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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, 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 12,864,284 shares outstanding of the Registrant's common stock as of
January 31, 2005.








STEEL TECHNOLOGIES INC.

INDEX



Page Number
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets
December 31, 2004 and September 30, 2004 .......................... 3

Condensed Consolidated Statements of Income and
Comprehensive Income Three Months Ended
December 31, 2004 and 2003 ........................................ 4

Condensed Consolidated Statements of Cash Flows Three Months
Ended December 31, 2004 and 2003 .................................. 5

Notes to Condensed Consolidated Financial Statements .............. 6-9

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .............................................10-18

Item 3. Quantitative and Qualitative Disclosures About Market
Risk .............................................................. 18

Item 4. Controls and Procedures ........................................... 19

PART II.OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders................ 19

Item 6. Exhibits .......................................................... 20

Signature ................................................................. 20

Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002

Exhibit 31.2 Certification of Chief Financial Officer 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, except shares) December 31 September 30
(Unaudited) 2004 2004
- --------------------------------------------------------------------------------

ASSETS
Current assets:
Cash and cash equivalents ................... $ 5,045 $ 2,273
Trade accounts receivable, net .............. 121,251 123,546
Inventories ................................. 197,660 178,490
Deferred income taxes ....................... 2,421 2,471
Prepaid expenses and other assets ........... 4,966 5,629
--------- ---------
Total current assets ..................... 331,343 312,409

Property, plant and equipment, net ............. 109,781 108,593
Investments in and advances to unconsolidated
affiliates .................................. 23,804 22,312
Goodwill ....................................... 18,148 18,148
Other assets ................................... 2,382 1,544
--------- ---------
$ 485,458 $ 463,006
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................ $ 68,814 $ 90,859
Accrued liabilities ......................... 15,208 14,901
Income taxes payable ........................ 10,217 6,278
--------- ---------
Total current liabilities ................ 94,239 112,038

Long-term debt ................................. 140,000 114,000
Deferred income taxes .......................... 17,804 18,295
Other long-term liabilities..................... 1,076 424
--------- ---------
Total liabilities ........................ 253,119 244,757
--------- ---------
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:
12,854,644 at December 31, 2004 and
12,804,073 at September 30, 2004............ 70,010 69,466
Treasury stock at cost: 2,633,149 shares at
December 31, 2004 and 2,626,742 at September
30, 2004.................................... (24,423) (24,238)
Additional paid-in capital .................. 5,170 5,170
Retained earnings ........................... 187,258 174,025
Accumulated other comprehensive loss ........ (5,676) (6,174)
--------- ---------
Total shareholders' equity ................ 232,339 218,249
--------- ---------
$ 485,458 $ 463,006
========= =========



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
- --------------------------------------------------------------------------------
2004 2003
---------------------


Sales ................................................ $254,016 $130,789
Cost of goods sold ................................... 221,570 120,012
-------- --------
Gross profit .................................... 32,446 10,777

Selling, general and administrative expenses ......... 10,121 6,616
Equity in net income of unconsolidated affiliates .... 1,471 482
-------- --------
Operating income ................................... 23,796 4,643

Interest expense, net ................................ 1,179 1,012
-------- --------
Income before income taxes ........................ 22,617 3,631

Provision for income taxes ........................... 8,100 1,233
-------- --------
Net income ........................................ $ 14,517 $ 2,398
======== ========
Weighted average number of common
shares outstanding-diluted ........................ 13,090 9,977
======== ========
Diluted earnings per common share .................... $ 1.11 $ 0.24
======== ========
Weighted average number of common
shares outstanding-basic .......................... 12,840 9,780
======== ========
Basic earnings per common share ...................... $ 1.13 $ 0.25
======== ========
Cash dividends per common share ...................... $ 0.10 $ 0.10
======== ========



Condensed Consolidated Statements of Comprehensive Income



(In thousands) Three Months Ended
(Unaudited) December 31
- --------------------------------------------------------------------------------
2004 2003
---------------------

