~~The accompanying notes are an integral part of these consolidated statements.~~

The accompanying notes are an integral part of these consolidated statements.

The Company incurred a nominal amount of financing lease obligations ~~of $1.0 million~~ during the nine months ended September 30, ~~2020. There were~~2022. The Company incurred no new financing lease obligations during the nine months ended September 30, 2021. ~~This~~These non-cash ~~transaction has~~transactions have been excluded from the Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2020.~~2022.

The accompanying notes are an integral part of these consolidated statements.

The accompanying consolidated financial statements have been prepared from the financial records of Olympic Steel, Inc. and its wholly-owned subsidiaries (collectively, Olympic or the Company), without audit and reflect all normal and recurring adjustments which are, in the opinion of management, necessary to fairly state the results of the interim periods covered by this report. Year-to-date results are not necessarily indicative of ~~2021~~2022 annual results and these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K10-K for the year ended December 31, ~~2020.~~ 2021. All intercompany transactions and balances have been eliminated in consolidation.

The Company operates in three reportable ~~segments: carbon~~segments; specialty metals flat products, ~~specialty metals~~carbon flat products, and tubular and pipe products. The specialty metals flat products segment and the carbon flat products segment are at times consolidated and referred to as the flat products segments. ~~Certain~~Some of the flat products segments’ assets and resources are shared by the specialty metals and carbon flat products segments, and both segments’ products are stored in the shared facilities and, in some locations, processed on shared equipment. As such, total assets and capital expenditures are reported in the aggregate for the flat products segments. Due to the shared assets and resources, certain of the flat products segment expenses are allocated between the specialty metals flat products segment and the carbon flat products segment based upon an established allocation methodology.

The primary focus of our specialty metals flat products segment ~~sells~~is on the direct sale and ~~distributes~~distribution of processed ~~aluminum~~stainless and ~~stainless~~aluminum flat-rolled sheet and coil products, flat bar products and fabricated parts. Through the acquisition of Shaw Stainless & Alloys, Inc. (Shaw) on October 1, 2021 and Action Stainless & Alloys, Inc. (Action Stainless) on December 14, 2020, ~~the~~our specialty metals flat products segment expanded its geographic footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe. ~~Action Stainless offers a range~~Through the acquisition of ~~processing capabilities, including plasma, laser and waterjet cutting and computer numerical control (CNC) machining. On~~ ~~October 1, 2021,~~ Berlin Metals, LLC (Berlin Metals) on April 2, 2018, the ~~Company acquired all of the net assets of Shaw Stainless & Alloy, Inc. (Shaw), based in Powder Springs, Georgia. Shaw is a full-line distributor~~specialty metals flat products segment expanded its product offerings to include differing types of stainless ~~steel~~flat-rolled sheet ~~pipe, tube, bar~~ and ~~angles. Shaw also manufactures~~coil and ~~distributes stainless steel bollards and water treatment systems.~~ prime tin mill products.

The ~~acquisition includes Shaw's stainless-steel distribution and fabrication businesses as well as its architectural and barrier defense businesses. The~~primary focus of our carbon flat products segment ~~sells~~is on the direct sale and ~~distributes~~distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products, and fabricated parts. ~~Through the acquisitions~~We act as an intermediary between metals producers and manufacturers that require processed metal for their operations. We serve customers in most metals consuming industries, including manufacturers and fabricators of ~~McCullough Industries (McCullough)~~transportation and ~~certain assets related to the manufacturing of the EZ Dumper® hydraulic dump inserts (EZ Dumper) in~~ ~~2019,~~material handling equipment, construction and farm machinery, storage tanks, environmental and energy generation equipment, automobiles, military vehicles and equipment, as well as general and plate fabricators and metal service centers. We distribute these products primarily through a direct sales force. Combined, the carbon and specialty metals flat products ~~segment expanded its product offerings~~segments have 34 strategically located processing and distribution facilities in the United States and one in Monterrey, Mexico. Our geographic footprint allows us to ~~include self-dumping metal hoppers~~focus on regional customers and ~~steel~~larger national and ~~stainless-steel dump inserts for pickup truck~~multi-national accounts, primarily located throughout the midwestern, eastern and ~~service truck beds.~~southern United States. On September 17, 2021, ~~the Company~~we sold substantially all of the assets related to ~~its~~our Detroit, ~~operation.~~Michigan operation to Venture Steel (U.S.). The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers.

The tubular and pipe products segment ~~which~~ consists of the Chicago Tube and Iron ~~subsidiary~~ (CTI)~~, distributes~~ business, acquired in 2011. Through our tubular and pipe products segment, we distribute metal tubing, pipe, bar, valves and fittings and ~~fabricates~~fabricated pressure parts supplied to various industrial markets. Founded in 1914, CTI operates from seven locations in the Midwestern and southeastern United States. The tubular and pipe products segment distributes its products primarily through a direct sales force.

Corporate expenses are reported as a separate line item for segment reporting purposes. Corporate expenses include the unallocated expenses related to managing the entire Company (i.e., all three segments), including payroll expenses for certain personnel, expenses related to being a publicly traded entity such as board of directors’ expenses, audit expenses, and various other professional fees.

On ~~March 11, 2020,~~ ~~the World Health Organization classified the novel coronavirus (COVID-~~19) outbreak as a pandemic. The Company is an essential business and remains open in all locations, adhering to all health guidelines to operate safely provided by the Center for Disease Control and Prevention and local authorities. The Company has implemented actions to maintain its financial health and liquidity. The Company continues to closely monitor the impact of the COVID-19 ~~pandemic on all aspects of its business. However, as a result of the many uncertainties surrounding the COVID-~~19 ~~pandemic, the Company is unable to predict the impact that it ultimately will have on its financial condition, results of operations, comprehensive income (loss), and cash flows.~~

~~There were~~ no ~~recently~~In March 2020, the Financial Accounting Standards Board, (FASB), issued Accounting Standards Update, (ASU), No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. The objective of this ASU is to ease the potential burden in accounting ~~pronouncements~~for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this ASU are elective and apply to all entities, subject to meeting certain criteria, that ~~would~~have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The Company is currently evaluating the impact of the adoptions of this ASU; however, the Company does not expect the adoption to have a material impact on the Company’s Consolidated Financial Statements.

The Company provides metals processing, distribution and delivery of large volumes of processed carbon, coated flat-rolled sheet, coil and plate products, aluminum, and stainless flat-rolled products, prime tin mill products, flat bar products, metal tubing, pipe, bar, valves, fittings and fabricated parts. The Company's contracts with customers are comprised of purchase orders with standard terms and conditions. Occasionally the Company may also have longer-term agreements with customers. Substantially all of the contracts with customers require the delivery of metals, which represent single performance obligations that are satisfied at a point in time upon transfer of control of the product to the customer.

Transfer of control is assessed based on the use of the product distributed and rights to payment for performance under the contract terms. Transfer of control and revenue recognition for substantially all of the Company’s sales occur upon shipment or delivery of the product, which is when title, ownership and risk of loss pass to the customer and is based on the applicable shipping terms. The shipping terms depend on the customer contract. An invoice for payment is issued at time of shipment and terms are generally net 30 days. The Company has certain fabrication contracts in one business unit for which revenue is recognized over time as performance obligations are achieved. This fabrication business is not material to the Company's consolidated results.

Within the metals industry, revenue is frequently disaggregated by products sold. The table below disaggregates the Company’s revenues by segment and products sold.

Disaggregated Revenue by Products Sold

For the Nine Months Ended September 30, 2020

Carbon flat
products

Specialty
metals flat
products

Tubular and
pipe products

Total

Hot Rolled
29.3 % 0 0 29.3 %
Plate
10.9 % 0 0 10.9 %
Cold Rolled
5.8 % 0 0 5.8 %
Coated
9.5 % 0 0 9.5 %
Specialty
0 22.8 % 0 22.8 %
Tube
0 0 18.5 % 18.5 %
Other
1.2 % 2.0 % 0 3.2 %
Total
56.7 % 24.8 % 18.5 % 100.0 %

Accounts receivable are presented net of allowances for credit losses and unissued credits of ~~$4.4~~$5.7 million and ~~$3.6~~$4.4 million as of September 30, ~~2021~~ 2022 and December 31, ~~2020,~~ 2021, respectively. The allowance for credit losses is maintained at a level considered appropriate based on historical experience, specific customer collection issues that have been identified, current market conditions and estimates for supportable forecasts when appropriate. Estimations are based upon a calculated percentage of accounts receivable, which remains fairly level from year to year, and judgments about the probable effects of economic conditions on certain customers, which can fluctuate significantly from year to year. The Company cannot guarantee that the rate of future credit losses will be similar to past experience. The Company considers all available information when assessing the adequacy of its allowance for credit losses and unissued credits.

The Company values certain of its tubular and pipe products inventory at the last-in, ~~first~~~~-out~~first-out (LIFO) method. At September 30, ~~2021~~ 2022 and December 31, ~~2020,~~ 2021, approximately ~~$55.4~~$53.4 million, or ~~13.3%~~10.5% of consolidated inventory, and ~~$50.3~~$55.4 million, or ~~21.0%~~11.4% of consolidated inventory, respectively, was reported under the LIFO method of accounting. The cost of the remainder of the tubular and pipe products inventory is determined using a weighted average rolling ~~first~~~~-in,~~ ~~first~~~~-out~~first-in, first-out (FIFO) method.

During the three and nine months ended September 30, 2022, the Company recorded $1.5 million of LIFO expense as current projections anticipate increased metals prices by December 31, 2022 compared to December 31, 2021. During the three and nine months ended September 30, 2021, the Company recorded $7.0 million and $12.0 million of LIFO expense, ~~respectively, as current projections anticipate increased metals prices by~~ ~~December 31, 2021~~ ~~compared to~~ ~~December 31, 2020.~~ ~~During the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020,~~ ~~the Company recorded $0.1 million and $1.1 million of LIFO income,~~ respectively.

If the FIFO method had been in use, inventories would have been ~~$9.9~~$21.2 million higher and ~~$2.1~~$19.7 million ~~lower~~higher than reported at September 30, ~~2021~~ 2022 and December 31, ~~2020,~~ 2021, respectively.

The Company’s intangible assets were recorded in connection with its acquisitions that occurred between 2011 and ~~2020.~~2021. The intangible assets were evaluated on the premise of highest and best use to a market participant, primarily utilizing the income approach valuation methodology. The useful ~~life~~lives of the customer relationships ~~was~~were determined to be ~~fifteen~~between 10 and 15 years, based primarily on the consistent and predictable revenue source associated with the existing customer base, the present value of which extends through the ~~fifteen-year~~10- and 15-year amortization ~~period.~~periods. The useful ~~life~~lives of the non-compete agreements ~~was~~were determined to be the length of the non-compete agreements, which range from one to five years. The useful ~~life~~lives of the trade names ~~was~~were determined to be indefinite primarily due to their history and reputation in the marketplace, the Company’s expectation that the trade names will continue to be used and the conclusion that there are currently no other factors identified that would limit their useful life. The Company will continue to evaluate the useful life assigned to its amortizable customer relationships and noncompete agreements in future periods.

Goodwill, by reportable unit, was as follows as of September 30, ~~2021~~ 2022 and December 31, ~~2020,~~ 2021, respectively. The goodwill is deductible for tax purposes. ~~The change in goodwill during~~ ~~2021~~ ~~is related to adjustments to the preliminary purchase price allocation of the fair market values of the assets acquired and liabilities assumed for Action Stainless.~~

Intangible assets consisted of the following as of September 30, ~~2021~~ 2022 and December 31, ~~2020,~~ 2021, respectively:

The Company estimates that amortization expense for its intangible assets subject to amortization will be approximately ~~$1.5~~$1.6 million per year for the next ~~two~~three years, $1.2 million the following year and ~~$1.4~~then $0.7 million ~~$1.0 million and $0.5 million per year~~ for the ~~three~~ ~~years thereafter, respectively.~~next year after.

