SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-14061
STEEL TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0712014
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15415 Shelbyville Road, Louisville, KY 40245
----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(502) 245-2110
(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
There were 9,760,379 shares outstanding of the Registrant's common stock as of
January 31, 2003.
1
STEEL TECHNOLOGIES INC.
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets December 31, 2002
(Unaudited) and September 30, 2002 (Audited) ...................... 3
Condensed Consolidated Statements of Income and Comprehensive
Income Three Months Ended December 31, 2002 and 2001 (Unaudited) .. 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended December 31, 2002 and 2001 (Unaudited) ......... 5
Notes to Condensed Consolidated Financial Statements (Unaudited) .. 6- 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .............................................10-14
Item 3. Quantitative and Qualitative Disclosures About Market
Risk .............................................................. 15
Item 4. Controls and Procedures............................................ 15
PART II. OTHER INFORMATION
Item 5. Submission of Matters to a Vote of Security Holders ............... 16
SIGNATURES ................................................................ 16
Certifications.............................................................17-18
2
Part I. - FINANCIAL INFORMATION
Item 1. Financial Statements
STEEL TECHNOLOGIES INC.
Condensed Consolidated Balance Sheets
(In thousands) December 31 September 30
- --------------------------------------------------------------------------------
2002 2002
(Unaudited) (Audited)
-------------------------------
ASSETS
Current assets:
Cash and cash equivalents ................... $ 2,808 $ 2,127
Trade accounts receivable, net .............. 65,892 74,000
Inventories ................................. 116,933 87,741
Deferred income taxes ....................... 1,800 1,841
Prepaid expenses and other assets ........... 2,590 2,789
--------- ---------
Total current assets ..................... 190,023 168,498
Property, plant and equipment, net ............. 100,358 102,560
Investments in corporate joint ventures ........ 16,915 16,590
Goodwill ....................................... 18,148 18,148
Other assets ................................... 1,502 1,319
--------- ---------
$ 326,946 $ 307,115
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................ $ 52,435 $ 65,466
Accrued liabilities ......................... 13,419 12,922
Income taxes payable ........................ 2,394 2,158
Long-term debt due within one year .......... 5,744 5,759
--------- ---------
Total current liabilities ................ 73,992 86,285
Long-term debt ................................. 104,400 74,900
Deferred income taxes .......................... 14,075 14,200
--------- ---------
Total liabilities ........................ 192,467 175,385
--------- ---------
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value: 500,000 shares
authorized; none issued or outstanding..... -- --
Common stock, no par value: 50,000,000 shares
authorized; issued and outstanding sares:
9,725,434 at December 31, 2002 and
9,663,468 at September 30, 2002............. 19,810 18,733
Treasury stock at cost: 2,557,455 shares at
December 31, 2002 and 2,518,645 at September
30, 2002.................................... (22,871) (22,090)
Additional paid-in capital .................. 4,909 4,909
Retained earnings ........................... 136,687 133,869
Accumulated other comprehensive loss ........ (4,056) (3,691)
--------- ---------
Total shareholders' equity ................ 134,479 131,730
--------- ---------
$ 326,946 $ 307,115
========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
STEEL TECHNOLOGIES INC.
