Olympic Steel Inc (ZEUS) 2005 Q1 法說會逐字稿

Good morning ladies and gentlemen and thank you for standing by. Welcome to the Olympic Steel Inc First Quarter 2005 Earnings Results Conference call. [OPERATOR INSTRUCTIONS]. At this time, I would like to turn the presentation over to Michael Siegal, Chief Executive Officer. Please go ahead Sir.

Thank you Andrew. Good morning and welcome to our call. On the call with me this morning is Rick Marabito, our Chief Financial Officer; David Wolfort who normally is on the call with us is traveling overseas and is unavailable for the call today. So first I would like to thank all of you for your participation and your interest in Olympic Steel, and before we begin let me remind you that forward-looking statements in this call are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Please refer to Olympic Steel's SEC filings for further information.

As indicated in the first quarter earnings release this morning, we are very pleased to report our highest quarterly sales revenue ever. First quarter sales totaled 284.6 million, a 52-percent increase over last year's first quarter sales reflecting higher average selling prices than at this time last year. And we are also pleased to report net income of 9.6 million or 92 cents per fully diluted share. During the first quarter, we actually saw a pretty good demand from most of the sectors in the market.

The exceptions for us would be the obvious Detroit automotive Big 3 sector, and we have a relatively robust market at other service centers and of course that market was not as good as we would have hoped as we see that the spot marketplace was impacted by the inventories that remained higher to service center level that we expected during the quarter. So we lost some sales to the service center market that we saw to on a regular basis. Going forward, we anticipate that the inventory overhang will continue to make the spot market pricing for carbon

products more competitive and thus compressing some gross margins on the sell side.

We continue at Olympic to focus on our efforts on maintaining strong disciplines over expenses, receivables and credit and our inventory turn over. We believe our diligence in this area will help to mitigate some of the markets pricing and margin fluctuations and Rick will detail some of that later. Our balance sheet also remains very strong. We finished the quarter with shareholder equity for a share at $18.51 and a debt to equity ratio of 0.6421 and continued to maintain very good inventory and accounts receivable turn over rates.

In our release, we also mentioned that we continue to invest in high value added processing equipment. We installed two new Lasers in Cleveland and in response to that growing outsource requirement we have two more lasers on order which would come in during the second and third quarter in our central region. So I will turn the conversation over to Rick for the financial results.

Thanks and good morning everyone. I will hit on a few financial items that Michael didn't yet touch on. Our gross margins on a per ton basis, they were very consistent, $137.34 in the first quarter versus a $138.88 per ton last year's first quarter. However the percentage of sale to gross margins did drop considerably and that was due to the impact of the much higher average selling price environment there were in. Our EBITDA totaled $18.9 million in the first quarter and that would be compared to 21.2 million last year's first quarter.

Operating expenses in the first quarter did decrease, they went down to 32.6 million compared to 34.7 million last year's first quarter, and we will continue to be very diligent and focused on the expense controls and expense management as we move through the rest of this year. Effective tax rates was 39% in the first quarter, and we are currently in the process of reviewing the impact of the manufacturing deduction that you get under the new American Jobs Creation Act of 2004 and what that means is as we look for the application of that manufacturing deduction may result in us seeing a slightly lower effective tax rate as we move forward in 2005.

Turning over to the balance sheet and our accounts receivable, the receivables as you saw on the release did go up by $34 million during the course of the first quarter and that increase was all due to sales, higher sales in first quarter versus fourth quarter and historically lowest end of the receivable cycle each year-end. Our DSOs remained very good. So, again it was debt increase that is really just due to the increase in sales, not due to a slowdown in velocity of the turnover of the receivables. Looking at our inventory. Our inventory did decrease by about $5 million during the quarter, went down to $181 million. We continue to turn our inventory about 5 times per year and we'll again continue to focus on that turnover number as we look through the rest of the year. The debt number did increase by 23.9 million during the quarter, and that was again primarily result of the $34 million increase you saw in the receivables. Our expectation would be the bad debt numbers going to come down considerably as we work through the rest of this year.

