OLYMPIC STEEL INC, 10-K, 2000-03-20

OLYMPIC STEEL INC
10-K, 2000-03-20
METALS SERVICE CENTERS & OFFICES

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

FOR THE YEAR ENDED DECEMBER 31, 1999

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

Commission File Number 0-23320

OLYMPIC STEEL, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
OHIO 34-1245650
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

5096 RICHMOND ROAD, BEDFORD HEIGHTS, OHIO 44146
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(Address of principal executive offices) (Zip Code)
</TABLE>

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, without par value

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )

As of March 6, 2000, the aggregate market value of voting stock held by
nonaffiliates of the registrant based on the closing price at which such stock
was sold on The NASDAQ Stock Market on such date approximated $33,029,000. The
number of shares of Common Stock outstanding as of March 6, 2000 was 9,971,100.

DOCUMENTS INCORPORATED BY REFERENCE

Registrant intends to file with the Securities and Exchange Commission a
definitive Proxy Statement pursuant to Regulation 14A of the Securities Exchange
Act of 1934 within 120 days of the close of its fiscal year ended December 31,
1999, portions of which document shall be deemed to be incorporated by reference
in Part I and Part III of this Annual Report on Form 10-K from the date such
document is filed.

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PART I

ITEM 1. BUSINESS

THE COMPANY

The Company is a leading North American steel service center that processes
and distributes flat-rolled carbon, stainless and tubular steel products from 14
facilities in eight midwestern and eastern states. The Company also participates
in two joint ventures in Michigan. The Company operates as an intermediary
between steel producers and manufacturers that require processed steel for their
operations. The Company purchases flat-rolled steel typically from steel
producers and responds to its customers' needs by processing steel to customer
specifications and by providing critical inventory and just-in-time delivery
services. Such services reduce customers' inventory levels, as well as save
time, labor and expense for customers, thereby reducing their overall production
costs. The Company's services include both traditional service center processes
of cutting-to-length, slitting, shearing and roll forming and higher value-added
processes of blanking, tempering, plate burning, laser welding, and precision
machining of steel parts.

The Company is organized into four regional operations with domestic
processing and distribution facilities in Connecticut, Georgia, Pennsylvania,
Ohio, Michigan, Illinois, Iowa, and Minnesota, servicing a diverse base of over
3,100 active customers located throughout the midwestern, eastern and southern
United States. Its international sales office is located in Pittsburgh,
Pennsylvania and services customers primarily in Mexico and Puerto Rico.

The Company is incorporated under the laws of the State of Ohio. The
Company's executive offices are located at 5096 Richmond Road, Cleveland, Ohio
44146. Its telephone number is (216) 292-3800.

INDUSTRY OVERVIEW

The steel industry is comprised of three types of entities: steel
producers, intermediate steel processors and steel service centers. Steel
producers have historically emphasized the sale of steel to volume purchasers
and have generally viewed intermediate steel processors and steel service
centers as part of their customer base. However, all three entities can compete
for certain customers who purchase large quantities of steel. Intermediate steel
processors tend to serve as processors in large quantities for steel producers
and major industrial consumers of processed steel, including automobile and
appliance manufacturers.

Services provided by steel service centers can range from storage and
distribution of unprocessed metal products to complex, precision value-added
steel processing. Steel service centers respond directly to customer needs and
emphasize value-added processing of flat-rolled steel and plate pursuant to
specific customer demands, such as cutting-to-length, slitting, shearing, roll
forming, shape correction and surface improvement, blanking, tempering, plate
burning and stamping. These processes produce steel to specified lengths,
widths, shapes and surface characteristics through the use of specialized
equipment. Steel service centers typically have lower cost structures and
provide services and value-added processing not otherwise available from steel
producers.

End product manufacturers and other steel users have increasingly sought to
purchase steel on shorter lead times and with more frequent and reliable
deliveries than can normally be provided by steel producers. Steel service
centers generally have lower labor costs than steel producers and consequently
process steel on a more cost-effective basis. In addition, due to this lower
cost structure, steel service centers are able to handle orders in quantities
smaller than would be economical for steel producers. The net results to
customers purchasing products from steel service centers are lower inventory
levels, lower overall cost of raw materials, more timely response and decreased
manufacturing time and operating expense. The Company believes that the
increasing prevalence of just-in-time delivery requirements has made the
value-added inventory, processing and delivery functions performed by steel
service centers increasingly important.

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CORPORATE HISTORY

The Company was founded in 1954 by the Siegal family as a general steel
service center. Michael Siegal (CEO), the son of one of the founders, began
working at the Company in the early 1970's and became President and CEO at the
end of 1983. David Wolfort (COO) was hired as general manager at the end of
1983, and Louis Schneeberger (CFO) joined the Company as chief financial officer
in 1987.

The new management team changed the Company's business strategy from a
focus on warehousing and distributing steel from a single facility with no major
processing equipment to a focus on growth, geographic and customer diversity and
value-added processing. An integral part of the Company's growth has been the
acquisition and start-up of several processing and sales operations, and the
continued investment in processing equipment.

In March 1994, the Company completed an initial public offering, and in
August 1996, completed a follow-on offering of its Common Stock.

BUSINESS STRATEGY

The Company believes that the steel service center and processing industry
continues to be driven by four primary trends: increased outsourcing of
manufacturing processes by domestic manufacturers; shift by customers to fewer
and larger suppliers; increased customer demand for higher quality products and
services; and consolidation of industry participants.

In recognition of these industry dynamics, the Company has historically
focused its business strategy on achieving profitable growth through the
start-up, acquisition, or joint venture partnering of service centers,
processors, and related businesses, and continued investments in higher
value-added processing equipment and services, while continuing its commitment
to expanding and improving its sales and servicing efforts and information
systems.

In the third quarter of 1999, the Company hired a strategic planning firm
to assist the Company with its strategic initiatives. Assistance from the
strategic consulting firm concludes at the end of the first quarter of 2000.
Phase I of the process focuses on expense reduction and management, and the
establishment and communication of five specific operating objectives for 2000
for all locations, except those in startup: (i) increase tons sold; (ii) reduce
operating expenses; (iii) improve on-time delivery; (iv) improve quality
directives; and (v) improve inventory turns.

Phase II of the strategic planning process began in December 1999, and
involves four other efforts:

(i) Creating a plan to support the newly developed strategy statement:
"Olympic Steel will achieve superior shareholder returns by being a
large, growing, multi-regional supplier of flat-rolled steel to
targeted customers offering consistent quality, on-time delivery,
competitive cost, and value-added services of custom technical,
material application and informational support."

(ii) Conducting business process reviews to gain an understanding of the
Company's business processes, identify inefficiencies, and redesign
the process to be more efficient and cost effective. The Company is
initially focusing on three impact areas that include order entry;
warehouse scheduling and planning; and demand planning, forecasting
and communicating. Process reviews and redesigns will be an on-going
effort at Olympic.

(iii) Analyzing the Company's customer base and creating a marketing plan
to ensure that those customers that fit Olympic's strategic plan are
properly targeted and serviced.

(iv) Redesigning the information and reports that are generated and
distributed to key managers to focus on those matters important to
achieving strategic goals.

Olympic believes its depth of management, strategically located facilities,
information systems, reputation for quality and customer service, extensive and
experienced sales force, and supplier relationships provide a strong foundation
for implementation of its strategy. Certain elements of the Company's strategy
are set forth in more detail below.
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INVESTMENT IN VALUE-ADDED PROCESSING EQUIPMENT. An integral part of the
Company's growth has been the purchase of major processing equipment and
construction of facilities. The Company's philosophy is that equipment purchases
should be driven by customer demand, and Olympic will continue to invest in
processing equipment to support such demand. When the results of sales and
marketing efforts indicate that there is sufficient customer demand for a
particular product or service, the Company will purchase the equipment to
satisfy that demand. In addition, the Company is constantly evaluating existing
equipment to ensure that it remains productive. This includes upgrading or
replacing equipment wherever necessary.

In 1987, the Company constructed a facility to house its first major piece
of processing equipment, a heavy gauge, cut-to-length line. The Company now has
96 major pieces of processing equipment. Certain equipment was purchased
directly from equipment manufacturers while the balance was acquired in the
Company's acquisitions of other steel service centers and related businesses.

In response to customer demands for higher tolerances and flatness
specifications, in 1996 the Company began operating a customized four-high 1/2"
by 72" temper mill and heavy gauge cut-to-length line in one of its Cleveland
facilities. It remains one of only a few of its kind in the United States and
incorporates state-of-the-art technology and unique design specifications. The
equipment permits the Company to process steel to a more uniform thickness and
flatness, upgrades the quality and consistency of certain of the Company's
products, and enables the Company to produce tempered sheet or coil to customer
specifications in smaller quantities than is available from other sources. The
Cleveland Temper Mill has been operating at its annual processing capacity of
approximately 135,000 tons for the past three years.

Customer response to the Cleveland Temper Mill product was so strong,
especially by agricultural equipment manufacturers and plate fabricators located
in the central states region, that the Company constructed and equipped a new,
190,000 square foot temper mill, sheet processing, and plate burning facility in
Bettendorf, Iowa. The Iowa facility became operational in the fourth quarter of
1998. However, due to continued weak demand from agricultural equipment
manufacturers the Iowa Temper Mill is not expected to be operating at capacity
until late 2000.

Since 1995, the Company has significantly expanded its plate processing
capacity. In 1995, the Company constructed a $7.4 million, 112,200 square foot
facility in Minneapolis which now houses ten laser, plasma and oxygen burning
tables and shot blasting equipment. Additional plate burning tables have been
added in Chicago, Philadelphia and Connecticut as well. In September 1999, the
Company completed construction of an 87,000 square foot facility in
Chambersburg, Pennsylvania to house existing machining centers as well as two
new pieces of plate processing equipment. These investments in plate processing
equipment have allowed the Company to further increase its higher value-added
processing services. The Company believes it is among the largest processors and
distributors of steel plate in the United States.

In addition to the plate burning and temper mill investments described
above, since 1997 the Company has also invested in a new tube mill and end
finishing equipment in Cleveland, added new or upgraded cut-to-length
capabilities in Detroit, Minneapolis, and Georgia, and purchased a slitter for
Iowa. In late 1999, a new slitter was ordered for the Detroit operation, which
is expected to become operational in the third quarter of 2000. As part of its
strategy to evaluate and upgrade or replace non-productive equipment, in many
cases the new equipment has replaced multiple pieces of older, less efficient
equipment.

The expansion of the Company's plate processing, machining and tempering
capabilities were made in response to the growing trend among capital equipment
manufacturers to outsource non-core production processes, such as plate
processing, and to concentrate on engineering, design and assembly. The Company
expects to further benefit from this trend and will continue to purchase new
equipment and upgrade existing equipment to meet this demand.

SALES AND MARKETING. The Company believes that its commitment to quality,
service and just-in-time delivery has enabled it to build and maintain strong
customer relationships, while expanding its geographic growth through the
continued upgrading and addition of sales personnel and the value-added services
provided.

The Company is aggressively analyzing its customer base and creating a
marketing plan to ensure that strategic customers are properly targeted and
serviced, while focusing its efforts to supply and service its larger

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customers on a national account basis. The national account program has
successfully resulted in selling to multi-location customers from multi-location
Olympic facilities.

The Company initiated a "Flawless execution" program in 1998 (Fe), which is
a commitment that every Olympic employee makes to provide superior customer
service while striving to exceed customer expectations. The Fe program includes
tracking actual on-time delivery and quality performance against goals, and the
appointment of Fe teams and leaders to improve efficiencies and streamline
processes at each operation.

The Company believes it has among the largest and most experienced sales
force in the industry, which is a significant competitive advantage. The
Company's sales force has grown to more than 140 from 80 at the beginning of
1994. These individuals make direct daily sales calls to customers throughout
the continental United States. The continuous interaction between the Company's
sales force and active and prospective customers provides the Company with
valuable market information and sales opportunities, including opportunities for
outsourcing and increased sales.

The Company's sales efforts are further supported by metallurgical
engineers and technical service personnel, who have specific expertise in carbon
and stainless steel and alloy plate, and e-commerce initiatives. Olympic has
introduced extranet pages for specific customers, which are integrated with the
Company's internal business systems to provide cost efficiencies for both the
Company and its customers.

In the international market, the Company's objective is to service foreign
customers by matching their steel requirements to a specific primary steel
producer. The Company functions as the sales and logistics arm of primary
producers, giving them access to customers that they might otherwise not sell or
service. All international sales and payments are made in United States dollars.
International sales have represented less than 5% of net sales in each of the
last three years.

ACQUISITIONS. Although the Company has focused on start-up and internal
operations over the past 18 months, it's strategy is to continue to expand
geographically by making acquisitions of steel service centers, processors and
related businesses, with a focus on the central and southern United States. The
Company has made seven acquisitions of other steel service centers or processors
since 1987, including two in the past three years:

In June 1997, the Company acquired Southeastern Metal Processing, Inc.
and Southeastern Transshipping Realty (Southeastern) for approximately
$13.7 million. Southeastern, which historically operated as a metals toll
processor and storage operation, is located near Atlanta, Georgia. The
acquisition provided the Company with a physical presence in the
southeastern market, and initially supported its sales office in
Greenville, South Carolina. In 1999, the Company closed its Greenville
office after consolidating its southern sales function into its Georgia
operation. In 1998, the Company completed a $2.7 million, 35,000 square
foot facility expansion and cut-to-length line upgrade. After the
expansion, the Georgia operation has five major pieces of processing
equipment and a 240,000 square foot facility, which allows the Company to
now service its southern customers with an expanded product and processing
base on a just-in-time delivery basis.