Condensed Consolidated Statements of Income
(In thousands, except per share results) Three Months Ended
(Unaudited) December 31
- --------------------------------------------------------------------------------
2002 2001
---------------------
Sales ................................................ $126,009 $101,576
Cost of goods sold ................................... 112,239 90,673
-------- --------
Gross profit .................................... 13,770 10,903
Selling, general and administrative expenses ......... 7,132 7,152
Equity in net income of unconsolidated
corporate joint ventures ........................... 325 353
-------- --------
Operating income ................................... 6,963 4,104
Interest expense, net ................................ 1,202 1,423
Loss (gain) on disposals/writeoffs of property, plant
and equipment...................................... 115 (346)
-------- --------
Income before income taxes ........................ 5,646 3,027
Provision for income taxes ........................... 1,856 1,163
-------- --------
Net income ........................................ $ 3,790 $ 1,864
======== ========
Weighted average number of common
shares outstanding-diluted ........................ 9,962 10,244
======== ========
Diluted earnings per common share .................... $ 0.38 $ 0.18
======== ========
Weighted average number of common
shares outstanding-basic .......................... 9,706 10,167
======== ========
Basic earnings per common share ...................... $ 0.39 $ 0.18
======== ========
Cash dividends per common share ...................... $ 0.10 $ 0.08
======== ========
Condensed Consolidated Statements of Comprehensive Income
(In thousands) Three Months Ended
(Unaudited) December 31
- --------------------------------------------------------------------------------
2002 2001
---------------------
Net income ........................................... $ 3,790 $ 1,864
Foreign currency translation adjustment............ (431) (262)
Change in unrealized gain (loss) on cash flow
hedges, net of taxes ........................... 66 (17)
-------- --------
Comprehensive income ................................. $ 3,425 $ 1,585
======== ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
STEEL TECHNOLOGIES INC.
Condensed Consolidated Statements of Cash Flows
(In thousands) Three months ended
(Unaudited) December 31
- --------------------------------------------------------------------------------
2002 2001
---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................... $ 3,790 $ 1,864
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation ................................... 3,404 3,634
Amortization ................................... - 184
Deferred income taxes .......................... (72) 890
Equity in net income of unconsolidated corporate
joint ventures ................................ (325) (353)
Loss (gain) on disposals/writeoffs of property,
plant and equipment ........................... 115 (346)
Increase (decrease) in cash resulting from
changes in:
Trade accounts receivable ................ 7,880 9,073
Inventories .............................. (29,385) (1,848)
Prepaids expenses and other assets ....... (19) (48)
Accounts payable ......................... (12,906) (1,717)
Accrued liabilities and income taxes ..... 935 398
-------- --------
Net cash (used in) provided by operating activities ... (26,583) 11,731
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ......... (1,802) (1,024)
Proceeds from sale of property, plant and equipment 292 774
-------- --------
Net cash used in investing activities ................. (1,510) (250)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ....................... 29,500 -
Principal payments on long-term debt ............... (15) (10,177)
Cash dividends on common stock ..................... (972) (813)
Repurchase of common stock ......................... (781) (452)
Net issuance of common stock under stock
option plans...................................... 1,077 15
-------- --------
Net cash provided by (used in) financing activities ... 28,809 (11,427)
-------- --------
Effect of exchange rate changes on cash ............... (35) (34)
-------- --------
Net increase in cash and cash equivalents ............. 681 20
Cash and cash equivalents, beginning of year .......... 2,127 3,380
-------- --------
Cash and cash equivalents, end of period .............. $ 2,808 $ 3,400
======== ========
Supplemental Cash Flow Disclosures:
Cash payment for interest ............................. $ 1,123 $ 1,519
======== ========
Cash payment for income taxes ......................... $ 1,400 $ 494
======== ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
STEEL TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION:
The condensed consolidated balance sheet as of December 31, 2002 and the
condensed consolidated statements of income, comprehensive income and cash flows
for the three months ended December 31, 2002 and 2001 have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at December 31, 2002
and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's annual report to shareholders for the year
ended September 30, 2002. The results of operations for the three months ended
December 31, 2002 are not necessarily indicative of the operating results for
the full year.
2. INVENTORIES:
Inventory consists of:
December 31 September 30
2002 2002
----------- ------------
(In thousands) Unaudited Audited
- -------------------------------------------------------------------------------
Raw materials .................................... $ 87,620 $ 66,535
Finished goods and work in process ............... 29,313 21,206
---------- ----------
$ 116,933 $ 87,741
========== ==========
3. LONG-TERM DEBT
During the first quarter of fiscal 2003, the Company extended the maturity date
of its $125,000,000 bank line of credit to August 31, 2005.
