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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
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( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 0-23320
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OLYMPIC STEEL, INC.
(Exact name of registrant as specified in its charter)
Ohio 34-1245650
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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 Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Indicate 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 6, 1999
------------------------------- --------------------------------
Common stock, without par value 10,374,200
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OLYMPIC STEEL, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - June 30, 1999 and 3
December 31, 1998
Consolidated Statements of Income - for the three and six
months ended June 30, 1999 and 1998 4
Consolidated Statements of Cash Flows - for the six
months ended June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-16
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 17
ITEM 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
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Part I. FINANCIAL INFORMATION
OLYMPIC STEEL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------- ---------
(unaudited)
Assets
<S> <C> <C>
Cash $ 83 $ 1,825
Accounts receivable 13,950 3,096
Inventories 108,412 121,407
Prepaid expenses and other 5,316 5,752
--------- ---------
Total current assets 127,761 132,080
--------- ---------
Property and equipment 150,151 144,762
Accumulated depreciation (28,937) (25,450)
--------- ---------
Net property and equipment 121,214 119,312
--------- ---------
Unexpended industrial revenue bond funds 5,921 --
Goodwill 3,674 3,726
Investments in joint ventures 593 990
--------- ---------
Total assets $ 259,163 $ 256,108
========= =========
Liabilities
Current portion of long-term debt $ 5,264 $ 4,888
Accounts payable 21,049 28,911
Accrued payroll 3,670 2,977
Other accrued liabilities 7,166 6,449
--------- ---------
Total current liabilities 37,149 43,225
--------- ---------
Revolving credit agreement 37,150 37,450
Term loans 29,155 28,097
Industrial revenue bonds 11,741 6,085
--------- ---------
Total long-term debt 78,046 71,632
--------- ---------
Deferred income taxes 5,249 3,508
--------- ---------
Total liabilities 120,444 118,365
--------- ---------
Shareholders' Equity
Preferred stock -- --
Common stock 103,896 106,319
Retained earnings 34,823 31,424
--------- ---------
Total shareholders' equity 138,719 137,743
--------- ---------
Total liabilities and shareholders' equity $ 259,163 $ 256,108
========= =========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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OLYMPIC STEEL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share and tonnage data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C>
Tons sold
Direct 270,112 283,025 521,662 572,202
Toll 58,513 65,528 110,937 120,939
--------- --------- --------- ---------
328,625 348,553 632,599 693,141
--------- --------- --------- ---------
Net sales $ 133,548 $ 152,254 $ 262,695 $ 307,961
Cost of sales 100,998 120,245 200,029 243,654
--------- --------- --------- ---------
Gross margin 32,550 32,009 62,666 64,307
Operating expenses
Warehouse and processing 8,937 8,748 16,911 17,509
Administrative and general 7,003 6,939 14,049 13,870
Distribution 4,425 4,629 8,726 9,218
Selling 3,882 3,703 7,642 7,308
Occupancy 1,119 1,035 2,352 2,161
Depreciation and amortization 1,891 1,701 3,767 3,354
--------- --------- --------- ---------
Total operating expenses 27,257 26,755 53,447 53,420
--------- --------- --------- ---------
Operating income 5,293 5,254 9,219 10,887
Loss from joint ventures (135) (89) (397) (205)
--------- --------- --------- ---------
Income before financing costs and taxes 5,158 5,165 8,822 10,682
Interest expense 949 813 1,819 1,777
Receivable securitization expense 784 1,060 1,476 1,969
--------- --------- --------- ---------
Income before taxes 3,425 3,292 5,527 6,936
Income taxes 1,319 1,251 2,128 2,636
--------- --------- --------- ---------
Net income $ 2,106 $ 2,041 $ 3,399 $ 4,300
========= ========= ========= =========
Net income per share $ 0.20 $ 0.19 $ 0.32 $ 0.40
========= ========= ========= =========
Weighted average shares outstanding 10,565 10,692 10,626 10,692
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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OLYMPIC STEEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(in thousands)
<TABLE>
<CAPTION>
1999 1998
-------- --------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,399 $ 4,300
Adjustments to reconcile net income to net
cash from (used for) operating activities-
Depreciation and amortization 3,767 3,354
Loss from joint ventures 397 205
Long-term deferred income taxes 1,741 436
-------- --------
9,304 8,295
Changes in working capital:
Accounts receivable (10,854) (6,780)
Inventories 12,995 1,393
Prepaid expenses and other 403 191
Accounts payable (7,862) 994
