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, 1994
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)
---------------------------------------------------------------
(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 preceeding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
There were 12,158,365 shares outstanding of the Registrant's
common stock as of January 31, 1995.
Page 1 of 11
<PAGE>
STEEL TECHNOLOGIES INC.
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
December 31, 1994 (Unaudited) and
September 30, 1994 (Audited) 3
Condensed Consolidated Statements of
Income Three months ended December 31,
1994 and 1993 (Unaudited) 4
Condensed Consolidated Statements of
Cash Flows Three months ended December 31,
1994 and 1993 (Unaudited) 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Page 2 of 11
<PAGE>
Part I. - FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
STEEL TECHNOLOGIES INC.
Condensed Consolidated Balance Sheets
(Amounts in Thousands)
<TABLE>
<S> <C> <C>
December 31, September 30,
1994 1994
ASSETS (Unaudited) (Audited)
- - - -----------------------------------------------------------------
Current assets:
- - - --------------
Cash and cash equivalents $ 6,243 $ 1,008
Trade accounts receivable, net 36,359 34,496
Inventories (Note 2) 75,624 80,357
Deferred income taxes 1,400 1,450
Prepaid expenses 52 536
- - - -----------------------------------------------------------------
Total current assets 119,678 117,847
- - - -----------------------------------------------------------------
Property, plant and equipment, net 82,282 73,329
- - - -----------------------------------------------------------------
Investments in corporate joint ventures 8,253 7,930
- - - -----------------------------------------------------------------
Other assets 1,283 1,307
- - - -----------------------------------------------------------------
$ 211,496 $ 200,413
=================================================================
</TABLE>
<TABLE>
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
- - - -----------------------------------------------------------------
Current liabilities:
- - - --------------------
Accounts payable $ 36,869 $ 43,432
Accrued liabilities 3,229 3,094
Income taxes 377 -
Long-term debt due within one year 385 810
- - - -----------------------------------------------------------------
Total current liabilities 40,860 47,336
- - - -----------------------------------------------------------------
Long-term debt 76,542 60,805
- - - -----------------------------------------------------------------
Deferred income taxes 4,912 4,634
- - - -----------------------------------------------------------------
Shareholders' equity:
- - - ---------------------
Preferred stock - -
Common stock 18,632 18,625
Additional paid-in capital 4,909 4,909
Retained earnings (Note 3) 65,641 64,104
- - - -----------------------------------------------------------------
89,182 87,638
- - - -----------------------------------------------------------------
$ 211,496 $ 200,413
=================================================================
</TABLE>
The accompanying notes are an integral part of the financial
statements.
Page 3 of 11
<PAGE>
STEEL TECHNOLOGIES INC.
Condensed Consolidated Statements of Income
(Amounts in Thousands, Except per Share Data, Unaudited)
<TABLE>
<S> <C> <C>
Three months ended
December 31
1994 1993
- - - ---------------------------------------------------------------------------
Sales $ 64,245 $ 54,072
Cost of goods sold 56,423 46,958
- - - ---------------------------------------------------------------------------
Gross profit 7,822 7,114
Selling, general and administrative expenses 4,000 3,396
Equity in net income of unconsolidated
corporate joint venture 323 303
- - - ---------------------------------------------------------------------------
Operating income 4,145 4,021
Interest expense 890 318
- - - ---------------------------------------------------------------------------
Income before income taxes 3,255 3,703
Provision for income taxes 1,231 1,327
- - - ---------------------------------------------------------------------------
Net income $ 2,024 $ 2,376
===========================================================================
Weighted average number of
common shares outstanding (Note 4) 12,157 12,137
===========================================================================
Earnings per common share (Note 4) $ 0.17 $ 0.20
===========================================================================
Cash dividends per common
share (Note 4) $ 0.04 $ 0.03
- - - ---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial
statements.
Page 4 of 11
<PAGE>
STEEL TECHNOLOGIES INC.
