 versus Q1 as it may be related to the gross margin momentum?.

So yes, you're correct. April 1 we have pricing reset on a good portion of our business I think thinking about the gross margin first looking at the sell price side we’ll have higher pricing points in the second quarter than the first quarter across the board both on the pricing resets for the quarterly fixed pricing as well as spot.

Obviously the cost of our inventory will rise in relation to what happens in the marketplace. So I would envision maybe a slight decline in gross margin in the second quarter but we’re pretty optimistic that the second quarter at this point looks a lot like the first quarter..

Perfect, appreciate that. And then on the inventory side how do you imagine that as you move to the year based on how you see things right now this I think the number was what 263.

Should we think that that should be around the numbers as you end the year assuming prices are where they are today or is that a number that will it will migrate down?.

Phil like I would just say look we concentrate on working capital turnover so we’re looking at 4.6 today we kind of target to get to five my guess is whatever the level of business is from a shipment level at the end of the quarter you'll see a commensurate inventory level to meet that inventory turn desire..

So think about the turnover basically is what you're guessing?.

That’s what we think about yes is not a net number, it’s not how many turns, it’s what are the dollars in the inventory it’s really about the velocity of working capital turnover.

And so our business accelerates great and we’ll have more inventory if we start to believe that the sales the velocity is moving down you’ll see the commensurate adjustment in the inventory level..

And then last from me is, what fiscal policy signposts you do you think customers need to see moving forward to sort of maintain the good volumes in terms of demand I mean what they’re looking in particular to sort satisfy the early year expectations that all it had in terms of optimism? Thanks very much..

Well each one of us might have a different answer on that one I would say tax policy. I think when you look backwards in the past the uncertainty of tax policy under the Obama regime basically retarded capital investment.

It wasn't a question of what the tax policy was it was what the direction of tax policy going and I don't think anybody believed the tax policy wasn't going to go out. Therefore if you're going to increase taxes you’re going to decrease capital deployment.

So what I would say is the benchmark of what people are expecting is anyway which the tax policy is either stable or better is the good signpost I don’t know if anybody else wants comment..

The only thing I’d piggyback Michael this is Don McNeeley the pipe and tube segment is regulatory mitigation.

At the end of the year the data point is the nation gains jobs and loses jobs this typically a net gain of 3 million jobs about a 100% of those were employers with 500 employees or less and this regulatory compliance burden on them is about 30% more owners than a large company because of course they don't have departments to facilitate this.

So I think the milepost, Michael is going to be some mitigation and regulatory obligation..

Okay Phil, yeah thanks. Thank you..

And we’ll take our next question from Aldo Mazzaferro with Macquarie. Please go ahead..

Hi, good morning Michael, David and Rick. I had a question on the demand side I’m looking at general steel consumption numbers and they seem to be starting to pick up after two years or so of slow trends.

And looking at the upside to get back to where we were at the old highs you could see steel consumption pick up another 20% in my view and I’m wondering if that were to happen given the amount of capital spending you've done and acquisitions you've done in the last say eight years or so.

Can you talk about what you think your full run rate of revenues might be compared to where it is today without assuming any further price changes or anything like that just in pure simple volume terms kind of idea of what utilization rate you think your facilities are at right now?.

Aldo, Dave Wolfort here, and Rick can comment on this further but I would tell you we would be very comfortable in absorbing your aspirational goals of the marketplace going up 20%. We have a lot of levers with all of our facilities we’ve done a terrific job on commercial integration.

We’re utilizing our facilities for all the products that we’ve described and we’re capable of moving those around in a very seamless manner in order to capitalize again on that aspirational goal of 20%. If it went up 10% we’d be thrilled to death and we’d be able to absorb that without any capital expenditures.

So we've made all of those expenses and we've done that in times as you well know we've done that in times when it hasn't been fashionable. So we were buying property and we were buying facilities back in ‘10 and ‘11 and ‘12 and redeploying equipment that's all done.

So we could I wouldn’t say easily absorb 20% but we could absorb 20% growth without any significant capital expense.

Rick?.

I think that's exactly right and I think Aldo the one indicator of that is you look at the first quarter the 14% increase in volume was a powerful driver for our earnings in the first quarter.