In June 1998, the Company made a strategic acquisition of JNT
Precision Machining (JNT), a machining center located in McConnellsburg,
Pennsylvania. JNT allowed the Company to provide additional value added
services to its existing and prospective customers that continue to
outsource. Additionally, the processes performed by JNT augment the
Company's plate processing performed at its Philadelphia operation. JNT
operated lathes, machining centers, drills and saws, which were relocated
in September 1999 to a newly constructed 87,000 square foot, $7 million
facility in nearby Chambersburg, Pennsylvania. The new facility also
includes two new pieces of plate processing equipment, which allows for
multiple processing of plate products in one location.

INVESTMENTS IN JOINT VENTURES. The Company diversified its selling and
processing capabilities for its customers by entering into the following joint
venture relationships:

In April 1997, the Company formed Olympic Laser Processing (OLP), a 50%
joint venture with the U.S. Steel Group of USX Corporation. OLP constructed a
new facility in Michigan and has initially equipped it with two automated
laser-welding lines. The venture plans to purchase and install two additional
manual laser weld

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lines during 2000. OLP produces laser-welded sheet steel blanks for the
automotive industry. Although OLP's ramp-up to capacity has been slower than
expected, demand for laser-welded parts is expected to continue growing due to
cost benefits, and reduced scrap and auto body weight. The Company expects OLP
to be operating at four-line capacity and achieve profitability by the end of
2001. OLP obtained its QS-9000 quality certification in 1998.

In December 1997, the Company invested in a 49% interest in Trumark Steel &
Processing (TSP), a joint venture formed in eastern Michigan with Michael J.
Guthrie and Carlton L. Guthrie (the Guthries). The Guthries are also the
executive officers of Trumark Inc., a privately held supplier of metal stamped
assemblies to the automotive industry located in Michigan, and majority members
of TruMack Assembly, an automotive assembler in Detroit. TSP was formed to
support the flat-rolled steel requirements of the automotive industry as a
Minority Business Enterprise (MBE). TSP obtained certification as an MBE from
the Michigan Minority Business Development Council in December 1998, and
obtained its QS-9000 quality certification in January 1999. During 1999, TSP
obtained a significant contract from a first-tier automotive stamper, and began
operating profitably in the second half of 1999.

In January 1997, the Company invested in a 45% interest in Olympic
Continental Resources (OCR), a joint venture with Atlas Iron Processors, Inc.
(Atlas) and OCR's Chief Executive Officer. OCR bought, sold and traded ferrous
and non-ferrous metals and alternate iron products to steel mills and scrap
processors. In December 1998, the Company wrote-off its entire $4.7 million
investment in OCR, and effective April 30, 1999, Atlas ownership in the OCR
joint venture ceased, and all OCR business transactions with Atlas also ceased.
During the third quarter of 1999, Olympic announced the dissolution of OCR, and
as guarantor of OCR's bank debt, made a payment to extinguish $4.7 million of
OCR outstanding bank debt.

DEPTH OF MANAGEMENT. The Company attributes a portion of its success to the
depth of its management. In addition to the three principal executive officers,
the Company's management team includes three Regional Vice Presidents, eleven
General Managers, its Vice Presidents of Sales and Marketing, MIS and Logistics,
its Directors of Investor Relations, Taxes & Risk Management, Materials
Management and Human Resources, and its Treasurer-Corporate Controller. The
Company has hired a Director-Business Process Engineering and Process Management
to commence employment on May 1, 2000. Members of the management team have a
diversity of backgrounds within the steel industry, including management
positions at steel producers and other steel service centers. They average 19
years of experience in the steel industry and 8 years with the Company. This
depth of management allows the Company to pursue and implement its strategic
plans.

PRODUCTS, PROCESSING SERVICES, AND QUALITY STANDARDS

The Company maintains a substantial inventory of coil and plate steel. Coil
is in the form of a continuous sheet, typically 36 to 96 inches wide, between
0.015 and 0.625 inches thick, and rolled into 10 to 30 ton coils. Because of the
size and weight of these coils and the equipment required to move and process
them into smaller sizes, such coils do not meet the requirements, without
further processing, of most customers. Plate is typically thicker than coil and
is processed by laser, plasma or oxygen burning.

Customer orders are entered (or electronically transmitted) into
computerized order entry systems, and appropriate inventory is then selected and
scheduled for processing in accordance with the customer's specified delivery
date. The Company attempts to maximize yield by combining customer orders for
processing each purchased coil or plate to the fullest extent practicable.

The Company's services include both traditional service center processes of
cutting-to-length, slitting, shearing and roll forming and higher value-added
processes of blanking, tempering, plate burning, precision machining and laser
welding to process steel to specified lengths, widths and shapes pursuant to
specific customer orders. Cutting-to-length involves cutting steel along the
width of the coil. Slitting involves cutting steel to specified widths along the
length of the coil. Shearing is the process of cutting sheet steel, while roll
forming is the process in which flat rolled coils are formed into tubing and
welded. Blanking cuts the steel into specific shapes with close tolerances.
Tempering improves the uniformity of the thickness and flatness of the steel
through a cold rolling process. Plate burning is the process of cutting steel
into specific shapes and sizes. The Company's

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machining activities include drilling, bending, milling, tapping, boring and
sawing. Laser welding of processed steel blanks is performed by the Company's
OLP joint venture.

The following table sets forth the major pieces of processing equipment
used by geographic region.

<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
PROCESSING EASTERN CENTRAL MIDSTATES JOINT
EQUIPMENT REGION REGION DETROIT REGION VENTURES TOTAL
---------- ------- ------- ------- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Cutting-to-length............................. 6 4 2 4 16
Blanking...................................... 4 4
Tempering (f)................................. 2 1 2 5
Plate processing.............................. 7 4 15 26
Slitting...................................... 4 2 3 1 10
Shearing (g).................................. 4 6 2 12
Roll forming.................................. 2 2
Machining..................................... 17 17
Shot blasting/grinding........................ 1 1 2
Laser welding................................. 2 2
-- -- -- -- -- --
Total.................................... 37 15 8 31 5 96
-- -- -- -- -- --
</TABLE>

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(a) Consists of four facilities located in Connecticut, Pennsylvania and
Georgia.

(b) Consists of six facilities located in Ohio and Illinois.

(d) Consists of three facilities located in Minnesota and Iowa.

(e) Consists of two facilities located in Michigan.

(f) In addition to the temper mills located in Cleveland and Iowa, tempering
includes press brake equipment.

(g) Shearing in the Central Region includes two tubing recut lines.

The Company's quality control system establishes controls and procedures
covering all aspects of its products from the time the material is ordered
through receipt, processing and shipment to the customer. These controls and
procedures encompass periodic supplier audits, meetings with customer advisory
boards, inspection criteria, traceability and certification. From time to time,
the Company has undergone quality audits by certain of its customers and has met
all requirements of those customers. In addition, the Philadelphia, Minneapolis
and Southern operations are ISO 9002 certified. The Detroit operation is one of
only a few domestic service centers to earn Ford's Q1 quality rating, and is
also QS-9000 certified. The TSP and OLP joint ventures are also QS-9000
certified. The Company has a quality testing lab adjacent to its temper mill
facility in Cleveland.

CUSTOMERS AND DISTRIBUTION

The Company processes steel for sale to over 3,100 domestic and foreign
customers. The Company has a diversified customer and geographic base, which
reduces the cyclicality of its business. The top 20 customers accounted for
approximately 20% of net sales in both 1999 and 1998. In addition, the Company's
largest customer accounted for approximately 3% and 2% of net sales in 1999 and
1998, respectively. Major domestic customers include manufacturers and
fabricators of transportation and material handling equipment, automobiles,
construction and farm machinery, storage tanks, environmental equipment,
appliances, food service and electrical equipment, as well as general and plate
fabricators, and steel service centers. Sales to the three largest U.S.
automobile manufacturers and their suppliers, made principally by the Company's
Detroit operation, and sales to other steel service centers, accounted for
approximately 17% and 12%, respectively, of the Company's net sales in 1999, and
20% and 11% of net sales in 1998.

While the Company ships products throughout the United States, most of its
customers are located in the midwestern, eastern and southern regions of the
United States. Most domestic customers are located within a 250-mile radius of
one of the Company's processing facilities, thus enabling an efficient delivery
system capable of handling a high frequency of short lead-time orders. The
Company transports most of its products directly to
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customers via dedicated independent trucking firms, although the Company also
owns and operates some trucks in different locations to facilitate
short-distance, multi-stop deliveries. International products are shipped either
directly from the steel producers to the customer or to an intermediate
processor, and then to the customer by rail, truck or ocean carrier.

The Company processes its steel to specific customer orders as well as for
stock. Many of the Company's customers commit to purchase on a regular basis
with the customer notifying the Company of specific release dates as the
processed products are required. Customers typically notify the Company of
release dates anywhere from a just-in-time basis up to three weeks before the
release date. Therefore, the Company is required to carry sufficient inventory
to meet the short lead time and just-in-time delivery requirements of its
customers.

SUPPLIERS

Olympic concentrates on developing relationships with high-quality domestic
integrated and mini mills, as well as foreign steel producers, and becoming an
important customer to such producers. The Company is a major customer of
flat-rolled coil and plate for many of its principal suppliers, but is not
dependent on any one supplier. The Company purchases in bulk from steel
producers in quantities that are efficient for such producers. This enables the
Company to maintain a continued source of supply at what it believes to be
competitive prices. Olympic believes the accessibility and proximity of its
facilities to major domestic steel producers will continue to be an important
factor in maintaining strong relationships with them.

The Company purchases flat-rolled steel for processing at regular intervals
from a number of domestic and foreign producers of primary steel. The Company
believes that its relationships with its suppliers are good. The Company has no
long-term commitments with any of its suppliers.

COMPETITION

The principal markets served by the Company are highly competitive. The
Company competes with other regional and national steel service centers, single
location service centers and, to a certain degree, steel producers and
intermediate steel processors on a regional basis. The Company has different
competitors for each of its products and within each region. The Company
competes on the basis of price, product selection and availability, customer
service, quality and geographic proximity. Certain of the Company's competitors
have financial and operating resources in excess of those of the Company.

With the exception of certain Canadian operations, foreign steel service
centers are generally not a material factor in the Company's principal domestic
markets. The Company competes for international sales with many domestic and
foreign steel traders and producers, none of whom dominates or controls the
international markets served by the Company. Many of these international
competitors are also suppliers to the Company.

MANAGEMENT INFORMATION SYSTEMS

Information systems are a critical component of Olympic's growth strategy.
The Company has invested, and will continue to invest, in advanced technologies
and human resources required in this area. The Company believes that its
information systems provide it with a significant competitive advantage over
smaller competitors with less resources than Olympic. The Company's information
systems focus on the following core application areas:

INVENTORY MANAGEMENT. The Company's information systems track the status of
inventories in all locations on a daily basis. This information is essential in
allowing the Company to closely monitor and manage its inventory.

DIFFERENTIATED SERVICES TO CUSTOMERS. The Company's information systems
allow it to provide value-added services to customers, including quality control
monitoring and reporting, just-in-time inventory management and shipping
services and EDI communications.

INTERNAL COMMUNICATIONS. The Company believes that its ability to quickly
and efficiently share information across its operations is critical to the
Company's success. The Company continues to invest in

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various communications and workgroup technologies which enables employees to
remain effective and responsive as the Company grows.

E-COMMERCE AND ADVANCED CUSTOMER INTERACTION. The Company is actively
involved in electronic commerce initiatives, including offering steel for sale
on the two primary Internet auction sites for steel, MetalSite and e-Steel. The
Company has integrated these external sites into its internal business systems
to streamline the costs and time associated with processing these electronic
transactions. Olympic has also introduced extranet sites for specific customers,
which are also integrated with the Company's internal business systems.

The company is exploring alternatives to either purchase new business
system software or select one of its existing three core business systems
software applications in order to operate the entire company from a common
system. The Company expects to make a decision regarding its future business
system software in 2000.

All of the Company's business application software systems were Y2K (Year
2000) compliant by the third quarter of 1999, and all other systems and
equipment were compliant prior to December 31, 1999. The Company has not
experienced any disruptions related to Y2K.

EMPLOYEES

At December 31, 1999, the Company employed 1,084 people. Approximately 242
of the Company's hourly plant personnel at the Minneapolis and Detroit
facilities are represented by four separate collective bargaining units. The two
collective bargaining agreements at Detroit expire in July 2001 and July 2002.
The agreement covering personnel at the Minneapolis coil facility expires
September 30, 2002, and the agreement covering the Minneapolis plate processing
facility personnel expires March 31, 2003. The Company has never experienced a
work stoppage and believes that its relationship with its employees is good.

SERVICE MARKS, TRADE NAMES AND PATENTS

The Company conducts its business under the name "Olympic Steel." A
provision of federal law grants exclusive rights to the word "Olympic" to the
U.S. Olympic Committee. The U.S. Supreme Court has recognized, however, that
certain users may be able to continue to use the word based on long-term and
continuous use. The Company has used the name Olympic Steel since 1954, but is
prevented from registering the name "Olympic" and from being qualified to do
business as a foreign corporation under that name in certain states. In such
states, the Company has registered under different names, including "Oly Steel"
and "Olympia Steel." The Company's wholly-owned subsidiary, Olympic Steel
Lafayette, Inc., does business in certain states under the names "Lafayette
Steel and Processing" and "Lafayette Steel," and the Company's operation in
Georgia does business under the name "Southeastern Metal Processing." The
Company's web site is located at http://www.olysteel.com.

GOVERNMENT REGULATION

The Company's operations are governed by many laws and regulations,
including those relating to workplace safety and worker health, principally the
Occupational Safety and Health Act and regulations thereunder. The Company
believes that it is in material compliance with these laws and regulations and
does not believe that future compliance with such laws and regulations will have
a material adverse effect on its results of operations or financial condition.

ENVIRONMENTAL

The Company's facilities are subject to certain federal, state and local
requirements relating to the protection of the environment. The Company believes
that it is in material compliance with all environmental laws, does not
anticipate any material expenditures to meet environmental requirements and does
not believe that compliance with such laws and regulations will have a material
adverse effect on its results of operations or financial condition.