6
4. NET INCOME PER SHARE COMPUTATIONS:
The following is a reconciliation of the denominator of the basic and diluted
per share computations:
Three Months Ended
(In thousands, except per share results) December 31
- --------------------------------------------------------------------------------
2002 2001
----------------------
Net income ............................................ $ 3,790 $ 1,864
--------- ---------
Shares (denominator) used for diluted
per share computations:
Weighted average shares of common stock
outstanding ................................... 9,706 10,167
Plus: dilutive effect of stock options ............ 256 77
--------- ---------
Diluted weighted average shares ............ $ 9,962 10,244
--------- ---------
Shares (denominator) used for basic per
share computations:
Weighted average shares of common stock
outstanding .................................... 9,706 10,167
--------- ---------
Net income per share data:
Diluted ........................................... $ 0.38 $ 0.18
========= =========
Basic ............................................. $ 0.39 $ 0.18
========= =========
All outstanding options are included in the diluted earnings per share
calculation above for the quarter ended December 31, 2002. Options to
purchase 567,500 shares at December 31, 2001 were excluded from the
calculations above because the exercise prices on the options were greater
than the average market price of the Company's stock during that period.
7
5. GOODWILL
The Company adopted Statement of Financial Accounting Standard No. 142 (SFAS No.
142), "Goodwill and Other Intangible Assets" effective October 1, 2002. Under
SFAS No. 142, goodwill is no longer amortized but is tested for impairment
annually using a fair-value based approach. During the quarter ended December
31, 2002, the Company performed the initial impairment test of goodwill and no
impairments were indicated.
The following table adjusts reported net income and earnings per share for the
three months ended December 31, 2002 and 2001 to exclude amortization of
goodwill:
Three Months Ended
(In thousands, except per share results) December 31
- --------------------------------------------------------------------------------
2002 2001
----------------------
Net income as reported................................. $ 3,790 $ 1,864
Add back amortization of goodwill...................... - 184
--------- ---------
Adjusted net income.................................... $ 3,790 $ 2,048
--------- ---------
Earnings per common share as reported - diluted........ $ 0.38 $ 0.18
Add back amortization of goodwill...................... - 0.02
--------- ---------
Adjusted earnings per common share - diluted........... $ 0.38 $ 0.20
--------- ---------
Earnings per common share as reported - basic.......... $ 0.39 $ 0.18
Add back amortization of goodwill...................... - 0.02
--------- ---------
Adjusted earnings per common share - basic............. $ 0.39 $ 0.20
--------- ---------
6. RELATED PARTIES
Summarized condensed income statement information of Mi-Tech Steel, Inc., a
fifty percent owned corporate joint venture accounted for by the equity method,
follows:
Three Months Ended
(Unaudited) December 31
-----------------------------------------------------------------------
2002 2001
----------- -----------
Sales $32,014,000 $32,574,000
Net Income 500,000 706,000
8
The Company has various transactions with Mi-Tech Steel, Inc. Included in
operating income of the Company are management fees and equity from the joint
venture earnings totaling $424,000 and $527,000 for the quarters ended December
31, 2002 and 2001, respectively. The Company's equity in undistributed net
income of Mi-Tech Steel, Inc. was $5,881,000 and $4,677,000 at December 31, 2002
and 2001, respectively.
The Company has recorded sales of $1,489,000 and $842,000 during the first
quarters of fiscal 2003 and 2002, respectively, and accounts receivable of
$872,000 and $1,029,000 as of December 31, 2002 and September 30, 2002,
respectively, for products sold to a company owned by an officer and director of
the Company. The Company believes these transactions are in the best interests
of the Company and the terms and conditions of these transactions are in the
aggregate not materially more favorable or unfavorable to the Company than would
be obtained on an arm's length basis from unaffiliated parties. See also
information contained under "Certain Transactions" in the Company's 2003 Proxy
Statement.
7. IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2002, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 146, "Accounting for Exit or Disposal Activities." SFAS No. 146 addresses
the recognition, measurement, and reporting of costs that are associated with
exit and disposal activities, including certain lease termination costs and
severance-type costs under a one-time benefit arrangement rather than an ongoing
benefit arrangement or an individual deferred-compensation contract. SFAS No.