And I think as the industrial markets come back we are very well positioned based on all the things that David just commented on to really take advantage of that without significant additional investment..

Thanks. I had a follow-up to and the way the market developing now after the March shipments from the MSCI came out and you saw the investment slightly decline sequentially and there is more buying in the middle level in the month of April.

I wonder if you could say how you're looking at your strategy in buying steel are you trying to step and increase inventory a little bit versus your shipments or keep them relative to where they are. And then also wondering whether the likely absence of U.S. steel in the near term here is going to make a big difference to the supply side? Thanks..

Well David again and I'm sure Michael will comment on this you know being appropriately inventory in our facilities is our goal as Mike said earlier and our inventory and working capital rotation is our objective and we are appropriately inventoried across the board. So we don't really change dramatically in these marketplaces.

The change that we did see is the change in administration as Mike and said we're going to have a change anyhow but the bias has changed quite a bit and quite frankly our customers are – we're fatigue with having a negative bias and they have a positive bias today and we see great growth going forward.

So the reality of it is our inventory is very well maintained and we're consistent about how we approach it and as you well know we're principally supply domestically, there are some new players on the block on the supply side that have come on board.

There is some revitalized the facilities that have come on board, and then there's some domestic manufacturers who aren't doing so well. In that market basket, we're very satisfied with our vendor relationships in the way that we manage those and with the inventory that we currently..

Again, Aldo I’ll just reiterate the same thing I just said to Phil. We are really focused on inventory management at all of our facilities by the product that is unique to that facility and we're really on 4.5 to 5 ton level at everywhere and it is our desire to stay in that box.

And so we have no qualms about where the market is, about our ability to stay within the 4.5 to 5 tons..

Thank you..

And moving on we’ll take a follow up question from Martin Englert with Jefferies. Please go ahead Martin..

Thank you.

Can you discuss how much of your delivery trade you manage internally with the trucking fleet versus externally?.

I can't Martin..

David here, we manage about anywhere between 25% and 30% of our shipments on own fleet. The balance of that obviously is on commercial carriers. We are constantly measuring that and adding the appropriate vehicles if you will to enhance our service levels..

Okay. Have you noted any I guess constraint on the external supply for transportation or I guess rising cost factors there were you think it may be more advantageous to add back more than that 25% to 30%..

I think we can add more, I think we will add more. Over time we are - we always want to make sure that whatever we had is sustainable. We believe it is sustainable and will do that right. The only thing that really inhibits us on that is that, everybody's wrestling match for truck drivers.

So we have a little bit of a pause on that as that sorts out so forth and so on but it's certainly a distribution costs are certainly on our dashboard right up front Martin..

Okay. That's fair.

And one last, what's your budgeted CapEx for 2017?.

The budget that we talked about last quarter is about $20 million but I will, tell you Martin we’re not going to hit that number just because the timing, I think some of the items that are in the plan will likely get spent lapping over into '18..

Okay. Thank you very much and congratulations on a good results..

And we’ll take another follow-up question from Phil Gibbs with KeyBanc. Please go ahead, sir..

Thank you. Last one here kind of philosophical question Michael. How are you thinking about the sort of the import landscape one way or the other. Is it more important to you to have kind of more balanced import versus U.S.

supply meaning, you call it more market share for the domestic mills or is it more important to see sort of a cut-down of fabricated products coming into the United States or your customers can make more..

There is great uncertainty about where we're going to be two and three years out relative to the current administration and different signals that we're getting around the 232 both in steel and now aluminum and maybe it'll dovetail into some components as it relates to the consideration of national security desires.

And obviously we're always concerned when you restrict imports of steel that in fact, steel product then come in finished form to reach to the consumer. So what I would tell you is, and since you’ve said, it’s philosophical as opposed to reality. This market is underserved by production in a general sense.

We need a certain amount of imports to feed the market. A lot of it is on [indiscernible] slabs, a lot of it was steel mills and sales. We’re all for free and fair trade. And therefore we would say that when unfair trade is considered we want the fullest extent of our laws to actually be enforced to those who choose to violate fair trade.

That's my comment..

So did that answer your question?.

That answers my question. That's it for the philosophical Friday. Thanks..