Page 9 of 40
<PAGE> 10

CYCLICALITY IN THE STEEL INDUSTRY; IMPACT OF CHANGING STEEL PRICES

The principal raw material used by the Company is flat-rolled carbon and
stainless steel that the Company typically purchases from steel producers. The
steel industry as a whole is cyclical, and at times pricing and availability in
the steel industry can be volatile due to numerous factors beyond the control of
the Company, including general, domestic and international economic conditions,
labor costs, production levels, competition, import duties and tariffs and
currency exchange rates. This volatility can significantly affect the
availability and costs of raw materials for the Company.

Steel service centers maintain substantial inventories of steel to
accommodate the short lead times and just-in-time delivery requirements of their
customers. Accordingly, the Company purchases steel in an effort to maintain its
inventory at levels that it believes to be appropriate to satisfy the
anticipated needs of its customers based upon historic buying practices,
contracts with customers and market conditions. The Company's commitments for
steel purchases are generally at prevailing market prices in effect at the time
the Company places its orders. The Company has no long-term, fixed-price steel
purchase contracts. When raw material prices increase, competitive conditions
will influence how much of the steel price increases can be passed on to the
Company's customers. When raw material prices decline, customer demands for
lower prices could result in lower sale prices and, as the Company uses existing
steel inventory, lower margins. Changing steel prices therefore could adversely
affect the Company's net sales, gross margins and net income.

CYCLICALITY OF DEMAND; SALES TO THE AUTOMOTIVE INDUSTRY

Certain of the Company's products are sold to industries that experience
significant fluctuations in demand based on economic conditions or other matters
beyond the control of the Company. The Company's diversified customer and
geographic base reduce such cyclicality; however, no assurance can be given that
the Company will be able to increase or maintain its level of sales in periods
of economic stagnation or downturn.

Sales of the Company's products for use in the automotive industry
accounted for approximately 17% and 20% of the Company's net sales in 1999 and
1998, respectively. Such sales include sales directly to automotive
manufacturers and to manufacturers of automotive components and parts. The
automotive industry experiences significant fluctuations in demand based on
numerous factors such as general economic conditions and consumer confidence.
The automotive industry is also subject, from time to time, to labor work
stoppages. Any prolonged disruption in business arising from work stoppages by
automotive manufacturers or by steel manufacturers could have a material adverse
effect on the Company's results of operations.

During 1998, global financial crises led to unrestrained, massive imports
of steel into the United States. These imports resulted in excess domestic steel
supply even though the demand for steel remained strong. When combined with a
50-day General Motors (GM) strike that commenced in June 1998, excess domestic
supply peaked, resulting in significant steel price declines in the second half
of 1998 and in 1999. The Company's operation in Detroit was significantly
impacted in 1998 by the GM strike in terms of sales volume and profitability,
while all of the Company's operations are impacted by lower steel pricing.

EFFECTS OF INFLATION

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 "anticipate," "expect," "believe," "estimated," "project," "plan" and
similar expressions are intended to identify forward-looking statements, which
are made pursuant to the safe harbor

Page 10 of 40
<PAGE> 11

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, those identified above; potential equipment
malfunction; equipment installation and facility construction delays especially
as related to the equipment installations at the Detroit and OLP operations in
2000; the adequacy of information technology and business system software
investment; the successes of the company's strategic planning efforts and
initiatives, the successes of joint ventures; and the availability of
acquisition opportunities. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, expected, believed, estimated,
projected 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.

Page 11 of 40
<PAGE> 12

ITEM 2. PROPERTIES

The Company believes that its properties are strategically situated
relative to its customers and each other, allowing the Company to support
customers from multiple locations. This permits the Company to provide inventory
and processing services which are available at one operation but not another.
Steel is shipped from the most advantageous facility, regardless of where the
order was taken. The facilities are located in the hubs of major steel
consumption markets, and within a 250-mile radius of most of the Company's
customers, a distance approximating the one-day driving and delivery limit for
truck shipments. The following table sets forth certain information concerning
the Company's properties:

<TABLE>
<CAPTION>
SQUARE OWNED OR
OPERATION LOCATION FEET FUNCTION LEASED
--------- -------------------------- ------- --------------------------------- --------
<S> <C> <C> <C> <C>
Cleveland Bedford Heights, Ohio (1) 127,000 Corporate headquarters and coil Owned
processing and distribution
center
Bedford Heights, Ohio (1) 121,500 Coil processing, distribution Owned
center and offices
Bedford Heights, Ohio (1) 59,500 Plate processing and distribution Leased(2)
center
Cleveland, Ohio 118,500 Roll form processing, Owned
distribution center and offices
Minneapolis Plymouth, Minnesota 196,800 Coil processing, distribution Owned
center and offices
Plymouth, Minnesota 112,200 Plate processing, distribution Owned
center and offices
Lafayette Detroit, Michigan 256,000 Coil processing, distribution Owned
center and offices
South Winder, Georgia 240,000 Coil processing, distribution Owned
center and offices
Iowa Bettendorf, Iowa 190,000 Coil and plate processing, Owned
distribution center and offices
Connecticut Milford, Connecticut 134,000 Coil and plate processing, Owned
distribution center and offices
Chicago Schaumburg, Illinois 80,500 Plate processing, distribution Owned
center and offices
Elk Grove Village, 48,000 Coil processing and distribution Owned
Illinois center
Philadelphia Lester, Pennsylvania 92,500 Plate processing, distribution Leased
center and offices
Chambersburg Chambersburg, Pennsylvania 87,000 Plate processing and machining, Owned
distribution center and offices
</TABLE>

- ---------------
(1) The Bedford Heights facilities are all adjacent properties.

(2) This facility is leased from a related party pursuant to the terms of a
triple net lease for $195,300 per year. The lease expires in June 2000,
subject to two ten-year renewal options.

The Company's international sales office is located in Pittsburgh,
Pennsylvania. The Company also has invested in two joint ventures which each own
a facility in Michigan. All of the properties listed in the table as owned are
subject to mortgages securing industrial revenue bonds, taxable rate notes, term
loans and the Company's credit agreement. Management believes that the Company
will be able to accommodate its capacity needs for the immediate future at its
existing facilities.

Page 12 of 40
<PAGE> 13

ITEM 3. LEGAL PROCEEDINGS

The Company is party to various legal actions that it believes are ordinary
in nature and incidental to the operation of its business. In the opinion of
management, the outcome of the proceedings to which the Company is currently a
party will not have a material adverse effect upon its operations or financial
condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

EXECUTIVE OFFICERS OF THE REGISTRANT

This information is included in this Report pursuant to Instruction 3 of
Item 401(b) of Regulation S-K. The following is a list of the executive officers
of the Company and a brief description of their business experience. Each
executive officer will hold office until his successor is chosen and qualified.

Michael D. Siegal, age 47, has served as President and Chief Executive
Officer of the Company since 1984, and as Chairman of the Board of Directors
since January 1, 1994. He has been employed by the Company in a variety of
capacities since 1974. Mr. Siegal is a member of the Executive Committee for the
Steel Service Center Institute (SSCI). He is also a member of the American Iron
and Steel Institute. He served as National Chairman of Israel Bonds during the
period 1991-1993 and presently serves as Vice Chairman of the Executive
Committee of the Development Corporation for Israel and as an officer for the
Cleveland Jewish Community Federation. He is a member of the Board of Directors
of American National Bank (Cleveland, Ohio) and the Cleveland Lumberjacks, a
professional hockey team.

R. Louis Schneeberger, age 45, has served as Chief Financial Officer and
director of the Company since 1987. Prior to that time, Mr. Schneeberger was
employed by Arthur Andersen LLP for ten years, concentrating on mergers,
acquisitions, and auditing. He is also Chairman of the Board of Directors of
Royal Appliance Mfg. Co. (a New York Stock Exchange listed company that is an
assembler and distributor of vacuum cleaners and other floor care products), a
certified public accountant, a trustee and Treasurer of the Achievement Centers
for Children, and a member of the Business Advisory Council of Kent State
University. Mr. Schneeberger has announced his resignation effective March 31,
2000.

David A. Wolfort, age 47, has served as Chief Operating Officer since 1995
and a director of the Company since 1987. He previously served as Vice
President -- Commercial from 1987 to 1995, after having joined the Company in
1984 as General Manager. Mr. Wolfort's duties include the management of all
sales, purchasing and operational aspects of each region. Prior to joining the
Company, Mr. Wolfort spent eight years with Sharon Steel, a primary steel
producer, in a variety of sales assignments, including General Manager-Field
Sales, Sharon Steel Products and was a steel fellow with the American Iron and
Steel Institute. Mr. Wolfort is the past president of SSCI's Northern Ohio
Chapter and is presently Chairman of its Governmental Affairs Committee and a
National Chapter Director. He is also a trustee of Health Hill Hospital for
Children and a member of the Northern Ohio Regional Board of the Anti-Defamation
League.

Richard T. Marabito, age 36, has served as the Company's Treasurer and
Corporate Controller since 1995. He joined the Company in 1994 as Corporate
Controller. Prior to joining the Company, Mr. Marabito served as Corporate
Controller for a publicly traded wholesale distribution company. Mr. Marabito is
a certified public accountant, and was employed from 1985 to 1990 by Arthur
Andersen LLP in its audit division. Mr. Marabito will assume the additional
title of Chief Financial Officer effective March 31, 2000.

Mr. Heber MacWilliams, age 56, serves as Vice President-Management
Information Systems, and has been employed by the Company since 1994. Prior to
joining the Company, Mr. MacWilliams spent 14 years as partner in charge of
management consulting at Walthal & Drake, a public accounting firm in Cleveland,
Ohio. Mr. MacWilliams is also a member of the faculty of Case Western Reserve
University's Graduate School of Business in Cleveland.

Page 13 of 40
<PAGE> 14

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

PRICE RANGE OF COMMON STOCK

The Company's Common Stock trades on NASDAQ under the symbol "ZEUS." The
following table sets forth, for each quarter in the two year period ended
December 31, 1999, the high and low closing prices of the Company's Common Stock
on NASDAQ:

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1999
First quarter........................................... $ 8.38 $ 5.06
Second quarter.......................................... 8.88 6.50
Third quarter........................................... 7.00 5.63
Fourth quarter.......................................... 6.22 4.38

1998
First quarter........................................... $17.13 $13.69
Second quarter.......................................... 16.25 12.50
Third quarter........................................... 12.88 6.13
Fourth quarter.......................................... 7.94 5.00
</TABLE>

HOLDERS OF RECORD

March 6, 2000, the Company believed there were approximately 3,800
beneficial holders of the Company's Common Stock.

DIVIDENDS

The Company presently retains all of its earnings, and anticipates that all
of its future earnings will be retained to finance the expansion of its business
and does not anticipate paying cash dividends on its Common Stock in the
foreseeable future. Any determination to pay cash dividends in the future will
be at the discretion of the Board of Directors after taking into account various
factors, including the Company's financial condition, results of operations,
current and anticipated cash needs, plans for expansion and restrictions under
the Company's credit agreements.

STOCK REPURCHASE

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 1999,
the Company repurchased 601,300 shares at an average price of $6.76 per share.
Repurchased shares are held in treasury and are available for general corporate
purposes.

SHAREHOLDER RIGHTS PLAN

On February 15, 2000, the Company filed a Form 8-K relative to the adoption
of a shareholders rights plan.

Page 14 of 40
<PAGE> 15

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected data of the Company for each of the
five years in the period ended December 31, 1999. The data presented should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and notes thereto included elsewhere in this report.

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
TONS SOLD DATA:
Direct............................ 1,065 1,070 1,111 1,022 931
Toll.............................. 207 231 219 150 155
Total.......................... 1,272 1,301 1,330 1,172 1,086

INCOME STATEMENT DATA:
Net sales........................... $524,794 $576,189 $608,076 $560,062 $554,469
Cost of sales....................... 401,028 455,544 483,071 436,553 446,513
Gross margin........................ 123,766 120,645 125,005 123,509 107,956
Operating expenses (a).............. 110,164 125,184 102,898 93,127 85,855
Operating income (loss)............. 13,602 (4,539) 22,107 30,382 22,101
Income (start-up costs) from joint
ventures.......................... (1,032) (322) 11 -- --
Interest expense.................... 4,315 3,856 4,172 4,301 10,746
Receivable securitization expense... 3,119 3,773 3,791 3,393 107
Income (loss) before taxes.......... 5,136 (12,490) 14,155 22,688 11,248
Income taxes........................ 1,977 (4,059) 5,308 8,569 4,504
Net income (loss)................... 3,159 (8,431) 8,847 14,119 6,744
Net income (loss) per share......... $ 0.30 $ (0.79) $ 0.83 $ 1.50 $ 0.78
Weighted average shares
outstanding....................... 10,452 10,692 10,692 9,427 8,600

BALANCE SHEET DATA:
Current assets...................... $137,513 $132,080 $142,175 $152,255 $124,371
Current liabilities................. 36,248 43,225 37,126 36,267 31,226
Working capital..................... 101,265 88,855 105,049 115,988 93,145
Total assets................... 266,965 256,108 265,534 241,130 202,072
Total debt..................... 93,426 76,520 79,924 64,582 98,540
Shareholders' equity................ 136,820 137,743 146,174 137,327 73,984
</TABLE>

- ---------------
(a) 1998 operating expenses include a non-recurring asset write-down charge of
$19,056.

Page 15 of 40
<PAGE> 16

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

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 Detroit
(Lafayette) and Georgia 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 results include the results of the JNT machining operation,
the net assets of which were acquired June 26, 1998. In September 1999, the JNT
operation was relocated, and is now operating from a newly constructed 87,000
square foot plate processing and machining facility in Chambersburg,
Pennsylvania. The accompanying financial statements also include the results of
the Company's operation in Georgia (Southeastern), the net assets of which were
acquired effective June 1, 1997.