Net income ........................................... $14,517 $ 2,398
Foreign currency translation adjustment............ 498 (701)
Change in unrealized loss on cash flow
hedges, net of taxes ........................... - 81
-------- --------
Comprehensive income ................................. $ 15,015 $ 1,778
======== ========

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
- --------------------------------------------------------------------------------
2004 2003
---------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................... $ 14,517 $ 2,398
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation ................................... 3,619 3,579
Deferred income taxes .......................... (512) (671)
Equity in net income of unconsolidated
affiliates .................................... (1,471) (482)
Increase (decrease) in cash resulting from
changes in:
Trade accounts receivable ................ 2,608 5,195
Inventories .............................. (18,904) (2,231)
Prepaids expenses and other assets ....... (144) 598
Accounts payable ......................... (22,174) (1,939)
Accrued liabilities and income taxes ..... 4,753 (80)
-------- --------
Net cash (used in) provided by operating activities ... (17,708) 6,367
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ......... (4,670) (5,373)
-------- --------
Net cash used in investing activities ................. (4,670) (5,373)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ....................... 76,000 1,000
Principal payments on long-term debt ............... (50,000) (1,000)
Cash dividends on common stock ..................... (1,284) (979)
Net issuance of common stock........................ 359 130
-------- --------
Net cash provided by (used in) financing activities ... 25,075 (849)
-------- --------
Effect of exchange rate changes on cash ............... 75 (80)
-------- --------
Net increase in cash and cash equivalents ............. 2,772 65
Cash and cash equivalents, beginning of year .......... 2,273 2,758
-------- --------
Cash and cash equivalents, end of period .............. $ 5,045 $ 2,823
======== ========
Supplemental Cash Flow Disclosures:
Cash payment for interest ............................. $ 836 $ 971
======== ========
Cash payment for income taxes ......................... $ 4,330 $ 484
======== ========


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, 2004 and the
condensed consolidated statements of income and comprehensive income for the
three months ended December 31, 2004 and 2003, and condensed consolidated cash
flows for the three months ended December 31, 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 as of and for the three months ended December 31, 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, 2004. The results of operations
for the three months ended December 31, 2004 are not necessarily indicative of
the operating results for the full year.


2. INVENTORIES:



Inventories consists of:


(In thousands) December 31 September 30
(Unaudited)) 2004 2004
- -------------------------------------------------------------------------------

Raw materials .................................... $ 140,346 $ 132,570
Finished goods and work in process ............... 57,314 45,920
---------- ----------
$ 197,660 $ 178,490
========== ==========



3. STOCK OPTIONS

At December 31, 2004, the Company had stock-based compensation plans which are
described more fully in Note 14 of Notes to Consolidated Financial Statements in
our Annual Report on Form 10-K for the fiscal year ended September 30, 2004. 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

6



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:




Three Months Ended
December 31
(In thousands except per share data) ------------------------------
(Unaudited) 2004 2003
- --------------------------------------------------------------------------------

Net income - as reported $14,517 $ 2,398
Total stock-based employee compensation
expense determined under fair value
method for all awards, net of taxes 56 86
------- -------
Net income - pro forma $14,461 $ 2,312
======= =======

Diluted net income per share - as reported $1.11 $0.24
Diluted net income per share - pro forma $1.11 $0.23
Basic net income per share - as reported $1.13 $0.25
Basic net income per share - pro forma $1.13 $0.24




4. 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 data) Three Months Ended
(Unaudited) December 31
- --------------------------------------------------------------------------------
2004 2003
----------------------

Net income ............................................ $ 14,517 $ 2,398
--------- ---------
Shares (denominator) used for diluted
per share computations:
Weighted average shares of common stock
outstanding ................................... 12,840 9,780
Plus: dilutive effect of stock options ............ 250 197
--------- ---------
Diluted weighted average shares ............ $ 13,090 $ 9,977
--------- ---------
Shares (denominator) used for basic per
share computations:
Weighted average shares of common stock
outstanding .................................... 12,840 9,780
--------- ---------
Net income per share data:
Diluted ........................................... $ 1.11 $ 0.24
========= =========
Basic ............................................. $ 1.13 $ 0.25
========= =========


7



All outstanding options are included in the diluted earnings per share
calculation above for the three months ended December 31, 2004 and 2003.