Looking at capital spending. First quarter we spent only about $400,000 in CapEx, and as Michael indicated, the laser equipment that we installed in Cleveland was financed in the first quarter that financed the operating leases, going forward on any additional laser equipment, we would expect that to be also finance through operating leases. With that I'll turn the call back over to Michael and he will provide a brief market overview.

Thanks Rick. As we stated earlier in the call, the general sentiment for the steel industry is for declining prices and some margin compression for service centers particularly in the flat well side of the business in the near term. Based upon taking a slightly longer view, however, there is still a lot of favorable industry dynamics that bode well for the steel industry going forward. But one, the recent consolidation of steel mills has resulted in 70% of flat well production in the hands of 3 manufacturers and 88% of plate in the hands of 3 manufacturers and those are our two main products. This provides a new sense of discipline in the marketplace as it relates to production and credit availability. We have seen those response at the market by adjusting an output to match current market supply and demand conditions and we are encouraged by that path. As an example, we have recently seen the mill reduction cut backs and maintenance schedules being pulled forward. This should provide a more stable pricing environment than in the historical past.

In addition, what we saw in the last two weeks was the 5-year extension of the sunset import duty agreements, and therefore we are not overly concerned about the surge of imports coming into this market in the near term, and that could be five years. Additionally, although prices have declined from last year's peak, we are still seeing pricing levels that are quite high by historical standards and even the steel pessimist, the long term pricing settling in at levels that are significantly higher than what was experienced prior to the mill consolidation. We continue to see raw material pricing accelerate and transportation cost remains high again on an historical basis. So, with the higher costs of production we don't see the sort of due-to-day scenario out there from our pricing standpoint.

On the demand side of the equation, it is still relatively okay and we can even say strong market. Other than the current softness in domestic automotive sector and the adjustment at the inventories and service centers, demand seems healthy, in fact many large industrial equipment manufacturers in the US have recently made announcements. We can look at Caterpillar, IngersolRand, and JLG as some of those examples made announcements indicating that their businesses are growing more than originally expected on top of very strong growth in 2004. Lastly, we are believers that the service center sector will consolidate and bring very good values to this sector over time, but to conclude we are still optimistic about the growth and value opportunities ahead for the service center industry and specifically for Olympic Steel. With that I'll turn the discussion back over to the operator for questions.

[OPERATOR INSTRUCTIONS] Chris Olin, Longbow Research.

Quick question on the competitive landscape. Are you seeing more intensified competition in the second quarter, I guess what I'm wondering is if these `mom & pop` distributors had become somewhat irrational with their pricing as they are working under liquidity concern?

Yes Chris, it's no more than it always is. That it is always intense competition in the universe. It's not moms & pops, because their access to credit and their access to material may be limited, so there are some players that are liquidating inventories, but I don't find the competition is any more for

than ever. It's competitive all the time, and it's just as competitive at this time.

And then lastly can you just talk a little bit about what you are seeing in the plate market versus the sheet market?

You know there are two segments to the plate segment that sort of the

plate market, that is really sort of some of the guys that are in Texas really on it, but there continues to be good demand. And for those of us that will continue to invest in the equipment that processes that plate that market still remains one of the healthiest that we see.

(Barry Heyman, Fagenson

Good quarter. Just a follow-up a little bit. First on the hot rolled coil, to the extent we are going to an inventory liquidation, what is your best guess, your best assessment at this point, Mike,

any more months of that we have before; we get back closer to steady state. And then secondly in plate, you mentioned that the market space has been pretty strong, was there some over inventory in plate in that the market has loosened up a little bit? Are we seeing similar phenomenon with service center inventories in plate are being worked down or is that still is real tight?

