Back to GetFilings.com
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 June 30, 2004
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____
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No____
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock as of the latest practical date.
There were 12,773,355 shares outstanding of the Registrant's common stock as of
July 31, 2004.
STEEL TECHNOLOGIES INC.
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
June 30, 2004 and September 30, 2003 .............................. 3
Condensed Consolidated Statements of Income and
Comprehensive Income Three and Nine Months Ended
June 30, 2004 and 2003 ............................................ 4
Condensed Consolidated Statements of Cash Flows Nine Months
Ended June 30, 2004 and 2003 ...................................... 5
Notes to Condensed Consolidated Financial Statements .............. 6-10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .............................................11-21
Item 3. Quantitative and Qualitative Disclosures About Market
Risk .............................................................. 22
Item 4. Controls and Procedures ........................................... 22
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................... 22
Signature ................................................................. 23
Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Title 18,
United States Code, Section 1350 as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Title 18,
United States Code, Section 1350 as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certification of Chief Executive Officer Pursuant to Title 18,
United States Code, Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.2 Certification of Chief Financial Officer Pursuant to Title 18,
United States Code, Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Part I. - FINANCIAL INFORMATION
Item 1. Financial Statements
STEEL TECHNOLOGIES INC.
Condensed Consolidated Balance Sheets
(In thousands) June 30 September 30
(Unaudited) 2004 2003
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents ................... $ 2,405 $ 2,758
Trade accounts receivable, net .............. 118,078 74,595
Inventories ................................. 138,656 84,301
Deferred income taxes ....................... 1,633 1,198
Prepaid expenses and other assets ........... 3,845 4,628
--------- ---------
Total current assets ..................... 264,617 167,480
Property, plant and equipment, net ............. 108,003 106,615
Investments in and advances to unconsolidated
affiliates .................................. 21,525 19,604
Goodwill ....................................... 18,148 18,148
Other assets ................................... 1,340 1,328
--------- ---------
$ 413,633 $ 313,175
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................ $ 74,975 $ 49,609
Accrued liabilities ......................... 15,570 10,353
Income taxes payable ........................ 3,873 -
Long-term debt due within one year .......... - 5,720
--------- ---------
Total current liabilities ................ 94,418 65,682
Long-term debt ................................. 101,000 94,680
Deferred income taxes .......................... 15,583 14,872
--------- ---------
Total liabilities ........................ 211,001 175,234
--------- ---------
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 shares:
12,755,945 at June 30, 2004 and
9,765,409 at September 30, 2003............. 68,894 20,371
Treasury stock at cost: 2,611,457 shares at
June 30, 2004 and 2,573,953 at September
30, 2003.................................... (23,858) (23,169)
Additional paid-in capital .................. 5,098 5,098
Retained earnings ........................... 158,656 141,073
Accumulated other comprehensive loss ........ (6,158) (5,432)
--------- ---------
Total shareholders' equity ................ 202,632 137,941
--------- ---------
$ 413,633 $ 313,175
========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
STEEL TECHNOLOGIES INC.
Condensed Consolidated Statements of Income
(Amounts in thousands, Three Months Ended Nine Months Ended
except per share data, unaudited) June 30 June 30
- --------------------------------------------------------------------------------
2004 2003 2004 2003
------------------------------------------
Sales ................................ $232,041 $129,603 $547,672 $385,752
Cost of goods sold ................... 205,632 120,368 490,910 351,586
-------- -------- -------- --------
Gross profit ................... 26,409 9,235 56,762 34,166
Selling, general and
administrative expenses ........... 9,347 7,285 24,535 21,332
Equity in net income of unconsolidated
affiliates ........................ 764 294 1,933 704
-------- -------- -------- -------
Operating income .................. 17,826 2,244 34,160 13,538
Interest expense, net ................ 971 1,155 2,932 3,703
Loss (gain) on disposals/writeoffs of
property, plant and equipment ..... 8 15 20 (87)
-------- -------- -------- -------
Income before income taxes ........ 16,847 1,074 31,208 9,922
Provision for income taxes ........... 6,310 102 11,371 3,168
-------- -------- -------- -------
Net income ....................... $ 10,537 $ 972 $ 19,837 $ 6,754
-------- -------- -------- -------
Diluted weighted average number of
common shares outstanding ......... 13,029 9,866 11,031 9,904
======== ======== ======== =======
Diluted earnings per common share .... $ 0.81 $ 0.10 $ 1.80 $ 0.68
======== ======== ======== =======
Basic weighted average number of
common shares outstanding ......... 12,743 9,763 10,782 9,742
======== ======== ======== =======
Basic earnings per common share ...... $ 0.83 $ 0.10 $ 1.84 $ 0.69
======== ======== ======== =======
Cash dividends per common share ...... $ 0.10 $ 0.10 $ 0.20 $ 0.20
======== ======== ======== =======
Condensed Consolidated Statements of Comprehensive Income
(In thousands) Three Months Ended Nine Months Ended
(Unaudited) June 30 June 30
- --------------------------------------------------------------------------------
2004 2003 2004 2003
------------------------------------------
Net income ........................... $ 10,537 $ 972 $ 19,837 $ 6,754
Foreign currency translation