6.	*Leases*:

The components of lease expense were as follows:

									For the Three Months				For the Nine Months
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				Ended September 30,				Ended September 30,
(in thousands)	2021		2020		2021		2020		2022		2021		2022		2021

Operating lease cost	$	1,733	$	1,767	$	5,148	$	5,322	$	1,898	$	1,733	$	5,484	$	5,148

Finance lease cost:
Amortization of right-of-use assets	$	210	$	62	$	634	$	182	$	180	$	210	$	549	$	634
Interest on lease liabilities		23		13		76		39		16		23		44		76
Total finance lease cost	$	233	$	75	$	710	$	221	$	196	$	233	$	593	$	710

Supplemental cash flow information related to leases was as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020		2022		2021		2022		2021

Cash paid for lease liabilities:
Operating cash flows from operating leases	$	1,704	$	1,742	$	5,060	$	5,251	$	1,865	$	1,704	$	5,335	$	5,060
Operating cash flows from finance leases		23		13		76		39		16		23		44		76
Financing cash flows from finance leases		202		58		607		173		176		202		542		607
Total cash paid for lease liabilities	$	1,929	$	1,813	$	5,743	$	5,463	$	2,057	$	1,929	$	5,921	$	5,743

Supplemental balance sheet information related to leases was as follows:

September 30,

December 31,

(in thousands)

2021

2020

Operating Leases

Operating lease
$ 36,916 $ 36,060
Operating lease accumulated amortization
(13,446 ) (10,706 )
Operating lease right-of-use asset, net
23,470 25,354

Operating lease current liabilities
5,457 5,580
Operating lease liabilities
18,292 19,965
Total operating lease liabilities
$ 23,749 $ 25,545

Finance Leases

Finance lease
$ 3,511 $ 3,582
Finance lease accumulated depreciation
(946 ) (333 )
Finance lease, net
2,565 3,249

Finance lease current liabilities
811 815
Finance lease liabilities
1,797 2,453
Total finance lease liabilities
$ 2,608 $ 3,268

September 30,

December 31,

2021

2020

Weighted Average Remaining Lease Term

Operating leases (in years)
6 7
Finance leases (in years)
4 6

Weighted Average Discount Rate

Operating leases
3.69 % 3.76 %
Finance leases
3.49 % 3.80 %

	September 30,			December 31,
(in thousands)	2022			2021
Operating Leases
Operating lease	$	44,402		$	42,023
Operating lease accumulated amortization		(16,927	)		(14,297	)
Operating lease right-of-use asset, net		27,475			27,726

Operating lease current liabilities		6,124			5,940
Operating lease liabilities		21,850			22,137
Total operating lease liabilities	$	27,974		$	28,077

Finance Leases
Finance lease	$	3,197		$	2,710
Finance lease accumulated depreciation		(1,464	)		(965	)
Finance lease, net		1,733			1,745

Finance lease current liabilities		633			661
Finance lease liabilities		1,158			1,115
Total finance lease liabilities	$	1,791		$	1,776

Weighted Average Remaining Lease Term
Operating leases (in years)		6			6
Finance leases (in years)		3			4

Weighted Average Discount Rate
Operating leases		3.37	%		3.44	%
Finance leases		3.56	%		3.42	%

Maturities of lease liabilities were as follows:

	Operating			Finance			Operating			Finance
(in thousands)	Leases			Leases			Leases			Leases

Year Ending December 31,
2021	$	1,661		$	226
2022		5,947			840		$	1,847		$	191
2023		4,857			568			6,685			637
2024		4,152			481			5,931			530
2025		2,875			315			4,705			336
2026								3,795			157
Thereafter		7,156			374			7,972			43
Total future minimum lease payments	$	26,648		$	2,804		$	30,935		$	1,894
Less remaining imputed interest		(2,899	)		(196	)		(2,961	)		(103	)
Total	$	23,749		$	2,608		$	27,974		$	1,791

7.	*Debt*:

The Company’s debt is comprised of the following components:

	As of				As of
	September 30,		December 31,		September 30,		December 31,
(in thousands)	2021		2020		2022		2021
Asset-based revolving credit facility due June 16, 2026	$	297,880	$	160,609		244,200		327,764
Total debt	$	297,880	$	160,609	$	244,200	$	327,764

On ~~June 16, 2021,~~ ~~the Company entered into a Fourth Amendment to Third Amended and Restated Loan and Security Agreement~~The Company’s asset-based credit facility (the ~~“ABL~~ABL Credit ~~Facility”), which amended and extended~~Facility) is collateralized by the Company’s ~~existing ABL Credit Facility.~~accounts receivable, inventory and personal property. The $475 million ABL Credit Facility consists of: (i) a revolving credit facility of up to $445 million, including a $20 million sub-limit for letters of credit, and (ii) a first in, last out revolving credit facility of up to $30 million. Under the terms of the ABL Credit Facility, the Company may, subject to the satisfaction of certain conditions, request additional commitments under the revolving credit facility in the aggregate principal amount of up to $200 million to the extent that existing or new lenders agree to provide such additional commitments, and add real estate as collateral at the Company’s discretion. The ABL ~~Credit~~ Facility matures on June 16, 2026.

The ABL Credit Facility contains customary representations and warranties and certain covenants that limit the ability of the Company to, among other things: (i) incur or guarantee additional indebtedness; (ii) pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt; (iii) make investments; (iv) sell assets; (v) enter into agreements that restrict distributions or other payments from restricted subsidiaries to the Company; (vi) incur ~~or suffer to exist~~ liens securing indebtedness; (vii) consolidate, merge or transfer all or substantially all of ~~their~~the Company’s assets; and (viii) engage in transactions with affiliates. In addition, the ABL Credit Facility contains a financial covenant which ~~provides that: (i)~~requires if any commitments or obligations are outstanding and the Company’s availability is less than the greater of $30 million or 10.0% of the aggregate amount of revolver commitments ($($47.5 million at September 30, ~~2021)~~ 2022) or 10.0% of the aggregate borrowing base ($($47.5 million at September 30, ~~2021)~~2022), then the Company must maintain a ratio of Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) minus certain capital expenditures and cash taxes paid to fixed charges of at least 1.00 to 1.00 for the most recent twelve fiscal month period.

The Company has the option to borrow under its revolver based on the agent’s base rate plus a premium ranging from 0.00% to 0.25% or the London Interbank Offered Rate (LIBOR) plus a premium ranging from 1.25% to 2.75%.

On January 10,2019, the Company entered into a ~~five~~five-year~~-year~~ forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $75 million of the outstanding LIBOR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at 2.57%. Although the Company is exposed to credit loss in the event of nonperformance by the other party to the interest rate hedge agreement, the Company anticipates performance by the counterparty.

As of September 30, ~~2021,~~ 2022, the Company was in compliance with its covenants and had approximately ~~$173~~$227 million of availability under the ABL Credit Facility.

As of September 30, ~~2021,~~ 2022, and December 31, ~~2020,~~ ~~$1.6~~2021, $1.3 million and ~~$0.9~~$1.6 million, respectively, of bank financing fees were included in “Prepaid expenses and other” and “Other long-term assets” on the accompanying Consolidated Balance Sheets. The financing fees are being amortized over the ~~five-year~~five-year term of the ABL Credit Facility and are included in “Interest and other expense on debt” on the accompanying Consolidated Statements of Comprehensive ~~Income (Loss).~~Income.

8.	*Derivative Instruments*:

Metals swaps and embedded customer derivatives

During ~~2021~~the first nine months of 2022 and ~~2020,~~2021, the Company entered into nickel swaps indexed to the London Metal Exchange (LME) price of nickel with ~~third~~~~-party~~third-party brokers. The nickel swaps are accounted for as derivatives for accounting purposes. The Company entered into them to mitigate its customers’ risk of volatility in the price of metals. The outstanding nickel swaps mature in ~~2021.~~2022. The swaps are settled with the brokers at maturity. The economic benefit or loss arising from the changes in fair value of the swaps is contractually passed through to the customer. The primary risk associated with the metals swaps is the ability of customers or ~~third~~~~-party~~third-party brokers to honor their agreements with the Company related to derivative instruments. If the customer or ~~third~~~~-party~~third-party brokers are unable to honor their agreements, the Company’s risk of loss is the fair value of the metals swaps.

These derivatives have not been designated as hedging instruments. The periodic changes in fair value of the metals and embedded customer derivative instruments are included in “Cost of materials sold” in the Consolidated Statements of Comprehensive ~~Income (Loss).~~Income. The Company recognizes derivative positions with both the customer and the third party for the derivatives and classifies cash settlement amounts associated with them as part of “Cost of materials sold” in the Consolidated Statements of Comprehensive ~~Income (Loss).~~Income. The cumulative change in fair value of the metals swaps that had not yet settled as of September 30, ~~2021~~ 2022 are included in “Other ~~accrued liabilities”,~~Accrued Liabilities,” and the embedded customer derivatives are included in “Accounts ~~receivable,~~Receivable, net” on the Consolidated Balance Sheets as of September 30, ~~2021.~~ ~~There were~~ no ~~outstanding metals swaps or embedded customer derivatives as of~~ ~~December 31, 2020.~~2022.

Fixed rate interest rate hedge

On January 10, 2019, the Company entered into a ~~five~~five-year~~-year~~ forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $75 million of the outstanding LIBOR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at 2.57%. The interest rate hedge is included in “Other long-term ~~liabilities”~~assets” on the Consolidated Balance Sheets as of September 30, ~~2021.~~ 2022. Although the Company is exposed to credit loss in the event of nonperformance by the other party to the interest rate hedge agreement, the Company anticipates performance by the counterparty.

The table below shows the total impact to the Company’s Consolidated Statements of Comprehensive Income ~~(Loss)~~ through net income of the derivatives for the three and nine months ended September 30, ~~2021~~ 2022 and ~~2020,~~2021, respectively.

Net Gain (Loss) Recognized

For the Three Months
Ended September 30,

For the Nine Months
Ended September 30,

(in thousands)

2021

2020

2021

2020

Fixed interest rate hedge
$ (475 ) $ (459 ) $ (1,406 ) $ (1,055 )
Metals swaps
(92 ) 82 136 55
Embedded customer derivatives
92 (82 ) (136 ) (55 )
Total loss
$ (475 ) $ (459 ) $ (1,406 ) $ (1,055 )

	Net Gain (Loss) Recognized
	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
(in thousands)	2022			2021			2022			2021
Fixed interest rate hedge	$	(77	)	$	(475	)	$	(871	)	$	(1,406	)
Metals swaps		(141	)		(92	)		577			136
Embedded customer derivatives		141			92			(577	)		(136	)
Total loss	$	(77	)	$	(475	)	$	(871	)	$	(1,406	)

9.	*Fair Value of Assets and Liabilities*:

During the nine months ended September 30, ~~2021,~~ 2022, there were no transfers of financial assets between Levels 1,2 or 3 fair value measurements. There have been no changes in the methodologies used at September 30, ~~2021~~ 2022 since December 31,~~2020.~~ 2021.

The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized by the Company:

	Value of Items Recorded at Fair Value								Value of Items Recorded at Fair Value
	As of September 30, 2021								As of September 30, 2022
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Metal Swaps									$	-	$	1,501	$	-	$	1,501
Embedded customer derivative	$	0	$	69	$	0	$	69		-		295		-		295
Fixed interest rate hedge										-		1,675		-		1,675
Total assets at fair value	$	0	$	69	$	0	$	69	$	-	$	3,471	$	-	$	3,471

Liabilities:
Metal Swaps	$	0	$	69	$	0	$	69	$	-	$	1,796	$	-	$	1,796
Fixed interest rate hedge		0		3,769		0		3,769
Total liabilities recorded at fair value	$	0	$	3,838	$	0	$	3,838	$	-	$	1,796	$	-	$	1,796

Value of Items Recorded at Fair Value

As of December 31, 2020

(in thousands)

Level 1

Level 2

Level 3

Total

Liabilities:

Fixed interest rate hedge
$ 0 $ 5,620 $ 0 $ 5,620
Total liabilities recorded at fair value
$ 0 $ 5,620 $ 0 $ 5,620

	Value of Items Recorded at Fair Value
	As of December 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Metal swaps	$	-	$	2,286	$	-	$	2,286
Total assets at fair value	$	-	$	2,286	$	-	$	2,286

Liabilities:
Metal swaps	$	-	$	2,178	$	-	$	2,178
Embedded customer derivatives		-		108		-		108
Fixed interest rate hedge		-		2,661		-		2,661
Total liabilities recorded at fair value	$	-	$	4,947	$	-	$	4,947

The value of the items not recorded at fair value represent the carrying value of the liabilities.

The carrying value of the ABL Credit Facility was ~~$297.9~~$244.2 million and ~~$160.6~~$327.8 million at September 30, ~~2021~~ 2022 and December 31, ~~2020,~~ 2021, respectively. AsManagement believes that the ABL Credit ~~Facility was amended on~~ ~~June 16, 2021,~~ ~~management believes that its~~Facility’s carrying value approximates its fair ~~value.~~

value due to the variable interest rate on the ABL Credit Facility.

10.

Accumulated Other Comprehensive Loss:

On January 10, 2019, the Company entered into a ~~five~~five-year~~-year~~ forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $75 million of the outstanding LIBOR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at 2.57%. The fair value of the interest rate hedge of ~~$3.8~~$1.7 million, net of tax of ~~$0.9~~$0.4 million is included in “Accumulated other comprehensive loss” on the Consolidated Balance Sheets at September 30, 2022. The fair value of the interest rate hedge was $2.7 million, net of tax of $0.7 million at December 31, 2021.

11.

Equity Plans:

Restricted Stock Units and Performance Share Units

Pursuant to the Amended and Restated Olympic Steel 2007 Omnibus Incentive Plan (the Incentive Plan), the Company may grant stock options, stock appreciation rights, restricted shares, restricted share units (RSUs), performance shares, and other stock- and cash-based awards to employees and directors of, and consultants to, the Company and its affiliates. Since adoption of the Incentive Plan, 1,400,000 shares of common stock have been authorized for equity grants.

On an annual basis, the compensation committee of the Company’s Board of Directors awards RSUs to each non-employee director as part of their annual compensation. The annual awards for ~~2021~~2022 and ~~2020~~2021 per director were ~~$80,000.~~$80,000. Subject to the terms of the Incentive Plan and the RSU agreement, the RSUs vest after one year of service (from the date of grant). The RSUs are not converted into shares of common stock until the director either resigns or is terminated from the board of directors.

Prior to 2021, under the Incentive Plan, each eligible participant was awarded RSUs with a dollar value equal to 10% of the participant’s base salary, up to an annual maximum of $17,500. The RSUs have a ~~five~~five-year~~-year~~ vesting period and the RSUs ~~will~~ convert into the right to receive shares of common stock upon a participant’s retirement, or earlier upon the participant’s death or disability or upon a change in control of the Company. Due to the ~~COVID-~~19COVID-19 pandemic, 0no RSU awards were granted in ~~2020.~~2021.

In January 2022, the Company adopted a new C-Suite Long-Term Incentive Plan (the C-Suite Plan) that operates under the Senior Manager Stock Incentive Plan. Under the ~~Incentive~~C-Suite Plan, the ~~Company awards RSUs to newly-appointed executive officers, based upon a percentage of their base salary. Upon Mr. Greiff’s promotion to~~Chief Executive Officer, the Chief Financial Officer and the President and Chief Operating Officer on ~~January 1, 2020,~~ ~~he received 15,694 RSUs.~~are eligible for participation. In each calendar year, eligible participants may be awarded a long-term incentive of both an RSU grant and a performance stock unit (PSU) grant. The ~~RSUs~~total long-term award target is $1.1 million for the Chief Executive Officer, $0.3 million for the Chief Financial Officer and $0.6 million for the President and Chief Operating Officer. The PSUs will vest ~~five~~if the return on net assets, calculated as EBITDA divided by Average Accounts Receivable, Inventory and Property and Equipment, exceeds 5%. Each RSU and service-based cash incentive vests three years ~~from~~after the grant ~~date, or earlier upon death or disability or upon~~date. Each vested RSU will convert into the right to receive one share of common stock. During the first quarter of 2022, a ~~change in control~~total of 20,000 RSUs and 20,000 PSUs were granted to the ~~Company.~~participants under the C-Suite Plan.