Two things. Let us take the second question first. Like I said there are two markets there, Barry. I think the guys that are sort of in the

don't do value added process

may find it more competitive. There are some import numbers that imports on plate were pretty strong, but the

numbers on plate inventories like all inventories are marginally down so far. So the guys who are making the pieces parts like we do are not seeing the same impact. Obviously every customer is looking for reduction of price because they read the same things in the newspapers that everybody reads. And they are saying, 'well, prices are going down and will have reduction', but we are creating value to that plate product by basically cutting it off with lasers and the oxy fields and the plasmas and so. The guys who need it for assembly -- the construction, agriculture marketplaces, you know, you are still creating value in that market as I indicated. It still is relatively good market from -- not only from a tonnage standpoint, but clearly from a value standpoint. The overall inventories from our assessment may get to be a slow in the July, August timeframes. I am not telling you they recover and start to pick up after that, but as we look at sort of the sentiment in the market, it is really not a question of how much inventory is out there, it is really a lot about the dollars. There is a lot of pressure when you look at your inventory and say not only do I have tons but I have got the highest all-time price which means I got the highest all-time cost, which means I've got the most amount of bank debt that I've ever had in my career, and therefore I'll have to liquidate this. In the case of Olympic steel, we started off with velocity of turnover inventory at about 40% better than the industry. So we average around 5 turns around an industry that goes about 3.5 months to 3.5 turns. At the peak last year and the cycle we looked at sort of we got to 6 turns. At our best, you know, sort of two-month period of time we'd like to get back to increase our velocity as well to mitigate the risk of the potential of what may occur and what may not occur. So we are about risk management on inventory and we started out or headed away for the most part, Barry.

Mark Parr, KeyBanc Capital Markets

Just curious what you think that the potential impact from the new plate burners could be for 2005 and how accretive could that investment be?

It is not material enough to make a difference, quite honestly because at the end of the day lasers are very sophisticated and good margin, but there is not a lot of tonnage that comes off lasers. You know in terms of what we see last year, we added 6 lasers last year. In total, we are going to add at least 4 this year. All of that is going to incrementally help keep our margins at a relatively higher than normalized basis, but at the end of the day we are still a tonnage house. And you know the pieces parts business while growing and growing substantially, I don't think has an overall material impact on the overall margin of Olympics. Rick, you want to comment.

Michael is exactly right, Mark. I think the way to look at it is, you know that new equipment isn't a big tonnage adder, isn't a big grower to the top tonnage line, but it is very good, very good augmentation to the gross profits. One piece of--

What sort of augmentation to the gross profit, I mean, could you get out of 4 plate burners this year?

Obviously it depends on the mix of the business and what else we have. But the overall impact I'd reiterate what Michael says. You are not going to see our percentage go up 4 percentage points because of

What they do is-- they certainly do help.

I would say the positive side of that Mark, is that while it is not – there was not a lot of tons that were associated with it. Our customers continued to push outsourcing. And so, as the flow of the understanding of our key customers is to create accretive investments for themselves of pushing out, sort of first stage processing on a greater extent when we want to continue to take advantage of that.

Right. The bigger -- the advantage of that also is, keep in mind a lot of the product that goes on to those laser cutters come off at Temper Mill. And we kind of have now the whole package and a suite of the products that makes us obviously a better supplier of choice versus you know, someone who needs to go to multiple places to do that. It also protects and enhances and gives you the opportunities on the Temper Mill as well.

Okay fine. Looking at the inventory situation, the dollars were down. How much were the tons impacted?

Tons are down as well.

Yes, tons are down.

Okay. Can you give us some sense of how much?

They are down about 10%.

Okay.

10% at the end of the

During the quarter they went down about 10% from December to March.

Okay. So, where do you think the tons will be at the end of June?

Lower.

Our goal is to continue to spin that inventory faster as Michael said, we had exceeded high.

Every good CEO always wants lower inventories. Does that imply that you are looking for lower tons in the second quarter or –

Not at all. It does not imply that at all. I think – obviously as a supplier of choice to many markets. We don't anticipate the stock market actually recovering much in the second quarter, which is the other service element. The business that we do have Mark. We also see the lead times. The less the domestic production industry takes significant production out, which we don't anticipate. We anticipate we will take some out but not significant amounts of tons out. That the lead times remain short and as a customer of choice because of the integrity we bring to the transactions and our ability to pay our bills and buy in large quantities, Mark. As long as those lead times stay short, it gives us the opportunity to continue to accelerate the turn over. And that's going to be the objective.