5. 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
(Unaudited) December 31
-----------------------------------------------------------------------
2004 2003
----------- -----------

Sales $ 70,541 $ 41,796
Gross Profit 7,040 2,800
Net Income 2,801 792


The Company has various transactions with Mi-Tech Steel. The Company reimbursed
Mi-Tech Steel $390,000 and $181,000, respectively, for its share of operating
costs of its Decatur, Alabama facility for the three months ended December 31,
2004 and 2003. The Company has recorded sales of $590,000 and $285,000 during
the three months ended December 31, 2004 and 2003, respectively, and accounts
receivable of $973,000 and $612,000 as of December 31, 2004 and September 30,
2004, respectively, for products and services sold at prevailing market prices
to Mi-Tech Steel. Included in operating income of the Company are management
fees and equity from the net income of Mi-Tech Steel totaling $1,634,000 and
$615,000 during the three months ended December 31, 2004 and 2003, respectively.

During the three months ended December 31, 2004 and 2003, the Company recorded
sales of $7,471,000 and $2,699,000, respectively, for scrap products sold to a
company owned by an officer and director of the Company. Accounts receivable
from the aforementioned company were $4,883,000 and $4,714,000 as of December
31, 2004 and September 30, 2004, respectively. Management reports these
transactions to the Audit Committee of the Board of Directors as frequently as
requested by the Committee, but at least annually. Most recently, in April 2004,
the Audit Committee reviewed and approved these transactions. The Company has
the ability to continue or cease selling scrap steel to this company at any
time.


6. IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123(R), Share-Based Payment, that addresses the accounting for
share-based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise or (b)
liabilities that are based on the fair value of the


8


enterprise's equity instruments or that may be settled by the issuance of such
equity instruments. SFAS No. 123(R) eliminates the ability to account for
share-based compensation transactions using APB Opinion No. 25 and requires
instead that such transactions be accounted for using a fair-value-based method.
SFAS No. 123(R) is effective for any interim or annual period beginning after
June 15, 2005. The Company is currently analyzing the impact of SFAS No. 123(R).

On October 22, 2004 the American Jobs Creation Act of 2004 was passed and is
effective for our fiscal year ended September 30, 2006. This law provides a
phased in deduction for a percentage of qualified income from domestic
production activities. The Company will assess the impact of this change in tax
law as further authoritative guidance becomes available.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an Amendment
of ARB No. 43." SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4,
"Inventory Pricing," to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and spoilage, and requires that these
items be recognized as current-period charges regardless of whether they meet
the criterion of "so abnormal." In addition, SFAS No. 151 requires that
allocation of fixed production overheads to the costs of conversion be based on
the normal capacity of the production facilities. The provisions of SFAS No.
151 are effective for inventory costs incurred during fiscal years beginning
after June 15, 2005, with earlier application permitted. The Company does not
expect the adoption of SFAS No. 151 will have a material impact on our financial
position, results of operations or cash flows.


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, 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, 2004.

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 and makes adjustments 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.

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

10



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, sales, 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 beyond previously established terms, additional allowances
may be required. Uncollectible accounts receivable are written off against
the allowance for doubtful accounts receivable when management determines
that the probability of payment is remote and collections efforts have
ceased.

Long-Lived Assets
-----------------

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 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 estimates of 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 the 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 the 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 the 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.


11



Overview
- --------

We are one of the largest independent flat-rolled steel processors in North
America. Our North American platform of 20 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.

For the three months ended December 31, 2004, sales increased 94% to a record
$254,016,000 from $130,789,000 in the same period a year ago. Net income for the
quarter increased to a record $14,517,000 or $1.11 per diluted share, on
approximately 13,090,000 weighted average shares outstanding, compared with net
income of $2,398,000 or $0.24 per diluted share in the year-earlier period, on
approximately 9,977,000 weighted average shares outstanding. The 31% increase in
weighted average diluted shares outstanding resulted from our successful
completion of a secondary stock offering of 2,905,000 shares in March 2004.