adjustment ................... (716) 1,480 (885) (827)
Decrease in unrealized loss on cash
flow hedges, net of taxes .... - 140 159 319
-------- --------- -------- -------
Comprehensive income ................. $ 9,821 $ 2,592 $19,111 $ 6,246
======== ========= ======== =======
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) Nine Months Ended
(Unaudited) June 30
- --------------------------------------------------------------------------------
2004 2003
---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................... $ 19,837 $ 6,754
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation ................................... 11,197 10,311
Deferred income taxes .......................... 681 245
Equity in net income of unconsolidated
affiliates .................................... (1,933) (704)
Loss (gain) on disposals/writeoffs of property,
plant and equipment ........................... 20 (87)
Increase (decrease) in cash resulting from
changes in:
Trade accounts receivable ................ (44,101) 3,453
Inventories .............................. (54,839) 9,501
Prepaids expenses and other assets ....... (19) (2,630)
Accounts payable ......................... 25,710 (19,792)
Accrued liabilities and income taxes ..... 9,622 (1,514)
-------- --------
Net cash (used in) provided by operating activities ... (33,825) 5,537
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ......... (12,948) (10,467)
Proceeds from sale of property, plant and equipment - 591
Acquisition, net of cash acquired .................. - (9,825)
Distribution from unconsolidated affiliate ......... 59 45
-------- --------
Net cash used in investing activities ................. (12,889) (19,656)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ....................... 65,000 52,500
Principal payments on long-term debt ............... (64,400) (34,754)
Cash dividends on common stock ..................... (2,254) (1,949)
Repurchase of common stock ......................... (689) (1,079)
Net proceeds from issuance of common stock ......... 48,523 1,602
Other .............................................. 175 175
-------- --------
Net cash provided by financing activities ............. 46,355 16,495
-------- --------
Effect of exchange rate changes on cash ............... 6 (41)
-------- --------
Net (decrease) increase in cash and cash equivalents .. (353) 2,335
Cash and cash equivalents, beginning of year .......... 2,758 2,127
-------- --------
Cash and cash equivalents, end of period .............. $ 2,405 $ 4,462
======== ========
Supplemental Cash Flow Disclosures:
Cash payment for interest ............................. $ 3,184 $ 3,714
======== ========
Cash payment for income taxes ......................... $ 5,601 $ 5,525
======== ========
Supplemental Schedule of Noncash Investing and Financing
Activities:
Fair value of assets acquired ...................... $ - $ 9,845
Liabilities assumed................................. - 20
-------- --------
Net cash paid....................................... $ - $ 9,825
======== ========
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 June 30, 2004 and the condensed
consolidated statements of income and comprehensive income for the three and
nine months ended June 30, 2004 and 2003, and condensed consolidated cash flows
for the nine months ended June 30, 2004 and 2003 have been prepared by Steel
Technologies Inc. (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
June 30, 2004 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
consolidated 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, 2003. The results of operations
for the nine months ended June 30, 2004 are not necessarily indicative of the
operating results for the full year.
2. STOCK OPTIONS
At June 30, 2004, the Company had stock-based compensation plans which are
described more fully in Note 13 of Notes to Consolidated Financial Statements in
our Annual Report on Form 10-K for the fiscal year ended September 30, 2003. As
permitted by Statement of Financial Accounting Standards (SFAS) No. 123
"Accounting for Stock-Based Compensation" and amended by SFAS No. 148,
"Accounting for Stock-Based Compensation Transition and Disclosure," the Company
follows the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations in
accounting for its stock option plans under the intrinsic value based method.
Accordingly, no stock-based compensation expense has been recognized for stock
options issued under the plans as all stock options granted under the plans had
an exercise price equal to the market value of the underlying common stock on
the date of grant. Had compensation expense been determined based on the fair
value of the stock options at the grant date consistent with the provisions of
SFAS No. 123, the Company's net income and basic and diluted net income per
share would have been impacted as follows:
6
(In thousands except per share data) Three Months Ended Nine Months Ended
(Unaudited) June 30 June 30
- -------------------------------------------------------------------------------
2004 2003 2004 2003
------ ------ ------ ------
Net income - as reported $10,537 $ 972 $19,837 $6,754
Total stock-based employee compensation
expense determined under
fair value method for all awards,
net of taxes 81 26 249 89
------- ------ ------- ------
Net income - pro forma $10,456 $ 946 $19,588 $6,665
======= ====== ======= ======
Diluted net income per share - as reported $ 0.81 $ 0.10 $ 1.80 $ 0.68
Diluted net income per share - pro forma $ 0.81 $ 0.10 $ 1.78 $ 0.67
Basic net income per share - as reported $ 0.83 $ 0.10 $ 1.84 $ 0.69
Basic net income per share - pro forma $ 0.82 $ 0.10 $ 1.82 $ 0.68
3. ACQUISITION
On March 7, 2003 the Company completed the purchase of certain assets from Cold
Metal Products, Inc. (Cold Metal Products) as approved by the U.S. Bankruptcy
Court in Youngstown, Ohio. The acquisition has been recorded under the purchase
method of accounting, with the operating results being included in the Company's
condensed consolidated financial statements since the date of acquisition. The
following unaudited pro forma consolidated results of operations have been
prepared as if the acquisition of the assets of Cold Metal Products had occurred
at the beginning of the corresponding period.