Condensed Consolidated Statements of Cash Flows
(Amounts in Thousands, Unaudited)
<TABLE>
<S> <C> <C>
Three months ended
December 31,
1994 1993
- - - ---------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,024 $ 2,376
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,603 1,195
Deferred income taxes 328 150
Equity in net income of corporate
joint venture (323) (304)
Increase (decrease) in cash
resulting from changes in:
Trade accounts receivable (1,863) 1,799
Inventories 4,733 (1,615)
Accounts payable (6,563) (5,343)
Accrued liabilities and taxes 512 984
Other 508 (689)
- - - ---------------------------------------------------------------------------
Net cash provided by (used in) operating activities 959 (1,447)
- - - ---------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (10,556) (4,392)
- - - ---------------------------------------------------------------------------
Net cash used in investing activities (10,556) (4,392)
- - - ---------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 15,494 6,968
Principal payments on long-term debt (182) -
Issuance of common stock under incentive
stock option plan 7 -
Cash dividends on common stock (487) (364)
- - - ---------------------------------------------------------------------------
Net cash provided by financing activities 14,832 6,604
- - - ---------------------------------------------------------------------------
Net increase in cash and cash equivalents 5,235 765
Cash and cash equivalents, beginning of year 1,008 140
- - - ---------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 6,243 $ 905
===========================================================================
</TABLE>
Supplemental Disclosures:
- - - -------------------------
Cash paid for interest was $1,084,000 and $339,000 for the
periods ended December 31, 1994 and 1993, respectively. Cash
paid for income taxes was $55,000 and $277,000 for the periods
ended December 31, 1994 and 1993, respectively.
The accompanying notes are an integral part of the financial
statements.
Page 5 of 11
<PAGE>
STEEL TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of December 31, 1994
and the consolidated statements of income for the three month
periods ended December 31, 1994 and 1993, and the condensed
consolidated statements of cash flows for the three-month periods
then ended have been prepared by the Company without audit. In
the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at
December 31, 1994 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these condensed financial statements be read
in conjunction with the financial statements and notes thereto
included in the Company's annual report to shareholders for the
year ended September 30, 1994. The results of operations for
the three months ended December 31, 1994 are not necessarily
indicative of the operating results for the full year.
2. INVENTORIES
<TABLE>
<S> <C> <C>
December 31, September 30,
1994 1994
(Unaudited) (Audited)
---------------------------
(Amounts in Thousands)
Inventories consist of:
- - - ------------------------------------------------------
Raw materials $66,479 $71,630
Finished goods and
work in process 9,145 8,727
- - - ------------------------------------------------------
$75,624 $80,357
======================================================
</TABLE>
3. RETAINED EARNINGS
<TABLE>
<S> <C>
Three months ended
December 31, 1994
------------------
(Amounts in Thousands)
Retained earnings consists of:
- - - -------------------------------------------------------
Balance, beginning of year $64,104
Net income 2,024
Cash dividends on common stock (487)
- - - -------------------------------------------------------
Balance, end of period $65,641
=======================================================
</TABLE>
Page 6 of 11
<PAGE>
4. EARNINGS PER COMMON SHARE
Earnings per common share are based on the weighted average
number of common shares outstanding during each period. Common
stock options are not included in earnings per share computations
since their effect is not significant.
Page 7 of 11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- - - ---------------------
For the first quarter ended December 31, 1994, the Company posted
record sales of $64,245,000 compared to 1993 sales of
$54,072,000, an increase of 19%. The Company benefited from an
improving economy and increased automotive production schedules
in the first quarter. The Company continues to focus significant
resources on the automotive industry and to generate a major
portion of business from selling to industrial customers
manufacturing component parts for use in the automotive industry.
The Company continued to increase its market share as the demand
for flat rolled products remained strong throughout the first
quarter. These factors allowed the Company to establish a new
first quarter tonnage record with a 12% increase in the number of
tons shipped from a year ago. Additionally, sales benefited from
increased selling price of approximately 8% as the Company was
able to pass through higher raw material costs to its customers.
Cost of goods sold increased as a percentage of sales to 88% in
the first quarter ended December 31, 1994 from 87% in 1993. The
continuation of the strong demand of the past year in automotive
and other steel consuming markets has created continued upward
pressure on the prices for steel from the primary mills.
Although a lag existed between the time the price increases
impacted the Company and when they were ultimately passed on, the
Company was successful in passing through a majority of these raw
material increases. These raw material increases offset the
benefits of the production cost economies of scale attributable
to the increased sales volumes and as a result the gross profit
margin decreased to 12% in 1994 from 13% in 1993. The Company
has taken steps to improve its ability to pass through these raw
material increases and while the gross profit margin decreased in
the first quarter of the 1995 fiscal year, the gross profit
margin showed improvements over the immediately preceeding
quarter. The Company is optimistic that increases in the average
selling price for flat rolled products will allow the Company to
continue this quarter-to-quarter margin improvement in fiscal
1995.