Our tons sold of company-owned steel products in our first quarter of fiscal
2005 increased 17.4% over the first quarter of fiscal 2004 to a record 293,000
tons. The unprecedented market conditions experienced throughout fiscal 2004
continued during our first quarter of fiscal 2005. We worked closely with our
strategic suppliers allowing us to satisfy our customer's needs and expand
volume in a variety of markets while at the same time managing challenging
pricing dynamics. We anticipate continued volume growth of approximately 10% for
the second quarter of fiscal 2005 over our first quarter 2005 levels. With our
recent investments we are well positioned to manage these higher volumes.

Our largest unconsolidated affiliate, Mi-Tech Steel, Inc. (Mi-Tech Steel), also
experienced record results in sales, volume shipped and profits in the first
quarter of fiscal 2005. Mi-Tech Steel plays an important role in our North
American platform. We anticipate Mi-Tech Steel's revenues to grow by
approximately 20% during the second quarter of fiscal 2005 versus the similar
quarter in fiscal 2004.

Our gross profit margin was 12.8% in the first quarter of fiscal 2005 compared
to 8.2% in the first quarter of fiscal 2004. Our gross profit margin improved
primarily due to higher

12



sales levels related to our market growth. We believe our gross profit margin in
our second quarter of 2005 will decline slightly from our first quarter of
fiscal 2005.

The steel producing industry continues to experience global consolidation. This
dynamic has created a stronger North American supply base with a more
disciplined approach to the market. As this consolidation continues, we continue
to be well aligned with the leading steel producers to meet our future growth
objectives. We remain committed to building upon our strong customer and
supplier relationships as we bring value to the supply chain through our North
American processing platform.

We intend to invest $17 million in capital projects in fiscal 2005. These
projects will enhance our capabilities by further expanding capacity, improving
quality and service to our customers and lowering conversion costs of current
operations.


Financial Highlights (in thousands except per share data and percentages)
-------------------------------------------------------------------------





For the Three Months Ended December 31
2004 2003
--------------- ------------------
% of % of %
(Unaudited) Actual Sales Actual Sales Change
- --------------------------------- -------- ------- -------- --------- --------

Sales $254,016 100.0% $130,789 100.0% 94%
Gross profit 32,446 12.8 10,777 8.2 201
Selling, general and
administrative expenses 10,121 4.0 6,616 5.1 53
Equity in net income of
unconsolidated affiliates 1,471 0.6 482 0.4 205
Operating income 23,796 9.4 4,643 3.5 413
Interest expense, net 1,179 0.5 1,012 0.8 16
Net income 14,517 5.7 2,398 1.8 505
Diluted earnings per common share $1.11 $0.24 363
Cash dividends per common share $0.10 $0.10 -

Other data
- ----------
Average days sales outstanding 43.0 47.5 (9)
Inventory turnover 4.5 5.6 (20)
Return on equity (annualized) 25.0% 6.9% 262



13




Results of Operations
- ---------------------

Sales
-----

We posted net sales of $254,016,000 for the first quarter ended December
31, 2004, an increase of 94% from sales of $130,789,000 for the first
fiscal quarter ended December 31, 2003. Tons shipped of company-owned steel
products in the first quarter of fiscal 2005 increased approximately 17% to
293,000 tons compared to the first quarter of fiscal 2004 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 68% for the first quarter of fiscal 2005 as
compared to the first quarter of fiscal 2004.

Gross profit
------------

Our gross profit margin was 12.8% in the first quarter of fiscal 2005
compared to 8.2% in the first quarter of fiscal 2004. Cost of goods sold
increased 84.6% in the first quarter of fiscal 2005 compared to the first
quarter of fiscal 2004. Cost of materials sold increased $97,532,000 in the
first quarter of fiscal 2005 due to higher sales volume and increased raw
material costs. The remaining increase in cost of goods sold in the first
quarter of fiscal 2005 was $4,026,000 and 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 decreased slightly from 14.4% in the fourth quarter
of fiscal 2004 to 12.8% in the first quarter of fiscal 2005 and we expect a
similar decrease in the second quarter of fiscal 2005. 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 $10,121,000 for the three
months ended December 31, 2004, compared to $6,616,000 for the three months
ended December 31, 2003. The increaser is primarily attributable to an
increase in company wide bonus plan expenses of approximately $1,814,000
which are tied to company profits, higher selling, administrative and
travel expenses of approximately $697,000 to increase our market coverage,
an increase of bad debt expense of $183,000 attributable to higher sales
levels and an increase of $426,000 in remaining general expenses. In
addition, the first quarter of fiscal 2004 included a reduction of property
tax expenses of approximately $385,000 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.