(In thousands except per share data) Nine Months Ended
(Unaudited) June 30, 2003
- ----------------------------------- ------------------
Sales $ 397,416
Net income $ 6,641
Diluted net income per share $ 0.67
Basic net income per share $ 0.68
This unaudited pro forma information is presented for informational purposes
only and is not necessarily indicative of future operating results.
7
4. INVENTORIES
Inventory consists of:
(In thousands) June 30 September 30
(Unaudited)) 2004 2003
- -------------------------------------------------------------------------------
Raw materials .................................... $ 100,327 $ 58,204
Finished goods and work in process ............... 38,329 26,097
---------- ----------
$ 138,656 $ 84,301
========== ==========
5. COMMON STOCK
On March 31, 2004, the Company completed a public stock offering of 2,905,000
shares of common stock at a price of $17.25. The Company realized net proceeds
of approximately $47.3 million from this offering.
6. NET INCOME PER SHARE COMPUTATIONS
The following is a reconciliation of the denominator of the basic and diluted
per share computations:
(Amounts in thousands, except per share results) Three Months Ended
(Unaudited) June 30
- --------------------------------------------------------------------------------
2004 2003
----------------------
Net income ............................................ $ 10,537 $ 972
--------- ---------
Shares (denominator) used for diluted
per share computations:
Weighted average shares of common stock
outstanding ................................... 12,743 9,763
Plus: dilutive effect of stock options ............ 286 103
--------- ---------
Diluted weighted average shares ............ $ 13,029 $ 9,866
--------- ---------
Shares (denominator) used for basic per
share computations:
Weighted average shares of common stock
outstanding .................................... 12,743 9,763
--------- ---------
Net income per share data:
Diluted ........................................... $ 0.81 $ 0.10
========= =========
Basic ............................................. $ 0.83 $ 0.10
========= =========
8
(Amounts in thousands, except per share results) Nine Months Ended
(Unaudited) June 30
- --------------------------------------------------------------------------------
2004 2003
----------------------
Net income ............................................ $ 19,837 $ 6,754
--------- ---------
Shares (denominator) used for diluted
per share computations:
Weighted average shares of common stock
outstanding ................................... 10,782 9,742
Plus: dilutive effect of stock options ............ 249 162
--------- ---------
Diluted weighted average shares ............ $ 11,031 $ 9,904
--------- ---------
Shares (denominator) used for basic per
share computations:
Weighted average shares of common stock
outstanding .................................... 10,782 9,742
--------- ---------
Net income per share data:
Diluted ........................................... $ 1.80 $ 0.68
========= =========
Basic ............................................. $ 1.84 $ 0.69
========= =========
All outstanding options are included in the diluted earnings per share
calculation above for the three and nine months ended June 30, 2004 and 2003.
7. RELATED PARTIES
Summarized condensed income statement information of Mi-Tech Steel, Inc.
(Mi-Tech Steel), a fifty percent owned unconsolidated affiliate accounted for by
the equity method, follows:
(In Thousands) Three Months Ended Nine Months Ended
(Unaudited) June 30 June 30
- ----------------- --------------------- -----------------------
2004 2003 2004 2003
---- ---- ---- ----
Sales $54,591 $35,904 $145,704 $100,144
Gross profit 4,118 2,300 10,868 6,369
Net income 1,386 439 3,412 1,000
The Company has various transactions with Mi-Tech Steel. Included in operating
income of the Company are management fees, Decatur operating expense
reimbursements and equity in the net income of Mi-Tech Steel. During the three
months and nine months ended June 30, 2004, these transactions totaled $590,000
and $1,630,000, respectively, compared to $186,000 and $814,000 for the three
and nine months ended June 30, 2003, respectively. The Company's equity in
undistributed net income of Mi-Tech Steel was $8,127,000 and $6,131,000 at June
30, 2004 and 2003, respectively.
During the three months and nine months ended June 30, 2004, the Company
recorded sales of $4,351,000 and $11,916,000, respectively, for products sold to
a company owned by an officer and director of the Company compared to sales of
$1,733,000 and $4,813,000, respectively, during the three months and nine months
ended June 30, 2003.
9
Accounts receivable from the aforementioned company was $2,772,000 and
$1,337,000 as of June 30, 2004 and September 30, 2003, respectively. 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 2004 Proxy Statement.
8. IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB
51" (FIN 46). The primary objectives of FIN 46 are to provide guidance on the
identification of entities for which control is achieved through means other
than through voting right (variable interest entities, or VIEs) and how to
determine when and which business enterprise should consolidate the VIE (the
primary beneficiary). The provisions of FIN 46, as amended by FASB Staff
Position 46-6, "Effective Date of FIN 46" and FIN 46R, are effective immediately
for VIEs created after January 31, 2003 and no later than March 31, 2004 for
VIEs created before February 1, 2003. In addition, FIN 46 requires that both the
primary beneficiary and all other enterprises with a significant variable
interest make additional disclosure in filings issued after January 31, 2003.
The Company has determined that it does not have any VIEs and the adoption of
FIN 46 does not have an impact on our financial position, results of operations
or cash flows.
10
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, competitive factors such as pricing and availability of steel; cyclicality
of demand in the steel industry, specifically in the automotive market; our
ability to make and integrate acquisitions; our inability to obtain sufficient
capital resources to fund our operations and our growth; risk of business
interruptions affecting automotive manufacturers; and reliance on key customers.
Readers 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. Unless the context
otherwise requires, references to "we," "us" or "our" refer collectively to
Steel Technologies Inc. and its subsidiaries.
Application of Critical Accounting Policies
- -------------------------------------------
Our consolidated financial statements 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,
we monitor and evaluate our estimates and assumptions.
A summary of significant accounting policies used in the preparation of the
consolidated financial statements are described in Note 1 of Notes to
Consolidated Financial Statements in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2003.
Our most critical accounting policies include the valuation of accounts
receivable, which impacts selling, general and administrative expense and the
assessment of recoverability of goodwill and long-lived assets. Management
reviews the estimates, including, but not limited to, the allowance for doubtful
accounts on a regular basis based on historical experiences, current conditions
and future expectations. The reviews are performed regularly and adjustments are
made as required by currently available information. We believe these estimates
are reasonable, but actual results could differ from these estimates.
11
Allowance for Doubtful Accounts Receivable
------------------------------------------
Our accounts receivable represent those amounts which have been billed to
our customers but not yet collected. An allowance for doubtful accounts is
maintained for estimated losses resulting from the inability of our
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 our customers were to deteriorate, resulting in an impairment
of the ability to make payments, additional allowances may be required.
Impairment of Long-Lived Assets and Goodwill
--------------------------------------------
Long-lived assets with estimated useful lives are depreciated to their
residual values over those useful lives in proportion to the economic value
consumed. We review the carrying value of our 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 discounted 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 discounted cash flows value is required.
Future changes in circumstances, cash flow estimates and fair value could
affect the valuations.
Goodwill is reviewed annually, or sooner if indicators of impairment exist,
for impairment using the present value technique to determine estimated
fair value of goodwill associated with each reporting entity. If the
goodwill is indicated as being impaired (the present value of cash flows
(fair value) of the reporting unit is less than the carrying amount), the
fair value of the reporting unit would then be allocated to our assets and
liabilities in a manner similar to a purchase price allocation in order to
determine the implied fair value of the reporting unit goodwill. This
implied fair value of the reporting unit goodwill would then be compared
with the carrying amount of the reporting unit goodwill and, if it were
less, we would then recognize an impairment loss.
Considerable management judgment is necessary to assess impairment and
estimate fair value. The projection of future cash flows for the goodwill
impairment analysis requires significant judgment and estimates with
respect to future revenues related to the assets and the future cash
outlays related to those revenues. Actual revenues and related cash flows
or changes in anticipated revenues and related cash flows could result in
changes in this assessment and result in an impairment charge. The
assumptions used in our evaluations, such as forecasted growth rates, cost
of capital, tax rates and residual values, are consistent with our internal
projections and operating plans. The use of different assumptions,
including cash flows and discount rates, could increase or decrease the
related impairment charge.
12
Overview
- --------
Steel Technologies Inc. is one of the largest independent flat-rolled steel
processors in North America. Our North American platform of 21 facilities,
including our unconsolidated affiliates, is strategically positioned in the
steel producing and consuming markets throughout the United States and Mexico.
We bring value to our customers through precision steel processing as well as
supply chain management, quality control and technical support. We utilize the
most advanced equipment to produce high-quality steel products and specialize in
meeting exact specifications for customers in a variety of industries and end
use markets including automotive, lawn and garden, appliance and rail car
industries. Our broad geographic coverage allows us to provide our customers
with efficient just-in-time delivery.
We focus our sales and marketing strategies to more fully leverage our North
American platform of value added steel processing facilities. We have been
successful in growing our volume across all operations and have gained
meaningful market growth, both with existing and new customers across a wide
range of end use markets. Our broad capabilities and geographic presence offers
distinct competitive advantages to customers that have multi-plant operations
throughout the United States, Canada and Mexico. This has allowed us to expand
with regional and large national accounts. In the third quarter of fiscal 2004,
our tons sold of company-owned steel products increased 45% over the same
quarter of fiscal 2003 to 353,000 tons. We anticipate approximately 25% volume
growth year over year in the upcoming fourth fiscal quarter through continued
market growth and strong economic conditions. With our recent investments we are
well positioned to manage these higher volumes.