Stock-based compensation expense recognized on RSUs for the three and nine months ended September 30, ~~2021~~ 2022 and ~~2020,~~2021, respectively, is summarized in the following table:

	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
(in thousands, except per share data)	2021		2020		2021		2020		2022		2021		2022		2021
RSU expense before taxes	$	258	$	286	$	778	$	973	$	335	$	258	$	997	$	778
RSU expense after taxes	$	191	$	204	$	573	$	672	$	251	$	191	$	730	$	573

All pre-tax charges related to RSUs were included in the caption “Administrative and general” on the accompanying Consolidated Statements of Comprehensive ~~Income (Loss).~~Income.

The following table summarizes the activity related to RSUs for the nine months ended September 30, ~~2021~~ 2022 and ~~2020,~~2021, respectively:

As of September 30, 2021
As of September 30, 2020

Number of

Weighted Average

Number of

Weighted Average

Shares

Granted Price

Shares

Granted Price

Outstanding at December 31
610,540 $ 18.25 636,086 $ 19.25
Granted
20,604 23.29 70,588 11.92
Converted into shares
(2,422 ) 17.09 (94,161 ) 20.27
Forfeited
(5,086 ) 17.55 (1,973 ) 18.14
Outstanding at September 30
623,636 $ 18.43 610,540 $ 18.25
Vested at September 30
414,090 $ 18.76 375,692 $ 18.88

		As of September 30, 2022					As of September 30, 2021
	Number of			Weighted Average		Number of			Weighted Average
	Shares			Granted Price		Shares			Granted Price
Outstanding at December 31		576,867		$	18.40		610,540		$	18.25
Granted		35,558			26.72		20,604			23.29
Converted into shares		(5,841	)		18.16		(2,422	)		17.09
Forfeited		(6,271	)		17.76		(5,086	)		17.55
Outstanding at September 30		600,313		$	18.79		623,636		$	18.43
Vested at September 30		424,598		$	19.26		414,090		$	18.76

12.

Income Taxes:

For the three months ended September 30, ~~2021,~~ 2022, the Company recorded an income tax provision of ~~$15.7~~$4.0 million, or ~~26.0%~~25.0%, compared to an income tax ~~benefit~~provision of ~~$0.6~~$15.7 million, or ~~27.0%~~26.0%, for the three months ended September 30, ~~2020.~~ 2021. For the nine months ended September 30, ~~2021,~~ 2022, the Company recorded an income tax provision of ~~$34.4~~$31.8 million, or ~~26.3%~~26.8%, compared to an income tax ~~benefit~~provision of ~~$3.3~~$34.4 million, or ~~30.9%~~26.3%, for the nine months ended September 30, ~~2020.~~2021.

~~For the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~the~~The tax provision ~~or benefit~~ for the interim period is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items that are taken into account in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, the Company makes a cumulative adjustment. ~~Due to the COVID-~~19 ~~pandemic and the uncertainty around forecasting an annual effective tax rate, the tax provision was recorded based on the actual effective tax rate including discrete items for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020.~~

The quarterly tax provision and the quarterly estimate of the annual effective tax rate is subject to significant volatility due to several factors, including variability in accurately predicting the Company’s pre-tax and taxable income and ~~loss and~~ the mix of jurisdictions to which they relate, changes in law and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, the effective tax rate can be more or less volatile based on the amount of pre-tax income. For example, the impact of discrete items and non-deductible expenses on the effective tax rate is ~~lower~~greater when the pre-tax income is ~~higher.~~lower.

13.

Shares Outstanding and Earnings Per Share:

Earnings per share have been calculated based on the weighted average number of shares outstanding as set forth below:

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

(in thousands, except per share data)

2021

2020

2021

2020

Weighted average basic shares outstanding
11,492 11,452 11,491 11,447
Assumed exercise of stock options and issuance of stock awards
23 0 18 0
Weighted average diluted shares outstanding
11,515 11,452 11,509 11,447
Net income (loss)
$ 44,533 $ (1,520 ) $ 96,190 $ (7,381 )
Basic earnings per share
$ 3.88 $ (0.13 ) $ 8.37 $ (0.64 )
Diluted earnings per share
$ 3.87 $ (0.13 ) $ 8.36 $ (0.64 )
Unvested RSUs
209 234 209 234

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(in thousands, except per share data)	2022		2021		2022		2021
Weighted average basic shares outstanding		11,548		11,492		11,543		11,491
Assumed exercise of stock options and issuance of stock awards		9		23		5		18
Weighted average diluted shares outstanding		11,557		11,515		11,548		11,509
Net income (loss)	$	12,046	$	44,533	$	86,972	$	96,190
Basic earnings per share	$	1.04	$	3.88	$	7.53	$	8.37
Diluted earnings per share	$	1.04	$	3.87	$	7.53	$	8.36
Unvested RSUs		176		209		176		209

14.

~~Equity Programs~~Stock Repurchase Program:

~~Stock Repurchase Program~~

On October 2, 2015, the Company announced that its Board of Directors authorized a stock repurchase program of up to 550,000 shares of the Company’s issued and outstanding common stock, which could include open market repurchases, negotiated block transactions, accelerated stock repurchases or open market solicitations for shares, all or some of which may be ~~affected~~effected through Rule ~~10b5~~-110b5-1 plans. Any of the repurchased shares are held in the Company’s treasury, or canceled and retired as the Board ~~of Directors~~ may determine from time to time. Any repurchases of common stock are subject to the covenants contained in the ABL Credit Facility. Under the ABL Credit Facility, the Company may repurchase common stock and pay dividends up to $5.0 million in the aggregate during any trailing twelve months without restrictions. Purchases of common stock or dividend payments in excess of $5.0 million in the aggregate require the Company to (i) maintain availability in excess of 20.0% of the aggregate revolver commitments ($($95.0 million at September 30, ~~2021)~~ 2022) or (ii) to maintain availability equal to or greater than 15.0% of the aggregate revolver commitments ($($71.3 million at September 30, ~~2021)~~ 2022) and the Company must maintain a pro-forma ratio of EBITDA minus certain capital expenditures and cash taxes paid to fixed charges of at least 1.00 to 1.00.

There were 0no shares repurchased during the three and nine months ended September 30, 2022 or September 30, 2021. ~~There were 0 shares repurchased during the~~ ~~three~~ ~~months ended~~ As of September 30, ~~2020.~~ ~~During the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020,~~ ~~the Company repurchased 15,000 shares for an aggregate cost of $145 thousand. As of~~ ~~September 30, 2021,~~ 2022, 360,212 shares remain authorized for repurchase under the program.

~~At-the-Market Equity Program~~

On September 3, 2021, the Company commenced an ~~at-the-market ("ATM")~~at-the market (ATM) equity program under its shelf registration statement, which allows it to sell and issue up to $50 million in shares of its common stock from time to time. The Company entered into an Equity Distribution Agreement on September 3, 2021 with KeyBanc Capital Markets Inc. ~~("KeyBanc")~~(KeyBanc) relating to the issuance and sale of shares of common stock pursuant to the program. KeyBanc is not required to sell any specific amount of securities but will act as the Company’s sales agent using commercially reasonable efforts consistent with its normal trading and sales practices, on ~~mutually~~mutual agreed terms between KeyBanc and the Company. KeyBanc will be entitled to compensation for shares sold pursuant to the program of 2.0% of the gross proceeds of any shares of common stock sold under the Equity Distribution Agreement. ~~NaN~~No shares were sold under the ATM program during the three and nine months ended September 30, 2022 and 2021.

15.

Segment Information:

The Company follows the accounting guidance that requires the utilization of a “management approach” to define and report the financial results of operating segments. The management approach defines operating segments along the lines used by the Company’s chief operating decision maker (CODM) to assess performance and make operating and resource allocation decisions. The CODM evaluates performance and allocates resources based primarily on operating income (loss). The operating segments are based primarily on internal management reporting.

The Company operates in three reportable ~~segments:~~segments; specialty metals flat products, carbon flat products, and tubular and pipe products. The specialty metals flat products segment and the carbon flat products segment are at times consolidated and referred to as the flat products segments, as certain of the flat products segments’ assets and resources are shared by the specialty metals and carbon flat products segments and both segments’ products are stored in the shared facilities and, in some locations, processed on shared equipment.

Corporate expenses are reported as a separate line item for segment reporting purposes. Corporate expenses include the unallocated expenses related to managing the entire Company (i.e., all three segments), including compensation for certain personnel, expenses related to being a publicly traded entity such as board of directors’ expenses, audit expenses and various other professional fees.

The following table provides financial information by segment and reconciles the Company’s operating income by segment to the consolidated income before income taxes for the three and ~~six~~nine months ended ~~June~~September 30, ~~2021~~ 2022 and ~~2020,~~2021, respectively.

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
(in thousands)	2021			2020			2021			2020			2022			2021			2022			2021
Net sales
Specialty metals flat products	$	164,179		$	80,904		$	428,533		$	223,887		$	188,301		$	164,179		$	614,744		$	428,533
Carbon flat products		404,596			167,948			976,480			511,726			336,259			404,596			1,086,473			976,480
Tubular and pipe products		99,691			51,069			282,654			166,984			109,877			99,691			338,729			282,654
Total net sales	$	668,466		$	299,921		$	1,687,667		$	902,597		$	634,437		$	668,466		$	2,039,946		$	1,687,667

Restructuring and other charges
Specialty metals flat products	$	0		$	0		$	0		$	27
Carbon flat products		0			0			0			3,559
Tubular and pipe products		0			0			0			0
Corporate		0			0			0			0
Total restructuring and other charges	$	0		$	0		$	0		$	3,586

Depreciation and amortization
Specialty metals flat products	$	858		$	513		$	2,662		$	1,457		$	1,024		$	858		$	3,037		$	2,662
Carbon flat products		2,698			2,852			8,570			8,932			2,513			2,698			7,885			8,570
Tubular and pipe products		1,239			1,344			4,035			4,076			1,112			1,239			3,620			4,035
Corporate		18			18			54			102			17			18			52			54
Total depreciation and amortization	$	4,813		$	4,727		$	15,321		$	14,567		$	4,666		$	4,813		$	14,594		$	15,321

Operating income (loss)
Operating income
Specialty metals flat products	$	24,663		$	2,448		$	46,387		$	7,174		$	15,072		$	24,663		$	85,629		$	46,387
Carbon flat products		37,164			(1,604	)		88,797			(12,378	)		1,732			37,164			27,225			88,797
Tubular and pipe products		2,354			744			11,713			7,274			7,095			2,354			28,977			11,713
Corporate expenses		(2,021	)		(1,951	)		(10,711	)		(6,867	)		(4,813	)		(2,021	)		(15,758	)		(10,711	)
Total operating income (loss)	$	62,160		$	(363	)	$	136,186		$	(4,797	)
Total operating income													$	19,086		$	62,160		$	126,073		$	136,186
Other income (loss), net		(15	)		(25	)		(24	)		(68	)		(17	)		(15	)		(38	)		(24	)
Income (loss) before interest and income taxes		62,145			(388	)		136,162			(4,865	)
Income before interest and income taxes														19,069			62,145			126,035			136,162
Interest and other expense on debt		1,947			1,693			5,618			5,823			3,007			1,947			7,276			5,618
Income (loss) before income taxes	$	60,198		$	(2,081	)	$	130,544		$	(10,688	)
Income before income taxes													$	16,062		$	60,198		$	118,759		$	130,544

	For the Nine Months Ended				For the Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2022		2021
Capital expenditures
Flat products segments	$	6,172	$	6,818	$	11,063	$	6,172
Tubular and pipe products		1,566		1,150		2,900		1,566
Corporate		0		0		-		-
Total capital expenditures	$	7,738	$	7,968	$	13,963	$	7,738

	As of				As of
	September 30,		December 31,		September 30,		December 31,
(in thouands)	2021		2020
(in thousands)					2022		2021
Assets
Flat products segments	$	721,133	$	404,269	$	774,536	$	777,074
Tubular and pipe products		249,566		235,516		262,130		245,962
Corporate		607		820		318		536
Total assets	$	971,306	$	640,605	$	1,036,984	$	1,023,572

There were no material revenue transactions between the specialty metals products, carbon flat products and tubular and pipe products segments. On ~~September 17, 2021,~~ ~~the Company sold substantially all of the assets related to its Detroit operation. The Detroit operation was primarily included in the carbon flat-rolled segment.~~

The Company sells certain products internationally, primarily in Canada and Mexico. International sales are immaterial to the consolidated financial results and to the individual segments’ results.

~~16.~~

~~Disposition of Assets~~:

On ~~September 17, 2021,~~ the Company sold substantially all of the assets related to its Detroit operation to Venture Steel (U.S.), Inc. for $58.4 million plus a working capital adjustment, estimated at $13.5 million, to be settled in late ~~2021~~ ~~or early~~ ~~2022.~~ The sale price included $9.5 million for property and equipment and the remaining assets and liabilities were sold at fair value. The proceeds of the sale will be used for working capital needs as well as future acquisitions and investments in organic growth opportunities. The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers. The sale of the Detroit operation does ~~not~~ indicate a strategic shift in the Company’s operations. The gain on the sale net of associated professional and legal fees totaled $3.5 million and are included in “Administrative and general” in the Corporate segment in the Consolidated Statements of Comprehensive Income (Loss). The operating results of the Detroit operation were included in the flat-products segments prior to the disposition.