146 requires liabilities associated with exit or disposal activities to be
expensed as incurred and will impact the timing of recognition for exit or
disposal activities that are initiated after December 31, 2002. The Company will
apply the provisions of SFAS No. 146 to any future exit or disposal activities
that are initiated after December 31, 2002.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS 148 provides alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation," to require more prominent and frequent disclosures in financial
statement about the effects of stock-based compensation. The transition guidance
and annual disclosure provisions of SFAS No. 148 are effective for fiscal years
ending after December 15, 2002, while the interim disclosure provisions are
effective for periods beginning after December 15, 2002. As permitted, the
Company will continue to follow the accounting guidelines of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," for
stock-based compensation and to furnish the pro forma disclosures required under
SFAS No. 148. The Company will make the required disclosures beginning with our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
When used in the following discussion, the word "expects" and other 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 actual results to differ materially from
those projected. Specific risks and uncertainties include, but are not limited
to, general business and economic conditions; cyclicality of demand in the steel
industry, specifically in the automotive market; work stoppages; risks of
business interruptions affecting automotive manufacturers; competitive factors
such as pricing and availability of steel; reliance on key customers; ability to
integrate acquisitions; and potential equipment malfunctions. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
republish revised forward-looking statements to reflect the occurrence of
unanticipated events or circumstances after the date hereof.
Application of Critical Accounting Policies
- -------------------------------------------
The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles.
The preparation of these financial statements requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from these estimates under different
assumptions or conditions. On an ongoing basis, the Company monitors and
evaluates its estimates and assumptions.
The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements and the consolidated financial statements of Mi-Tech Steel,
Inc.:
Allowance for Doubtful Accounts Receivable
------------------------------------------
The Company maintains an allowance for doubtful accounts for estimated
losses resulting from the inability of its customers to make required
payments. The allowance is maintained at a level considered appropriate
based on historical and other factors that affect collectibility. The
factors include historical trends of write-offs, recoveries and credit
losses; the monitoring of portfolio credit quality; and current and
projected economic and market conditions. If the financial condition of the
Company's customers were to deteriorate, resulting in an impairment of the
ability to make payments, additional allowances may be required.
10
Impairment of Long-Lived Assets
-------------------------------
The Company reviews the carrying value of its long-lived assets for
impairment whenever changes in events and circumstances indicate that the
carrying amount of the assets may not be recoverable. If an evaluation is
required, the estimated future undiscounted cash flows associated with an
asset would be compared to the asset's carrying value to determine if a
write-down to market value or undiscounted cash flows value is required.
Future changes in circumstances, cash flow estimates and fair value could
affect the valuations.
Results of Operations
- ---------------------
Steel Technologies posted first quarter sales of $126,009,000 for the fiscal
quarter ended December 31, 2002, an increase of 24% from sales of $101,576,000
for the first quarter ended December 31, 2001. Tons shipped of Company-owned
steel products in the first quarter of fiscal 2003 increased approximately 10%
compared to the first quarter of fiscal 2002 while the average selling price of
Company-owned steel products increased approximately 13% for the first quarter
of fiscal 2003 as compared to the previous year.
The Company focuses significant resources on the automotive industry and
generates a major portion of business from selling manufacturing component parts
to the automotive industry. The Company continues to increase market share with
both existing and new customers.
The gross profit margin was 10.9% in the first quarter of fiscal 2003 compared
to 10.7% in the first quarter of fiscal 2002. The company expects average raw
material costs in fiscal 2003 to exceed average raw material costs in fiscal
2002. In general, production cost efficiencies and product mix improvements may
positively impact gross margins and somewhat offset rising raw material costs.
Selling, general and administrative costs were $7,132,000 or 5.6% of sales for
the first quarter ended December 31, 2002, compared to $7,152,000 or 7.0% of
sales for the first quarter ended December 31, 2001. Selling, general and
administrative costs for the first fiscal quarter of 2001 included approximately
$184,000 of goodwill expense (see Note 5 of the Company's Notes to Condensed
Consolidated Financial Statements). Steel Technologies continues to actively
manage the level at which selling, general and administrative expenses are added
to its cost structure.