The Company's two joint ventures include: Olympic Laser Processing (OLP), a
company formed in April 1997 to process laser welded sheet steel blanks for the
automotive industry; and 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). 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 both of the joint venture
companies' bank credit facilities. As of December 31, 1999, Olympic guaranteed
50% of OLP's $18.1 million and 49% of TSP's $3.2 million of outstanding debt on
a several basis.

OLP constructed a new facility and has initially equipped it with two
automated laser-welding lines. The venture plans to purchase and install two
additional manual laser weld lines during 2000. The Company expects OLP start-up
costs to continue until the second half of 2001, when all four welding lines are
anticipated to be operating at full capacity. TSP obtained certification as an
MBE from the Michigan Minority Business Development Council in December 1998,
and has been operating profitably in the second half of 1999. Start-up costs for
OLP and TSP have been expensed as incurred.

In December 1998, the Company wrote-off its entire $4.7 million joint
venture investment in 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. Effective April 30, 1999,
Atlas Iron Processors, Inc. (Atlas) 45% ownership interest in the OCR joint
venture ceased, and all OCR business transactions with Atlas also ceased. During
the third quarter of 1999, Olympic announced the dissolution of OCR. Olympic, as
guarantor of OCR's bank debt, made a payment to extinguish all $4.7 million of
OCR outstanding bank debt, and simultaneously assumed all remaining OCR
receivables, inventory, and accounts payable, which are included in the 1999
consolidated financial statements of the Company.

Financing costs include interest expense on debt and costs associated with
the Company's accounts receivable securitization program (Financing Costs).
Interest rates paid by the Company under its credit agreement are generally
based on prime or 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.

Page 16 of 40
<PAGE> 17

Because the Company conducts its operations generally on the basis of
short-term orders, backlog is not a meaningful indicator of future performance.

RESULTS OF OPERATIONS

The following table sets forth certain income statement data expressed as a
percentage of net sales:

<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Net sales........................................... 100.0% 100.0% 100.0%
Cost of sales....................................... 76.4 79.1 79.4
----- ----- -----
Gross margin...................................... 23.6 20.9 20.6
Operating expenses before asset writedown........... 21.0 18.4 16.9
Asset write-down.................................... -- 3.3 --
----- ----- -----
Operating income (loss)........................... 2.6 (0.8) 3.6
Income (start-up costs) from joint ventures......... (0.2) (0.1) --
Interest and receivable securitization expense...... 1.4 1.3 1.3
----- ----- -----
Income (loss) before taxes........................ 1.0 (2.2) 2.3
Income taxes........................................ 0.4 (0.7) 0.9
----- ----- -----
Net income (loss)................................. 0.6% (1.5)% 1.5%
===== ===== =====
</TABLE>

1999 COMPARED TO 1998

Tons sold decreased 2.2% to 1,272 thousand in 1999 from 1,301 thousand in
1998. Tons sold in 1999 included 1,065 thousand from direct sales and 207
thousand from toll processing, compared with 1,070 thousand from direct sales
and 231 thousand from toll processing in 1998. The decrease in direct tons was
primarily attributable to the elimination of low margin automotive business in
Detroit and depressed demand from customers in the agricultural equipment
market, especially for unprocessed plate products. The Company anticipates
demand from agricultural-related customers to remain weak for the foreseeable
future. The decrease in tolling tons was attributable to the company's Georgia
operation, which increased its proportion of direct sales in 1999.

Net sales decreased by $51.4 million, or 8.9%, to $524.8 million from
$576.2 million in 1998. Average selling prices declined 6.8% due to continued
decreased market prices for steel, resulting from the significant penetration of
imported steel in 1998. The Company expects average selling prices to increase
in 2000 as compared to 1999.

As a percentage of net sales, gross margin increased to 23.6% in 1999 from
20.9% in 1998. The increase is a result of selling a larger proportion of
processed, higher value-added steel, and elimination of certain lower margin
automotive sales. In 2000, the Company anticipates supply-side steel price
increases will compress its gross margins, as all such increases may not be able
to be passed on to customers.

Operating expenses in 1998 include a one-time asset write-down charge of
$19.1 million. Excluding the 1998 one-time charge, operating expenses in 1999
increased 3.9% to $110.2 million from $106.1 million. On a per ton basis,
operating expenses increased 6.2% to $86.58 from $81.55 in 1998. As a percentage
of net sales, operating expenses increased to 21.0% from 18.4% in 1998. The
increases were primarily due to lower sales volume; lower average selling
prices; new facility start-up costs; and costs associated with strategic
planning efforts.

Operating expenses in 1999 include approximately $3.5 million of
incremental costs associated with the Iowa temper mill and plate processing
facility start-up, and the JNT/Chambersburg operation acquisition and new
facility start-up. The Iowa facility is not expected to reach production
capacity and profitability until late 2000 due to the continued weak demand from
agricultural equipment manufacturers. The newly constructed Chambersburg plate
processing and machining facility is expected to complete its start-up by the
end of the first quarter of 2000.

The Company engaged a strategic planning consulting firm in the third
quarter of 1999. One focus of the Company's strategic effort is to reduce
operating expenses at each operation not in start-up by 7% in the year

Page 17 of 40
<PAGE> 18

2000. Operating expenses in 1999 include more than $600 thousand of costs
associated with the strategic consulting process, which is expected to conclude
by the end of the first quarter of 2000.

Net start-up costs from joint ventures totaled $1.0 million in 1999,
compared to $322 thousand in 1998. The company's losses from OLP totaled $1.0
million in 1999 compared to $553 thousand last year, while TSP losses decreased
to $14 thousand in 1999 from $264 thousand in 1998. OCR contributed $495
thousand of income in 1998. OLP incurred higher start-up costs in 1999, as a
result of the facility and equipment becoming operational. TSP became profitable
in the second half of 1999.

Financing Costs decreased 2.6% to $7.4 million in 1999 from $7.6 million in
1998. Average borrowings outstanding in 1999 decreased approximately $9.4
million, primarily as a result of lower inventory levels in 1999. Interest costs
associated with the Iowa facility borrowings were expensed in 1999 and
capitalized in 1998. The Company's overall effective borrowing rate was 6.9% in
both 1999 and 1998. The Premium for 1999 averaged 1.50%, compared to 1.15% in
1998. The Company's Premium increased to 2.0% effective December 1, 1999, and
will remain at this level through at least May 2000. Costs associated with the
accounts receivable securitization program decreased $654 thousand or 17.3%, as
a result of less average receivables sold in 1999 compared to 1998, due to lower
sales in 1999.

Pretax income for 1999 totaled $5.1 million compared to a pretax loss of
$12.5 million in 1998. Excluding the impact of the asset write-down, 1998 pretax
income totaled $6.6 million. Income taxes approximated 38.5% of pretax income in
1999, compared to a 1998 tax benefit of 32.5% of pretax loss. The lower tax rate
in 1998 was attributable to the asset write-down charge.

Net income totaled $3.2 million or $.30 per share, compared to a net loss
of $8.4 million or $.79 per share in 1998. Excluding the impact of the asset
write-down, 1998 net income totaled $4.1 million, or $.38 per share.

During 1999, the Company repurchased 601 thousand shares of its Common
Stock. Average shares outstanding totaled 10.452 million in 1999, compared to
10.692 million in 1998.

1998 COMPARED TO 1997

Tons sold decreased 2.1% to 1,301 thousand in 1998 from 1,330 thousand in
1997. Tons sold in 1998 included 1,070 thousand from direct sales and 231
thousand from toll processing, compared with 1,111 thousand from direct sales
and 219 thousand from toll processing in 1997. The increase in tolling tons was
attributable to Southeastern, offset by a reduction at Lafayette attributable to
the impact of the General Motors (GM) strike in 1998 (the Strike). The decrease
in direct tons was primarily attributable to Lafayette, again impacted by the
Strike, and a decrease in international sales to Mexico.

Net sales decreased by $31.9 million, or 5.2%, to $576.2 million from
$608.1 million in 1997. Average selling prices declined 3.2% due to 1998 market
conditions which resulted in decreased prices for steel, and an increased
proportion of tolling sales in 1998. International sales declined $13.9 million
in 1998, as a result of less participation in the Mexican market.

The Company's sales to GM decreased $7.9 million, or 42% in 1998, due to
the impact of the Strike, as well as a decline in the Company's participation
with GM. The Company's sales to suppliers of GM also declined in the second half
of 1998 due to the Strike. Approximately 20% of the Company's 1998 net sales
were made to customers in the automotive industry, compared to approximately 23%
in 1997.

As a percentage of net sales, gross margin increased to 20.9% in 1998 from
20.6% in 1997. The increase reflected the impact of enhanced margins from the
Company's non-automotive sales, lower international sales, and an increased
proportion of tolling sales in 1998.

Operating expenses totaled $125.2 million in 1998, and included a one-time
asset write-down charge of $19.1 million. The charge consisted of $14.4 million
to write-off goodwill and write-down certain fixed assets at Lafayette, and $4.7
million to write-down the Company's investment in OCR. The Lafayette charge was
taken in accordance with accounting regulations which require long-lived assets
such as goodwill and fixed assets to be written down to fair market value when
circumstances indicate that their carrying values are impaired. The changed
dynamics in the automotive marketplace, including GM's introduction of new
processing capabilities at its regional distribution center, adversely impacted
Lafayette's cash flows and operating earnings. These dynamics not only resulted
in a loss of sales volume to GM but also left a portion of Lafayette's
processing

Page 18 of 40
<PAGE> 19

equipment non-productive and thereby non-competitive in the automotive
marketplace. The Company disposed of four pieces of processing equipment in the
third quarter of 1998, and developed a plan to dispose of the remaining
non-competitive equipment. The remaining three pieces of non-competitive
equipment were disposed in 1999. Accordingly, the Company recorded a charge of
$5.0 million to write-down certain processing equipment and other fixed assets,
and $9.4 million to write-off all goodwill at Lafayette. Separately, the OCR
investment write-down was required because, in Olympic's judgement, OCR's entire
$6.2 million receivable from its largest customer, Atlas, was uncollectible.

Excluding the asset write-down, operating expenses increased to $106.1
million from $102.9 million. On a per ton basis, operating expenses increased
5.4% to $81.55 from $77.39 in 1997. As a percentage of net sales, operating
expenses before the asset write-down increased to 18.4% in 1998 from 16.9% in
1997. The increases were primarily due to lower sales volume; lower average
selling prices; start-up costs; increased spending on information technology,
including Y2K costs; and $432 thousand of non-recurring costs associated with
the disposition of fixed assets. Start-up costs included in operating expenses
in 1998 totaled $1.9 million compared to $400 thousand in 1997. These costs
primarily related to the $26 million temper mill and plate processing facility
in Bettendorf, Iowa (the Iowa Facility) and a new tube mill in Cleveland.

Income from the OCR joint venture in 1998 totaled $495 thousand versus $449
thousand in 1997. Olympic's share of OLP and TSP start-up costs totaled $553
thousand and $264 thousand, respectively in 1998, and $429 thousand and $9
thousand, respectively in 1997.

Financing Costs decreased 4.2% to $7.6 million in 1998 from $8.0 million in
1997. Average borrowings outstanding in 1998 decreased approximately $5.2
million, primarily as a result of lower inventory levels in 1998, offset by
increased borrowings on the Iowa Facility term loan. Interest costs associated
with Iowa Facility borrowings were capitalized through December 1998. The
Company's overall effective borrowing rate increased to 6.9% in 1998 from 6.7%
in 1997. The Premium for 1998 averaged 1.15%, compared to .9% in 1997. The
Company's Premium increased 25 basis points to 1.5% effective March 1, 1999.
Costs associated with the accounts receivable securitization program decreased
slightly in 1998 as a result of lower commercial paper rates, offset by a $.4
million increase in the amount of average receivables sold in 1998 compared to
1997.

Pretax loss for 1998 totaled $12.5 million compared to $14.2 million of
pretax income in 1997. Excluding the impact of the asset write-down, 1998 pretax
income totaled $6.6 million. In 1998, the income tax benefit approximated 32.5%
of pretax loss, compared to income tax expense recorded at 37.5% of pretax
income in 1997. The decrease in the tax rate from 1997 was attributable to the
1998 asset write-down charge.

Net loss totaled $8.4 million or $.79 per share in 1998, compared to net
income of $8.8 million or $.83 per share in 1997. Excluding the impact of the
asset writedown, 1998 net income totaled $4.1 million, or $.38 per share.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal capital requirement is to fund its growth,
including 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, equity offerings, and
leasing transactions to fund these requirements. Historically, the Company has
used revolving credit borrowings under its bank credit facility and proceeds
from its receivable securitization program to finance its working capital
requirements.

Net cash from operating activities primarily represents net income plus
non-cash charges for depreciation, amortization and net start-up costs from
joint ventures, as well as changes in working capital. During 1999, $1 million
of net cash was provided from operating activities, consisting of $15 million of
cash generated from net income and non-cash charges, offset by $14 million of
cash used for working capital purposes.

Working capital at December 31, 1999 increased $12.4 million from the end
of 1998. The increase is primarily attributable to an $8.2 million decrease in
accounts payable and a $6.7 million increase in accounts receivable.

As of December 31, 1999, $52 million of eligible receivables were sold
under the Company's accounts receivable securitization program, compared to $57
million at December 31, 1998. The amount of trade

Page 19 of 40
<PAGE> 20

receivables sold by the Company typically changes monthly depending upon the
level of defined eligible receivables available for sale at each month end.

Net cash used for investing activities in 1999 totaled $12.6 million,
including $5.5 million of payments for the new $7 million plate processing and
machining facility constructed in Chambersburg, Pennsylvania. Other significant
spending included $1.4 million for new laser processing equipment in Minnesota
and $1.3 million for computer information technology. During the fourth quarter
of 1999, the Company also committed to purchase a new $4.2 million slitting and
packaging line for its Detroit operation. The slitter is expected to be
installed and operational during the second half of 2000. The Company's 2000
capital spending plan approximates $7 million, including the new slitter.