~~17.~~

~~Subsequent Event~~:

On ~~October 1, 2021,~~ the Company acquired all of the net assets of Shaw Stainless & Alloy, Inc. (Shaw), based in Powder Springs, Georgia for $12.0 million. Shaw is a full-line distributor of stainless steel sheet, pipe, tube, bar and angles. Shaw also manufactures and distributes stainless steel bollards and water treatment systems. The acquisition includes Shaw's stainless-steel distribution and fabrication businesses as well as its architectural and barrier defense businesses.

~~The acquisition will be accounted for as a business combination and the assets acquired and liabilities assumed valued at fair market value. The acquisition is~~ ~~not~~ ~~considered significant and Shaw’s results will be included in the Company’s specialty metals flat products segment beginning in the Company’s~~ ~~fourth~~ ~~quarter of~~ ~~2021~~ ~~financial results. Upon the acquisition, the Company entered into an amendment to include the eligible assets of Shaw in its ABL Credit Facility.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and accompanying notes contained herein and our consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed under Item 1A (Risk Factors) in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, and in Part II, Item 1A (Risk Factors) in this Quarterly Report on Form 10-Q. The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appear elsewhere in this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q and other documents we file with the Securities and Exchange Commission, or SEC, contain various forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, business, our beliefs and management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, conferences, webcasts, phone calls and conference calls. Words such as “may,” “will,” “anticipate,” “should,” “intend,” “expect,” “believe,” “estimate,” “project,” “plan,” “potential,” and “continue,” as well as the negative of these terms or similar expressions, are intended to identify forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those implied by such statements including, but not limited to:

Should one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, intended, expected, believed, estimated, projected or planned. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to republish revised forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date hereof, except as otherwise required by law.

We are a leading metals service center that operates in three reportable segments; ~~carbon~~specialty metals flat products, ~~specialty metals~~carbon flat products, and tubular and pipe products. We provide metals processing and distribution services for a wide range of customers. Our specialty metals flat products segment’s focus is on the direct sale and distribution of processed aluminum and stainless flat-rolled sheet and coil products, flat bar products, prime tin mill products and fabricated parts. Through the acquisition of Shaw Stainless & Alloy, or Shaw, on October 1, 2021, and Action Stainless & Alloys, Inc., or Action Stainless, on December 14, 2020, our specialty metals flat products segment expanded its geographic footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe. Shaw also manufactures and distributes stainless steel bollards and water treatment systems. Action Stainless offers a range of processing, including plasma, laser and waterjet cutting and computer numerical control, or CNC, machining. Our carbon flat products segment’s focus is on the direct sale and distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products and fabricated parts. ~~Through the acquisitions of McCullough Industries, or McCullough, and the EZ Dumper® hydraulic dump inserts, or EZ Dumper, in 2019,~~In addition, our carbon flat products ~~segment expanded its~~segment’s product offerings to include self-dumping metal hoppers and carbon and stainless-steel dump inserts for pickup truck and service truck beds. On September 17, 2021, the Company sold substantially all of the assets related to its Detroit operation. The Detroit operation was primarily focused on the distribution of carbon flat-rolled steel to domestic automotive manufacturers and their suppliers and primarily included in the carbon ~~flat-rolled~~flat products segment. In addition, we distribute metal tubing, pipe, bar, valves and fittings and fabricate ~~pressure~~ parts supplied to various industrial markets through our tubular and pipe products segment. Products that require more value-added processing generally have a higher gross profit. Accordingly, our overall gross profit is affected by, among other things, product mix, the amount of processing performed, the demand for and availability of metals, and volatility in selling prices and material purchase costs. We also perform toll processing of customer-owned metals. We sell certain products internationally, primarily in Canada and Mexico. International sales are immaterial to our consolidated financial results and to the individual segments’ results.

Our results of operations are affected by numerous external factors, including, but not limited to: general and global business, economic, financial, banking and political conditions; fluctuations in the value of the U.S. dollar to foreign currencies, competition; metals pricing, demand and availability; transportation and energy costs; pricing and availability of raw materials used in the production of metals; global supply, the level of metals imported into the United States, tariffs, and inventory held in the supply chain; the availability and increased costs of labor; customers’ ability to manage their credit line availability; and layoffs or work stoppages by our own, our suppliers’ or our customers’ personnel. The metals industry also continues to be affected by the global consolidation of our suppliers, competitors and end-use customers.

Like other metals service centers, we maintain substantial inventories of metals to accommodate the short lead times and just-in-time delivery requirements of our customers. Accordingly, we purchase metals in an effort to maintain our inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon customer forecasts, historic buying practices, supply agreements with customers and market conditions. Our commitments to purchase metals are generally at prevailing market prices in effect at the time we place our orders. From time to time, we have entered into nickel swaps at the request of our customers in order to mitigate our customers’ risk of volatility in the price of ~~metals, and we have entered into metals hedges to mitigate our risk of volatility in the price of~~ metals. We have no long-term, fixed-price metals purchase contracts. When metals prices decline, customer demands for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently, lower gross profits and earnings as we use existing metals inventory. When metals prices increase, competitive conditions will influence how much of the price increase we can pass on to our customers. To the extent we are unable to pass on future price increases in our raw materials to our customers, the net sales and gross profits of our business could be adversely affected.

At September 30, ~~2021,~~2022, we employed approximately ~~1,600~~1,647 people. Approximately ~~195~~178 of the hourly plant personnel at the facilities listed below are represented by seven separate collective bargaining units. The table below shows the expiration dates of the collective bargaining agreements.

We have never experienced a work stoppage and we believe that our relationship with employees is good. However, any prolonged work stoppages by our personnel represented by collective bargaining units could have a material adverse impact on our business, financial condition, results of operations and cash flows.

We operate in three reportable ~~segments: carbon~~segments; specialty metals flat products, ~~specialty metals~~carbon flat products, and tubular and pipe products. The ~~carbon~~specialty metals flat products segment and the ~~specialty metals~~carbon flat products segment are at times consolidated and referred to as the flat products segment. Some of the flat products segments’ assets and resources are shared by the ~~carbon~~specialty metals and ~~specialty metals~~carbon segments and both segments’ products are stored in the shared facilities and, in some locations, processed on shared equipment. As such, total assets and capital expenditures are reported in the aggregate for the flat products segments. Due to the shared assets and resources, certain of the flat products segment expenses are allocated between the ~~carbon~~specialty metals flat products segment and the ~~specialty metals~~carbon flat products segment based upon an established allocation methodology.

We follow the accounting guidance that requires the utilization of a “management approach” to define and report the financial results of operating segments. The management approach defines operating segments along the lines used by the chief operating decision maker, or CODM, to assess performance and make operating and resource allocation decisions. Our CODM evaluates performance and allocates resources based primarily on operating income. Our operating segments are based primarily on internal management reporting.

Due to the nature of the products sold in each segment, there are significant differences in the segments’ average selling price and the cost of materials sold. ~~The tubular and pipe products segment generally has the highest average selling price among the three segments followed by the specialty metals flat products and carbon flat products segments.~~ Due to the nature of the tubular and pipe products, we do not report tons sold or per ton information. Gross profit per ton is generally higher in the specialty metals flat products segment than the carbon flat products segment. Gross profit as a percentage of net sales is generally highest in the tubular and pipe products segment, followed by the carbon and specialty metals flat products segments. Due to the differences in average selling prices, gross profit and gross profit percentage among the segments, a change in the mix of sales could impact total net sales, gross profit and gross profit percentage. In addition, certain inventory in the tubular and pipe products segment is valued under the LIFO method. Adjustments to the LIFO inventory value are recorded to cost of materials sold and may impact the gross margin and gross margin percentage at the consolidated Company and tubular and pipe products segment levels.

The primary focus of our specialty metals flat products segment is on the direct sale and distribution of processed stainless and aluminum flat-rolled sheet and coil products, flat bar products and fabricated parts. Through the acquisition of Shaw on October 1, 2021, and Action Stainless on December 14, 2020, our specialty metals flat products segment expanded its geographic footprint and enhanced its product offerings in stainless steel and aluminum plate, sheet, angles, rounds, flat bar, tubing and pipe. Through ~~its~~the acquisition of Berlin Metals, LLC, or Berlin Metals, on April 2, 2018, our specialty metals flat products segment expanded its product offerings to include differing types of stainless flat-rolled sheet and coil and prime tin mill products. We act as an intermediary between metals producers and manufacturers that require processed metals for their operations. We serve customers in various industries, including manufacturers of food service and commercial appliances, agriculture equipment, transportation and automotive equipment. We distribute these products primarily through a direct sales force.

The primary focus of our carbon flat products segment is on the direct sale and distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products and fabricated parts. We act as an intermediary between metals producers and manufacturers that require processed metals for their operations. We serve customers in most metals consuming industries, including manufacturers and fabricators of transportation and material handling equipment, construction and farm machinery, storage tanks, environmental and energy generation equipment, automobiles, military vehicles and equipment, as well as general and plate fabricators and metals service centers. We distribute these products primarily through a direct sales force.

Combined, the carbon and specialty metals flat products segments have ~~26 strategically-located~~34 strategically located processing and distribution facilities in the United States and one in Monterrey, Mexico. Many of our facilities service both the carbon and the specialty metals flat products segments, and certain assets and resources are shared by the segments. Our geographic footprint allows us to focus on regional customers and larger national and multi-national accounts, primarily located throughout the midwestern, eastern and southern United States.

The tubular and pipe products segment consists of the Chicago Tube and Iron, or CTI ~~business.~~business, acquired in 2011. Through our tubular and pipe products segment, we distribute metal tubing, pipe, bar, valve and fittings and fabricate ~~pressure~~ parts supplied to various industrial markets. Founded in 1914, CTI operates from seven locations in the Midwestern and southeastern United States. The tubular and pipe products segment distributes its products primarily through a direct sales force.

Corporate expenses are reported as a separate line item for segment reporting purposes. Corporate expenses include the unallocated expenses related to managing the entire Company (i.e., all three segments), including compensation for certain personnel, expenses related to being a publicly traded entity such as board of directors’ expenses, audit expenses and various other professional fees.

Our results of operations are impacted by the market price of metals. Metals prices fluctuate significantly and changes to our net sales, cost of materials sold, gross profit, cost of inventory and profitability, are all impacted by industry metals pricing. ~~Since August 2020, metals prices have continuously increased and metals~~Index pricing inon carbon steel decreased during the third quarter of 2022 by $241 per ton, or 23.5%, and decreased during the first nine months of 2022 by $745 per ton, or 48.5%. Despite the decrease in index pricing during 2022, our average selling prices and average cost of materials sold were higher during the third quarter and first nine months of 2022 than during the same periods of 2021. Metals prices in our specialty metals products segment increased during 2022 compared to 2021 ~~reached record levels. Hot rolled coil index prices were 226% higher~~due to the unprecedented increase in metal surcharges experienced during the second quarter and continuing into the third quarter of ~~2021~~2022. The average price of stainless surcharges increased 54.7% during the first nine months of 2022 compared to the first nine months of 2021. Metals pricing for the tubular and pipe products segment have a tendency to lag behind the carbon flat products segment by several months. We expect average selling prices, gross margin and operating income to be lower in the fourth quarter of 2022 than the third quarter of ~~2020. The increased~~2022 as a result of continued decreased industry metals pricing is primarily caused by disruptions in the domestic and global supply chains; increased raw material pricing; supply shortages, including increased lead times and delivery delays; increased transportations costs; and increased domestic demand as the economy recovers from the COVID-19 pandemic. pricing.

Transactional or “spot” selling prices generally move in tandem with market price changes, while fixed selling prices typically lag and reset quarterly. Similarly, inventory costs (and, therefore, cost of materials sold) tend to move slower than market selling price changes due to mill lead times and inventory turnover impacting the rate of change in average cost. When average selling prices increase, and net sales increase, gross profit and operating expenses as a percentage of net sales will generally decrease. During the third quarter and first nine months of 2021, our sales volumes were negatively impacted by supply chain disruptions, however, our net sales were positively impacted by the price increases experienced in the first nine months of 2021, in particular for carbon flat products, which increased our profitability during the third quarter and first nine months of 2021.

The following table presents consolidated operating results for the periods indicated (dollars are shown in thousands):

Net sales ~~increased 122.9%~~decreased 5.1% to $634.4 million in the third quarter of 2022 from $668.5 million in the third quarter of ~~2021 from $299.9 million in the third quarter of 2020.~~2021. Specialty metals flat products net sales were 29.7% of total net sales in the third quarter of 2022 compared to 24.6% of total net sales in the third quarter of ~~2021 compared to 27.0%~~2021. Carbon flat products net sales were 53.0% of total net sales in the third quarter of ~~2020. Carbon flat products net sales were~~2022 compared to 60.5% of total net sales in the third quarter of ~~2021 compared to 56.0%~~2021. Tubular and pipe products net sales were 17.3% of total net sales in the third quarter of ~~2020. Tubular and pipe products net sales were~~2022 compared to 14.9% of total net sales in the third quarter of ~~2021 compared to 17.0% of total net sales in the third quarter of 2020.~~2021. The ~~increase~~decrease in net sales was due to a ~~98.9%~~consolidated 15.9% decrease in volume, partially offset by a 12.9% increase in ~~consolidated~~ average selling prices during the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020,~~2021. During the third quarter and ~~a 12.0% increase in consolidated volume.~~ first nine months of 2022, our sales volumes were negatively impacted by the sale of our Detroit operations on September 17, 2021. We expect metals prices to decrease during the fourth quarter of 2022 compared to the third quarter of 2022.