The Company continues to actively managed the level at which
selling, general and administrative costs are added to its cost
structure. This cost control over the last several years has
resulted in selling, general and administrative costs increasing
at a slower rate than the growth in sales. As a result, selling,
general and administrative expenses have remained at 6% of sales
for the quarter ended December 31, 1994 and 1993.
The Company's equity in unconsolidated corporate joint venture
increased to $323,000 in 1994 from $303,000 in 1993 as a result
of an increase in the operating profits of the 50% owned
corporate joint venture, Mi-Tech Steel, Inc.
Interest expense increased to $890,000 in 1994 from $318,000 in
1993. These increases are the result of higher average
outstanding borrowings and higher interest rates on the
outstanding borrowings during the quarter ended December 31,
1994.
The Company anticipates a charge to earnings of approximately
$.02 per share in the second quarter of fiscal 1995 to record the
impact of the Mexican peso devaluation on the Company's 80% owned
steel processing company located in Monterrey, Mexico.
The tax act of 1993 increased the Company's maximum corporate tax
rate causing the effective income tax rate to increase to 38% in
the first quarter ended December 31, 1994 from 36% a year ago.
The impact of the higher statutory rate is offset somewhat by the
earnings of the Mi-Tech Steel joint venture, which are not fully
taxable to the Company.
Page 8 of 11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Cont.)
Liquidity and Capital Resources
- - - -------------------------------
At December 31, 1994, the balance sheet reflected a strong
financial condition. The Company had $78,818,000 of working
capital, maintained a current ratio of 2.9:1 and had total
long-term debt at 46% of total capitalization. Additionally,
shareholders' equity increased to a record $89,182,000 at
December 31, 1994.
Over the last several years the Company has improved its
financial position as sales and operating profits have increased
significantly. Accounts receivable, inventories and other
working capital items have been increased to support the higher
sales levels and an additional several days of inventory have
been maintained in anticipation of rising raw material costs.
These working capital items were financed with a combination of
debt and cash from operations.
This financial strength has also allowed the Company to continue
its investment in new equipment and facilities during the three
months ended December 31, 1994. Capital expenditures for the
first quarter totaled $10,556,000 and were financed primarily
with proceeds from long-term debt. During the quarter the
Company invested over $4,000,000 on the new steel processing
facility in Gallatin County, Kentucky. This new facility,
located adjacent to the new Gallatin Steel mini mill, will have
the capability to pickle, level and slit flat rolled steel.
Construction began in October 1994 and the facility is estimated
to be operational in the fourth quarter of fiscal 1995. This new
$20 million operation will comprise the majority of the planned
$25 million 1995 capital budget.
During the first quarter the Company made significant progress on
the expansion of the Portage, Indiana, facility. This $6 million
expansion will significantly increase the production capacity of
the Portage, Indiana, plant which will enable the Company to
extend its coverage in the Chicago and Midwest markets. The
expansion includes the installation of new slitting lines as well
as an additional 75,000 square feet of production and storage
space.
The Company believes that it currently has sufficient liquidity
and available capital resources to meet its existing needs. The
Company expects funds generated from operations and the
availability of $10 million under its recently expanded $80
million unsecured bank line of credit to be sufficient to finance
the capital additions plans for 1995. The working capital needs
associated with the anticipated sales growth in 1995 should be
offset by the cash flow generated from anticipated inventory
reductions. As fiscal 1995 progresses, the Company expects to
increase its inventory turnover as it reduces the level of
inventory purchased in anticipation of rising raw material costs.
At this time the Company has no known commitments or demands
which must be met beyond the next twelve months other than the
line of credit. It is currently anticipated that a portion of
the line of credit will be refinanced with longer term debt and
the remainder will be renewed at the end of the term. However,
the Company may seek, from time to time, additional funds to
finance the opening of new plants, significant improvements in
its production and processing equipment and purchases of
equipment to expand its production and processing capabilities.
The form of such financing may vary depending upon the prevailing
market and related conditions, and may include short or long-term
borrowings or the issuance of debt or equity securities.