Cash flows from financing activities totaled $11.2 million, and primarily
consisted of $10.4 million of net borrowings under its credit agreement, offset
by $4.1 million used to repurchase shares of Olympic common stock. 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 commenced October 1, 1999.

The Company's bank credit agreement was amended in January 2000 (the Credit
Facility). The amendment changed future interest coverage requirements, and
added a 50 basis point pricing tier to the Premium schedule. The Credit Facility
also includes letter of credit commitments, which totaled approximately $6.3
million at December 31, 1999, and contains restrictive covenants which require
minimum net worth levels, maintenance of certain financial ratios and
limitations on capital expenditures. The Company is in compliance with all
covenants contained in the amended Credit Facility agreement.

As of December 31, 1999, approximately $38.1 million was available under
the Company's revolving credit and accounts receivable securitization
facilities. The Company believes that funds available under the Credit and
securitization facilities, 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 requirements and
capital expenditure requirements 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 and
equipment, acquisitions and significant improvements to processing equipment to
respond to customers' demands.

YEAR 2000 COMPLIANCE

All of the Company's business application software systems were Y2K (Year
2000) compliant by the third quarter of 1999, and all other systems and
equipment was compliant prior to December 31, 1999. The Company has not
experienced any disruptions related to Y2K.

EFFECTS OF INFLATION

Inflation generally affects the Company by increasing the cost of
personnel, transportation services, processing equipment, purchased steel, and
borrowings under the various credit agreements. The Company does not believe
that inflation has had a material effect on its operating income over the
periods presented. However, it has and could have a material effect on interest
expense based on inflation's impact on amounts borrowed and prime and LIBOR
borrowing rates. Conversely, when raw material prices decline, as in 1998 and
1999, customer demands for lower prices have and could result in lower selling
prices and, as the Company uses existing steel inventory, lower margins.
Changing steel prices therefore could adversely affect the Company's net sales,
gross margins and net income.

Page 20 of 40
<PAGE> 21

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and
the Board of Directors of
Olympic Steel, Inc.:

We have audited the accompanying consolidated balance sheets of Olympic
Steel, Inc. (an Ohio corporation) and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Olympic Steel, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.

Arthur Andersen LLP

Cleveland, Ohio,
January 28, 2000.

Page 21 of 40
<PAGE> 22

ITEM 8. FINANCIAL STATEMENTS

OLYMPIC STEEL, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands, except per share data)

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales.................................................. $524,794 $576,189 $608,076
Cost of sales.............................................. 401,028 455,544 483,071
-------- -------- --------
Gross margin.......................................... 123,766 120,645 125,005

Operating expenses
Warehouse and processing................................. 35,226 35,456 33,579
Administrative and general............................... 29,371 27,166 27,458
Distribution............................................. 17,968 18,024 18,046
Selling.................................................. 15,176 14,209 13,745
Occupancy................................................ 4,571 4,300 4,067
Depreciation and amortization............................ 7,852 6,973 6,003
Asset write-down......................................... -- 19,056 --
-------- -------- --------
Total operating expenses.............................. 110,164 125,184 102,898
-------- -------- --------
Operating income (loss)............................... 13,602 (4,539) 22,107

Income (start-up costs) from joint ventures................ (1,032) (322) 11
-------- -------- --------
Income (loss) before interest and taxes............... 12,570 (4,861) 22,118

Interest expense........................................... 4,315 3,856 4,172
Receivable securitization expense.......................... 3,119 3,773 3,791
-------- -------- --------
Income (loss) before taxes............................ 5,136 (12,490) 14,155

Income taxes............................................... 1,977 (4,059) 5,308
-------- -------- --------
Net income (loss)................................... $ 3,159 $ (8,431) $ 8,847
======== ======== ========
Net income (loss) per share......................... $ 0.30 $ (0.79) $ 0.83
======== ======== ========
Weighted average shares outstanding................. 10,452 10,692 10,692
</TABLE>

The accompanying notes are an integral part of these statements.

Page 22 of 40
<PAGE> 23

OLYMPIC STEEL, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(in thousands)

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Cash........................................................ $ 1,433 $ 1,825
Accounts receivable......................................... 9,802 3,096
Inventories................................................. 119,585 121,407
Prepaid expenses and other.................................. 6,693 5,752
-------- --------
Total current assets................................... 137,513 132,080
-------- --------
Property and equipment...................................... 156,849 144,762
Accumulated depreciation.................................... (32,645) (25,450)
-------- --------
Net property and equipment............................. 124,204 119,312
-------- --------
Unexpended IRB funds........................................ 1,668 --
Goodwill.................................................... 3,622 3,726
Investments in joint ventures............................... (42) 990
-------- --------
Total assets........................................... $266,965 $256,108
======== ========
LIABILITIES
Current portion of long-term debt........................... $ 6,061 $ 4,888
Accounts payable............................................ 20,671 28,911
Accrued payroll............................................. 3,595 2,977
Other accrued liabilities................................... 5,921 6,449
-------- --------
Total current liabilities.............................. 36,248 43,225
-------- --------
Revolving credit agreement.................................. 47,892 37,450
Term loans.................................................. 29,076 28,097
Industrial revenue bonds.................................... 10,397 6,085
-------- --------
Total long-term debt................................... 87,365 71,632
-------- --------
Deferred income taxes....................................... 6,532 3,508
-------- --------
Total liabilities...................................... 130,145 118,365
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock, without par value, 5,000 shares authorized,
no shares issued or outstanding........................... -- --
Common stock, without par value, 20,000 shares authorized,
10,091 and 10,692 issued and outstanding at December 31,
1999 and 1998, respectively............................... 102,237 106,319
Retained earnings........................................... 34,583 31,424
-------- --------
Total shareholders' equity............................. 136,820 137,743
-------- --------
Total liabilities and shareholders' equity............. $266,965 $256,108
======== ========
</TABLE>

The accompanying notes are an integral part of these balance sheets.

Page 23 of 40
<PAGE> 24

OLYMPIC STEEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands)

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 3,159 $ (8,431) $ 8,847
Adjustments to reconcile net income (loss) to net cash
from operating activities-
Depreciation and amortization.......................... 7,852 6,973 6,003
Asset write-down....................................... -- 19,056 --
Loss on sale of fixed assets........................... -- 432 --
(Income) start-up costs from joint ventures............ 1,032 322 (11)
Long-term deferred income taxes........................ 3,024 (2,524) 1,209
-------- -------- --------
15,067 15,828 16,048
Changes in working capital:
Accounts receivable....................................... (6,706) 3,321 3,829
Inventories............................................... 1,822 10,904 6,008
Prepaid expenses and other................................ (1,007) (3,721) 910
Accounts payable.......................................... (8,240) 4,645 (1,165)
Accrued payroll and other accrued liabilities............. 90 (12) (128)
-------- -------- --------
(14,041) 15,137 9,454
-------- -------- --------
Net cash from operating activities..................... 1,026 30,965 25,502
-------- -------- --------
Cash flows from investing activities:
Equipment purchases and deposits.......................... (6,688) (16,904) (12,611)
Facility purchases and construction....................... (4,115) (8,368) (4,297)
Other capital expenditures, net........................... (1,771) (1,319) (1,195)
Acquisitions of JNT and Southeastern...................... -- (795) (13,689)
Investments in joint ventures............................. -- (98) (6,222)
-------- -------- --------
Net cash used for investing activities................. (12,574) (27,484) (38,014)
-------- -------- --------
Cash flows from financing activities:
Revolving credit agreement................................ 10,442 (11,359) 2,352
Term loans and IRB's...................................... 6,464 7,955 9,890
Unexpended IRB funds...................................... (1,668) -- --
Repurchase of common stock................................ (4,082) -- --
-------- -------- --------
Net cash from (used for) financing activities.......... 11,156 (3,404) 12,242
-------- -------- --------
Cash:
Net change................................................ (392) 77 (270)
Beginning balance......................................... 1,825 1,748 2,018
-------- -------- --------
Ending balance............................................ $ 1,433 $ 1,825 $ 1,748
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

Page 24 of 40
<PAGE> 25

OLYMPIC STEEL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands)

<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS
-------- --------
<S> <C> <C>
Balance at December 31, 1996........................... $106,319 $31,008
Net income........................................... -- 8,847
-------- -------

Balance at December 31, 1997........................... 106,319 39,855
Net loss............................................. -- (8,431)
-------- -------

Balance at December 31, 1998........................... 106,319 31,424
Net income........................................... -- 3,159
Repurchase of 601 common shares...................... (4,082) --
-------- -------

Balance at December 31, 1999........................... $102,237 $34,583
======== =======
</TABLE>

The accompanying notes are an integral part of these statements.

Page 25 of 40
<PAGE> 26

OLYMPIC STEEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(dollars in thousands, except per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
Olympic Steel, Inc. and its wholly-owned subsidiaries (collectively the Company
or Olympic), after elimination of intercompany accounts and transactions.
Investments in the Company's joint ventures are accounted for under the equity
method.

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CONCENTRATION RISKS

The Company is a major customer of flat-rolled coil and plate steel for
many of its principal suppliers, but is not dependent on any one supplier. The
Company purchased approximately 16% of its total steel requirements from its
single largest supplier in both 1999 and 1998.

INVENTORIES

Inventories are stated at the lower of cost or market and include the costs
of purchased steel, internal and external processing, and freight. Cost is
determined using the specific identification method.

PROPERTY AND EQUIPMENT, AND DEPRECIATION

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives ranging from 3 to 30
years.

GOODWILL AND AMORTIZATION

Goodwill includes the cost in excess of fair value of the net assets
acquired and is being amortized on a straight-line method ranging from 15 to 40
years. The Company evaluates facts and circumstances to determine if the value
of goodwill or other long-lived assets may be impaired. In 1998, the Company
determined that goodwill and certain fixed assets at its Detroit operation were
impaired and recorded an asset write-off to market value. Goodwill amortization
expense totaled $104 in 1999, $358 in 1998, and $314 in 1997. Accumulated
amortization of goodwill totaled $256 at December 31, 1999, and $152 at December
31, 1998.

REVENUE RECOGNITION

Revenue is recognized when steel is shipped to the customer. Sales returns
and allowances are treated as reductions to sales and are provided for based on
historical experience and current estimates.

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 1999,
the company repurchased 601 thousand shares at an average price of $6.76 per
share. Repurchased shares are held in treasury and are available for general
corporate purposes.

Page 26 of 40
<PAGE> 27

Earnings per share have been calculated based on the weighted average
number of shares outstanding. Average shares outstanding were 10.5 million in
1999, and 10.7 million in both 1998 and 1997. Basic and diluted earnings per
share are the same, as the effect of outstanding stock options is not dilutive.

2. ASSET WRITE-DOWN:

The Company recorded an asset write-down charge of $19,056 in the fourth
quarter of 1998. The charge consisted of $14,356 to write-off of goodwill and
write-down certain fixed assets at the Company's Detroit operation in accordance
with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," which requires assets such as goodwill and
fixed assets to be written down to fair market value when circumstances indicate
that their carrying values are impaired. The remaining $4,700 of the charge
related to the write-down of Olympic's investment in its Olympic Continental
Resources joint venture (OCR).

3. ACQUISITIONS:

Effective June 26, 1998, the Company acquired certain assets and assumed
certain liabilities of JNT Precision Machining, Inc. (JNT), a machining center
located in McConnellsburg, Pennsylvania, which operates lathes, machine centers,
drills and saws. The cash purchase price totaled $795. The acquisition was
accounted for as a purchase and, accordingly, assets and liabilities were
reflected at estimated fair values. The purchase price allocation resulted in
goodwill of $162, which is being amortized over 15 years. During the second half
of 1999, the JNT operation was relocated to a new 87,000 square foot plate
processing and machining facility constructed in Chambersburg, Pennsylvania.

Effective June 1, 1997, the Company acquired substantially all of the
assets and assumed certain liabilities of Southeastern Metal Processing, Inc.
and Southeastern Transshipping Realty (Southeastern). Southeastern historically
operated as a metals toll processor and is located near Atlanta, Georgia. The
purchase price, which included assumed liabilities, totaled approximately
$17,200. The adjusted cash portion of the purchase price, including fees and
expenses and the repayment of $2,500 of Southeastern's bank debt, approximated
$13,700. The acquisition has been accounted for as a purchase and, accordingly,
assets and liabilities were reflected at estimated fair values. The purchase
price allocation resulted in goodwill of approximately $3,700 which is being
amortized over 40 years.

4. INVESTMENTS IN JOINT VENTURES:

In December 1998, the Company wrote-off 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) ownership interest in the OCR joint venture ceased, and all OCR
business transactions with Atlas also ceased. During the third quarter of 1999,
Olympic announced the dissolution of OCR. Olympic, as guarantor of OCR's bank
debt, made a payment to extinguish all $4.7 million of OCR outstanding bank
debt, and simultaneously assumed all remaining OCR receivables, inventory, and
accounts payable, which are included in the 1999 consolidated financial
statements of the Company.

In April 1997, the Company and the U.S. Steel Group of USX Corporation
(USS) formed Olympic Laser Processing (OLP), a joint venture to process laser
welded sheet steel blanks for the automotive industry. OLP is owned 50% by each
of the companies. OLP has constructed a new facility in Michigan and initially
equipped it with two laser-welding lines. Production has begun on both lines and
OLP plans to purchase two additional manual lines in 2000. OLP start-up costs
are being expensed as incurred. The Company and USS each contributed $2,000 in
cash to OLP during the first half of 1997 and each guarantees, on a several
basis, 50% of OLP's outstanding debt under its $20,000 bank loan agreement. OLP
debt outstanding at December 31, 1999 totaled $18,076.