Net sales increased ~~87.0%~~20.9% to $2.0 billion in the first nine months of 2022 from $1.7 billion in the first nine months of ~~2021 from $902.6 million~~2021. Specialty metals flat products net sales were 30.1% of total net sales in the first nine months of ~~2020. Specialty metals flat products net sales were~~2022 compared to 25.4% of total net sales in the first nine months of ~~2021 compared to 24.8%~~2021. Carbon flat products net sales were 53.3% of total net sales in the first nine months of ~~2020. Carbon flat products net sales were~~2022 compared to 57.9% of total net sales in the first nine months of ~~2021 compared to 56.7%~~2021. Tubular and pipe products net sales were 16.6% of total net sales in the first nine months of ~~2020. Tubular and pipe products net sales were~~2022 compared to 16.7% of total net sales in the first nine months of ~~2021 compared to 18.5% of total net sales in the first nine months of 2020.~~2021. The increase in net sales was due to a ~~64.2%~~consolidated 41.0% increase in ~~consolidated~~ average selling prices during the first nine months of ~~2021~~2022 compared to the first nine months of ~~2020, and~~2021, partially offset by a ~~13.8% increase in~~14.3% consolidated ~~volume. We expect carbon metals market prices to~~ decrease in volume. The decrease in tons sold is primarily due to the ~~fourth quarter~~sale of our Detroit operations on September 17, 2021.

Cost of materials sold increased ~~117.1%~~1.3% to ~~$520.9~~$527.5 million in the third quarter of ~~2021~~2022 from ~~$240.0~~$520.1 million in the third quarter of ~~2020.~~2021. Cost of materials sold increased ~~81.5%~~26.0% to $1.6 billion in the first nine months of 2022 from $1.3 billion in the first nine months of ~~2021 from $718.7 million in the first nine months of 2020.~~2021. The increase in cost of materials sold in the third quarter and first nine months of ~~2021~~2022 is related to the increased metals pricing discussed above in Results of ~~Operations and increased sales volumes.~~ Operations.

As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) ~~increased~~decreased to 16.9% in the third quarter of 2022 from 22.1% in the third quarter of ~~2021 from 20.0% in the third quarter of 2020.~~2021. As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) ~~increased~~decreased to 19.5% in the first nine months of 2022 from 22.7% in the first nine months of ~~2021 from 20.4% in the first nine months of 2020.~~2021. The ~~increase~~decrease in the gross profit as a percentage of net sales is due to the ~~impact of the rapidly increasing~~ average ~~selling prices discussed above in Results of Operations, while the average costs~~cost of inventory ~~did not increase as quickly as~~increasing more than the average selling ~~price.~~prices.

Operating expenses in the third quarter of ~~2021~~2022 increased ~~$25.1~~$2.4 million, or ~~41.6%~~2.9%, to ~~$85.4~~$87.9 million from ~~$60.3~~$85.4 million in the third quarter of ~~2020.~~2021. As a percentage of net sales, operating expenses ~~decreased~~increased to 13.9% for the third quarter of 2022 from 12.8% in the third quarter of ~~2021 from 20.1% in the third quarter of 2020.~~2021. Operating expenses in the specialty metals flat products segment increased ~~$10.6~~$3.4 million, operating expenses in the carbon flat products segment ~~increased $11.7~~decreased $5.4 million, operating expenses in the tubular and pipe products segment increased ~~$2.7~~$1.7 million and Corporate expenses increased ~~$70 thousand~~$2.8 million in the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020. Operating~~2021. The increase in operating expenses ~~increased during the third quarter of 2021 as a result of increased variable expenses related~~was primarily attributable to ~~increased sales volume, increased labor hours, and increased variable performance-based incentive compensation;~~ the inclusion of operating expenses related to the ~~December 2020~~October 2021 acquisition of ~~Action Stainless; and~~Shaw, inflationary impacts on labor, transportation and other product support ~~costs.~~costs, partially offset by lower year-over-year variable performance-based incentive compensation. During the 3^rd quarter of 2021 we recorded a $3.5 million gain, net of expenses, on the sale of our Detroit operations on September 17^th, 2021.

Operating expenses in the first nine months of ~~2021~~2022 increased ~~$58.5~~$23.5 million, or ~~31.0%~~9.5%, to ~~$247.2~~$270.8 million from ~~$188.7~~$247.2 million in the first nine months of ~~2020.~~2021. As a percentage of net sales, operating expenses decreased to ~~14.7%~~13.3% in the first nine months of ~~2021~~2022 from ~~20.9%~~14.6% in the first nine months of ~~2020.~~2021. Operating expenses in the specialty metals flat products segment increased ~~$25.2~~$22.3 million, operating expenses in the carbon flat products segment ~~increased $21.4~~decreased $5.2 million, operating expenses in the tubular and pipe products segment increased ~~$8.2~~$1.3 million and Corporate expenses increased ~~$3.8~~$5.0 million in the first nine months of ~~2021~~2022 compared to the first nine months of ~~2020. Operating~~2021. The increase in operating expenses ~~increased during the first nine months of 2021 as a result of increased variable expenses related~~was primarily attributable to ~~increased sales volume, increased labor hours, and increased variable performance-based incentive compensation;~~ the inclusion of operating expenses related to the ~~December 2020~~October 2021 acquisition of ~~Action Stainless; and~~Shaw, inflationary impacts on labor, transportation and other product support costs, ~~compared to~~partially offset by lower year-over-year variable performance-based incentive compensation. During the first nine months of ~~2020.~~2021 we recorded a $3.5 million gain, net of expenses, on the sale of our Detroit operations on September 17^th, 2021.

Interest and other expense on debt totaled $3.0 million, or 0.5% of net sales, in the third quarter of 2022 compared to $1.9 million, or 0.3% of net sales, in the third quarter of 2021 compared to $1.7 million, or 0.6% of net sales, in the third quarter of 2020. The increase was primarily due to increased average borrowings in the third quarter of 2021 compared to the third quarter of 2020.2021. Interest and other expense on debt totaled $7.3 million, or 0.4% of net sales, in the first nine months of 2022 compared to $5.6 million, or 0.3% of net sales, in the first nine months of ~~2021 compared~~2021. The increase was due to ~~$5.8 million, or 0.6% of net sales,~~higher borrowings and a higher effective borrowing rate in the first nine months of ~~2020. The decrease was due to lower interest rates in the first nine months of 2021~~2022 compared to the first nine months of ~~2020.~~2021. Our effective borrowing rate, exclusive of deferred financing fees and commitment fees, was 2.9% for the first nine months of 2022 compared to 2.6% for the first nine months of ~~2021 compared to 3.3% for the first nine months of 2020.~~2021.

In the third quarter of ~~2021,~~2022, income before income taxes totaled ~~$60.2~~$16.1 million compared to ~~a loss~~income before income taxes of ~~$2.1~~$60.2 million in the third quarter of ~~2020.~~2021. In the first nine months of ~~2021,~~2022, income before income taxes totaled ~~$130.5~~$118.8 million compared to ~~a loss~~income before income taxes of ~~$10.7~~$130.5 million in the first nine months of ~~2020.~~2021.

An income tax provision of ~~26.0%~~25.0% was recorded for the third quarter of ~~2021,~~2022, compared to an income tax ~~benefit~~provision of ~~27.0%~~26.0% for the third quarter of ~~2020.~~2021. An income tax provision of ~~26.3%~~26.8% was recorded for the first nine months of ~~2021,~~2022, compared to an income tax ~~benefit~~provision of ~~30.9%~~26.3% for the first nine months of ~~2020.~~2021. Our tax provision ~~or benefit~~ for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items that are considered in the relevant period. Each quarter, we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment. During the third quarter of 2020, due to the COVID-19 pandemic and our inability to accurately forecast the impact of the pandemic, we recorded the tax provision using an actual effective tax rate as of September 30, 2020.

Net income for the third quarter of ~~2021~~2022 totaled $12.0 million, or $1.04 per basic share and diluted share, compared to net income of $44.5 million, or $3.88 per basic ~~share~~ and $3.87 per ~~diluted share, compared to a net loss of $1.5 million or $0.13 per basic and~~ diluted share, for the third quarter of ~~2020.~~2021. Net income for the first nine months of ~~2021~~2022 totaled $87.0 million, or $7.53 per basic share and diluted share, compared to net income of $96.2 million, or $8.37 per basic ~~share~~ and $8.36 per ~~diluted share, compared to a net loss of $7.4 million or $0.64 per basic and~~ diluted share, for the first nine months of ~~2020.~~2021.

The following table presents selected operating results for our specialty metals flat products segment for the periods indicated (dollars are shown in thousands, except for per ton information):

Tons sold by our specialty metals flat products segment ~~increased 7~~decreased 17.0% to 34 thousand ~~or 22.1%, to~~in the third quarter of 2022 from 41 thousand in the third quarter of ~~2021 from 34 thousand in the third quarter of 2020.~~2021. Tons sold by our specialty metals flat products segment ~~increased 30~~decreased 9.9% to 111 thousand ~~or 33.1%, to~~in the first nine months of 2022 from 123 thousand in the first nine months of ~~2021 from 93 thousand in the first nine months of 2020.~~2021. The ~~increase~~decrease in tons sold was due to ~~the acquisition of Action Stainless as well as customer demand returning to more normalized levels, compared to suppressed sales in 2020 caused by the COVID-19 pandemic.~~current economic trends.

Net sales in our specialty metals flat products segment increased ~~$83.3~~$24.1 million, or ~~102.9%~~14.7%, to $188.3 million in the third quarter of 2022 from $164.2 million in the third quarter of ~~2021 from $80.9 million in the third quarter of 2020.~~2021. The increase in sales was due to a ~~66.1%~~38.2% increase in average selling prices ~~and~~offset by a ~~22.1% increase~~17.0% decrease in sales volume during the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020. Sales volumes in the third quarter of 2020 were adversely impacted by the COVID-19 pandemic.~~2021. Average selling prices in the third quarter of ~~2021~~2022 were ~~$3,985~~$5,508 per ton, compared with ~~$2,398~~$3,985 per ton in the third quarter of ~~2020,~~2021, and ~~$3,435~~$5,913 per ton in the second quarter of ~~2021.~~2022. The increase in the year over year average selling price per ton is a result of the increased industry metals pricing discussed above. We expect specialty metals prices to remain elevated in the fourth quarter of ~~2021.~~2022, but lower than the third quarter of 2022.

Net sales in our specialty metals flat products segment increased ~~$204.6~~$186.2 million, or ~~91.4%~~43.5%, to $614.7 million in the first nine months of 2022 from $428.5 million in the first nine months of ~~2021 from $223.9 million in the first nine months of 2020.~~2021. The increase in sales was due to a ~~43.8%~~59.3% increase in average selling prices ~~and~~offset by a ~~33.1% increase~~9.9% decrease in sales volume during the first nine months of ~~2021~~2022 compared to the first nine months of ~~2020.~~2021. Average selling prices in the first nine months of ~~2021~~2022 were ~~$3,476~~$5,537 per ton, compared with ~~$2,417~~$3,476 per ton in the first nine months of ~~2020.~~2021. The increase in the year over year average selling price per ton is a result of the increased industry metals and the stainless surcharge pricing discussed above in Results of Operations.

Cost of materials sold in our specialty metals flat products segment increased ~~$50.4~~$30.3 million, or ~~72.3%~~25.2%, to $150.5 million in the third quarter of 2022 from $120.2 million in the third quarter of ~~2021 from $69.8 million in the third quarter of 2020.~~2021. Cost of materials sold in our specialty metals flat products segment increased ~~$140.2~~$124.6 million, or ~~73.4%~~37.6%, to $456.0 million in the first nine months of 2022 from $331.3 million in the first nine months of ~~2021 from $191.1 million in the first nine months of 2020.~~2021. The increase in cost of materials sold was due to the ~~increase in sales volume and~~ increased industry metals pricing discussed above in Results of Operations.

As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) ~~increased~~decreased to 20.1% in the third quarter of 2022 from 26.8% in the third quarter of ~~2021 from 13.7% in the third quarter of 2020.~~2021. As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) increased to 25.8% in the first nine months of 2022 from 22.7% in the first nine months of ~~2021 from 14.6%~~2021. The third quarter of 2022 decrease in gross profit as a percentage of net sales is due to the ~~first nine months~~average costs of ~~2020.~~inventory increasing more quickly than the average selling price increases. The increase in the year over year gross profit as a percentage of net sales is due to the impact of the ~~rapidly increasing~~increased average selling prices discussed above in Results of Operations, while the average costs of inventory did not increase as quickly as the average selling price.

Operating expenses increased ~~$10.6~~$3.4 million, or ~~122.6%~~17.6%, to $22.7 million in the third quarter of 2022 from $19.3 million in the third quarter of ~~2021 from $8.7 million in the third quarter of 2020.~~2021. As a percentage of net sales, operating expenses increased to 12.0% in the third quarter of 2022 compared to 11.8% in the third quarter of ~~2021 compared to 10.7% in the third quarter of 2020.~~2021. Operating expenses increased ~~$25.2~~$22.3 million, or ~~98.4%~~44.0%, to $73.1 million in the first nine months of 2022 from $50.8 million in the first nine months of ~~2021 from $25.6 million in the first nine months of 2020.~~2021. As a percentage of net sales, operating expenses ~~increased to~~remained flat at 11.9% in the first nine months of ~~2021~~2022 compared to ~~11.4% in~~ the first nine months of ~~2020.~~2021. The year-over-year increase in operating expenses was primarily attributable to the inclusion of operating expenses related to the ~~December 2020~~October 1, 2021 acquisition of ~~Action Stainless; increased variable expenses related to increased sales volume, increased labor hours and increased variable performance-based incentive compensation; and~~Shaw Stainless, inflationary impacts on labor, transportation and other product support ~~costs.~~costs and increased variable performance-based incentive compensation.