At December 31, 1994, the Company had $76,542,000 in long-term
debt outstanding. Under its various loan agreements, the Company
has agreed to maintain specified levels of working capital and
net worth, maintain certain ratios and limit the addition of
substantial debt. The Company is in compliance with all of its
loan covenants, and none of these covenants would restrict the
Company from completing currently planned capital expenditures.
Page 9 of 11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Cont.)
Liquidity and Capital Resources (Cont.)
- - - ---------------------------------------
Pursuant to a joint venture agreement, Steel Technologies has
guaranteed $6,250,000 of the bank financing required for working
capital purposes of Mi-Tech Steel, Inc.
The Company maintains an investment, principally in preferred
stock of Processing Technology, Inc., a corporate joint venture.
The Company continues to evaluate the possible conversion of its
preferred stock investment into common stock of Processing
Technology, Inc. The Company's decision to convert its
investment to common stock will be based upon the joint venture
attaining certain financial criteria established by Steel
Technologies. Upon conversion, the Company would be obligated to
guarantee a proportionate share, currently approximating
$10,500,000, of the joint venture's loan and lease commitments.
Currently, the Company is a guarantor on a $2,000,000 Processing
Technology, Inc. bank line of credit.
The Company does not sponsor medical and life programs which
extend to pensioners and dependents. Therefore, the Company is
not subject to the provisions of Statement of Financial
Accounting Standards, No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions."
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- - - -----------------------------------------
(a) First Amendment to Loan Agreement dated as of January 17, 1995,
between the Registrant and PNC Bank, Kentucky, Inc., National City
Bank, Kentucky, NBD Bank, N.A. and Third National Bank, Nashville,
Tennessee.
(b) On November 21, 1994, the Company reported on Form 8-K that
Timothy M. Graven resigned, effective November 15, 1994, as President
and Chief Operating Officer and as a director of Steel Technologies
Inc.
Page 10 of 11
<PAGE>
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 Kenneth R. Bates
----------------
Kenneth R. Bates
Vice President Finance;
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
Dated February 13, 1995
Page 11 of 11
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- - - ------- ----------------------
10 -- First Amendment to Loan Agreement dated as of
January 17, 1995, between the Registrant and
PNC Bank, Kentucky, Inc., National City Bank,
Kentucky, NBD Bank, N.A. and Third National
Bank, Nashville, Tennessee
EXHIBIT 10
----------
FIRST AMENDMENT TO LOAN AGREEMENT
---------------------------------
THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "First Amend-
ment"), is made and entered into as of the 17th day of January,
1995, by and among (i) STEEL TECHNOLOGIES INC., a Kentucky corpo-
ration with principal office and place of business in Louisville,
Kentucky (the "Borrower"), (ii)(a) PNC BANK, KENTUCKY, INC., a
Kentucky banking corporation with principal office and place of
business in Louisville, Kentucky ("PNC"), (b) NATIONAL CITY BANK,
KENTUCKY, a national banking association with principal office and
place of business in Louisville, Kentucky ("National City"), (c)
NBD BANK, a Michigan banking corporation with principal office
and place of business in Detroit, Michigan ("NBD"), and (d) THIRD
NATIONAL BANK IN NASHVILLE, a national banking association with
principal office and place of business in Nashville, Tennessee
("Third National") (PNC, National City, NBD and Third National is
each hereinafter individually referred to as a "Bank," and all of
the same are hereinafter collectively referred to as the
"Banks"), and (iii) PNC BANK, KENTUCKY, INC., in its capacity as
agent for the Banks (in such capacity, the "Agent").
P R E L I M I N A R Y S T A T E M E N T S:
- - - - - - - - - - - - - - - - - - - - -
A. Pursuant to that certain Loan Agreement dated as of
October 15, 1994, among the Borrower, the Banks and the Agent
(the "Loan Agreement"), the Borrower has obtained from the Banks a
revolving credit facility in the principal amount of Seventy
Million Dollars ($70,000,000.00) (the "Revolver"), for the purposes
set forth in Section 2.5 of the Loan Agreement.
B. The Borrower has now requested that the Banks increase
the principal amount of the Revolver from Seventy Million Dollars
($70,000,000.00) to Eighty Million Dollars ($80,000,000.00) to
provide additional working capital to the Borrower and to finance
specified corporate activities of the Borrower.