Right. So second quarter you will see we are going to decrease our inventory tons and our inventory dollars. But Michael is right. Having done the tonnage on the output side, the sales side that is not all we are pointing for.

We have an objective that we want to get to which I don't necessarily want to share because you either do or don't get to it on a variety of factors. The objective, the objectives I can tell you is to be lower in inventory tons and obviously dollars by at least the same amount in the second quarter as we were in the first quarter.

Okay just one more question, if I could, on the gross margin number. Do you look for margins from here to come under some additional pressure? I guess is there anyway you could help us to give guidance on where the gross profit margin might be in the second quarter?

I think based on what we talked about in terms of the service center situation and the inventories we are looking at in the industry. Mark, what I would tell you is that yes, we are looking for carbon flat-rolled products to be more compression in the second quarter. So our expectation and outlook would be that the margins are going to be slightly compressed from where they were in the first quarter.

Okay. But just slightly. I mean, you are not looking for a major change?

No.

Alright. Okay. And then anything unusual on the operating expense side that we should be looking at?

No. I think we are going to remain focused on that.

Do you look for those to come down in the first quarter?

Yes. I would expect – as you are looking at the first quarter the second quarter, my best guess will be we will probably come in second quarter lower than the first quarter.

Okay. Terrific. Congratulations. Keep up the great work.

Deborah Fine. Fine Capital.

Good morning gentlemen.

Hi Deborah. Good morning.

I have 2 questions. Mike could you walk through on the demand side of your business if you are seeing any weakness by industry or region and particular strength? And could you also comment on whether you are seeing any competitive lead price in your products?

second question is no, we don't see any competitors that will induce us at all to break our normal channels of domestic purchasing or again go along. There is nothing that's -- nothing from a foreign standpoint, from a pricing standpoint that we see at all active. Concurrently strength in the markets, I mean we look at, you know, again without talking about the shortage of players, which is what I talked about for the agricultural marketplace, I mean clearly we are encouraged by the construction of

marketplace. We are seeing some weakness in the New England market, we see some weakness in the Detroit market, which is obvious.

What do you think is causing New England? I didn't know that was a big market for you.

Oh! yes, obviously...

We have a location in Connecticut.

Yes, we have the big location in Connecticut. The weakness in Connecticut, I think it is just sort of normal GDP and sort of the old

kind of guys, you got a lot of old industries out there and is just -- that usually seems to be a market that is the last to recover and the first to sort of feel the impact of somewhat of a recession because of, you know, lot of old industries out there, you know, servicing, a variety of small manufacturing concerns and so I think just pressures of interest rates and a variety of other things. GDP, some scenario of the GDP, lack of growth, really impacts that market first and foremost. But, down south is good. The Cleveland market, which also dealt with predominantly

remains pretty good. I mean surprisingly even in spite of the fact that we have lost service on our sales because it is not there, but you know out in Minnesota, the ad market, the energy market, you know, we don't participate in the aerospace on the west coast but those remain very robust. It is really Detroit, that really is big three automotive that really creates the most of the chaos and that doesn't seem to have a solution in the near term.

Thank you.

Michelle Abbobam, Abbobam Research.

Bunches of questions. I guess the first one, you know, from your perspective, imports were up in March and when you are trying to wait on the data, it does look like there was a search from Russia, you know, I heard someone saying the Russians were going to be sending in all the stuff because they thought the -- some of that thing was going to be, you know, they are going to win and they are going to ship a lot more, but it didn't seem visible in the marketplace ahead of time. Can you go into a little bit of your thoughts on the import number and the Russian thing?

Well, I guess, opening a navigation in the mid west, I mean so -- in the Great Lakes, I mean, so, it is not unusual that March, you know, the first opening of the Great Lakes, you get a big hint, you know, guys have been waiting. And, clearly when you look back over that material with

show, which is some time in the late third or early fourth quarter for the opening of navigation, the market perception was that there is still going to be relatively good consumption and prices are still going be high and mills had the potential to raise their prices. So, a lot of that arrival, I think, is through the Great Lakes region that creates that search for the opening of navigation and most of it generally has placed well on to the market today.