Operating income in the third quarter of ~~2021~~2022 totaled ~~$24.7~~$15.1 million, or ~~15.0%~~8.0% of net sales, compared to ~~$2.4~~$24.7 million, or ~~3.0%~~15.0% of net sales, in the third quarter of ~~2020.~~2021. Operating income in the first nine months of ~~2021~~2022 totaled ~~$46.4~~$85.6 million, or ~~10.8%~~13.9% of net sales, compared to ~~$7.2~~$46.4 million, or ~~3.2%~~10.8% of net sales, in the first nine months of ~~2020.~~

The following table presents selected operating results for our carbon flat products segment for the periods indicated (dollars are shown in thousands, except for per ton information):

Tons sold by our carbon flat products segment ~~increased 20~~decreased 16.9% to 203 thousand ~~or 9.1%, to~~in the third quarter of 2022 from 245 thousand in the third quarter of ~~2021 from 224 thousand in the third quarter of 2020.~~2021. Tons sold by our carbon flat products segment ~~increased 57~~decreased 14.9% to 620 thousand ~~or 8.4% to~~in the first nine months of 2022 from 729 thousand in the first nine months of ~~2021 from 672 thousand in the first nine months of 2020.~~2021. The ~~increase~~decrease in tons sold is primarily due to customer demand returning to more normalized levels, compared to suppressed sales in 2020 caused by the COVID-19 pandemic; however, our ability to ship is still limited due to supply chain disruptions experienced by our customers. In addition, tons sold by the carbon flat products segment was negatively impacted by the sale of our Detroit ~~operation~~operations on September 17, 2021.

Net sales in our carbon flat products segment ~~increased $236.6~~decreased $68.3 million, or ~~140.9%~~16.9%, to $336.3 million in the third quarter of 2022 from $404.6 million in the third quarter of ~~2021 from $167.9 million in the third quarter of 2020.~~2021. The ~~increase~~decrease in sales was attributable to a ~~120.9% increase in average selling prices in the third quarter of 2021 compared to the third quarter of 2020, and a 9.1% increase~~16.9% decrease in tons sold. ~~Net sales were negatively impacted by the sale of our Detroit operation on September 17, 2021.~~ Average selling prices in the third quarter of ~~2021 increased to~~2022 remained flat at $1,655 per ton when compared ~~with $749 per ton in~~to the third quarter of ~~2020~~2021 and ~~$1,332~~decreased compared with $1,760 per ton in the second quarter of ~~2021.~~2022. We expect ~~carbon~~ metals prices to decrease in the fourth quarter of 2022 as discussed above in Results of Operations.

Net sales in our carbon flat products segment increased $110.0 million, or 11.3%, to $1.1 billion in the first nine months of 2022 from $976.5 million in the first nine months of 2021. The increase in sales was attributable to a 30.8% increase in average selling prices in the first nine months of 2022 compared to the first nine months of 2021, partially offset by a 14.9% decrease in tons sold. Average selling prices in the first nine months of 2022 increased to $1,753 per ton, compared with $1,340 per ton in the first nine months of 2021. The increase in the year over year average selling price per ton is a result of the increased industry metals pricing discussed above in Results of Operations.

~~Net sales in our carbon flat products segment increased $464.8~~Cost of materials sold decreased $27.5 million, or ~~90.8%~~8.6%, to ~~$976.5~~$293.5 million in the third quarter of 2022 from $321.0 million in the third quarter of 2021. Cost of materials sold increased $176.7 million, or 23.4%, to $931.8 million in the first nine months of ~~2021~~2022 from $511.7 million in the first nine months of 2020. The increase in sales was attributable to a 76.0% increase in average selling prices in the first nine months of 2021 compared to the first nine months of 2020, and an 8.4% increase in tons sold. Average selling prices in the first nine months of 2021 increased to $1,340 per ton, compared with $761 per ton in the first nine months of 2020.

Cost of materials sold increased $186.2 million, or 138.1%, to $321.0 million in the third quarter of 2021 from $134.8 million in the third quarter of 2020. Cost of materials sold increased $342.2 million, or 82.9%, to $755.1 million in the first nine months of ~~2021 from $412.9 million in the first nine months of 2020.~~2021. The increase was due to the increased market price for metals discussed above in Results of Operations.

As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) ~~increased~~decreased to 12.7% in the third quarter of 2022 compared to 20.7% in the third quarter of ~~2021 compared to 19.7% in the third quarter of 2020.~~2021. As a percentage of net sales, gross profit (as defined in footnote (a) in the table above) ~~increased~~decreased to 14.2% in the first nine months of 2022 compared to 22.7% in the first nine months of ~~2021 compared to 19.3% in the first nine months of 2020.~~2021. The ~~increase~~decrease in the gross profit as a percentage of net sales is due to the impact of the ~~rapidly increasing~~decreased carbon average selling prices discussed above in Results of Operations, while the average costs of inventory did not ~~increase~~decrease as quickly as the average selling price. We expect this trend to continue into the fourth quarter of 2022.

Operating expenses in the third quarter of ~~2021 increased $11.7~~2022 decreased $5.4 million, or ~~33.8%~~11.6%, to ~~$46.4~~$41.0 million from ~~$34.7~~$46.4 million in the third quarter of ~~2020.~~2021. Operating expenses in the first nine months of ~~2021 increased $21.4~~2022 decreased $5.2 million, or ~~19.2%~~3.9%, to ~~$132.3~~$127.4 million from ~~$111.2~~$132.6 million in the first nine months of ~~2020. Operating~~2021. The year-over-year decrease in operating expenses ~~increased as a result of increased variable expenses related~~was primarily attributable to ~~increased sales volume, increased labor hours and increased~~lower variable performance-based incentive ~~compensation and inflationary impacts on labor, transportation and other product support costs.~~compensation.

Operating income in the third quarter of ~~2021~~2022 totaled ~~$37.2~~$1.7 million, or ~~9.2%~~0.5% of net sales, compared to operating ~~loss~~income of ~~$1.6~~$37.2 million, or ~~1.0%~~9.2% of net sales, in the third quarter of ~~2020.~~2021. Operating income in the first nine months of ~~2021~~2022 totaled ~~$88.8~~$27.2 million, or ~~9.1%~~2.5% of net sales, compared to operating ~~loss~~income of ~~$12.4~~$88.8 million, or ~~2.4%~~9.1% of net sales, in the first nine months of ~~2020.~~

The following table presents selected operating results for our tubular and pipe products segment for the periods indicated (dollars are shown in thousands):

Net sales increased ~~$48.6~~$10.2 million, or ~~95.2%~~10.2%, to $109.9 million in the third quarter of 2022 from $99.7 million in the third quarter of ~~2021 from $51.1 million in the third quarter of 2020.~~2021. The increase is a result of a ~~51.9%~~15.6% increase in average selling prices ~~and~~offset by a ~~28.5% increase~~4.6% decrease in ~~sales~~shipping volume during the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020.~~2021. Net sales increased ~~$115.7~~$56.1 million, or ~~69.3%~~19.8%, to $338.7 million in the first nine months of 2022 from $282.7 million in the first nine months of ~~2021~~2021. The increase is a result of a 40.2% increase in average selling prices offset by a 14.5% decrease in shipping volume during the third quarter of 2022 compared to the third quarter of 2021. We expect metals prices to decrease in the fourth quarter of 2022 as discussed above in Results of Operations.

Cost of materials sold increased $3.8 million, or 4.8%, to $83.4 million in the third quarter of 2022 from ~~$167.0~~$79.6 million in the third quarter of 2021. Cost of materials sold increased $37.5 million, or 17.2%, to $255.3 million in the first nine months of 2020. The increase is a result of a 51.9% increase in average selling prices and a 28.5% increase in sales volume during the third quarter of 2021 compared to the third quarter of 2020. We expect tubular and pipe metals prices to remain elevated2022 from $217.8 million in the ~~fourth quarter~~first nine months of 2021. During the three and nine months ended September 30, 2022, the Company recorded $1.5 million of LIFO expense. During the three and nine months ended September 30, 2021, the Company recorded $7.0 million and $12.0 million of LIFO expense, respectively.

Cost of materials sold increased $44.3 million, or 125.4%, to $79.6 million in the third quarter of 2021 from $35.3 million in the third quarter of 2020. Cost of materials sold increased $103.1 million, or 89.8%, to $217.8 million in the first nine months of 2021 from $114.7 million in the first nine months of 2020. The increase in cost of materials sold is primarily a result of the increased market price for metals discussed above in Results of Operations. As a result of rapidly increasing prices, during the third quarter of 2021, our tubular and pipe products segment recorded $7.0 million of LIFO expense, compared to $0.1 million of LIFO income recorded in the third quarter of 2020. During the first nine months of 2021, our tubular and pipe products segment recorded $12.0 million of LIFO expense, compared to $1.1 million of LIFO income during the first nine months of 2020.

As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) ~~decreased~~increased to 24.1% in the third quarter of 2022 compared to 20.1% in the third quarter of ~~2021 compared to 30.8% in the third quarter of 2020.~~2021. As a percentage of net sales, the LIFO expense recorded in the third quarter of 2022 decreased gross profit by 1.4% and in the third quarter of 2021 decreased gross profit by ~~12.0% compared to the LIFO income recorded in the third quarter of 2020, which increased gross profit by 0.2%~~7.0%. As a percentage of net sales, gross profit (as defined in footnote (b) in the table above) ~~decreased~~increased to 24.6% in the first nine months of 2022 compared to 23.0% in the first nine months of ~~2021 compared to 31.3% in the first nine months of 2020.~~2021. As a percentage of net sales, the LIFO expense recorded in the first nine months of 2022 decreased gross profit by 0.4% and in the third quarter of 2021 decreased gross profit by 4.2% ~~compared to the LIFO income recorded in the first nine months of 2020, which increased gross profit by 0.7%~~.

Operating expenses in the third quarter of ~~2021~~2022 increased ~~$2.7~~$1.7 million, or ~~18.1%~~9.4%, to ~~$17.7~~$19.4 million from ~~$15.0~~$17.7 million in the third quarter of ~~2020.~~2021. Operating expenses decreased to ~~17.8%~~17.6% of net sales in the third quarter of ~~2021~~2022 compared to ~~29.4%~~17.8% in the third quarter of ~~2020.~~2021. Operating expenses in the first nine months of ~~2021~~2022 increased ~~$8.2~~$1.3 million, or ~~18.1%~~2.4%, to ~~$53.2~~$54.5 million from ~~$45.0~~$53.2 million in the first nine months of ~~2020.~~2021. Operating expenses decreased to ~~18.8%~~16.1% of net sales in the first nine months of ~~2021~~2022 compared to ~~26.9%~~18.8% in the first nine months of ~~2020. Operating~~2021. The increase in operating expenses ~~increased as a result of increased variable expenses related~~was primarily due to ~~increased sales volume and increased variable performance-based incentive compensation and~~ inflationary impacts on labor, transportation and other product support ~~costs.~~costs and increased variable performance-based incentive compensation, offset by the $2.1 million gain on the sale of the Milan, Iowa facility in the first quarter of 2022.

Operating income in the third quarter ~~2021~~2022 totaled ~~$2.4~~$7.1 million, or ~~2.4%~~6.5% of net sales, compared to ~~$0.7~~$2.4 million, or ~~1.5%~~2.4% of net sales, in the third quarter of ~~2020.~~2021. Operating income in the first nine months of ~~2021~~2022 totaled ~~$11.7~~$29.0 million, or ~~4.2%~~8.6% of net sales, compared to ~~$7.3~~$11.7 million, or ~~4.5%~~4.2% of net sales, in the first nine months of ~~2020.~~

Corporate expenses ~~were~~increased $2.8 million, or 138.1%, to $4.8 million in the third quarter of 2022 from $2.0 million in the third quarter of ~~2021 and 2020.~~2021. Corporate expenses increased ~~$3.8~~$5.0 million, or ~~56.0%~~47.1%, to $15.8 million in the first nine months of 2022 from $10.7 million in the first nine months of 2021 ~~from $6.9 million in~~During the ~~first nine months~~3^rd quarter of ~~2020. Corporate expense increased as~~2021 we recorded a ~~result of increased performance-based incentive compensation offset by the~~ $3.5 million gain, net of expenses, on the sale of our Detroit ~~operation~~operations on September 17, 2021.

Our principal capital requirements include funding working capital needs, purchasing, upgrading and acquiring processing equipment and facilities, making acquisitions and paying dividends. We use cash generated from operations and borrowings under our credit facility to fund these requirements.

We believe that funds available under our ~~asset-based credit facility, or~~ ABL Credit Facility, together with funds generated from operations, will be sufficient to provide us with the liquidity necessary to fund anticipated working capital requirements, capital expenditure requirements, our dividend payments and any share repurchases and business acquisitions ~~over~~for at least the next 12 ~~months.~~months and for the foreseeable future thereafter. In the future, we may as part of our business strategy, acquire and dispose of assets or other companies in the same or complementary lines of business, or enter into or exit strategic alliances and joint ventures. Accordingly, the timing and size of our capital requirements are subject to change as business conditions warrant and opportunities arise.

For the nine months ended September 30, 2022, we generated $98.3 million of net cash from operations, of which $107.1 million was generated from operating activities and $8.9 million was used for working capital. For the nine months ended September 30, 2021, we used $126.9 million of net cash for operations, of which $107.8 million was generated from operating activities and $234.7 million was used for working capital. ~~For the nine months ended September 30, 2020, we generated $28.7 million of net~~

Net cash from operations totaled $107.1 million during the first nine months of ~~which $9.2~~2022 and was mainly comprised of net income of $87.0 million, ~~was generated from operating activities~~the non-cash depreciation and ~~$19.5~~amortization addback of $14.9 million, ~~was generated from working capital.~~

gains on disposition of property and equipment of $2.2 million and changes in other long-term liabilities of $5.5 million. Net cash from operations totaled $107.8 million during the first nine months of 2021 and was mainly comprised of net income of $96.2 million, the non-cash depreciation and amortization addback of $15.8 million, a decrease in other long-term assets of $5.6 million, ~~and stock-based compensation of $0.8 million,~~ offset by a gain on disposition of our Detroit ~~operation~~operations of $6.1 million and changes in other long-term liabilities of $4.5 million. Net cash from operations totaled $9.2 million during the first nine months of 2020 and mainly consisted of non-cash depreciation and amortization of $15.0 million added back to the net loss of $7.4 million, loss on sale of fixed assets of $2.0 million, and stock-based compensation of $0.9 million, offset by changes in other long-term assets of $3.3 million.