In December 1997, the Company, Michael J. Guthrie and Carlton L. Guthrie
(the Guthries) completed the formation of Trumark Steel & Processing, LLC (TSP),
a joint venture to support the flat-rolled steel requirements of the automotive
industry. The Guthries are also the executive officers of Trumark Inc., a
privately held supplier of metal stamped assemblies to the automotive industry
located in Michigan. In 1997, the Company made a $147

Page 27 of 40
<PAGE> 28

cash contribution to TSP for its 49% ownership interest in the venture. In
December 1998, and February 2000 additional contributions of $98 and $147,
respectively, were made by Olympic. TSP start-up costs have been expensed as
incurred. The Company and the Guthries severally guarantee outstanding debt
under TSP's credit facility in proportion to each member's ownership interest.
TSP debt outstanding at December 31, 1999 totaled $3,176.

5. ACCOUNTS RECEIVABLE:

Since 1995, the Company has operated under an agreement to sell, on a
revolving basis, through its wholly-owned subsidiary, Olympic Steel Receivables
LLC, an undivided interest in a designated pool of its trade accounts
receivable. The maximum amount of receivables available for sale under the
agreement, which expires December 19, 2002, is $70,000. The Company, as agent
for the purchaser of the receivables, retains collection and administrative
responsibilities for the participating interests sold. As collections reduce the
receivables included in the pool, the Company may sell additional undivided
interests in new receivables up to the $70,000 limit. The amount of receivables
sold by the Company typically will change monthly depending upon the level of
defined eligible receivables available for sale at each month end settlement
date.

As of December 31, 1999 and 1998, $52,000 and $57,000, respectively, of
receivables were sold and reflected as a reduction of accounts receivable in the
accompanying consolidated balance sheets. Costs of the program, which primarily
consist of the purchaser's financing cost of issuing commercial paper backed by
the receivables, totaled $3,119 in 1999, $3,773 in 1998, and $3,791 in 1997, and
have been classified as Receivable Securitization Expense in the accompanying
consolidated statements of income.

Accounts receivable are presented net of allowances for doubtful accounts
of $1,031 and $455 as of December 31, 1999 and 1998, respectively. Bad debt
expense totaled $911 in 1999, $98 in 1998, and $155 in 1997.

6. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Land and improvements................................. $ 10,256 $ 10,101
Buildings and improvements............................ 57,056 53,075
Machinery and equipment............................... 76,475 70,744
Furniture and fixtures................................ 4,799 4,181
Computer equipment.................................... 6,149 5,037
Vehicles.............................................. 198 291
Construction in progress.............................. 1,916 1,333
-------- --------
156,849 144,762
Less accumulated depreciation......................... (32,645) (25,450)
-------- --------
Net property and equipment.......................... $124,204 $119,312
======== ========
</TABLE>

Construction in progress at December 31, 1999 primarily consisted of
progress payments for a new slitter in Detroit and payments for new equipment in
Chambersburg. Construction in progress at December 31, 1998 primarily consisted
of payments made for the construction and equipping of the Chambersburg facility
and progress payments for new plate processing equipment.

7. REVOLVING CREDIT AGREEMENT:

The Company has been operating under various multi-bank revolving credit
agreements for many years. The Company's bank credit agreement (the Credit
Facility) currently consists of a $68,000 revolving credit component, a $21,000
term loan component to finance the Iowa temper mill and plate processing
facility (the Iowa Term Loan), letter of credit commitments totaling $6,262 as
of December 31, 1999, and a $71,400 liquidity

Page 28 of 40
<PAGE> 29

facility related to the Company's accounts receivable securitization agreement.
The respective assets financed provide collateral for the Iowa Term Loan and the
letters of credit. The agreement's maturity date is June 30, 2002. Each year,
the Company may request to extend its maturity date one year with the approval
of the bank group.

The Company has the option to borrow based on the agent bank's base rate or
London Interbank Offered Rates (LIBOR) plus a premium (the Premium). The Premium
is determined every three months based on the Company's operating performance
and leverage ratio. During 1999, the Premium averaged 1.50%, compared to 1.15%
in 1998. The effective interest rate for revolving credit borrowings amounted to
7.7% in 1999, 7.2% in 1998, and 7.0% in 1997. Interest on the base rate option
is payable quarterly in arrears while interest on the LIBOR option is payable at
the end of the LIBOR interest period, which ranges from one to six months. The
agreement also includes a commitment fee of .25% of the unused portion of the
revolver, payable quarterly in arrears. The Company's borrowing rate increased
to LIBOR plus 2.0% commencing December 1, 1999.

In January 2000, the Credit Facility was amended to change interest
coverage requirements commencing December 31, 1999. The amendment also added
another 50 basis point pricing tier to the Premium schedule. The Company is in
compliance with all covenants contained in the amended agreement.

The revolving credit agreement balance includes $6,311 and $2,353 of checks
issued that have not cleared the bank as of December 31, 1999 and 1998,
respectively.

8. TERM LOANS:

In May 1997, the Company entered into a $10,000 loan agreement with a
domestic bank to finance the fixed asset portion of the Southeastern
acquisition. In October 1999, an additional $2,000 was borrowed for an expansion
to the facility. The loan agreement includes a 10 year $3,500 term loan
component, a seven year $6,500 term loan component, and a five year $2,000
component (the Southeastern Term Loans). The term loans are secured by the real
estate and equipment financed, and are repayable in quarterly installments that
commenced September 1, 1997. Interest is charged at LIBOR plus the same Premium
associated with the Company's Credit Facility.

In 1993, the Company completed a $10,000 refinancing of certain of its real
estate in Minnesota, Connecticut, Illinois, and Ohio in the form of taxable rate
notes. The term of the notes is 15 years with annual principal payments of $700
for the first 10 years and $600 for years 11 through 15. The notes are backed by
a three year bank letter of credit, expiring October 15, 2001, and are secured
by mortgages on the real estate financed. The interest rate changes each week
based on the taxable rate note market.

The $21,000 Iowa Term Loan requires annual principal repayments of 10% of
the amount borrowed, which commenced May 30, 1999.

The long-term portion of term loans at December 31, 1999 and 1998,
consisted of the following:

<TABLE>
<CAPTION>
EFFECTIVE INTEREST
DESCRIPTION RATE AT 12/31/99 1999 1998
----------- ------------------ ------- -------
<S> <C> <C> <C>
Iowa Term Loan.......................... 8.0% $16,800 $15,300
Southeastern Term Loans................. 7.6% 7,025 6,804
Taxable rate notes...................... 6.8% 5,100 5,800
Other................................... 4.0% 151 193
------- -------
$29,076 $28,097
======= =======
</TABLE>

9. INDUSTRIAL REVENUE BONDS:

In April 1999, the Company entered into a $6,000, 5.1% fixed rate
tax-exempt industrial development bond agreement to finance the construction and
equipping of a new $7,000, 87,000 square foot plate processing and machining
facility in Chambersburg, Pennsylvania. Proceeds from the bonds were deposited
into an escrow account and are invested in commercial paper funds until
withdrawn for reimbursement. The loan agreement includes a 15-year, $3,100 real
estate component, and a 10-year, $2,900 million equipment component. Quarterly

Page 29 of 40
<PAGE> 30

repayments commenced October 1, 1999. The Chambersburg land, building and
equipment secure the outstanding debt.

The long-term portion of industrial revenue bonds at December 31, 1999 and
1998, consisted of the following:

<TABLE>
<CAPTION>
EFFECTIVE INTEREST
DESCRIPTION OF BONDS RATE AT 12/31/99 1999 1998
-------------------- ------------------ ------- ------
<S> <C> <C> <C>
$6,000 fixed rate bonds due 1999 through
2014................................... 5.1% $ 5,472 $ --
$6,000 variable rate bonds due 1995
through 2004........................... 5.7% 2,400 3,000
$4,800 variable rate bonds due 1992
through 2004........................... 5.7% 1,650 2,000
$2,660 variable rate bonds due 1992
through 2004........................... 5.7% 875 1,085
------- ------
$10,397 $6,085
======= ======
</TABLE>

The bonds due in 2004 are all backed by standby letters of credit, expiring
June 30, 2002 with the revolving credit bank group, which has a first lien on
certain land, building and equipment.

10. SCHEDULED DEBT MATURITIES, INTEREST, DEBT CARRYING VALUES AND COVENANTS:

Scheduled maturities of all long-term debt for the years succeeding
December 31, 1999 are $6,061 in 2000, $6,072 in 2001, $6,098 in 2002, $6,121 in
2003, $5,730 in 2004, and $15,452 thereafter. The overall effective interest
rate for all debt amounted to 6.9% in both 1999 and 1998, and 6.7% in 1997.
Interest paid totaled $4,712, $5,124, and $4,579, for the years ended December
31, 1999, 1998 and 1997, respectively. Amounts paid relative to the accounts
receivable securitization program totaled $3,159 in 1999, $3,858 in 1998 and
$3,736 in 1997. Interest of $149, $1,082, and $156, was capitalized in 1999,
1998 and 1997, respectively, in connection with constructing and equipping
facilities.

Management believes the carrying values of its long-term debt approximate
their fair values, as each of the Company's debt arrangements bear interest at
rates that vary based on a bank's base rate, LIBOR, the short-term tax exempt
revenue bond index or taxable rate note market.

Under its debt agreements, the Company is subject to certain covenants such
as minimum net worth, capital expenditure limitations, and interest coverages.
The Company is in compliance with all of its covenants after amending its
interest coverage covenant requirement on January 15, 2000.

Page 30 of 40
<PAGE> 31

11. INCOME TAXES:

The components of the Company's net deferred tax asset or liability at
December 31 are as follows:

<TABLE>
<CAPTION>
ASSET/(LIABILITY) 1999 1998
----------------- ------- ------
<S> <C> <C>
Accrued income taxes...................................... $ 5,211 $1,642

Current deferred income taxes:
Inventory............................................... 847 (583)
Asset write-down........................................ -- 1,774
Tax credit carryforward................................. -- 861
Other temporary items................................... (885) 475
Total current deferred income taxes.................. (38) 2,527
------- ------
Accrued and current deferred income taxes................. 5,173 4,169
------- ------
Long-term deferred income taxes:
Goodwill................................................ 1,383 1,643
Tax credit carryforward................................. 896 --
Tax in excess of book depreciation...................... (8,066) (4,702)
Other temporary items................................... (745) (449)
------- ------
Total long-term deferred income taxes................ (6,532) (3,508)
Total income tax asset (liability)................... $(1,359) $ 661
======= ======
</TABLE>

The following table reconciles the U.S. federal statutory rate to the
Company's effective tax rate:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory rate............................ 35.0% 35.0% 35.0%
State and local taxes, net of federal benefit.......... 2.0 2.0 2.0
Asset write-down....................................... -- (5.5) --
All other, net......................................... 1.5 1.0 0.5
---- ---- ----
Effective income tax rate.............................. 38.5% 32.5% 37.5%
==== ==== ====
</TABLE>

The tax provision includes a current provision of $252, $1,255, and $4,495,
and a deferred expense or (benefit) of $1,725, ($5,314), and $813, in 1999, 1998
and 1997, respectively. Income taxes paid in 1999, 1998 and 1997, totaled $315,
$3,202, and $4,459, respectively.

12. RETIREMENT PLANS:

The Company has several retirement plans consisting of a profit-sharing
plan and a 401(k) plan covering all non-union employees, and two separate 401(k)
plans covering all union employees.

Company contributions for the non-union profit-sharing plan are in
discretionary amounts as determined annually by the Board of Directors. Company
contributions were 3% in 1999, and 4% in both 1998 and 1997, of each eligible
employee's W-2 earnings. The non-union 401(k) retirement plan allows eligible
employees to contribute up to 10% of their W-2 earnings. The Company
contribution is determined annually by the Board of Directors and is based on a
percentage of eligible employees' contributions. For each of the last three
years, the Company matched one half of each eligible employee's contribution.

Company contributions for each of the last three years for the union plans
were 3% of eligible W-2 wages plus one half of the first 4% of each employee's
contribution.

Retirement plan expense amounted to $1,841, $2,346, and $2,258 for the
years ended December 31, 1999, 1998, and 1997, respectively.

Page 31 of 40
<PAGE> 32

13. STOCK OPTIONS:

In January 1994, the Stock Option Plan (Option Plan) was adopted by the
Board of Directors and approved by the shareholders of the Company. Pursuant to
the provisions of the Option Plan, key employees of the Company, non-employee
directors and consultants may be offered the opportunity to acquire shares of
Common Stock by the grant of stock options, including both incentive stock
options (ISOs) and nonqualified stock options. ISOs are not available to
non-employee directors or consultants. A total of 450,000 shares of Common Stock
has been reserved for options under the Option Plan. The purchase price of a
share of Common Stock pursuant to an ISO will not be less than the fair market
value of a share of Common Stock at the grant date. Options vest over period of
three or five years at rates of 33.3% and 20% per year, respectively, commencing
on the first anniversary of the date of grant, and all expire 10 years after the
date of grant. The Option Plan will terminate on January 5, 2004. Termination of
the Option Plan will not affect outstanding options.

During 1999, additional non-qualified options to purchase 194,333 shares of
common stock were issued to the Company's outside directors, executive officers
and senior managers at option prices ranging from $7.18 to $8.75. During 1997,
nonqualified options to purchase 8,000 shares were issued to the Company's
outside directors and certain key employees. No options were issued in 1998.
Since adoption of the Option Plan, options to purchase 8,000 shares have been
exercised. As of December 31, 1999, options to purchase 306,833 shares were
outstanding, of which 101,600 were exercisable at prices ranging from $14.63 to
$15.50 per share.

In 1996, the Company adopted the disclosure-only provisions of SFAS No.
123, "Accounting for Stock-Based Compensation." The Black-Scholes option-pricing
model was used to determine that the pro forma impact of compensation expense
from options granted was immaterial for all years presented.