Accrued payroll and other accrued liabilities 1,410 251
-------- --------
(3,908) (3,951)
-------- --------
Net cash from operating activities 5,396 4,344
-------- --------
Cash flows from investing activities:
Acquisition of JNT (net of working capital of $113) -- (755)
Facility construction and improvements (2,792) (6,458)
Equipment purchases and deposits (1,916) (6,968)
Other capital expenditures, net (876) (550)
-------- --------
Net cash used for investing activities (5,584) (14,731)
-------- --------
Cash flows from financing activities:
Proceeds from IRB issuance 5,973 --
Unexpended IRB funds (5,921) --
Repurchase of common stock (2,423) --
Revolving credit agreement (300) 6,278
Term loans and IRB's 1,117 6,478
-------- --------
Net cash from (used for) financing activities (1,554) 12,756
-------- --------
Cash:
Net change (1,742) 2,369
Beginning balance 1,825 1,748
-------- --------
Ending balance $ 83 $ 4,117
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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OLYMPIC STEEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
The accompanying consolidated financial statements have been prepared from the
financial records of Olympic Steel, Inc. (Olympic or the Company) and its
wholly-owned subsidiaries, without audit and reflect all adjustments which are,
in the opinion of management, necessary to fairly present the results of the
interim periods covered by this report. All significant intercompany
transactions and balances have been eliminated in consolidation. Investments in
the Company's joint ventures are accounted for under the equity method. Certain
amounts in the 1998 consolidated financial statements have been reclassified to
conform to the 1999 presentation.
(1) SHARES OUTSTANDING AND EARNINGS PER SHARE:
In April 1999, the Company's board of directors authorized a one-year program to
purchase up to 1 million shares of Olympic common stock. During the quarter
ended June 30, 1999, the Company repurchased 292,800 shares at an average price
of $8.25 per share. Repurchased shares are held in treasury and are available
for general corporate purposes.
Earnings per share have been calculated based on the weighted average number of
shares outstanding. Basic and diluted earnings per share are the same, as the
effect of outstanding stock options is not dilutive.
(2) ACCOUNTS RECEIVABLE:
As of June 30, 1999, and December 31, 1998, $55 million and $57 million,
respectively, of receivables were sold under the Company's accounts receivable
securitization program. Receivables sold are reflected as a reduction of
accounts receivable in the accompanying consolidated balance sheets. In July,
1999, the receivables securitization agreement was amended to extend the
agreement termination date to December 19, 2002.
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(3) LONG-TERM DEBT:
Interest rates under the Company's various credit agreements are primarily based
on LIBOR plus a premium determined quarterly, which varies with the Company's
operating performance and financial leverage. Since March 1, 1999, the LIBOR
premium has been 1.5%. The overall effective interest rate for all debt for both
the three and six month periods ended June 30, 1999 was 6.8%, compared to 7.0%
and 6.9%, for the respective periods in 1998.
The Company's bank credit agreement includes a secured $21 million term loan
component to finance the construction and equipping of the new temper mill and
plate processing facility in Iowa (the Iowa Term Loan). On May 30, 1999 the
first annual 10% principal repayment of $2.1 million was made.
Included in the revolving credit balances on the accompanying consolidated
balance sheets are $13.9 million and $2.4 million of checks issued that have not
cleared the bank as of June 30, 1999 and December 31, 1998, respectively.
In April 1999, the Company entered into a $6 million, 5.1% fixed rate tax-exempt
industrial development bond financing agreement with a domestic lender. Proceeds
from the bonds, which have been deposited into an escrow account and are
invested in commercial paper funds, are being used for the construction and
equipping of a new $7 million, 87,000 square foot plate processing and machining
facility in Chambersburg, Pennsylvania. The new facility is expected to be
completed in the third quarter of 1999. The loan agreement includes a 15-year,
$3.1 million real estate component, and a 10-year, $2.9 million equipment
component. Quarterly repayments commence October 1, 1999. The Chambersburg land,
building and equipment secure the outstanding debt. Capitalized interest
associated with the Chambersburg project has totaled $81 thousand in the first
half of 1999.
(4) STOCK OPTIONS:
On April 23, 1999, additional non-qualified options to purchase 184,333 shares
of common stock were issued to the Company's outside directors, executive
officers and senior managers at an option price of $8.75, the market value of a
share of common stock at the grant date. After issuance of the new grants,
options to purchase 316,833 shares were outstanding, of which 111,600 were
exercisable at prices ranging from $14.63 to $15.50 per share.