The Company's share of the income of its joint venture operations was $325,000
and $353,000 for the first quarter of fiscal 2003 and 2002, respectively.
Net interest expense for the first quarter of fiscal 2003 decreased to
$1,202,000 from $1,423,000 for the first quarter of fiscal 2002. The decrease is
primarily attributable to lower average interest rates during the current
quarter as compared to last year offset by higher average borrowings during the
first quarter of fiscal 2003.
11
Excluding non-deductible goodwill amortization expense of approximately $184,000
recorded during the first quarter of fiscal 2002 (see Note 5 of the Company's
Notes to Condensed Consolidated Financial Statements), the Company's effective
income tax rate was approximately 32.9% and 36.2%, respectively, for the first
quarters of fiscal 2003 and 2002. The decrease is attributable primarily to a
non-recurring state income tax benefit recorded during the quarter ended
December 31, 2002. The Company estimates its effective income tax rate will be
approximately 37% for fiscal 2003.
Liquidity and Capital Resources
- -------------------------------
As of December 31, 2002, Steel Technologies had $116,031,000 of working capital,
maintained a current ratio of 2.6:1 and had total debt at 45% of capitalization.
The Company continues to manage the levels of accounts receivable, inventories
and other working capital items in relation to the trends in sales and the
overall market. During the first quarter of fiscal 2003, the Company increased
inventory levels and improved payment days to its suppliers. This working
capital increase has been financed primarily through borrowings from the
Company's line of credit facility. These primary factors contributed
significantly to the $26,584,000 of cash used in operations during the first
three months of fiscal 2003 compared to cash provided by operating activities of
$11,731,000 for the first three months of fiscal 2002.
Capital expenditures for the first three months of fiscal 2003 totaled
approximately $1,802,000. The major expenditures were for various capacity
improvement projects. Steel Technologies continues to expand production capacity
and processing facilities to serve the growing needs of customers. For fiscal
2003, the capital additions to all facilities are expected to approximate
$15,000,000.
Steel Technologies maintains an equity investment of approximately $18,885,000
in its 90%-owned Mexican subsidiary. Additional investments in the Company's
Mexican operations, if required, would be financed with available funds from the
Company's bank line of credit.
The translation of the financial statements of the Company's Mexican subsidiary
from local currencies to the U.S. dollar subjects the Company to exposure
relating to fluctuating exchange rates. However, this exposure is mitigated
somewhat by a large percentage of transactions denominated in the U.S. dollar.
Management does not consider its exposure to exchange rate risks to be material
and considers the Mexican peso a relatively stable currency. The Company does
not typically manage its related foreign currency exchange rate risk through the
use of financial instruments. Foreign currency transaction gains (losses)
included in sales were $113,000 and ($234,000) during the first three months of
fiscal 2003 and 2002, respectively.
The Company maintains a 50% equity investment in Mi-Tech Steel and a 49% equity
investment in Ferrolux Metals Co., LLC. Additional equity contributions to the
Company's joint venture operations are not expected for the foreseeable future,
but, if
12
required, would be financed with available funds from the Company's bank line of
credit.
The Company has a $125,000,000 line of credit agreement. During the first
quarter of fiscal 2003, the Company extended the maturity date of its
$125,000,000 bank line of credit to August 31, 2005. The credit agreement has
various variable options on the interest rate, none of which are greater than
the bank's prime. During the first quarter of fiscal 2003, the Company borrowed
$29,500,000 on its line of credit facility to support its working capital needs.
At December 31, 2002, there was $93,000,000 outstanding on the credit facility.
Cash flows from operations and available borrowing capabilities are expected to
meet the needs of the Company throughout fiscal 2003. Any additional funds will
be used for growth, including strategic acquisitions, investment in joint
ventures, construction of new plant capacity, and investment in production and
processing capabilities. The form of such financing may vary depending upon the
prevailing market and related conditions, and may include short or long-term
borrowings or the issuance of debt or equity securities. Operating cash flows
are somewhat influenced by cyclicality of demand in the steel industry,
especially in the automotive market.
The Company has $17,120,000 outstanding at December 31, 2002 on the ten-year
note which requires annual principal payments of approximately $5,700,000
through March 2005.