Our largest unconsolidated affiliate, Mi-Tech Steel, Inc. (Mi-Tech Steel),
experienced 52% growth in revenue in the third quarter of fiscal 2004 compared
to the third quarter of fiscal 2003. Mi-Tech Steel is well positioned with their
network of facilities to grow with transplant automotive and other large
national accounts.
Our gross profit margin was 11.4% in the third quarter of fiscal 2004 compared
to 7.1% in the third quarter of fiscal 2003. Our gross profit margin improved
primarily due to higher sales levels related to our market growth and to a
lesser extent our increase in selling prices to offset increased raw material
costs.
During the most recent fiscal quarter, our steel suppliers continue to be
impacted by the shortage of raw materials resulting in unprecedented increases
affecting the cost to steel producers on scrap, coke, iron ore and energy. As a
result, the North American steel producers have implemented temporary raw
material surcharges to offset these costs until conditions subside. We are
currently subject to raw material price increases and surcharges from our
suppliers. We intend to continue to pass on these price increases and surcharges
to our customers. As a result we anticipate continued double-digit selling price
increases year over year in the upcoming fourth fiscal quarter. To the extent we
are unable to continue to pass on these price increases and surcharges, the
profitability of our business could be adversely affected.
13
As a result of a weaker U.S. dollar, increasing demand and continued shortages
of raw materials, we expect our raw material costs to increase throughout our
fourth fiscal quarter. We remain diligent and focused on our supplier relations
and in securing material to support our customer requirements. Although we
expect supply conditions to remain tight throughout the upcoming quarter, we
have aligned our business with the most viable North American producer base and
expect to maintain adequate supply to support our valued customers and projected
growth.
We successfully completed a secondary public stock offering during our second
fiscal quarter. We raised approximately $47.3 million which was used to reduce
the debt outstanding on our unsecured line of credit facility. This will allow
us the financial flexibility to continue to implement our strategic growth
initiatives, through additional investments in current operations, future
acquisitions and existing affiliates.
Financial Highlights
--------------------
(in thousands except per share data, other data and percentages)
----------------------------------------------------------------
For the Three Months Ended June 30
2004 2003
--------------- ------------------
% of % of %
(Unaudited) Actual Sales Actual Sales Change
- --------------------------------- -------- ------- -------- --------- --------
Sales $232,041 100.0% $129,603 100.0% 79%
Gross profit 26,409 11.4 9,235 7.1 186
Selling, general and
administrative expenses 9,347 4.0 7,285 5.6 28
Equity in net income of
unconsolidated affiliates 764 0.3 294 0.2 160
Operating income 17,826 7.7 2,244 1.7 694
Interest expense, net 971 0.4 1,155 0.9 (16)
Net income 10,537 4.5 972 0.7 984
Diluted earnings per common share $0.81 $0.10 710
Other data
- ----------
Average days sales outstanding 45.8 49.9 (8)
Inventory turnover 5.9 6.1 (3)
Return on equity (annualized) 20.8% 2.8% 643
14
For the Nine Months Ended June 30
2004 2003
--------------- ------------------
% of % of %
(Unaudited) Actual Sales Actual Sales Change
- --------------------------------- -------- ------- -------- --------- --------
Sales $547,672 100.0% $385,752 100.0% 42%
Gross profit 56,762 10.4 34,166 8.8 66
Selling, general and
administrative expenses 24,535 4.5 21,332 5.5 15
Equity in net income of
unconsolidated affiliates 1,933 0.3 704 0.2 175
Operating income 34,160 6.2 13,538 3.5 152
Interest expense, net 2,932 0.5 3,703 1.0 (21)
Net income 19,837 3.6 6,754 1.8 194
Diluted earnings per common share $1.80 $0.68 165
Cash dividends per common share $0.20 $0.20 --
Results of Operations
- ---------------------
Sales
-----
We posted net sales of $232,041,000 for the fiscal quarter ended June 30,
2004, an increase of 79% from sales of $129,603,000 for the fiscal quarter
ended June 30, 2003. Tons shipped of company-owned steel products in the
third quarter of fiscal 2004 increased approximately 45% to 353,000 tons
compared to the third quarter of fiscal 2003 as a result of continued
market growth with large national accounts and improved economic
conditions. The average selling price of company-owned steel products
increased approximately 34% for the third quarter of fiscal 2004 as
compared to the previous year.
Sales for the nine months ended June 30, 2004 increased by 42% to
$547,672,000 compared to $385,752,000 for the nine months ended June 30,
2003. Tons shipped in the first nine months of fiscal 2004 increased 31%
compared to the first nine months of fiscal 2003. Average selling prices of
steel for the first nine months of fiscal 2004 increased approximately 11%
compared to the first nine months of fiscal 2003.
Gross profit
------------
Our gross profit margin was 11.4% in the third quarter of fiscal 2004
compared to 7.1% in the third quarter of fiscal 2003. Cost of goods sold
increased 70.8% in the third quarter of fiscal 2004 compared to the third
quarter of fiscal 2003. Cost of materials sold increased $78,932,000 in the
third quarter of fiscal 2004 due to higher sales volume and increased raw
material costs. The remaining increase in cost of goods sold in the third
15
quarter of fiscal 2004 was $6,332,000 and was primarily a result of
increased labor costs and related fringe benefits and increased delivery
costs due to higher sales volume.