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(5) JOINT VENTURE:
In December 1998, the Company wrote-down its entire 45% joint venture investment
in Olympic Continental Resources LLC (OCR), a broker of scrap metal and
alternate iron products. Effective April 30, 1999, Atlas Iron Processors, Inc.
(Atlas), no longer has an ownership interest in the OCR joint venture, and OCR
has ceased all business transactions with Atlas as of that date. OCR continues
as a joint venture between Olympic and Uwe T. Schmidt, OCR's Chief Executive
Officer. However, the Company does not expect any future contribution from OCR,
as the venture is winding-down its operations. Olympic remains a guarantor of
OCR's outstanding bank debt, up to a maximum of $10 million. OCR's outstanding
bank debt at July 30, 1999 totaled $5.2 million. OCR's lenders have indicated
that they will no longer fund the OCR loan after August 31, 1999. Olympic will
assume all OCR receivables, inventory, and accounts payable, and repay any loan
balance outstanding as of that date.
(6) SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid during the six months ended June 30, 1999 and 1998 totaled $1.9
million and $2.3 million, respectively. Income taxes paid during the first half
of 1999 and 1998 totaled $159 thousand and $3.1 million, respectively.
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<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's results of operations are affected by numerous external
factors, such as general economic and political conditions, competition, steel
pricing and availability, and work stoppages by automotive manufacturers.
Olympic sells a broad range of products, many of which have different
gross margins. Products that have more value-added processing generally have a
greater gross margin. Accordingly, the Company's overall gross margin is
affected by product mix and the amount of processing performed, as well as
volatility in selling prices and material purchase costs. The Company performs
toll processing of customer-owned steel, the majority of which is performed by
its Lafayette Steel and Southern operations. Toll processing generally results
in lower selling prices and gross margin dollars per ton but higher gross margin
percentages than the Company's direct sales.
The Company's 1999 first half results include the results of the
Company's JNT machining operation, the net assets of which were acquired
effective June 26, 1998. JNT is a machining center currently operating from its
facility in McConnellsburg, Pennsylvania, until construction of a new 87,000
square foot plate processing and machining facility is completed in nearby
Chambersburg, Pennsylvania.
The Company's three joint ventures include: Olympic Laser Processing
(OLP), a company formed in April 1997 to process laser welded sheet steel blanks
for the automotive industry; Trumark Steel & Processing (TSP), a company formed
in December 1997, to support the flat-rolled steel requirements of the
automotive industry as a Minority Business Enterprise (MBE); and Olympic
Continental Resources (OCR), a company formed in January 1997 to buy, sell and
trade ferrous and non-ferrous metals and alternate iron products to steel mills
and scrap processors. In December 1998, the Company wrote-down its entire 45%
joint venture investment in OCR. Effective April 30, 1999, Atlas Iron
Processors, Inc. (Atlas), no longer has an ownership interest in the OCR joint
venture, and OCR has ceased all business transactions with Atlas as of that
date. OCR continues as a joint venture between Olympic and Uwe T. Schmidt, OCR's
Chief Executive Officer. However, the Company does not expect any future
contribution from OCR, as the venture is winding down its operations. The
Company's 50% interest in OLP and 49% interest in TSP are accounted for under
the equity method. The Company guarantees portions of outstanding debt under all
three of the joint venture companies' bank credit facilities.
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<PAGE> 10
As of June 30, 1999, Olympic guaranteed all of OCR's $6.9 million of outstanding
debt, and 50% of OLP's $17.0 million and 49% of TSP's $3.0 million of
outstanding debt on a several basis. OCR's lenders have indicated that they will
no longer fund the OCR loan after August 31, 1999. Olympic will assume all OCR
receivables, inventory, and accounts payable, and repay any loan balance
outstanding as of that date. As of July 30, 1999, OCR's outstanding debt totaled
$5.2 million.
OLP has constructed a new facility and has initially equipped it with
two laser-welding lines. Prototyping has begun on both welding lines and
production has begun on one line. The Company expects OLP start-up costs to
continue through 1999, as both welding lines are not expected to be operating at
full capacity until the second half of 2000. TSP obtained certification as an
MBE from the Michigan Minority Business Development Council in December 1998,
and began operating profitably in the second quarter of 1999. Start-up costs for
joint ventures have been expensed as incurred.