Provisions contained in the Company's various debt agreements require the
Company to maintain specified levels of net worth, maintain certain financial
ratios and limit the addition of substantial debt. The Company's line of credit
agreement and private placement note contain cross-default provisions with
respect to the line of credit agreement and private placement note. The Company
is in compliance with all of its loan covenants, and none of these covenants
would restrict the completion of currently planned capital expenditures or
acquisitions.
At this time, the Company has no other known material obligations, commitments
or demands that must be met beyond the next twelve months.
Steel Technologies believes all manufacturing facilities are in compliance with
applicable federal and state environmental regulations. The Company is not
presently aware of any fact or circumstance, which would require the expenditure
of material amounts for environmental compliance.
13
Related Party Transactions
- --------------------------
The Company has various transactions with Mi-Tech Steel as well as sales to a
company owned by an officer and director of the Company (see Note 6 of the
Company's Notes to Condensed Consolidated Financial Statements).
Impact of Recently Issued Accounting Pronouncements
- ---------------------------------------------------
In June 2002, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 146, "Accounting for Exit or Disposal Activities." SFAS No. 146 addresses
the recognition, measurement, and reporting of costs that are associated with
exit and disposal activities, including certain lease termination costs and
severance-type costs under a one-time benefit arrangement rather than an ongoing
benefit arrangement or an individual deferred-compensation contract. SFAS No.
146 requires liabilities associated with exit or disposal activities to be
expensed as incurred and will impact the timing of recognition for exit or
disposal activities that are initiated after December 31, 2002. The Company will
apply the provisions of SFAS No. 146 to any future exit or disposal activities
that are initiated after December 31, 2002.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS 148 provides alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation," to require more prominent and frequent disclosures in financial
statement about the effects of stock-based compensation. The transition guidance
and annual disclosure provisions of SFAS No. 148 are effective for fiscal years
ending after December 15, 2002, while the interim disclosure provisions are
effective for periods beginning after December 15, 2002. As permitted, the
Company will continue to follow the accounting guidelines of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," for
stock-based compensation and to furnish the pro forma disclosures required under
SFAS No. 148. The Company will make the required disclosures beginning with our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.
14
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change during the first three months ended December
31, 2002 from the disclosures about market risk provided in the Company's Annual
Report on Form 10-K for the year ended September 30, 2002.
Item 4. Controls and Procedures
Within 90 days prior to the filing date of this report, management, including
the Company's Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures with respect to the information generated for use in this
Quarterly Report on Form 10-Q. Based upon that evaluation, the Company's Chief
Executive Officer and Chief Financial Officer concluded that the disclosure
controls and procedures are effective to ensure that material information
required to be disclosed in the reports we file or submit under the Securities
Exchange Act of 1934 is made known to us by others within the Company, including
its consolidated subsidiaries.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation or any corrective actions with regard to significant
deficiencies or material weaknesses.
15
Part II - Other Information
Item 5. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders was held on January 23, 2003. The matter
voted upon at the meeting was the election of three directors for three-year
terms.
The number of votes cast for, against or withheld with respect to each nominee
for director elected at the meeting were as follows:
Nominee Votes For Votes Against Votes Withheld
- ------- --------- ------------- --------------
Jimmy Dan Conner 8,812,637 0 145,268
Andrew J. Payton 8,814,069 0 143,836
Mark Essig 8,791,827 0 166,078
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STEEL TECHNOLOGIES INC.
(Registrant)
By /s/ Joseph P. Bellino
-----------------------------
Joseph P. Bellino
Chief Financial Officer
(Principal Financial and Chief Accounting Officer)
Dated February 6, 2003
16
CERTIFICATIONS
I, Bradford T. Ray, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Steel Technologies
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: February 6, 2003
/s/ Bradford. T. Ray
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Bradford T. Ray
Chief Executive Officer
17
I, Joseph P. Bellino, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Steel Technologies
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: February 6, 2003
/s/ Joseph P. Bellino
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Joseph P. Bellino
Chief Financial Officer
18