Okay, and what is the implication for imports going into the next few months, do you think it will continue at these levels?

No.

Then, my other question would be you mentioned you think this industry is going to consolidate. Can you elaborate on what your role is and what valuations are and the same question everybody is asking is, isn't buying Olympic Steel a more attractive transaction for you than buying another service vendor?

Well, let's talk about the consolidation first, you know, and valuations. You see the rise in Integris valuation and then you see the Jorgenson IPO. So, it is somewhere between those numbers is probably the real market and maybe you will see the load in the Jogenson transaction given the sentiment of the marketplace. So, you have some benchmarks that says to the universe of buyers and sellers that this is where the market has perceived the market to be. So, historical numbers are always the case. So that's number one. Number two, you know, I think, they're in the universal consolidating producers. If you look at what's some lower and middle and some others are looking to accomplish in terms of a 100 million ton production. You know, that's what out any creation of new

that's going to buy and consolidate. You know, you have to sit at the table with scale to match them, and so from the standpoint, you know, the objective of Olympics mission is to grow its market share. But we also have to bring the scale to our purchasing capabilities to create the value for the customers. So, I think, that in the large distribution entities which has to be scaled. And, I think, that there are a number of service centers, and certainly investment bankers talking opportunities in this sector today. And in terms of Olympic Steel, we look at our options everyday, and I look it as that.

Okay, so have any comments on your plans to be an acquirer or not?

Our mission reflects our desire to continue to grow up.

Okay, field or ..?

All options are open.

Okay, thank you.

Thanks. Tom

.

Good morning.

Hi, Tom.

Hi, guys. Great job, I think, you proved to the market that you can make money and as well as market? Maybe you've picked up a few believers today?

Welcome, always helped.

I continue to be one of them. But basically, my question to you is in terms of the pricing environment, I think, that's what driven the equity prices to these very very depressed level. How much worse do you see it getting in terms of the current quarter, can you give any guidance in terms of an average selling price decline as it applies to the 10%, somewhat in that area or would it be more than that.

I'll differ on the second question you say, you know. As you know we don't get forward looking scenarios. It is compared about there is no question about it. In terms of the pricing environment, again, you know, when you look at

these are very great guys who are understanding the strength of the creation of variation players, I think, I don't want to call it over that belief as that has some negative commendation. We would hope that these brighter gentlemen who are historically, you know, operating in a universe that hasn't returned the good positive capital on much more sensitive to those scenarios. They are healthy in terms of the cash flow. They are obviously based upon the numbers we've seen making a lot of money at these levels. And I would hope that they would act responsibly to manage production versus price. And, so from that standpoint, you know, they call back to the traditional, you know, we're going to make tons of curve rather than returns on invested capital the priority. Then they will continue to be heavily discounted against other manufacturing sectors. And I don't think that would be responsible and they produce their obligation to their shareholders, and, you know, I think, we are brighter than the historical guys running steel companies. They are sensitive to return uninvested capital.

Balance sheet vice obviously there are in very strong condition. So you would think that would do the right thing?

One can only hope.

Yes, just the last question is tonnage. Here you say anything about the current quarter in terms of what you expect or did you give any kind of guidance at all?

Nope, still we have lots of good, you know, so far that was out -- speculate, you know, in terms of what our

could be. We just don't get forward to end the statements now.

Great job, thanks.

Thank you. John Hudson. Bricoleur Capital Management.

Hi, Mike and Rick. Just a couple of quick balance sheet numbers for a period, cash, and the bank borrowings that can wreck order?

Don't miss me, one second while I look it up.

Okay, and while you are doing that you know Mike, I have looked at your gross profit for downtrend pretty closely, and if you look at cost of goods per ton, it's continued to go up, obviously. Have we peaked out on that yet? Prices is kind of flat, they have started to go down a bit, we peak that on the cost side of it yet?