For the first nine months of fiscal 2004 our gross profit margin was 10.4%
compared to 8.8% for the first nine months of fiscal 2003. Cost of goods
sold increased 39.6% in the first nine months of fiscal 2004 compared to
the first nine months of fiscal 2003. Cost of materials sold increased
$126,047,000 due to higher sales volume and increased raw material costs.
The remaining increase in cost of goods sold for the nine months ended June
30, 2004 compared to June 30, 2003 of $13,277,000 was primarily a result of
increased labor costs and related fringe benefits and increased delivery
costs due to higher sales volume.
Our gross profit margin improved somewhat from an escalating price
environment due to rising raw material costs. This benefit to our earnings
may reverse in subsequent quarters as the full effect of raw material
increases works through our inventory.
We expect average raw material costs in the fourth quarter of fiscal 2004
to exceed average raw material costs in the third quarter of fiscal 2004 as
a result of steel supply shortages and raw material surcharges that were
implemented by our suppliers. We intend to continue to pass on these price
increases and surcharges to our customers to mitigate the impact of the
surcharges on our gross profit margin. If we are unable to continue to pass
through future price increases to our customers, our gross margins will
decrease.
We may offset rising material costs and positively impact gross profit by
achieving production cost efficiencies and product mix improvements
Selling, general and administrative expenses
--------------------------------------------
Selling, general and administrative costs were $9,347,000 for the three
months ended June 30, 2004, compared to $7,285,000 for the three months
ended June 30, 2003. Higher sales volume and net income levels contributed
to an increase in selling, general and administrative expenses as a result
of higher selling costs and increases in company wide bonus plan expenses.
Selling, general and administrative costs for the nine months ended June
30, 2004 were $24,535,000 compared to $21,332,000 for the nine months ended
June 30, 2003. Higher sales volume and net income levels contributed to an
increase in selling, general and administrative expenses as a result of
higher selling costs and increases in company wide bonus plan expenses. For
the nine months ended June 30, 2004, selling, general and administrative
cost reductions were achieved in the amount of $740,000 from a
non-recurring state payroll tax incentive and a reduction of property tax
expenses as a result of receiving an assessment at amounts significantly
lower than estimated.
We continue to actively manage the level at which selling, general and
administrative expenses are added to our cost structure.
16
Equity in net income of unconsolidated affiliates
-------------------------------------------------
Our share of the income of our unconsolidated affiliates increased to
$764,000 for the third quarter of fiscal 2004 compared to $294,000 in 2003.
For the nine months ended June 30, 2004 income from our unconsolidated
affiliates was $1,933,000 compared to $704,000 for the nine months ended
June 30, 2003.
Our largest unconsolidated affiliate, Mi-Tech Steel, experienced 52% sales
growth during the third quarter and 46% sales growth for the first nine
month of fiscal 2004 as compared to fiscal 2003. The continued ramping up
of the Nissan Motor Co., Ltd.'s new Canton, Mississippi operation
contributed positively to Mi-Tech Steel's earnings. Mi-Tech Steel's newest
facility located near the Nissan Mississippi operation has begun a
$4,000,000 follow-on expansion to handle automotive exposed processing to
service Nissan and other businesses in the southern region of the U.S.
Interest expense
----------------
Net interest expense for the third quarter of fiscal 2004 decreased to
$971,000 from $1,155,000 for the third quarter of fiscal 2003. Net interest
expense for the nine months ended June 30, 2004 decreased to $2,932,000
compared to $3,703,000 during the same period of fiscal 2003. The decrease
is primarily attributable to lower interest rates on variable rate debt
during the current period as compared to the same period last year offset
by a $269,000 expense related to the early retirement of our ten-year note
in June, 2004.
Income tax expense
------------------
Our effective income tax rate was approximately 37.5% and 9.5%,
respectively, for the third quarters of fiscal 2004 and 2003. The effective
tax rate for the third quarter of fiscal 2003 was 23% lower as a result of
recording an income tax benefit attributable to state and foreign income
tax matters that were more favorable than originally estimated. The
remaining change in our effective tax rate during the quarter was primarily
attributable to higher earnings during the third quarter of fiscal 2004
compared to the same period last year.
For the first nine months of fiscal 2004 and 2003 our effective income tax
rate was 36.4% and 31.9%, respectively. During the nine months ended June
30, 2003, we recorded an income tax benefit attributable to state and
foreign income tax matters that were more favorable than originally
estimated and also recognized a nonrecurring state income tax benefit which
combined to reduce our effective income tax rate by 4.5%.
17
Liquidity and Capital Resources
- -------------------------------
As of June 30, 2004, we had $170,199,000 of working capital, maintained a
current ratio of 2.8:1 and had total debt at 33% of capitalization. Generally,
in periods of economic expansion and increased demand for our products, our
working capital requirements increase. Conversely, in periods of economic
contraction and reduced demand for our products, our working capital
requirements decrease.