Financing costs include interest expense on debt and costs associated
with the Company's accounts receivable securitization program (the Financing
Costs). Interest rates paid by the Company under its credit agreement are based
on LIBOR plus a premium (the Premium) determined quarterly, which varies based
on the Company's operating performance and financial leverage. Receivable
securitization costs are based on commercial paper rates calculated on the
amount of receivables sold.
The Company sells certain products internationally, primarily in Mexico
and Puerto Rico. All international sales and payments are made in United States
dollars. These sales historically involve the Company's direct representation of
steel producers and may be covered by letters of credit or trade receivable
insurance. Typically, international sales are more transactional in nature with
lower gross margins than domestic sales. Domestic steel producers generally
supply domestic customers before meeting foreign demand, particularly during
periods of supply constraints.
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<PAGE> 11
RESULTS OF OPERATIONS
Tons sold decreased 5.7% to 329 thousand in the second quarter of 1999
from 349 thousand for the second quarter of 1998, and 8.7% in the first half of
1999 to 633 thousand from 693 thousand in the first half of 1998. Tons sold in
the second quarter of 1999 included 270 thousand from direct sales and 59
thousand from toll processing, compared with 283 thousand direct tons and 66
thousand tolling tons in the comparable period of last year. Tons sold in the
first half of 1999 included 522 thousand from direct sales and 111 thousand from
toll processing, compared with 572 thousand direct tons and 121 thousand tolling
tons in the first half of last year. The decrease in direct tons sold is
primarily attributable to continued weak demand from agricultural equipment
manufacturers and other service centers, and a decline in sales to the Company's
automotive customers.
Net sales decreased 12.3% to $133.5 million for the second quarter of
1999 from $152.3 million for 1998. For the first half, net sales decreased 14.7%
to $262.7 million from $308 million in the prior year period. Average selling
prices declined 7.0% and 6.5% for the three and six month periods, respectively,
primarily due to continued market price declines resulting from excessive supply
in certain product lines.
As a percentage of net sales, gross margin increased to 24.4% for the
second quarter of 1999 from 21.0% for 1998, and to 23.9% for the first half of
1999 from 20.9% last year. The increases reflect the impact of selling a larger
proportion of processed, higher value-added steel, elimination of lower margin
automotive sales, and the decline in sales to other service centers.
Operating expense increased 1.9% to $27.3 million from $26.8 million in
the second quarter of 1999 versus the same period last year. For the first six
months, operating expenses remained constant between years at $53.4 million. Due
to the decline in volume and average selling prices, operating expenses
increased to $82.94 per ton or 20.4% of net sales for the second quarter of
1999, from $76.76 per ton or 17.6% of net sales in 1998. For the first half of
1999, operating expenses totaled $84.49 per ton or 20.3% of net sales, compared
to $77.07 per ton or 17.3% of net sales in 1998. Operating expenses in 1999
include approximately $2 million of incremental costs associated with the Iowa
temper mill and plate processing facility start-up and the McConnellsburg
facility, which was acquired at the end of the second quarter of 1998. The Iowa
facility is expected to reach production capacity by the end of 1999.
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<PAGE> 12
Losses from joint ventures totaled $135 thousand in the second quarter
of 1999, compared to $89 thousand in 1998. For the first half of 1999, losses
from joint ventures totaled $397 thousand compared to $205 thousand. TSP began
operating profitably in the second quarter of 1999, while OLP has incurred
higher start-up costs in the current year.
Financing Costs for the second quarter of 1999 decreased to $1.7
million from $1.9 million in 1998. For the first half of 1999, Financing Costs
declined to $3.3 million from $3.7 million in 1998. Average borrowings
outstanding in the 1999 periods decreased primarily as a result of lower
inventory levels. Receivable securitization expense declined due to lower 1999
sales, resulting in less accounts receivables sold than in the comparable
periods of 1998. The Company's effective bank borrowing rate for both the second
quarter and first six months of 1999 declined to 6.8% from 7.0% and 6.9% for the
respective periods in 1998. The Company's Premium has been 1.5% over LIBOR since
March 1, 1999.
Pretax income for the second quarter of 1999 increased to $3.4 million
from $3.3 million for 1998. For the first half of 1999, pretax income decreased
to $5.5 million from $6.9 million in 1998. Income taxes approximated 38.5% of
pretax income in the 1999 periods compared to 38% for 1998.