Yes.

Okay, so that's going to start trending down too, in terms of your cost of inventory?

We would expect that to be the case.

And our cash number at the end of the quarter was 6.7 million. And then you wanted the debt number?

Just the bank borrowings.

You mean the revolver is that what--. Revolver was about 84 million.

Okay, so in terms of the gross profit for ton trend, e probably get compressed a little bit more, but it is not going to be this drop of a clip type scenario, right?

That is right.

And then when I listened to what you are saying about the market place, it's down -- you still seeing pretty good customer demand. You have got the auto industry kind of barking now. You are diverting steel into the spark market which is I think causing a lot of this pressure. You are expecting lower imports and we have had some mill outages and some accelerated maintenance, so that all kind of points to a firming market, in a couple of months, doesn't it?

Well, you know, again there is a lot of things that can change between now and that probably market period of time. We are looking at a scenario that's as, you know, July never is a good month, because of the manufacturing shut downs. So we have got to get from this point through that sort of July scenario, what the market conditions are and then hope that in a general sense that the global market place and the domestic market place remains somewhat rational with no sort of big hiccups going out there and then, we think that there could be a return to a pricing kink. Yes, in fact good demand and inventories exist given the fact that we don't produce enough in this country. And there is a rising need. Pellet cost, iron ore cost, oil cost, insurance cost, and with the retention of the duty scenarios, yes I don't see where the surge is going to come in from a supply standpoint and then the question is what happens to the demand. And that's always a big question mark.

So would you do agree with the statement that things look a bit worse right now than may be they actually are because of this inventory correction going on?

I think this sentiment is definitely over blown, yes.

Okay, and then just -- I don't know if you have seen any of this, it might be too soon. But does the Mittal-ISG merger

have any impact on you guys, you think in terms of just dealing with them?

It's too early to tell. The biggest issue for us is always not for Olympic, but for the universe is, you know if you were a big buyer at ISG, and you were a big buyer, you are staffed and now you only have one credit volume. This summer your short-term credit disappeared because you have only been worth -- let's call that million dollars at both mills. Do you now get $2 million of credit or do you get cut back in your

after your supply

Right, and the restart of the Burns harbor plate mill, what kind of plate is going to come out of there. Is it just plane A36 kind of commodity stuff?

Yes, there is no high or low account into that at the percent time.

And in size, is it suppose to be just you know-?

Well, 80% of the market is between 0.5 inch and 2 inch, rest of it's not by starters we get it, they could make a 836 and the 570 high strength steel. No question it is a good plate mill. But again it's, you don't run these things for armor plate, you run it for the commodity 836, because that's what makes the marginal cost or the fixed cost go down in tons.

Mark Parr.

Michael, I have just a point of clarification on the import situation. We have been looking at the numbers. First quarter flat rolled imports were about 2 million tons, that's an 8 million ton annualized rate, which is about 20% below a normalized level and given your outlook for the numbers to come down in the second quarter I would agree with you, it's a fairly healthy environment from an import supply perspective.

If the dollar raises even a little bit it even makes it that much more healthy, but I think the key factor there was the extension of the 5-year duty agreement. So that is taking the Shell scenario and all these Russian boats out there that are ready to come here

. They are not coming here now.

If they were coming to begin with which is

They are certainly not going to come down.

David Zoreth, Hawkshaw Capital

Quick question. I was pleasantly surprised to see how strong that revenue per ton was, I guess, given all the negative views about pricing in the last quarter. Could you help me understand what impact did pricing since

so strong relative to where market currently is?