14. COMMITMENTS AND CONTINGENCIES:

The Company leases certain warehouses, sales offices and processing
equipment under long-term lease agreements. The leases are classified as
operating and expire at various dates through 2004. In some cases the leases
include options to extend. Rent expense was $1,600, $2,278, and $2,175 for the
years ended December 31, 1999, 1998 and 1997, respectively.

Future minimum lease payments as of December 31, 1999 are as follows:

<TABLE>
<S> <C>
2000........................................................ $1,104
2001........................................................ 924
2002........................................................ 736
2003........................................................ 651
2004........................................................ 585
Thereafter.................................................. --
------
$4,000
======
</TABLE>

The Company is a defendant in various legal proceedings and claims that
arise in the ordinary course of business. In the opinion of management, the
outcome of the proceedings to which the Company is currently a party will not
have a material adverse effect upon its operations or financial position.

15. RELATED PARTY TRANSACTIONS:

Related entities handled a portion of the freight activity for the
Company's Cleveland operation. Payments to these entities totaled $1,319,
$2,383, and $2,906 for the years ended December 31, 1999, 1998 and 1997,
respectively. There is no common ownership or management of this entity with the
Company. Another related entity owns one of the Cleveland warehouses and leases
it to the Company at an annual rental of $195. The lease expires June 2000 and
has two remaining renewal options of 10 years each.

Page 32 of 40
<PAGE> 33

16. SUBSEQUENT EVENT -- SHAREHOLDER RIGHTS PLAN:

On January 31, 2000, the Company's board of directors (the Directors)
approved the adoption of a share purchase rights plan. The terms and description
of the plan are set forth in a rights agreement, dated January 31, 2000, between
the Company and National City Bank, as rights agent (the Rights Agreement). The
Directors declared a dividend distribution of one right for each share of common
stock of the Company outstanding as of the March 6, 2000 record date (the Record
Date). The Rights Agreement also provides, subject to specified exceptions and
limitations, that common stock issued or delivered from the Company's treasury
after the record date will be accompanied by a right. Each right entitles the
holder to purchase one-one-hundredth of a share of Series A Junior Participating
Preferred stock, without par value at a price of $20 per one one-hundredth of a
preferred share (a Right). The Rights expire on March 6, 2010, unless earlier
redeemed, exchanged or amended. Rights become exercisable to purchase Preferred
Shares following the commencement of certain tender offer or exchange offer
solicitations resulting in beneficial ownership of 15% or more of the Company's
outstanding common shares as defined in the Rights Agreement.

SUPPLEMENTARY FINANCIAL INFORMATION
UNAUDITED QUARTERLY RESULTS OF OPERATIONS
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
1999 1ST 2ND 3RD 4TH YEAR
---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales........................... $129,147 $133,548 $125,168 $136,931 $524,794
Gross margin........................ 30,116 32,550 30,605 30,495 123,766
Operating income.................... 3,926 5,293 3,392 991 13,602
Income (loss) before taxes.......... 2,102 3,425 1,314 (1,705) 5,136
Net income (loss)................... $ 1,293 $ 2,106 $ 808 $ (1,048) $ 3,159
Net income (loss) per share....... $ 0.12 $ 0.20 $ 0.08 $ (0.10) $ 0.30
Weighted average shares
outstanding.................... 10,692 10,565 10,381 10,199 10,452
Market price of common stock: (a)
High.............................. $ 8.38 $ 8.88 $ 7.00 $ 6.22 $ 8.88
Low............................... 5.06 6.50 5.63 4.38 4.38
</TABLE>

<TABLE>
<CAPTION>
1998 1ST 2ND 3RD 4TH(b) YEAR
---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales........................... $155,707 $152,254 $132,035 $136,193 $576,189
Gross margin........................ 32,298 32,009 27,827 28,511 120,645
Operating income (loss)............. 5,633 5,254 1,497 (16,923) (4,539)
Income (loss) before taxes.......... 3,644 3,292 (482) (18,944) (12,490)
Net income (loss)................... $ 2,259 $ 2,041 $ (299) $(12,432) $ (8,431)
Net income (loss) per share....... $ 0.21 $ 0.19 $ (0.03) $ (1.16) $ (0.79)
Weighted average shares
outstanding.................... 10,692 10,692 10,692 10,692 10,692
Market price of common stock: (a)
High.............................. $ 17.13 $ 16.25 $ 12.88 $ 7.94 $ 17.13
Low............................... 13.69 12.50 6.13 5.00 5.00
</TABLE>

- ---------------
(a) Represents high and low closing quotations as reported by NASDAQ.

(b) Includes an asset write-down charge of $19,056 recorded in fourth quarter
1998 operating expenses.

Page 33 of 40
<PAGE> 34

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by Item 10 as to the Directors of the Registrant will
be incorporated herein by reference to the information set forth under the
captions "Election of Directors and Section 16(a) Beneficial Ownership Reporting
Compliance" in the Registrant's definitive proxy statement for its April 26,
2000 Annual Meeting of Shareholders.

ITEM 11. EXECUTIVE COMPENSATION

Information required by Item 11 will be incorporated herein by reference to
the information set forth under the caption "Executive Officers' Compensation"
in the Registrant's definitive proxy statement for its April 26, 2000 Annual
Meeting of Shareholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by Item 12 will be incorporated herein by reference to
the information set forth under the captions "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management" in the Registrant's
definitive proxy statement for its April 26, 2000 Annual Meeting of
Shareholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by Item 13 will be incorporated herein by reference to
the information set forth under the caption "Related Transactions" in the
Registrant's definitive proxy statement for its April 26, 2000 Annual Meeting of
Shareholders.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) THE FOLLOWING FINANCIAL STATEMENTS ARE INCLUDED IN PART II, ITEM 8:

Report of Independent Public Accountants

Consolidated Statements of Income for the Years Ended December 31, 1999,
1998 and 1997

Consolidated Balance Sheets as of December 31, 1999 and 1998

Consolidated Statements of Cash Flows for the Years Ended December 31, 1999,
1998 and 1997

Consolidated Statements of Shareholders' Equity for the Years Ended December
31, 1999, 1998 and 1997

Notes to Consolidated Financial Statements

(a)(2) FINANCIAL STATEMENT SCHEDULES. All schedules have been omitted since
the required information is not present or not present in amounts sufficient
to require submission of the schedule, or because the information required
is included in the financial statements including notes thereto.

(a)(3) EXHIBITS. The Exhibits filed herewith are set forth on the Index to
Exhibits filed as part of this report.

(b) REPORTS ON FORM 8-K. No reports were filed on Form 8-K during the fourth
quarter of 1999. However, on February 15, 2000, the Company filed a Form 8-K
relative to the adoption of a shareholders rights plan.

Page 34 of 40
<PAGE> 35

OLYMPIC STEEL, INC.

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION OF DOCUMENT PAGE NO.
------- ----------------------- ----------
<S> <C> <C>
3.1(i) Amended and Restated Articles of Incorporation (a)
3.1(ii) Amended and Restated Code of Regulations (a)
4.1 Credit Agreement dated October 4, 1996 by and among the (b)
Registrant, three banks and National City Bank, Agent
4.2 First Amendment to Credit Agreement dated January 24, 1997 (c)
by and among the Registrant, three banks and National City
Bank, Agent
4.3 Second Amendment to Credit Agreement, dated May 30, 1997 (d)
4.4 Third Amendment to Credit Agreement, dated July 14, 1997 (d)
4.5 Fourth Amendment to Credit Agreement, dated December 8, 1998 (h)
4.6 Fifth Amendment to Credit Agreement, dated March 10, 1999 (h)
4.7 Sixth Amendment to Credit Agreement, dated January 15, 2000 39-43
4.8 Receivables Purchase Agreement dated December 19, 1995 among (e)
the Registrant, Olympic Steel Receivables LLC, Olympic Steel
Receivables, Inc. and Clipper Receivables Corporation as
Purchaser
4.9 Second Amendment to Receivables Purchase Agreement, dated (d)
July 14, 1997
Information concerning certain of the Registrant's other
long-term debt is set forth in Notes 7 through 10 of Notes
to Consolidated Financial Statements. The Registrant hereby
agrees to furnish copies of such instruments to the
Commission upon request
10.1 Olympic Steel, Inc. Stock Option Plan (a)
10.2 Lease, dated as of July 1, 1980, as amended, between S.M.S. (a)
Realty Co., a lessor, and the Registrant, as lessee,
relating to one of the Cleveland facilities
10.4 Lease, dated as of November 30, 1987, as amended, between (a)
Tinicum Properties Associates L.P., as lessor, and the
Registrant, as lessee, relating to Registrant's Lester,
Pennsylvania facility
10.5 Operating Agreement of Trumark Steel & Processing, LLC, (f)
dated December 12, 1997, by and among Michael J. Guthrie,
Carlton L. Guthrie and Oly Steel Welding, Inc.
10.6 Carrier Contract Agreement for Transportation Services, (h)
dated August 1, 1998, between Lincoln Trucking Company and
the Registrant
10.7 Operating Agreement of OLP, LLC, dated April 4, 1997, by and (g)
between the U.S. Steel Group of USX Corporation and Oly
Steel Welding, Inc.
21 List of Subsidiaries 44
23 Consent of Arthur Andersen LLP 45
24 Directors and Officers Powers of Attorney 46
27 Financial Data Schedule (EDGAR Filing Only)
</TABLE>

- ---------------
(a) Incorporated by reference to the Exhibit with the same exhibit number
included in Registrant's Registration Statement on Form S-1 (No. 33-73992)
filed with the Commission on January 12, 1994.

(b) Incorporated by reference to an Exhibit included in Registrant's Form 10-Q
filed with the Commission on November 4, 1996.

Page 35 of 40
<PAGE> 36

(c) Incorporated by reference to an Exhibit included in Registrant's Form 10-K
filed with the Commission on March 7, 1997.

(d) Incorporated by reference to an Exhibit included in Registrant's Form 10-Q
filed with the Commission on August 5, 1997.

(e) Incorporated by reference to an Exhibit included in Registrant's Form 10-K
filed with the Commission on March 29, 1996.

(f) Incorporated by reference to an Exhibit included in Registrant's Form 10-K
filed with the Commission on March 9, 1998.

(g) Incorporated by reference to an Exhibit included in Registrant's Form 10-Q
filed with the Commission on May 2, 1997.

(h) Incorporated by reference to an Exhibit included in Registrant's Form 10-K
filed with the Commission on March 12, 1999.

Page 36 of 40
<PAGE> 37

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

OLYMPIC STEEL, INC.

March 20, 2000 By: /s/ R. LOUIS SCHNEEBERGER
----------------------------------
R. Louis Schneeberger,
Chief Financial Officer and
Director

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED AND ON THE 20TH DAY OF MARCH, 2000.

<TABLE>
<S> <C>
/s/ MICHAEL D. SIEGAL * March 20, 2000
- -----------------------------------------------------
Michael D. Siegal President, Chairman of the Board
and Chief Executive Officer

/s/ R. LOUIS SCHNEEBERGER * March 20, 2000
- -----------------------------------------------------
R. Louis Schneeberger Chief Financial Officer and
Director

/s/ DAVID A. WOLFORT * March 20, 2000
- -----------------------------------------------------
David A. Wolfort
Chief Operating Officer and Director

/s/ SUREN A. HOVSEPIAN * March 20, 2000
- -----------------------------------------------------
Suren A. Hovsepian
Business Consultant and Director

/s/ RICHARD T. MARABITO * March 20, 2000
- -----------------------------------------------------
Richard T. Marabito
Treasurer and Corporate Controller
(Principal Accounting Officer)

/s/ MARTIN H. ELRAD * March 20, 2000
- -----------------------------------------------------
Martin H. Elrad, Director

/s/ THOMAS M. FORMAN * March 20, 2000
- -----------------------------------------------------
Thomas M. Forman, Director

/s/ BETSY S. ATKINS * March 20, 2000
- -----------------------------------------------------
Betsy S. Atkins, Director
</TABLE>

* The undersigned, by signing his name hereto, does sign and execute this Annual
Report on Form 10-K pursuant to the Powers of Attorney executed by the
above-named officers and Directors of the Company and filed with the
Securities and Exchange Commission on behalf of such officers and Directors.

<TABLE>
<S> <C>
By: /s/ R. LOUIS SCHNEEBERGER March 20, 2000
- -----------------------------------------------------
R. Louis Schneeberger, Attorney-in-Fact
</TABLE>

Page 37 of 40

<PAGE> 1

EXHIBIT 4.7

SIXTH AMENDMENT TO CREDIT AGREEMENT
-----------------------------------

THIS SIXTH AMENDMENT TO CREDIT AGREEMENT, dated as of January
15, 2000, (this "Sixth Amendment"), is by and among OLYMPIC STEEL, INC., an Ohio
corporation ("Borrower"), and NATIONAL CITY BANK ("NCB") and the group of other
banks signatory hereto or that become parties to the Credit Agreement hereafter
identified by amendment or supplement thereto (NCB and the banks comprising such
group at any specific time, hereinafter referred to as the "Banks") and NATIONAL
CITY BANK, as agent for the Banks (in that capacity, "NCB-Agent").

RECITALS
--------

A. Borrower, the Banks and NCB-Agent entered into a Credit
Agreement, dated as of October 4, 1996 (the "Credit Agreement"), pursuant to
which Borrower may obtain, among other things, (i) loans ratably from the Banks
that are on a revolving credit basis and (ii) subject LCs issued by NCB in which
the Banks agree to ratably share the obligations in respect thereof, in each
case until the expiration date.

B. Borrower, the Banks and NCB-Agent entered into the First
Amendment to Credit Agreement, dated as of January 24, 1997 (the "First
Amendment"), in order to increase the amount of the commitments by the Banks for
subject revolving credit loans and additional subject LCs by Ten Million Dollars
($10,000,000) and to permit Borrower to make certain joint venture investments
and guarantees of indebtedness of the joint venture entities.