C. The Banks are willing to and desire to increase the
principal amount of the Revolver from Seventy Million Dollars
($70,000,000.00) to Eighty Million Dollars ($80,000,000.00) upon
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth in the Loan Agreement
and herein, and for other good and valuable consideration, the
mutuality, receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
1. Each capitalized term used herein, unless otherwise
expressly defined herein, shall have the meaning set forth in the
Loan Agreement.
2. The term "Base Rate", as defined in Section 1.11 of the
Loan Agreement, is hereby re-defined to mean the Federal Funds
<PAGE>
Rate plus three-fourths of one percent (3/4 of 1%) per annum;
provided, in the event that, and during periods that, the Federal
Funds Rate cannot be determined by the Agent under the circumstances
specified in Section 2.2 of the Loan Agreement, the Base Rate shall
be the Prime Rate.
3. Section 1.48 of the Loan Agreement is hereby deleted.
4. The term "Letter of Credit Fee Percentage", as defined in
Section 1.57 of the Loan Agreement, is hereby re-defined to mean
three-fourths of one percent (3/4 of 1%) per annum.
5. The term "LIBOR Rate", as defined in Section 1.59 of the
Loan Agreement, is hereby re-defined to mean the Adjusted LIBOR
Rate plus three-fourths of one percent (3/4 of 1%) per annum.
6. The term "Pro Rata Share", as defined in Section 1.72 of
the Loan Agreement, is hereby re-defined to mean, with respect to
each Revolving Loan Commitment of each Bank, the percentage set
forth opposite that Bank's name on Exhibit A attached hereto and
made a part hereof; provided, that Exhibit A shall be amended and
each Bank's Pro Rata Share shall be adjusted from time to time to
give effect to the addition or removal of any Bank as provided in
the Loan Agreement or by assignment pursuant to Section 10 of the
Loan Agreement. The percentages set forth on Exhibit A attached
hereto and made a part hereof supersede the percentages set forth
on Schedule 2.1 attached to and made a part of the Loan
Agreement.
7. The term "Revolver", as defined in Section 1.78 of the
Loan Agreement, is hereby re-defined to mean the revolving credit
facility established by the Banks in favor of the Borrower in the
principal amount of Eighty Million Dollars ($80,000,000.00) pursu-
ant to the Loan Agreement, pursuant to which the Borrower may
obtain Revolving Loans and Letters of Credit during the term of the
Revolver upon the terms and conditions set forth in the Loan Agree-
ment. All references to the "aggregate principal balance of the
Revolving Loans outstanding" or similar phrases in the Loan Agree-
ment shall mean, as at the date of determination thereof, the sum
of (i) the entire aggregate outstanding principal balance of all
Revolving Loans made by the Banks pursuant to the Loan Agreement,
and (ii) the then existing Letter of Credit Usage.
8. The Loan Agreement is hereby amended by adding Sections
1.91, 1.92 and 1.93 thereto as follows:
"1.91 'Wabash Guaranty Agreement' means that
certain Guaranty Agreement dated as of October
15, 1994, executed and delivered by Wabash
Steel Corporation, in favor of the Agent for
the benefit of the Banks.
1.92 'Mexican Subsidiary' means Transforma-
dora y Comercializadora de Metales S.A. de
C.V., a corporation organized and existing
under the laws of Mexico.
1.93 'Mexican Subsidiary Guaranty Agreement'
means that certain Guaranty Agreement to be
<PAGE>
executed and delivered by the Mexican Subsid-
iary in favor of the Agent for the benefit of
the Banks."
9. Subject to the terms and conditions set forth in the Loan
Agreement and this First Amendment, the Banks hereby increase the
principal amount of the Revolver from Seventy Million Dollars
($70,000,000.00) to Eighty Million Dollars ($80,000,000.00) for the
period from the date hereof through May 31, 1995. To effect the
increase in the principal amount of the Revolver from Seventy
Million Dollars ($70,000,000.00) to Eighty Million Dollars
($80,000,000.00), NBD and Third National has each increased the
amount of its Revolving Loan Commitment from Fifteen Million Dol-
lars ($15,000,000.00) to Twenty Million Dollars ($20,000,000.00).