Average days sales outstanding to customers was 46 days as of June 30, 2004
compared to 50 as of June 30, 2003. We expect average days sales outstanding to
increase to 50 days during the fourth quarter of fiscal 2004. Average days
inventory was 61 days as of June 30, 2004 compared to 59 days as of June 30,
2003. We expect average days inventory to increase to 65 days during the fourth
quarter of fiscal 2004.
Our average payment days to suppliers was 33 days as of June 30, 2004 compared
to 34 days as of June 30, 2003. We expect average payment days to suppliers to
remain at 33 days during the fourth quarter of fiscal 2004.
During the first nine months of fiscal 2004, cash used in operations was
$33,825,000 primarily working capital related. We increased inventory by
$54,839,000 and accounts receivable by $44,101,000 to support our sales growth,
which was partially offset by an increase in accounts payable of $25,710,000.
This working capital increase was financed primarily from borrowings under our
bank line of credit. In the fourth quarter of fiscal 2004, as we continue to
expand our sales, we expect to increase inventory and accounts receivable to
support our growth. We expect to finance our cash flow needs with borrowings
under our line of credit agreement.
Capital expenditures for the first nine months of fiscal 2004 totaled
approximately $12,948,000 primarily for various capacity improvement projects.
We continue to expand production capacity to serve the growing needs of
customers and invest in automation to improve productivity and make our
operations more efficient. For fiscal 2004, the capital additions to all
facilities are expected to approximate $17,000,000.
We maintain an equity investment of approximately $18,244,000 in our 90%-owned
Mexican subsidiary. Additional investments in our Mexican operations, if
required, would be financed with available funds from our credit facility.
The translation of the financial statements of our Mexican subsidiary from local
currencies to the U.S. dollar subjects us 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. We do not consider
our exposure to exchange rate risks to be material and consider the Mexican peso
a relatively stable currency. We do not typically manage our related foreign
currency exchange rate risk through the use of financial instruments. Foreign
currency transaction gains included in sales were $382,000 and $461,000 during
the three and nine months ended June 30, 2004, respectively, reflecting a weaker
average exchange rate of the peso relative to the U.S. dollar during fiscal
2004. Foreign currency transaction (losses) gains recorded during the three and
nine months ended June 30, 2003 were ($422,000) and $194,000, respectively.
18
We maintain a 50% equity investment in Mi-Tech Steel and a 49% equity investment
in Ferrolux Metals. As part of our strategy to develop the operations of our
unconsolidated affiliates, we loaned Mi-Tech Steel $2,000,000 on September 30,
2003. The loan is subordinate to all existing Mi-Tech Steel loans and matures
September 30, 2006. Interest is paid at maturity at a LIBOR based interest rate.
Additional equity contributions to our unconsolidated affiliates are not
required and we do not guarantee any obligations of our unconsolidated
affiliates. While distributions from Mi-Tech Steel are permitted, if authorized
by Mi-Tech Steel's board of directors, such distributions are restricted by one
of Mi-Tech Steel's loan agreements. Such restrictions limit distributions to 15%
of Mi-Tech Steel's net income in any fiscal year. Distributions from Mi-Tech
Steel are not, and are not expected to be, material sources of liquidity for us.
Mi-Tech Steel's liquidity needs are met primarily by their cash flows from
operating activities and existing line of credit facility. Cash flows from
operations and available borrowing capabilities are expected to meet Mi-Tech
Steel's future needs.
On March 31, 2004, we completed a public stock offering of 2,905,000 shares of
common stock at a price of $17.25. We realized net proceeds of approximately
$47,300,000 from this offering and used these proceeds to reduce borrowings
under our line of credit facility. The completion of this offering has allowed
us to continue to implement our strategic growth initiatives.
Borrowings and repayments under our line of credit agreement are initiated as
needed to fund our operating and investing activities described above. During
the first nine months of fiscal 2004, we borrowed $65,000,000 to finance our
working capital needs and repaid $64,400,000 on our indebtedness.
We have a $151,000,000 unsecured line of credit agreement expiring on August 31,
2005, with various variable options on the interest rate, none of which are
greater than the bank's prime rate. At June 30, 2004, there was $101,000,000
outstanding on the credit facility.
On June 1, 2004 we prepaid the entire principal balance of $5,680,000
outstanding on the ten-year note which required a final principal payment in
March 2005. With this prepayment we were required to pay a make-whole payment of
$269,000 which is included in interest expense.
Provisions contained in our debt agreements require us to maintain specified
levels of net worth, maintain certain financial ratios and limit the addition of
substantial debt. With the prepayment of our private placement note, certain
cross-default provisions with respect to the line of credit agreement and
private placement note were eliminated. We are in compliance with our loan
covenants, and none of these covenants would restrict the completion of
currently planned capital expenditures.
19
Cash Requirements, Contractual Obligations and Contingencies
- ------------------------------------------------------------
Our liquidity needs are met primarily by our cash flows from operating
activities and our line of credit facility. Operating cash flows are somewhat
influenced by cyclicality of demand in the steel industry, especially in the
automotive market. We anticipate borrowing on our existing line of credit
facility to support our continued growth and to meet our working capital needs.