Net income for the second quarter of 1999 totaled $2.1 million, or $.20
per share, compared to $2.0 million, or $.19 per share for 1998. For the first
six months of 1999, net income totaled $3.4 million, or $.32 per share, compared
to $4.3 million, or $.40 per share in 1998. During the second quarter of 1999,
the Company repurchased 292,800 shares of its Common Stock. As a result, average
shares outstanding totaled 10.565 million and 10.626 million for the three and
six month periods of 1999, compared to 10.692 million for both periods of 1998.
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<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirement is to fund its growth,
including strategic acquisitions and joint ventures, the purchase and upgrading
of processing equipment and services, the construction and upgrading of related
facilities, and additional working capital requirements. The Company uses cash
generated from operations, long-term debt obligations, proceeds from the
Company's accounts receivable securitization program, equity offerings, and
leasing transactions to fund these requirements. Historically, the Company has
used revolving credit borrowings under its bank credit facility to finance
working capital requirements.
Net cash from operating activities primarily represents net income plus
non-cash charges for depreciation, amortization and losses from joint ventures,
as well as changes in working capital. During the first six months of 1999, $5.4
million of net cash was provided from operating activities, consisting of $9.3
million of cash generated from net income and non-cash charges offset by $3.9
million of cash used for working capital purposes.
Working capital at June 30, 1999 increased by $1.8 million since
December 31, 1998. The most significant components of the working capital change
include a $10.9 million increase in accounts receivable and $7.9 million
decrease in accounts payable, offset by a $13 million decrease in inventory and
$1.7 million decrease in cash. The accounts receivable increase is the result of
traditionally stronger June sales as compared to December sales. December
historically represents the lowest sales period of each year for the Company.
The inventory and accounts payable decreases are attributable to a focus on
inventory management during 1999.
As of June 30, 1999, and December 31, 1998, $55 million and $57
million, respectively, of eligible receivables were sold under the Company's
accounts receivable securitization program. The amount of trade receivables sold
by the Company typically changes monthly depending upon the level of defined
eligible receivables available for sale at each month end.
During the first half of 1999, net cash used for investing activities
totaled $5.6 million, primarily consisting of progress payments made for the new
plate processing and machining facility being constructed in Chambersburg,
Pennsylvania. Olympic plans to spend approximately $7 million on the project, of
which $3.3 million was spent in the first half of 1999. The new facility is
projected to be completed in the third quarter of 1999.
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<PAGE> 14
Cash flows used for financing activities totaled $1.6 million, and
primarily consisted of $2.4 million used to repurchase shares of Olympic common
stock, offset by $1.1 million of final draws, net of repayments, on term loans.
In April 1999, the Company's board of directors authorized a one-year program to
purchase up to 1 million shares of Olympic common stock (Stock Purchase). The
cost of purchasing such shares has been funded from the Company's revolving
credit facility. Also in April 1999, the Company entered into a $6 million, 5.1%
fixed rate tax-exempt industrial development bond financing agreement (IDB) to
finance the Chambersburg project. Quarterly IDB repayments commence October 1,
1999.
As of June 30, 1999, approximately $45.8 million in unused availability
existed under the Company's revolving credit and accounts receivable
securitization facilities. The Company believes that funds available under its
revolving credit facility, other credit and financing agreements and funds
generated from operations will be sufficient to provide the Company with the
liquidity necessary to fund its anticipated working capital, capital expenditure
requirements, the Stock Purchase, and the assumption of any OCR debt required
over the next 12 months. Capital requirements are subject to change as business
conditions warrant and opportunities arise. In connection with its internal and
external expansion strategies, the Company may from time to time seek additional
funds to finance other new facilities, acquisitions and significant improvements
to processing equipment to respond to customers' demands.
YEAR 2000 COMPLIANCE
The year 2000 (Y2K) problem refers to computer applications using only
the last two digits to refer to a year rather than all four digits. As a result,
these applications could fail or create erroneous results if they recognize "00"
as the year 1900 rather than the year 2000, or if they will not recognize "00"
as a legitimate year value.
The Company has had a project in place since the second half of 1996 to
deal with these issues. Olympic has budgeted approximately $1 million to
remediate its affected systems. The project has been staffed by in-house MIS and
user personnel, with the exception of the plant equipment assessment, which was
performed by outside experts. These costs are recorded as normal operating
expenses as incurred.