Working capital at September 30, ~~2021~~2022 totaled ~~$519.4~~$574.4 million, a ~~$243.9~~$9.3 million increase from December 31, ~~2020.~~2021. The increase was primarily attributable to a ~~$178.0~~$23.1 million increase in inventories, ~~(resulting from increased metals prices and inventory tonnage during the first nine months of 2021),~~ a $151.6 million increase in accounts receivable (resulting from higher sales and increased average selling prices in the first nine months of 2021 compared to the fourth quarter of 2020) and a $7.4 million increase in prepaid expenses and other, offset by a $72.7$14.8 million increase in accounts payable and a $3.6 million increase in outstanding checks, ~~and~~offset by a ~~$29.5~~$12.0 million ~~increase~~decrease in accrued payroll and other ~~accrued liabilities.~~liabilities, a $5.2 million decrease in accounts receivable and a $2.6 million decrease in prepaid expenses and other.

Net cash used for investing activities totaled $10.7 million during the nine months ended September 30, 2022, compared to net cash from investing activities of $1.8 million during the nine months ended September 30, ~~2021, compared to~~2021. Net cash used for investing activities primarily consisted of ~~$6.8~~$14.0 million ~~during the nine months ended September 30, 2020. Proceeds~~in new capital expenditures offset by $3.3 million in proceeds primarily from the sale of ~~our Detroit operation’s property and equipment on September 17, 2021 totaled $9.5 million.~~the Milan, Iowa facility. The capital expenditures in the first nine months of ~~2021~~2022 and ~~2020~~2021 were primarily attributable to additional processing equipment at our existing facilities. ~~During 2021, we~~We expect ~~our~~ capital spending in the fourth quarter of 2022 to be ~~less than our annual depreciation expense.~~comparable to the third quarter of 2022.

During the first nine months of ~~2021, $134.7~~2022, $87.2 million of cash was ~~generated from~~used for financing activities, which primarily consisted of ~~$137.3~~$83.6 million of net ~~borrowings~~repayments under our ABL Credit Facility, ~~offset by $1.2~~$3.0 million of dividends paid, $0.5 million of principal payments under capital lease obligations and $0.1 million of credit facility fees and expenses related to the amended ABL Credit ~~Facility, $0.7 million of dividends paid and $0.7 million used for principal payments under capital lease obligations.~~Facility.

Dividends paid were $3.0 million and $0.7 million for ~~both~~ the nine months ended September 30, ~~2021~~2022 and September 30, ~~2020.~~2021, respectively. In November ~~2021,~~2022, our Board of Directors approved a regular quarterly dividend of ~~$0.02~~$0.09 per share, which will be paid on December 15, ~~2021~~2022 to shareholders of record as of December 1, ~~2021.~~2022. Regular dividend distributions in the future are subject to the availability of cash, the $5.0 million annual limitation on cash dividends and common stock repurchases under our ABL Credit Facility and continuing determination by our Board of Directors that the payment of dividends remains in the best interest of our shareholders.

In 2015, our Board of Directors authorized a stock repurchase program of up to 550,000 shares of our issued and outstanding common stock, which could include open market repurchases, negotiated block transactions, accelerated stock repurchases or open market solicitations for shares, all or some of which may be effected through Rule 10b5-1 plans. Repurchased shares will be held in our treasury, or canceled and retired as our Board ~~of Directors~~ may determine from time to time. Any repurchases of common stock are subject to the covenants contained in the ABL Credit Facility. Under the ABL Credit Facility, we may repurchase common stock and pay dividends up to $5.0 million in the aggregate during any trailing twelve months without restrictions. Purchases in excess of $5.0 million require us (i) to ~~(i)~~ maintain availability in excess of 20% of the aggregate revolver commitments ($95.0 million at September 30, ~~2021)~~2022) or (ii) to maintain availability equal to or greater than 15% of the aggregate revolver commitments ($71.3 million at September 30, ~~2021)~~2022) and we must maintain a pro-forma ratio of ~~earnings before interest, taxes, depreciation and amortization, or~~ EBITDA, minus certain capital expenditures and cash taxes paid to fixed charges of at least 1.00 to 1.00. The timing and amount of any repurchases under the stock repurchase program will depend upon several factors, including market and business conditions, and limitations under the ABL Credit Facility, and repurchases may be discontinued at any time. As of September 30, ~~2021,~~2022, 360,212 shares remain authorized for repurchase under the program.

There were no shares repurchased during the three orand nine months ended September 30, ~~2021. There were no shares repurchased during the three months ended~~2022 or September 30, ~~2020. During the nine months ended September 30, 2020 we repurchased 15,000 shares, for an aggregate cost of $145 thousand.~~

On September 3, 2021, we commenced an ~~at-the-market,~~at-the market, or ATM, equity program under our shelf registration statement, which allows us to sell and issue up to $50 million in shares of our common stock from time to time. We entered into an Equity Distribution Agreement on September 3, 2021 with KeyBanc Capital Markets Inc., or KeyBanc, relating to the issuance and sale of shares of common stock pursuant to the program. KeyBanc is not required to sell any specific amount of securities but will act as our sales agent using commercially reasonable efforts consistent with its normal trading and sales practices, on ~~mutually~~mutual agreed terms between KeyBanc and us. KeyBanc will be entitled to compensation for shares sold pursuant to the program of 2.0% of the gross proceeds of any shares of common stock sold under the Equity Distribution Agreement. No shares were sold under the ATM program during the three and nine months ended September 30, 2022 and 2021.

~~On June 16, 2021, we entered into a Fourth Amendment to Third Amended and Restated Loan and Security Agreement, which amended and extended our existing~~Our ABL Credit ~~Facility.~~Facility is collateralized by our accounts receivable inventory and personal property. The ~~$475 million~~ ABL Credit Facility consists ~~of:~~of (i) a revolving credit facility of ~~up to~~ $445 million, including a $20 million sub-limit for letters of credit and (ii) a first in, last out revolving credit facility of up to $30 million. Under the terms of the ABL Credit Facility, we may ~~subject to the satisfaction of certain conditions,~~ request additional commitments ~~under the revolving credit facility~~ in the aggregate principal amount of up to $200 million to the extent that existing or new lenders agree to provide such additional ~~commitments~~commitments. Revolver borrowings are limited to the lesser of a borrowing base, comprised of eligible receivables and ~~add real estate as collateral at our discretion.~~inventories, or $475 million in the aggregate. The ABL Credit Facility matures on June 16, 2026.

The ABL Credit Facility contains customary representations and warranties and certain covenants that limit our ability to, among other things: (i) incur or guarantee additional indebtedness; (ii) pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt; (iii) make investments; (iv) sell assets; (v) enter into agreements that restrict distributions or other payments from restricted subsidiaries to us; (vi) incur ~~or suffer to exist~~ liens securing indebtedness; (vii) consolidate, merge or transfer all or substantially all of ~~their~~our assets; and (viii) engage in transactions with affiliates. In addition, the ABL Credit Facility contains a financial covenant which ~~provides that: (i)~~requires if any commitments or obligations are outstanding ~~and~~ our availability is less than the greater of $30 million or 10.0% of the aggregate amount of revolver commitments ($47.5 million at September 30, ~~2021)~~2022) or 10.0% of the aggregate borrowing base ($47.5 million at September 30, ~~2021)~~2022), then we must maintain a ratio of Earnings before Interest, Taxes, Depreciation and Amortization, or EBITDA, minus certain capital expenditures and cash taxes paid to fixed charges of at least 1.00 to 1.00 for the most recent twelve fiscal month period.

We have the option to borrow under its revolver based on the agent’s base rate plus a premium ranging from 0.00% to 0.25% or the London Interbank Offered Rate, or LIBOR, plus a premium ranging from 1.25% to 2.75%.

As of September 30, ~~2021,~~2022, we were in compliance with our covenants and had approximately ~~$173~~$227 million of availability under ~~our~~the ABL Credit Facility.

As of September 30, ~~2021, $1.6~~2022, $1.3 million of bank financing fees were included in “Prepaid expenses and other” and “Other long-term assets” on the accompanying Consolidated Balance Sheets. The financing fees are being amortized over the five-year term of the ABL Credit Facility and are included in “Interest and other expense on debt” on the accompanying Consolidated Statements of Comprehensive ~~Income (Loss).~~Income.

On January 10, 2019, we entered into a five-year forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on $75 million of the outstanding LIBOR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at 2.57%.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on the consolidated financial statements included in this Quarterly Report on Form 10-Q, which have been prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements. We monitor and evaluate our estimates and assumptions, based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.

We review our financial reporting and disclosure practices and accounting practices quarterly to ensure they provide accurate and transparent information relative to the current economic and business environment. For further information regarding the accounting policies that we believe to be critical accounting policies that affect our more significant judgments and estimates used in preparing our consolidated financial statements, see Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Our principal raw materials are carbon, coated and stainless steel, ~~and~~ aluminum, pipe and tube, flat rolled coil, sheet and plate that we typically purchase from multiple primary metals producers. The metals industry as a whole is cyclical and, at times, pricing and availability of metals can be volatile due to numerous factors beyond our control, including general domestic and international economic conditions, the levels of metals imported into the United States, labor costs, sales levels, competition, levels of inventory held by other metals service centers, consolidation of metals producers, new global capacity by metals producers, higher raw material costs for the producers of metals, import duties and tariffs and currency exchange rates. This volatility can significantly affect the availability and cost of raw materials for us.

We, like many other metals service centers, maintain substantial inventories of metals to accommodate the short lead times and just‑in‑time delivery requirements of our customers. Accordingly, we purchase metals in an effort to maintain our inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon historic buying practices, supply agreements with customers and market conditions. Our commitments to purchase metals are generally at prevailing market prices in effect at the time we place our orders. We have no long‑term, fixed‑price metals purchase contracts. When metals prices increase, competitive conditions will influence how much of the price increase we can pass on to our customers. To the extent we are unable to pass on future price increases in our raw materials to our customers, the net sales and profitability of our business could be adversely affected. When metals prices decline, customer demands for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently, lower gross profits and inventory lower of cost or ~~market~~net realizable value adjustments as we sell existing inventory. Significant or rapid declines in metals prices or reductions in sales volumes could adversely impact our ability to remain in compliance with certain financial covenants in our credit facility, as well as result in us incurring inventory or intangible asset impairment charges. Changing metals prices therefore could significantly impact our net sales, gross profits, operating income and net income.

Rising metals prices result in higher working capital requirements for us and our customers. Some customers may not have sufficient credit lines or liquidity to absorb significant increases in the price of metals. While we have generally been successful in the past in passing on producers’ price increases and surcharges to our customers, there is no guarantee that we will be able to pass on price increases to our customers in the future. Declining metals prices have generally adversely affected our net sales and net income, while increasing metals prices have generally favorably affected our net sales and net income.

Approximately ~~45%~~52% and ~~42%~~45% of our consolidated net sales during the first nine months of ~~2021~~2022 and ~~2020,~~2021, respectively, were directly related to industrial machinery and equipment manufacturers and their fabricators.

Inflation generally affects us by increasing the cost of employee wages and benefits, transportation services, processing equipment, energy and borrowings under our credit facility. General inflation, excluding increases in the price of metals, labor and increased distribution expense, has not had a material effect on our financial results ~~during~~in prior years, but is expected to have an impact in 2022 due to the ~~past two years.~~elevated inflation rate.

We are exposed to the impact of fluctuating metals prices and interest rate changes. During ~~2021~~2022 and ~~2020,~~2021, we entered into metals swaps at the request of customers. These derivatives have not been designated as hedging instruments. For certain customers, we enter into contractual relationships that entitle us to ~~pass-through~~pass through the economic effect of trading positions that we take with other third parties on our customers’ behalf.

Our primary interest rate risk exposure results from variable rate debt. We have the option to enter into 30- to 180-day fixed base rate LIBOR loans under the ABL Credit Facility. On January 10, 2019, we entered into a five-year interest rate swap that locked the interest rate at 2.57% on $75 million of our revolving debt.

The evaluation required by Rule 13a-15(e) of the Securities Exchange Act of 1934 of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-Q has been carried out under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. These disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in reports that are filed with or submitted to the SEC is: (i) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures and (ii) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, ~~2021,~~2022, our disclosure controls and procedures were effective.

There were no changes in our internal control over financial reporting that occurred during the third quarter of ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~We are continually monitoring and assessing the COVID-19 pandemic’s impact on our internal controls to minimize the impact on their design and operating effectiveness.~~

Items 1, 1A, 2, 3, 4 and 5 of this Part II are either inapplicable or are answered in the negative and are omitted pursuant to the instructions to Part II.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Ohio		34-1245650
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

22901 Millcreek Boulevard, Suite 650, Highland Hills, OH		44122
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, without par value	ZEUS	The NASDAQ Stock Market LLC

	Large accelerated filer ☐	Accelerated filer ☒
	Non-accelerated filer ☐	Smaller reporting company ☐
		Emerging growth company ☐

	Class		Outstanding as of November ~~5, 2021~~	4, 2022
	Common stock, without par value		~~11,077,322~~	11,129,932

			Page No.