14



Equity in net income of unconsolidated affiliates
-------------------------------------------------

Our share of the income of our unconsolidated affiliates increased to
$1,471,000 for the first quarter of fiscal 2005 compared to $482,000 in
2004.

Our largest unconsolidated affiliate, Mi-Tech Steel, experienced 69% sales
growth during the first quarter of fiscal 2005 as compared to the first
quarter of fiscal 2004. The continued ramping up of the Nissan Motor Co.,
Ltd.'s new Canton, Mississippi operation contributed positively to Mi-Tech
Steel's earnings. In addition, Mi-Tech Steel continues to benefit from
strong transplant and domestic market growth.

Interest expense
----------------

Net interest expense for the first quarter of fiscal 2005 increased to
$1,179,000 from $1,012,000 for the first quarter of fiscal 2004. The
increase is attributable to higher average borrowings on our unsecured line
of credit to support our sales growth and higher interest on fixed rate
debt that replaced variable rate debt at lower rates during the first
quarter of fiscal 2005.

Income tax expense
------------------

Our effective income tax rate was approximately 35.8% and 34.0%,
respectively, for the first quarters of fiscal 2005 and 2004. The increase
in our effective tax rate is primarily attributable to a lower percentage
of overall earnings from Mi-Tech Steel, which are not fully taxable to our
Company.


Liquidity and Capital Resources
- -------------------------------

As of December 31, 2004, we had $237,104,000 of working capital, maintained a
current ratio of 3.5:1 and had total debt at 38% 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 43 days as of December 31, 2004
compared to 48 as of December 31, 2003. We expect average days sales outstanding
to increase to 45 days during the second quarter of fiscal 2005. Average days
inventory was 80 days as of December 31, 2004 compared to 65 days as of December
31, 2003. We expect average days inventory to decrease to 75 days during the
second quarter of fiscal 2005.

Our average payment days to suppliers was 28 days as of December 31, 2004
compared to 36 days as of December 31, 2003. We expect average payment days to
suppliers to be 35 days during the second quarter of fiscal 2005.

15



During the first three months of fiscal 2005, cash used in operations was
$17,708,000 primarily working capital related. We increased inventory by
$18,904,000 to support our sales growth and reduced accounts payable by
$22,174,000 to meet our obligations to suppliers. This working capital increase
was financed primarily from borrowings under our bank line of credit.

Capital expenditures for the first three months of fiscal 2005 totaled
approximately $4,670,000. 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 2005, the capital additions to
all facilities are expected to approximate $17,000,000.

We maintain an equity investment of $25,744,000 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 losses included in sales were $167,000 during the three
months ended December 31, 2004 reflecting a stronger average exchange rate of
the peso relative to the U.S. dollar during the first quarter of fiscal 2005.
Foreign currency transaction gains included in sales for the three months ended
December 31, 2003 were $120,000.

We maintain a 50% equity investment in Mi-Tech Steel and a 49% equity investment
in Ferrolux Metals. 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 and shareholder loans. Cash flows from operations and available
borrowing capabilities are expected to meet Mi-Tech Steel's future needs.

On October 21, 2004, we issued $50,000,000 in unsecured senior notes which have
an average term of 9.4 years and a blended interest rate of 5.67%. The notes are
comprised of $10,000,000 of 5.33% Series A Senior Notes due October 21, 2011 and
$40,000,000 of 5.75% Series B Senior Notes due October 21, 2014. The proceeds
from the notes were used to reduce borrowings outstanding on our revolving line
of credit facility.