And moving on we'll take another follow-up question from Aldo Mazzaferro with Macquarie. Aldo, please go ahead..

Thanks for the follow-up. Just couple of quick ones. On the margins, looking at the specialty metals margin, gross margin percentages are below the carbon, even though obviously per ton margin is much higher on the absolute dollars.

But I’m wondering is there some reason why stainless and aluminum distribution margins would not eventually approach carbon as that division matures or is there some reason why you stay a little below the carbon market?.

No, what I would tell you Aldo is traditionally, in the flat-rolled, we’ve seen that. We’ve seen the improvement in that margin. We expect we will continue to as we do more on the fabrication side. That's probably going to add a little bit more to it.

But it’s been traditional for our company to have the margin and stainless aluminum be below the carbon..

Aldo, Dave Wolfort here. Just little additional comment, when you look at the totality of Olympic Steel, you have to consider Chicago Tube and Iron as the balancing element to the specialty metals. I mean, there is 17% equal in our marketplace. And when you blend those together, you get very close to where the carbon is.

So this isn't by accident or coincidence. So as a matter of fact, Don McNeeley, he is here, he can comment if you're so desire on the Chicago Tube and Iron element of our business.

And as you well know, both of these components now, the tubing component and our acquisition of Chicago Tube and Iron in July of '11, and then the growth of our specialty business since Andrew Wright joined us in 2009, the manifestation of both of those now equate to 35% of our revenue. And that's a pretty big deal, and it's evenly divided.

And we expect the equal growth.

You want to hear a little bit from Don?.

Absolutely..

Good morning, Aldo. I think David is spot on. I think if you step back and look at Zeus, you look at it in terms of our portfolio theory, here they are in this very hard soft commodity business if you will and then move it upstream with value-added. And I think I would describe them as an environment where nothing happens by accident.

So David is right on. If you look at Andy Greiff's specialty metals and combine with our long products, frankly our market is such a niche market, we will never be able to deliver the growth that Andy has been able to deliver for Olympic.

And Andy probably wouldn't have the opportunity to deliver the margins that we deliver because of our high value-added and high-engineering. So I think if you look at them together, you’ve got very strategic inclusion now off to 235% of total revenue. So I think David’s comments again are spot on. You better look at it in its totality..

That was a great explanation. And Michael, I've got one more. If I was at your annual meeting, I couldn't make it unfortunately, but if I was a shareholder, I thought that Trump might reduce taxes on corporate 15%.

Would I be likely to expect a higher dividend you think?.

Maybe an extra brownie. No, Aldo, we said this at our board meeting yesterday. One quarter does not make a trend. And so we are thrilled with the direction of where the market is moving. The sentiment across the board of our customers is very positive. Not just positive but very positive.

And so all of these things will lead to what we believe is the manifestation of the previous investments that we made for a better kind of outcome on our income and all those things will be considered as we start to get some sustained profitability at the level we know we are capable of delivering.

And if the includes dividend - I would say it’s premature at this point..

I would speak out from the angle of, you've got a 38% to 40% effective rate now, and if suddenly had a 15% or even 20% of effective rate then you could have a lot more retained earnings. I'm wondering whether some of that retain might end up in the shareholder's hand. That’s all..

Look, as a major shareholder, I'm never against it. On the other side of the equation, I would say although you talk to shareholders as well as I do, and I don’t find too many shareholders who actually own Olympic Steel because of their dividend. And I think that they view us as a growth and value company.

We're going to show them the power of the growth and we hope to actually now show them the value of those investments that we’ve made in the past.

If in fact we don't have better use for that capital as we have done in the past where we have had higher dividends and special dividends, if it is appropriate, there is no question that we are not opposed to taking that approach if it is the most desirable aspect for the use of our funds..

Thank you Mike, and congratulations on all the progress you've made over the last eight years..

That concludes today's question-and-answer session. I'd now like to turn the call back over to Mr. Siegal for any additional or closing remark..

Thanks, operator. And thanks for all the very good questions this time. We appreciate you joining us this morning and your interest in Olympic Steel. We certainly look forward to announcing our successful second quarter and first half earnings. So everybody enjoy the day. Have a great day everybody. Thank you..

Once again, that does conclude today's conference. Thank you for your participation. You may now disconnect..