C. Borrower, the Banks and NCB-Agent entered into the Second
Amendment to Credit Agreement, dated as of May 30, 1997 (the "Second
Amendment"), in order to increase the amount of the commitments by the Banks for
subject revolving credit loans and additional subject LCs by Eight Million
Dollars ($8,000,000), to add a commitment by Banks for new Series A term loans
in the amount of Seventeen Million Dollars ($17,000,000), to permit certain
borrowing from other lenders, to permit the Borrower to allow certain of its
property to become encumbered by liens in favor of other lenders and to extend
the expiration date to June 30, 2000.

D. Borrower, the Banks and NCB-Agent entered into the Third
Amendment to Credit Agreement, dated as of July 14, 1997 (the "Third Amendment")
in order to add an additional bank as a party to Credit Agreement, to adjust the
ratable share of the obligations among the Banks which were original parties to
the Credit Agreement, to decrease the aggregate amount of the commitments by the
Banks for existing subject LCs, and to make appropriate changes to the Credit
Agreement in recognition that some or all of the proceeds of the subject loans
would be used by a new subsidiary of Borrower, Olympic Steel Iowa, Inc., for the
purpose of acquiring land and constructing a temper mill facility in Bettendorf,
Iowa.

E. Borrower, the Banks and NCB-Agent entered into the Fourth
Amendment to Credit Agreement, dated as of December 8, 1998 (the "Fourth
Amendment") in order to authorize Borrower to borrow funds from Mellon Bank,
N.A. ("Mellon"), one of the Banks, pursuant to a discretionary Swing Line of
Credit facility (the "Swing Loan") as an

<PAGE> 2

additional exception to the prohibition against incurring indebtedness under
Section 3D.02 of the Credit Agreement; to grant to Mellon a one-time right to
have the Banks refund the outstanding Swing Loan as a subject revolving credit
loan; and to adjust Mellon's subject commitment with respect to the subject
loans made pursuant to the Credit Agreement until such time as the Swing Loan is
refunded at Mellon's request by a subject revolving credit loan.

F. Borrower, the Banks and NCB-Agent entered into the Fifth
Amendment to Credit Agreement dated as of March 10, 1999 (the "Fifth Amendment")
in order to extend the expiration date until June 30, 2002; to increase the
amount of the series A subject term loan commitment by $4,000,000, to waive
certain covenant requirements and exclude certain charges therefrom and modify
the interest rates payable by Borrower based on Borrower's EBIT-to-interest
ratio.

G. Borrower, the Banks and NCB-Agent desire to again amend the
Credit Agreement by this Sixth Amendment in order to change the Interest Rate
and Letter of Credit Commission and to modify the Interest Coverage requirements
of the Credit Agreement.

AGREEMENT
---------

Accordingly, the parties have agreed and do hereby agree as follows:

1. Subsection 2B.07 INTEREST RATES AND LETTER OF CREDIT
COMMISSIONS of the Credit Agreement shall be deleted in its entirety and the
following shall be substituted in place thereof:

2B.07 INTEREST RATES AND LETTER OF CREDIT COMMISSIONS - (a)
Effective as of December 1, 1999 and thereafter until maturity, the
principal of subject revolving credit loans and term loans shall bear
interest at the per annum rates and the commissions on the subject
letters of credit (in both cases, computed in accordance with
subsection 8.10) as calculated based on the following:

(i) Prime rate loans shall bear interest at a fluctuating rate
equal to the prime rate from time to time in effect, with each change
in the prime rate automatically and immediately changing the rate
thereafter applicable to the prime rate loans plus the applicable prime
rate margin as determined in accordance with the following table;

(ii) LIBOR loans shall bear interest at a rate equal to the
LIBOR pre-margin rate in effect at the start of the applicable contract
period (except that any change in the FRB reserve percentage shall
automatically and immediately change the LIBOR pre-margin rate
thereafter applicable to the LIBOR loans) plus the applicable LIBOR
margin as determined in accordance with the following table;

(iii) Commissions on existing subject LCs have been paid in
advance through the respective dates set forth on EXHIBIT 2(B).07(iii).
Commencing after such dates commissions on all subject LCs shall be
adjusted quarterly on the last business day of

<PAGE> 3

each March, June, September and December of each year on the basis of
the applicable percentage as determined in accordance with the
following table:
<TABLE>
<CAPTION>

- ----------------------------------------------------------------------------------------------------------------------

If the Borrower's and the Borrower's Then, both the applicable LIBOR And the
Liabilities-to-Worth EBIT-to-Interest Ratio margin and the applicable letter of applicable
Ratio is: is: credit commission shall be equal to: Prime rate
margin equals:
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
less than or equal to Greater than or equal 75 basis points 0
.75:1 to 3.50:1
- ----------------------------------------------------------------------------------------------------------------------
greater than .75:1 but less Less than 3.50:1 but 100 basis points 0
than or equal to 1.25:1 greater than or equal to
2.75:1
- ----------------------------------------------------------------------------------------------------------------------
Greater than 1.25:1 but less Less than 2.75:1 but 125 basis points 0
than or equal to 1.75:1 greater than or equal to
2.25:1
- ----------------------------------------------------------------------------------------------------------------------
greater than 1.75:1 Less than 2.25:1 but 175 basis points 0
greater than or equal to
2.00:1
- ----------------------------------------------------------------------------------------------------------------------
greater than 1.75:1 Less than 2.00:1 200 basis points 0
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

Both the liabilities-to-worth ratio and EBIT-to-interest ratio must be
satisfied in order for the corresponding applicable prime rate margin,
applicable LIBOR margin and applicable letter of credit commission to
be effective, and if either the specific liabilities-to-worth ratio or
EBIT-to-interest ratio is not satisfied, then the next highest prime
rate margin, LIBOR margin or applicable letter of credit commission
shall be applicable.

(b) After maturity (whether occurring by lapse of time or by
acceleration), the prime rate loans shall bear interest at a
fluctuating rate equal to the prime rate from time to time in
effect plus two percent (2%) per annum; PROVIDED, that in no
event shall the rate applicable to the prime rate loans after
the maturity thereof be less than the rate applicable thereto
immediately before maturity and each LIBOR loan shall bear
interest computed and payable in the same manner as in the
case of prime rate loans EXCEPT that in no event shall any
LIBOR loan bear interest after maturity at a lesser rate than
that applicable thereto immediately before maturity.

2. Subsection 3B.03 INTEREST COVERAGE of the Credit Agreement
shall be deleted in its entirety and the following substituted in place thereof:

3B.03 INTEREST COVERAGE - On a consolidated statement basis,
Borrower will not, as at the end of the fiscal quarter during any
fiscal year of Borrower (commencing December 31, 1999), suffer or
permit its EBIT-to-interest ratio to be less

<PAGE> 4

than 1.50:1 except as hereinafter provided. The Banks waive Borrower's
compliance with the EBIT-to-interest ratio requirement as of
September 30, 1999 provided such ratio was not less than 1.75:1.
Further, notwithstanding the foregoing, Borrower's EBIT-to-interest
ratio for the fiscal quarter ending on September 30, 2000 shall be not
less than 1.75:1 and for the fiscal quarters ending on and after
December 31, 2000 shall be not less than 2.25:1.

3. Borrower shall pay or cause to be paid to NCB-Agent an amendment fee
in the amount of $85,000.00 to be shared ratably among the Banks.

4. From and after the effective date of this Sixth Amendment,
references in the Credit Agreement and the subject notes (as amended by the
First Amendment, the Second Amendment, the Third Amendment, the Fourth
Amendment, the Fifth Amendment and this Sixth Amendment thereto or pursuant to
such amendments) to the Credit Agreement shall be deemed to be references to the
Credit Agreement as amended by all such amendments (unless otherwise expressly
indicated).

5. Borrower restates and reaffirms all of its representations and
warranties set forth in Section 4B of the Credit Agreement as of the date
hereof.

6. This Sixth Amendment and the modifications set forth herein shall be
and become effective as of the date hereof.

7. The Credit Agreement, as amended by the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment and
this Sixth Amendment, is hereby ratified and confirmed.

8. This Sixth Amendment may be executed in one or more counterparts,
each counterpart to be executed by Borrower, by NCB-Agent and by one or more or
all of the Banks. Each such executed counterpart shall be deemed to be an
executed original for all purposes but all such counterparts taken together
shall constitute one agreement, which agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof.

9. This Sixth Amendment may be executed by representatives of the Banks
using facsimile signatures and facsimilied signature pages shall in all respects
be binding on all parties hereto and thereto as if such signature pages were
originally delivered. Original signature pages for all facsimilied signature
pages shall be delivered to NCB-Agent.

<PAGE> 5

In WITNESS WHEREOF, the parties have executed this Sixth Amendment as
of the date first above written.
<TABLE>
<CAPTION>

<S> <C>
NATIONAL CITY BANK, AGENT OLYMPIC STEEL, INC.

By: By:
------------------------------------------------- --------------------------------------------
Printed Name: Printed Name:
--------------------------------------- ---------------------------------
Title: Title:
---------------------------------------------- -----------------------------------------

NATIONAL CITY BANK MELLON BANK, N.A.

COMERICA BANK PNC BANK, NATIONAL ASSOCIATION

<PAGE> 1

EXHIBIT 21

LIST OF SUBSIDIARIES OF OLYMPIC STEEL, INC.

<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF ORGANIZATION % OWNERSHIP
- ------------------ --------------------- -----------
<S> <C> <C>
Olympia International, Inc. U.S. Virgin Islands 100%
Olympic Steel Lafayette, Inc. Ohio 100%
Olympic Steel Minneapolis, Inc. Minnesota 100%
Olympic Steel Receivables, Inc. Delaware 100%
Olympic Steel Receivables LLC Delaware 100%(a)
Olympic Steel Trading, Inc. Ohio 100%
Oly Steel Welding, Inc. Michigan 100%
Olympic Steel Iowa, Inc. Iowa 100%(b)
OLP LLC Michigan 50%(c)
Trumark Steel & Processing LLC Michigan 49%(d)
</TABLE>

- ---------------
(a) Owned 100% by Olympic Steel, Inc. and Olympic Steel Receivables, Inc.

(b) Owned 100% by Olympic Steel Minneapolis, Inc.

(d) Owned 49% by Oly Steel Welding, Inc.

Page 38 of 40

<PAGE> 1

EXHIBIT 23

CONSENT OF ARTHUR ANDERSEN LLP

As independent public accountants, we hereby consent to the incorporation
of our report dated January 28, 2000, included in this Form 10-K, into the
Company's previously filed Form S-8 Registration Statement File No. 333-10679.

Arthur Andersen LLP

Cleveland, Ohio
March 15, 2000

Page 39 of 40

<PAGE> 1

EXHIBIT 24

POWERS OF ATTORNEY

OLYMPIC STEEL, INC.

KNOW ALL MEN BY THESE PRESENTS, that OLYMPIC STEEL, INC., an Ohio
corporation, and each person whose name is signed below hereby constitute and
appoint Michael D. Siegal, R. Louis Schneeberger and Richard T. Marabito their
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for and on behalf of Olympic Steel, Inc. and the undersigned
Directors and officers of Olympic Steel, Inc., and each of such Directors and
officers, to sign Olympic Steel, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1999, any or all amendments thereto, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting such attorneys-in-fact and agents
full power and authority to do and perform each and every act and thing
requisite and necessary in connection with such matters and hereby ratifying and
confirming all that such attorneys-in-fact and agents or their substitute or
substitutes may do or cause to be done by virtue hereof.

This Power of Attorney of Olympic Steel, Inc., and the Directors and
officers of Olympic Steel, Inc. may be executed in multiple counterparts, each
of which shall be deemed an original with respect to the person executing it.

IN WITNESS WHEREOF, this Power of Attorney has been signed at Cleveland,
Ohio this 15th day of March, 2000.

OLYMPIC STEEL, INC.

By: /s/ R. LOUIS SCHNEEBERGER
----------------------------------
R. Louis Schneeberger,
Chief Financial Officer

DIRECTORS AND OFFICERS:

/s/ MARTIN H. ELRAD
- ------------------------------------------------------
Martin H. Elrad, Director

/s/ THOMAS M. FORMAN
- ------------------------------------------------------
Thomas M. Forman, Director

/s/ SUREN A. HOVSEPIAN
- ------------------------------------------------------
Suren A. Hovsepian, Consultant and Director

/s/ BETSY S. ATKINS
- ------------------------------------------------------
Betsy S. Atkins, Director

/s/ R. LOUIS SCHNEEBERGER
- ------------------------------------------------------
R. Louis Schneeberger,
Chief Financial Officer and Director

/s/ MICHAEL D. SIEGAL
- ------------------------------------------------------
Michael D. Siegal, President, Chief Executive Officer and Chairman of the Board

/s/ DAVID A. WOLFORT
- ------------------------------------------------------
David A. Wolfort,
Chief Operating Officer and Director

/s/ RICHARD T. MARABITO
- ------------------------------------------------------
Richard T. Marabito, Treasurer
and Corporate Controller
(Principal Accounting Officer)

Page 40 of 40

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,433
<SECURITIES> 0
<RECEIVABLES> 9,802
<ALLOWANCES> 0
<INVENTORY> 119,585
<CURRENT-ASSETS> 137,513
<PP&E> 156,849
<DEPRECIATION> (32,645)
<TOTAL-ASSETS> 266,965
<CURRENT-LIABILITIES> 36,248
<BONDS> 45,534
0
0
<COMMON> 102,237
<OTHER-SE> 34,583
<TOTAL-LIABILITY-AND-EQUITY> 266,965
<SALES> 524,794
<TOTAL-REVENUES> 524,794
<CGS> 401,028
<TOTAL-COSTS> 401,028
<OTHER-EXPENSES> 110,164
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,315
<INCOME-PRETAX> 5,136
<INCOME-TAX> 1,977
<INCOME-CONTINUING> 3,159
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,159
<EPS-BASIC> .30
<EPS-DILUTED> .30

</TABLE>