On May 31, 1995, the principal amount of the Revolver shall auto-
matically be reduced from Eighty Million Dollars ($80,000,000.00)
to Seventy Million Dollars ($70,000,000.00), and the Borrower shall
pay to the Agent on behalf of the Banks on May 31, 1995, as a
permanent reduction in the principal amount of the Revolver pursu-
ant to Section 2.4C of the Loan Agreement, an amount equal to the
positive difference, if any, between (i) the then outstanding
principal balance of the Revolver, and (ii) Seventy Million Dollars
($70,000,000.00). Each Bank's Pro Rata Share effective the date
hereof is set forth on Exhibit A attached hereto and made a part
hereof. Further, the amount of each Bank's Revolving Loan Com-
mitment effective the date hereof is as follows:
Revolving
Name of Bank Loan Commitment
------------ ---------------
PNC Bank, Kentucky, Inc. $30,000,000
National City Bank, Kentucky $10,000,000
NBD Bank $20,000,000
Third National Bank in Nashville $20,000,000
10. The Borrower covenants and agrees to use the proceeds of
the foregoing Ten Million Dollars ($10,000,000.00) increase in the
principal amount of the Revolver solely to support its working
capital needs and to finance specified corporate activities of
the Borrower.
11. The Loan Agreement is hereby amended by adding Section
5.12 thereto as follows:
"5.12 Mexican Subsidiary Guaranty Agreement.
The Borrower shall cause its Mexican Subsid-
iary to execute and deliver the Mexican Sub-
sidiary Guaranty Agreement substantially in
the form of Exhibit B attached hereto and made
a part hereof on or before May 31, 1995. In
conjunction therewith, the Borrower shall
cause its Mexican Subsidiary to deliver such
closing certificates, opinions of counsel and
such other documents and instruments as may be
<PAGE>
reasonably requested by the Requisite Banks to
demonstrate that the Mexican Subsidiary Guar-
anty Agreement has been duly authorized, exe-
cuted and delivered by the Mexican Subsidiary
and constitutes a legal, valid and binding
obligation of the Mexican Subsidiary under the
applicable laws of Mexico.
12. Section 6.5(iv) of the Loan Agreement is hereby amended
and restated as follows:
"(iv) So long as no Event of Default or
Potential Event of Default has occurred and is
continuing or would result therefrom, the
Borrower (A) may contribute capital and/or
make loans to its Mexican Subsidiary in an
amount not to exceed Eight Million Dollars
($8,000,000.00) during the term of the Loan
Agreement, and (B) may increase its existing
investment in and/or make loans to its other
Consolidated Subsidiaries."
13. The Loan Agreement is hereby amended by adding Section
5.13 thereto as follows:
"5.13 Private Placement of Debt. The Bor-
rower will engage a firm of recognized stand-
ing in the placement of long-term debt to make
a proposal to the Borrower to place a minimum
of Twenty Million Dollars ($20,000,000) of
long-term debt on behalf of the Borrower. The
Borrower shall have sole discretion in deter-
mining whether to consummate a placement of
its long-term debt and, if so, the terms and
conditions of such placement. In the event
the Borrower elects to consummate a placement
of its long-term debt, the Borrower will use
the net proceeds of such placement to perma-
nently reduce the principal amount of the
Revolver pursuant to Section 2.4C of the Loan
Agreement. In the event the Borrower consum-
mates a private placement of its long-term
debt in a minimum amount equal to or greater
than Twenty Million Dollars ($20,000,000.00)
on or before May 31, 1995 and applies the net
proceeds thereof to a permanent reduction of
the principal amount of the Revolver pursuant
to Section 2.4C of the Loan Agreement, the
Borrower shall not be independently obligated
to effect a permanent reduction in the prin-
cipal of the Revolver in the amount of Ten
Million Dollars ($10,000,000.00) on May 31,
1995 as otherwise required pursuant to Section
9 hereof. In the event the Borrower fails to
consummate such private placement of its long-
term debt in a minimum amount equal to or
greater than Twenty Million Dollars
($20,000,000.00) on or before May 31, 1995,
(a) the Borrower shall be obligated under Sec-
<PAGE>
tion 9 hereof to effect a permanent reduction
in the principal of the Revolver in the amount
of Ten Million Dollars ($10,000,000.00) on May
31, 1995, (b) the Base Rate shall equal the
Federal Funds Rate plus seven-eighths of one
percent (7/8 of 1%) per annum effective June
1, 1995, (c) the Letter of Credit Fee Percent-
age shall equal seven-eighths of one percent
(7/8 of 1%) per annum effective June 1, 1995,
and (d) the LIBOR Rate shall equal the Ad-
justed LIBOR Rate plus seven-eighths of one
percent (7/8 of 1%) per annum effective
June 1, 1995.