Cash flows from operations and available borrowing capabilities are expected to
meet our future needs.
Our bank line of credit facility matures on August 31, 2005. We expect to renew
or replace our existing line of credit agreement with a multiple year agreement
during our fourth fiscal quarter of 2004. We believe that, given our successful
multiple year renewals in 1998 and 2001 and the one-year extension of the
maturity date in fiscal 2003 to its current maturity, we will obtain this
renewal or replacement. We continue to remain in compliance with all covenants,
including our leverage ratios, and all of our borrowings are unsecured. In the
event we are unable to refinance our line of credit on a similar basis, we have
sufficient working capital and fixed assets available to obtain secured
financing to meet our future needs.
We have entered into operating leases and agreements to purchase electricity to
meet the needs of our facilities. These obligations have not changed
significantly from those disclosed in our Annual Report on Form 10-K for the
year ended September 30, 2003.
At this time, we have no other known material off-balance sheet arrangements,
contractual obligations, contingent liabilities or commitments that must be met
beyond the next twelve months.
We believe all manufacturing facilities are in compliance with applicable
federal and state environmental regulations. We are not presently aware of any
fact or circumstance, which would require the expenditure of material amounts
for environmental compliance.
Related Party Transactions
- --------------------------
We have various transactions with Mi-Tech Steel and we sell scrap steel products
to a company owned by Stuart N. Ray, an officer and director of Steel
Technologies (see Note 7 of our Notes to Condensed Consolidated Financial
Statements). The price that we receive for our scrap steel is based on a
published index price. We have no ongoing contractual or other commitments to
sell scrap steel to Mr. Ray's company and we can discontinue sales to this
company at any time. We bid our scrap steel business to potential purchasers on
a regular basis.
Recently Issued Accounting Pronouncements
- -----------------------------------------
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of ARB 51" (FIN 46). The primary
objectives of FIN 46 are to provide guidance on the identification of entities
for which control is achieved through means other than through voting right
(variable interest entities, or VIEs) and how to determine when and which
business enterprise should consolidate the VIE (the primary
20
beneficiary). The provisions of FIN 46, as amended by FASB Staff Position 46-6,
"Effective Date of FIN 46" and FIN 46R, are effective immediately for VIEs
created after January 31, 2003 and no later than March 31, 2004 for VIEs created
before February 1, 2003. In addition, FIN 46 requires that both the primary
beneficiary and all other enterprises with a significant variable interest make
additional disclosure in filings issued after January 31, 2003. We have
determined that we do not have any variable interest entities and the adoption
of FIN 46 does not have an impact on our financial position, results of
operations or cash flows.
21
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change during the nine months ended June 30, 2004
from the disclosures about market risk provided in our Annual Report on Form
10-K for the year ended September 30, 2003.
Item 4. Controls and Procedures
Management, including our Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the third quarter covered by this
Quarterly Report on Form 10-Q. Based upon that evaluation, our 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 our company, including our
consolidated subsidiaries, particularly during the period for which reports of
our company, including this Quarterly Report on Form 10-Q, are being prepared.
There were no changes in our internal control over financial reporting that
occurred during our third fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
Exhibits filed with this report are attached hereto.
On June 25, 2004, we furnished a current report on Form 8-K under Item 12,
concerning the issuance of a press release announcing our expected financial
results for the third quarter ended June 30, 2004.
On July 19, 2004, we furnished a current report on Form 8-K under Item 12,
concerning the issuance of a press release reporting our financial results for
the third quarter ended June 30, 2004.
22
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: August 6, 2004
23
EXHIBIT 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Bradford T. Ray, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Steel Technologies
Inc. for the fiscal quarter ended June 30, 2004;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
third fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 6, 2004
/s/ Bradford. T. Ray
- --------------------
Bradford T. Ray
Chief Executive Officer
EXHIBIT 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph P. Bellino, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Steel Technologies
Inc. for the fiscal quarter ended June 30, 2004;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
third fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 6, 2004
/s/ Joseph P. Bellino
- ---------------------
Joseph P. Bellino
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO TITLE 18, UNITED STATES CODE, SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, I, Bradford T. Ray, Chief
Executive Officer of Steel Technologies Inc., (the Company) certify, to the best
of my knowledge, based upon a review of the Quarterly Report on Form 10-Q of the
Company for the quarter ended June 30, 2004:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Bradford T. Ray
-------------------
Bradford T. Ray
Chief Executive Officer
Date: August 6, 2004
EXHIBIT 32.1
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO TITLE 18, UNITED STATES CODE, SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, I, Bradford T. Ray, Chief
Executive Officer of Steel Technologies Inc., (the Company) certify, to the best
of my knowledge, based upon a review of the Quarterly Report on Form 10-Q of the
Company for the quarter ended August 6, 2004:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Joseph P. Bellino
---------------------
Joseph P. Bellino
Chief Financial Officer
Date: August 6, 2004