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<PAGE> 15
In addressing the Y2K issues, Olympic has taken initiatives in three
general areas: (i) information technology (IT) and communication systems, (ii)
non-IT systems and (iii) related third party issues. The Company remains on
budget and on schedule for the project as described in its "Year 2000
Compliance" disclosure made in its 1998 Form 10-K. Specifically, all business
application software systems have been remediated, tested, and are in
production.
As of July 31, 1999, Olympic's only known exceptions to Y2K compliance
are:
(i) Payroll and Human Resources System. This new system was
acquired as a routine upgrade to meet expanded business
requirements. It is still in the implementation phase, and is
expected to be running live in October 1999. The new system is
represented to be Y2K compliant by the vendor.
(ii) Voice Mail System. The Company has purchased a new, Y2K
compliant voice mail system, which is expected to be
operational by the end of the third quarter of 1999.
Olympic's description of its Y2K compliance issue is based upon
information obtained by Olympic through evaluations of Olympic's IT and
communication systems, and customer and supplier Y2K compliance assurances. No
assurance can be given that the Company will be able to address the Y2K issues
for all of its software and applications in a timely manner or that it will not
encounter unexpected difficulties or significant expenses relating to adequately
addressing the Y2K issue. If Olympic or the major customers or suppliers with
whom Olympic does business fail to address adequately the Y2K issues, or Olympic
fails to successfully integrate or convert its computer systems generally,
Olympic's business or results of operations could be materially adversely
affected. The Company is unable to provide assurances for eventualities not
known in advance, or for multiple or simultaneous occurrences beyond its
capability to handle with the resources available. The Y2K disclosures presented
in this section are considered to be a "Year 2000 Readiness Disclosure" under
the provisions of the "Year 2000 Information and Readiness Disclosure Act" of
1998. For additional disclosure of the Company's Y2K program, refer to the
Company's 1998 Form 10-K, filed with the Securities and Exchange Commission on
March 19, 1999.
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<PAGE> 16
FORWARD-LOOKING INFORMATION
This document contains various forward-looking statements and
information that are based on management's beliefs as well as assumptions made
by and information currently available to management. When used in this
document, the words "expect," "believe," "anticipate," "plan" and similar
expressions are intended to identify forward-looking statements, which are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such statements are subject to certain risks, uncertainties
and assumptions including, but not limited to, general business and economic
conditions; competitive factors such as the availability and pricing of steel
and fluctuations in demand, specifically in the automotive market; work
stoppages by automotive or steel manufacturers; potential equipment malfunction;
equipment installation and facility construction delays (particularly for the
Chambersburg expansion project); ramp up rates for the new Iowa and Chambersburg
facilities; Y2K issues; and the successes of its joint ventures. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
expected, believed, anticipated or planned. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Company undertakes no obligation to republish revised
forward-looking statements to reflect the occurrence of unanticipated events or
circumstances after the date hereof.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's annual meeting of shareholders was held on April 23,
1999.
(b) At the annual meeting, the Company's shareholders elected Michael
D. Siegal, David A. Wolfort, Thomas M. Forman and Betsy S. Atkins, as
Directors for a two-year term, which expires at the annual meeting of
shareholders in 2001. The term of office of R. Louis Schneeberger,
Suren A. Hovsepian and Martin H. Elrad as Directors, continued after
the 1999 meeting; such term expires at the annual shareholders meeting
in 2000.
(c) At the annual meeting, the Company's shareholders ratified the
appointment of Arthur Andersen, LLP as auditors of the Company for
1999. The holders of 9,874,002 shares of Common Stock voted to ratify
the appointment, the holders of 23,822 shares voted against the
ratification, and the holders of 6,745 shares abstained.
The following tabulation represents voting for the Directors:
For Withheld Authority
---------------- ------------------
Michael D. Siegal 9,656,711 247,858
David A. Wolfort 9,657,181 247,388
Thomas M. Forman 9,657,381 247,188
Betsy S. Atkins 9,652,313 252,256
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 - Financial Data Schedule
17 of 18
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
OLYMPIC STEEL, INC.
(Registrant)
Date: August 6, 1999 By: /s/ R. Louis Schneeberger
_________________________
R. LOUIS SCHNEEBERGER
Chief Financial Officer
By: /s/ Richard T. Marabito
_________________________
RICHARD T. MARABITO
Treasurer and Corporate Controller
(Principal Accounting Officer)
18 of 18
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<FISCAL-YEAR-END> DEC-31-1998
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