16




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 three months of fiscal 2005, we borrowed $76,000,000 to finance our
working capital needs and used the proceeds from the unsecured senior notes to
make a $50,000,000 payment on our line of credit facility.

We have a $135,000,000 unsecured revolving credit facility that matures
September 2009. Our existing banking group can elect to expand the availability
to $200,000,000 at our request under certain circumstances. Interest on the
facility is paid with various variable options on the interest rate, none of
which are greater than the bank's prime rate. At December 31, 2004, there was
$90,000,000 outstanding on the credit facility.

Provisions contained in our debt agreements require us to maintain specified
levels of net worth, maintain certain financial ratios and limit capital
expenditures, operating leases, capital leases and addition debt. We are in
compliance with our loan covenants, and none of these covenants would restrict
the completion of currently planned capital expenditures.

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.

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, 2004.

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 5 of our Notes to Condensed Consolidated Financial
Statements). Management reports these transactions to the Audit Committee of the
Board of Directors as frequently as requested by the Committee, but at least
annually. Most recently, in April 2004, the Audit

17


Committee reviewed and approved these transactions. The Company has the ability
to continue or cease selling scrap steel to this company at any time.

Recently Issued Accounting Pronouncements
- -----------------------------------------

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123(R), Share-Based Payment, that addresses the accounting for
share-based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise or (b)
liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity instruments.
SFAS No. 123(R) eliminates the ability to account for share-based compensation
transactions using APB Opinion No. 25 and requires instead that such
transactions be accounted for using a fair-value-based method. SFAS No. 123(R)
is effective for any interim or annual period beginning after June 15, 2005. We
are currently analyzing the impact of SFAS No. 123(R).

On October 22, 2004 the American Jobs Creation Act of 2004 was passed and is
effective for our fiscal year ended September 30, 2006. This law provides a
phased in deduction for a percentage of qualified income from domestic
production activities. We will assess the impact of this change in tax law as
further authoritative guidance becomes available.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an Amendment
of ARB No. 43." SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4,
"Inventory Pricing," to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and spoilage, and requires that these
items be recognized as current-period charges regardless of whether they meet
the criterion of "so abnormal." In addition, SFAS No. 151 requires that
allocation of fixed production overheads to the costs of conversion be based on
the normal capacity of the production facilities. The provisions of SFAS No.
151 are effective for inventory costs incurred during fiscal years beginning
after June 15, 2005, with earlier application permitted. We do not expect the
adoption of SFAS No. 151 will have a material impact on our financial position,
results of operations or cash flows.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change during the three months ended December 31,
2004 from the disclosures about market risk provided in our Annual Report on
Form 10-K for the year ended September 30, 2004.

18





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 first fiscal 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
and to permit our company to report that information within the time period
specified to the Securities and Exchange Commission.

There were no changes in our internal control over financial reporting that
occurred during our first fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.


Part II - Other Information

Item 4. Submission of Matters to a Vote of Security Holders

The annual meeting of shareholders was held on January 27, 2005. The matters
voted upon at the meeting were the election of three directors for three-year
terms and ratification of an amendment to the Company's Second Non-employee
Directors Stock Plan to increase the number of shares of common stock available
for issuance from 25,000 to 75,000.

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

Merwin J. Ray 9,035,428 0 2,624,907
Bradford T. Ray 9,021,488 0 2,638,847
Doug A. Bawel 8,915,344 0 2,744,991


The number of votes cast for, against or abstained with respect to approval of
an amendment to the Company's Second Non-employee Directors Stock Plan to
increase the number of shares of common stock available for issuance from 25,000
to 75,000 were as follows.

Votes For Votes Against Votes Abstained
--------- ------------- ---------------

8,657,738 0 54,844

19




Item 6. Exhibits

Exhibits filed or furnished with this report:

Exhibit 31.1 Certification of Chief Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 Certification of Chief Financial Officer 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




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 8, 2005

20


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 ending December 31, 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
first 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 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: February 8, 2005

/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 ending December 31, 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
first 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 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: February 8, 2005

/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 December 31, 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: February 8, 2005


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 December 31, 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: February 8, 2005