Part I. FINANCIAL INFORMATION			34
	Item 1. *Financial Statements*		34
		Consolidated Balance Sheets – September 30, ~~2021~~2022 and December 31, ~~2020~~2021 (unaudited)	34
		Consolidated Statements of Comprehensive Income – for the three and nine months ended September 30, 2022 and 2021 ~~and 2020~~ (unaudited)	45
		Consolidated Statements of Cash Flows – for the nine months ended September 30, 2022 and 2021 ~~and 2020~~ (unaudited)	56
		Supplemental Disclosures of Cash Flow Information – for the nine months ended September 30, 2022 and 2021 ~~and 2020~~ (unaudited)	67
		Consolidated Statements of Shareholders’ Equity – for the three and nine months ended September 30, 2022 and 2021 ~~and 2020~~ (unaudited)	78
		Notes to Unaudited Consolidated Financial Statements	89
	Item 2. *Management’s Discussion and Analysis of Financial Condition and Results of Operations*		21
	Item 3. *Quantitative and Qualitative Disclosures About Market Risk*		33
	Item 4. *Controls and Procedures*		34
Part II. OTHER INFORMATION			34 35
	Item 6. *Exhibits*		3536
SIGNATURES			3637

	As of
	September 30, 2021			December 31, 2020
	(unaudited)
Assets
Cash and cash equivalents	$	15,143		$	5,533
Accounts receivable, net		303,236			151,601
Inventories, net (includes LIFO credit of $9,885 and LIFO debit of $2,115 as of September 30, 2021 and December 31, 2020, respectively)		417,979			240,001
Prepaid expenses and other		12,459			5,069
Total current assets		748,817			402,204
Property and equipment, at cost		412,635			434,579
Accumulated depreciation		(265,360	)		(277,379	)
Net property and equipment		147,275			157,200
Goodwill		5,234			5,123
Intangible assets, net		31,307			32,593
Other long-term assets		15,203			18,131
Right of use assets, net		23,470			25,354
Total assets	$	971,306		$	640,605

Liabilities
Accounts payable	$	160,034		$	87,291
Accrued payroll		35,493			10,985
Other accrued liabilities		28,450			22,869
Current portion of lease liabilities		5,457			5,580
Total current liabilities		229,434			126,725
Credit facility revolver		297,880			160,609
Other long-term liabilities		16,620			22,478
Deferred income taxes		10,365			9,818
Lease liabilities		18,292			19,965
Total liabilities		572,591			339,595
Shareholders' Equity
Preferred stock		0			0
Common stock		133,174			132,382
Accumulated other comprehensive loss		(2,827	)		(4,215	)
Retained earnings		268,368			172,843
Total shareholders' equity		398,715			301,010
Total liabilities and shareholders' equity	$	971,306		$	640,605

	Three months ended						Nine months ended
	September 30,						September 30,
	2021			2020			2021			2020

Net sales	$	668,466		$	299,921		$	1,687,667		$	902,597
Costs and expenses
Cost of materials sold (excludes items shown separately below)		520,866			239,967			1,304,234			718,726
Warehouse and processing		26,208			19,471			76,153			62,173
Administrative and general		24,811			16,507			74,328			52,577
Distribution		14,424			11,226			42,086			33,133
Selling		12,155			6,130			30,408			18,863
Occupancy		3,029			2,256			8,951			7,355
Depreciation		4,243			4,347			13,557			13,422
Amortization		570			380			1,764			1,145
Total costs and expenses		606,306			300,284			1,551,481			907,394
Operating income (loss)		62,160			(363	)		136,186			(4,797	)
Other loss, net		(15	)		(25	)		(24	)		(68	)
Income (loss) before interest and income taxes		62,145			(388	)		136,162			(4,865	)
Interest and other expense on debt		1,947			1,693			5,618			5,823
Income (loss) before income taxes		60,198			(2,081	)		130,544			(10,688	)
Income tax provision (benefit)		15,665			(561	)		34,354			(3,307	)
Net income (loss)	$	44,533		$	(1,520	)	$	96,190		$	(7,381	)
Gain (loss) on cash flow hedge		434			470			1,851			(3,001	)
Tax effect on cash flow hedge		(109	)		(118	)		(463	)		750
Total comprehensive income (loss)	$	44,858		$	(1,168	)	$	97,578		$	(9,632	)

Earnings per share:
Net income (loss) per share - basic	$	3.88		$	(0.13	)	$	8.37		$	(0.64	)
Weighted average shares outstanding - basic		11,492			11,452			11,491			11,447
Net income (loss) per share - diluted	$	3.87		$	(0.13	)	$	8.36		$	(0.64	)
Weighted average shares outstanding - diluted		11,515			11,452			11,509			11,447

Dividends declared per share of common stock	$	0.02		$	0.02		$	0.06		$	0.06

	As of
	September 30, 2022			December 31, 2021
	(unaudited)
Assets
Cash and cash equivalents	$	10,232		$	9,812
Accounts receivable, net		279,344			284,570
Inventories, net (includes LIFO reserves of $21,236 and $19,736 as of September 30, 2022 and December 31, 2021, respectively)		508,103			485,029
Prepaid expenses and other		7,447			9,989
Total current assets		805,126			789,400
Property and equipment, at cost		424,051			413,396
Accumulated depreciation		(276,918	)		(266,340	)
Net property and equipment		147,133			147,056
Goodwill		10,496			10,496
Intangible assets, net		32,439			33,653
Other long-term assets		14,315			15,241
Right of use assets, net		27,475			27,726
Total assets	$	1,036,984		$	1,023,572

Liabilities
Accounts payable	$	167,081		$	148,649
Accrued payroll		38,071			44,352
Other accrued liabilities		19,441			25,395
Current portion of lease liabilities		6,124			5,940
Total current liabilities		230,717			224,336
Credit facility revolver		244,200			327,764
Other long-term liabilities		11,245			15,006
Deferred income taxes		16,317			9,890
Lease liabilities		21,850			22,137
Total liabilities		524,329			599,133
Shareholders' Equity
Preferred stock		-			-
Common stock		134,423			133,427
Accumulated other comprehensive income (loss)		1,256			(1,996	)
Retained earnings		376,976			293,008
Total shareholders' equity		512,655			424,439
Total liabilities and shareholders' equity	$	1,036,984		$	1,023,572

	For the Three Months Ended September 30, 2021											For the Three Months Ended September 30, 2022
			Accumulated												Accumulated
			Other												Other
	*Common*		*Comprehensive*			*Retained*			*Total*			Common			Comprehensive			Retained			Total
	*Stock*		*Loss*			*Earnings*			*Equity*			Stock			Income (Loss)			Earnings			Equity
Balance at June 30, 2021	$	132,916	$	(3,153	)	$	224,057		$	353,820

Balance at June 30, 2022												$	134,089		$	(462	)	$	365,932		$	499,559
Net income		0		0			44,533			44,533			-			-			12,046			12,046
Payment of dividends		0		0			(222	)		(222	)		-			-			(1,002	)		(1,002	)
Stock-based compensation		258		0			0			258			335			-			-			335
Changes in fair value of hedges, net of tax		0		326			0			326			-			1,718			-			1,718
Balance at September 30, 2021	$	133,174	$	(2,827	)	$	268,368		$	398,715
Other													(1	)		-			-			(1	)
Balance at September 30, 2022												$	134,423		$	1,256		$	376,976		$	512,655

	For the Nine Months Ended September 30, 2021											For the Nine Months Ended September 30, 2022
			Accumulated												Accumulated
			Other												Other
	*Common*		*Comprehensive*			*Retained*			*Total*			Common			Comprehensive			Retained			Total
	*Stock*		*Loss*			*Earnings*			*Equity*			Stock			Income (Loss)			Earnings			Equity
Balance at December 31, 2020	$	132,382	$	(4,215	)	$	172,843		$	301,010

Balance at December 31, 2021												$	133,427		$	(1,996	)	$	293,008		$	424,439
Net income		0		0			96,190			96,190			-			-			86,972			86,972
Payment of dividends		0		0			(665	)		(665	)		-			-			(3,004	)		(3,004	)
Stock-based compensation		792		0			0			792			997			-			-			997
Changes in fair value of hedges, net of tax		0		1,388			0			1,388			-			3,252			-			3,252
Balance at September 30, 2021	$	133,174	$	(2,827	)	$	268,368		$	398,715
Other													(1	)		-			-			(1	)
Balance at September 30, 2022												$	134,423		$	1,256		$	376,976		$	512,655

	Disaggregated Revenue by Products Sold
	For the Three Months Ended September 30, 2021
	Carbon flat products			Specialty metals flat products			Tubular and pipe products			Total
Hot Rolled		31.9	%		0			0			31.9	%
Plate		11.2	%		0			0			11.2	%
Cold Rolled		7.8	%		0			0			7.8	%
Coated		7.8	%		0			0			7.8	%
Specialty		0			23.3	%		0			23.3	%
Tube		0			0			14.9	%		14.9	%
Other		1.8	%		1.3	%		0			3.1	%
Total		60.5	%		24.6	%		14.9	%		100.0	%

	Inventory as of				Inventory as of
(in thousands)	September 30, 2021		December 31, 2020		September 30, 2022		December 31, 2021
Unprocessed	$	341,346	$	194,614	$	409,131	$	417,595
Processed and finished		76,633		45,387		98,972		67,434
Totals	$	417,979	$	240,001	$	508,103	$	485,029

									Specialty Metals		Carbon Flat		Tubular and Pipe
(in thousands)	Carbon Flat Products		Specialty Metals Flat Products		Tubular and Pipe Products		Total		Flat Products		Products		Products		Total
Balance as of December 31, 2020	$	1,065	$	4,058	$	0	$	5,123
Balance as of December 31, 2021									$	9,431	$	1,065	$	-	$	10,496
Acquisitions		0		111		0		111		-		-		-		-
Impairments		0		0		0		0		-		-		-		-
Balance as of September 30, 2021	$	1,065	$	4,169	$	0	$	5,234
Balance as of September 30, 2022									$	9,431	$	1,065	$	-	$	10,496

								As of September 30, 2022
	As of September 30, 2021							Gross Carrying		Accumulated			Intangible Assets,
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Intangible Assets, Net		Amount		Amortization			Net
Customer relationships - subject to amortization	$	21,259	$	(10,166	)	$	11,093	$	22,559	$	(11,713	)	$	10,846
Covenant not to compete - subject to amortization		259		(213	)		46		509		(284	)		225
Trade name - not subject to amortization		20,168		-			20,168		21,368		-			21,368
	$	41,686	$	(10,379	)	$	31,307	$	44,436	$	(11,997	)	$	32,439

								As of December 31, 2021
	As of December 31, 2020							Gross Carrying		Accumulated			Intangible Assets,
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Intangible Assets, Net		Amount		Amortization			Net
Customer relationships - subject to amortization	$	21,442	$	(9,101	)	$	12,341	$	22,559	$	(10,552	)	$	12,007
Covenant not to compete - subject to amortization		259		(186	)		73		509		(231	)		278
Trade name - not subject to amortization		20,179		-			20,179		21,368		-			21,368
	$	41,880	$	(9,287	)	$	32,593	$	44,436	$	(10,783	)	$	33,653

	As of September 30, 2021					As of September 30, 2020
	Number of			Weighted Average		Number of			Weighted Average
	Shares			Granted Price		Shares			Granted Price
Outstanding at December 31		610,540		$	18.25		636,086		$	19.25
Granted		20,604			23.29		70,588			11.92
Converted into shares		(2,422	)		17.09		(94,161	)		20.27
Forfeited		(5,086	)		17.55		(1,973	)		18.14
Outstanding at September 30		623,636		$	18.43		610,540		$	18.25
Vested at September 30		414,090		$	18.76		375,692		$	18.88

	●	rising interest rates and ~~profits;~~their impacts on our variable interest rate debt;
	●	supplier consolidation or addition of new capacity;

	●	the timing and outcomes of inventory lower of cost or net realizable value adjustments and LIFO income or expense;
	●	reduced production schedules, layoffs or work stoppages by our own, our suppliers’ or customers’ personnel;

	●	our ability to repurchase shares of our common stock and the amounts and timing of repurchases, if any;
	●	our ability to sell shares of our common stock under the at-the-market equity program; and

Facility	Expiration date
~~Minneapolis (plate), Minnesota~~	~~March 31, 2022~~
Hammond, Indiana	November 30, 2024
Locust, North Carolina	March 4, 2025
St. Paul, Minnesota	May 25, 2025
Romeoville, Illinois	May 31, 2025
Minneapolis (coil), Minnesota	September 30, 2025
Indianapolis, Indiana	January 29, 2026
Minneapolis (plate), Minnesota	March 31, 2027

(a)	Gross profit is calculated as net sales less the cost of materials sold.
(b)	Operating expenses are calculated as total costs and expenses less the cost of materials sold.

(a)	Includes $1,500 of LIFO expense for the three and nine months ended September 30, 2022. Includes $7,000 and $12,000 of LIFO expense for the three and nine months ended September 30, 2021, respectively. ~~Includes $100 and $1,100 of LIFO income for the three and nine months ended September 30, 2020, respectively.~~
(b)	Gross profit is calculated as net sales less the cost of materials sold.
(c)	Operating expenses are calculated as total costs and expenses less the cost of materials sold.

Exhibit	Description of Document	Reference

~~2.1~~	~~Asset Purchase Agreement, dated as of September 17, 2021, by and among Venture Steel (U.S), Inc., Olympic Steel Lafayette, Inc. and Olympic Steel, Inc.~~	~~Incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K filed with the Commission on September 22, 2021 (Commission File No. 0-23320)~~
31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.1	Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith

32.2	Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith


101	The following materials from Olympic Steel’s Quarterly Report on Form 10-Q for the period ended September 30, ~~2021,~~2022, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Comprehensive Income (Loss), (iii) the Consolidated Statements of Cash Flows, (iv) the Supplemental Disclosures of Cash Flow Information, (v) the Consolidated Statements of Shareholders’ Equity, (vi) Notes to Unaudited Consolidated Financial Statements and (vii) document and entity information.

104	Cover ~~Pager~~Page Interactive Data File (embedded ~~with~~within the Inline XBRL ~~document).~~
	and contained in Exhibit 101)

	OLYMPIC STEEL, INC.
	(Registrant)


Date: November ~~5, 2021~~ 4, 2022	By:	/s/ Richard T. Marabito
	Richard T. Marabito
	Chief Executive Officer

	By:	/s/ Richard A. Manson
	Richard A. Manson
	Chief Financial Officer
	(Principal Financial and Accounting Officer)