Well, this is different markets. And obviously there are lots of negative sentiment to those who have necessarily have a factual base. Our big markets, Olympic, with its locations in Iowa and Minnesota and even Chambersburg, Pennsylvania were much geared in terms of the agricultural construction marketplace. We create a lot of value added value to our customers by doing first, second stage processing for them. Again, I hate to keep referring to the mission statement, David, that again I'll learn to provide business system solutions and we like to talk about accretive value to our customers about how we con work together for the creation of value and our best customers clearly like the value that Olympic Steel brings to them because it's win-win scenario. So we are not just

you have a contractual marketplace and the spot marketplace. Our contractual marketplace to our end-use customer remains pretty good from both of

. We hope we create that value for the customers, but the spot market is being, it's sort of intertwining apples and oranges. The spot market, which is essentially service centers are the ones that are getting all the negative publicity and people are viewing that as that's the market, when in fact the value creation scenario for real supply chain management remains pretty good and that's where you see no problem with the gross margin, retaining its value.

Can you give us a sense for during the quarter how much of this business was contractual versus spot?

When typically Olympic, we will say, is about 65, 35 contractual to spot changes by location. Generally, the spot is the service centers that have a short form and may be some small manufactures that are not big enough to get sort of contractual arrangement or think that they can always find best price in the marketplace. But it's 65 and 35 in general or is probably higher than that because of the lack of service center business in the first quarter.

And would it be fair to presume that that 65 or whatever it is that was a little bit higher was contracted before the weakness setting in the market there by insulating you and if that's the case how long do you guys had advantage, typically?

We want our customers to grow. So we were never not sensitive to their ability to grow their market share and do what it takes for them to be competitive against their universe. So the fact that we may have a contract with someone is always about the value creation scenario and not just the price of steel. The price of steel in lot of the component tree of the caterpillar tractor -- like there is a lot of steel, but that is not the big cost. You look at some of these guys and the steel component is not nearly as significant as not meeting production needs or demands. So the relative basis of what happens in the marketplace from a steel-pricing standpoint should not impact those agreements. But it is not a question of this year was good and this year was bad, it's the relative value of helping the customer, the accretives in terms of his universe. So, it is not -- this year it is this price and next year it is that price. It's all about the value creation for both of us in the equation. So, it really is not as volatile as steel pricing is in the stock market.

Okay, so if I'm understanding you then we can kind of infer from that you are not seeing customers push back on their contracts now that perhaps pricing has weakened?

Customers always care about price, it is always fashionable.

I would not make that, would not infer that at all.

Victor

UBS

Just wanted to know if you had any plans to -- specific plans to enhance the shareholder value or take advantage of the seemingly low prices.

I think that's my obligation, to enhance shareholder value. I'm not exactly sure what your question -- what you are asking?

I am asking specifics like stock buy back, like some kind of maybe a tender at these low prices.

Our board is sensitive to its responsibilities to shareholders. We have a high inside ownership, probably higher than most of our contemporaries. So, there is a great alignment between management and outside shareholders in terms of the value creation, and I think that our Board discusses all options as it relates to creating shareholder value.

Okay.

Mark Parr, KeyBanc Capital Markets

Thank you, Michael you had indicated in your commentary that you are seeing supply discipline or some discipline from the mills. I was wondering if you could give some more color on that in terms of where you are seeing things and where you might see the opportunity for some additional discipline if things continue to look on us on the sloppy side?

I am not permitted to have discussions and I can't answer that, I wish I could, but I can't because I have no insight, knowledge in terms of what you still discussing about, price versus production, new course. I can't give any more color than the news that we've already seen, whether it is

and Salzgitter, and Absalom even the announcements here with

Cleveland. No, I have no more color to add unfortunately, I wish I could.

Would you look at the announcement by US Steel of cutting their flat rolled shipment outlook back from 15.2 to 14.5 with that be supply discipline in your view?

It depends on how we use to accomplish that.

Okay, thanks.

Thank you Sir. Management at this time we appear to have no additional questions in queue. If you would like to close with any concluding remarks please do so at this time.

Yes, thank you one and let me just remind you that's not our policy to give forward-looking earnings estimates, I think I said that a couple of times. We would anticipate releasing our second quarter earnings around the last week of July, and again thank you for your interest in Olympic Steel and this concludes our call. Thank you all.

Ladies and gentlemen, at this time we will conclude today's presentation. We thank you for your participation on the conference call. At this time you may now disconnect and please have a pleasant day.