14. Section 6.9 of the Loan Agreement is hereby amended to
provide that the Borrower will not permit the ratio of its Con-
solidated Total Debt to its Consolidated Total Capitalization to
exceed .55 to 1.0 as at any Fiscal Quarter end commencing with the
Borrower's Fiscal Quarter end March 31, 1995.
15. This First Amendment may be executed in one or more
counterparts, each of which shall be deemed an original and all of
which shall constitute one and the same instrument.
16. Except to the extent expressly amended or modified
hereby, the Borrower hereby ratifies and reaffirms each of its
covenants, agreements, obligations, representations and warranties
set forth in the Loan Agreement.
17. This First Amendment shall be effective as of the later
of (a) January 17, 1995, or (b) the date of delivery of the follow-
ing documents to the Banks and/or the Agent:
(i) This First Amendment, duly executed by the Borrower;
(ii) An Amended and Restated Revolving Promissory Note in
the face principal amount of Twenty Million Dollars
($20,000,000.00) made payable to the order of NBD, duly executed by
the Borrower, in the form of Exhibit C attached hereto and made a
part hereof;
(iii) An Amended and Restated Revolving Promissory Note in
the face principal amount of Twenty Million Dollars
($20,000,000.00) made payable to the order of Third National, duly
executed by the Borrower, in the form of Exhibit D attached hereto
and made a part hereof;
(iv) Certified Resolutions of the Board of Directors of
the Borrower, authorizing the Borrower's execution and delivery of
this First Amendment and the Amended and Restated Revolving Promis-
sory Notes to be respectively issued to NBD and Third National;
(v) A supplemental written opinion of counsel on behalf
of the Borrower, substantially in the form of Exhibit E attached
hereto and made a part hereof;
(vi) A Ratification and Reaffirmation duly executed by
Wabash Steel Corporation with respect to the Wabash Guaranty
Agreement.
<PAGE>
(vii) The payment to the Agent for the benefit of the
Banks of a closing fee in the amount of Twenty-Five Thousand
Dollars ($25,000.00).
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Loan Agreement to be duly executed as of the day and
year first above written.
STEEL TECHNOLOGIES INC.
By: /s/ Kenneth R. Bates
--------------------------------
Its: Chief Financial Officer
-------------------------------
(the "Borrower")
PNC BANK, KENTUCKY, INC.
By: /s/ H. Joseph Brenner
--------------------------------
Title: Vice President
-----------------------------
Address: PNC Bank, Kentucky, Inc.
Citizens Plaza
500 West Jefferson Street
Louisville, KY 40202
Attn: H. Joseph Brenner
Vice President
Telephone: (502) 581-3991
Telecopy: (502) 581-3355
("PNC")
<PAGE>
NATIONAL CITY BANK, KENTUCKY
By: /s/ Deroy Scott
--------------------------------
Title: Vice President
-----------------------------
Address: 101 South Fifth Street
Louisville, KY 40202
Attn: Deroy Scott
Vice President
Telephone: (502) 581-7821
Telecopy: (502) 581-4424
("National City")
NBD BANK
By: /s/ Randall K. Stephens
--------------------------------
Title: Vice President
-----------------------------
Address: 611 Woodward Avenue
Detroit, MI 48226
Attn: Randall K. Stephens
Telephone: (313) 225-1314
Telecopy: (313) 225-3269
("NBD")
THIRD NATIONAL BANK IN NASHVILLE
By: /s/ Allen K. Oakley
--------------------------------
Title: Group Vice President
-----------------------------
Address: 201 Fourth Avenue North
Nashville, TN 37219
Attn: Allen K. Oakley
Telephone: (615) 748-5934
Telecopy: (615) 259-4119
("Third National")
(collectively, the "Banks")
<PAGE>
PNC BANK, KENTUCKY, INC., in its
capacity as Agent
By: /s/ H. Joseph Brenner
--------------------------------
Title: Vice President
------------------------------
(the "Agent")
<PAGE>
EXHIBIT A
---------
PRO RATA SHARES OF THE BANKS
----------------------------
Pro Rata
Name of Bank Share
------------ --------
PNC Bank, Kentucky, Inc. 37.5%
National City Bank, Kentucky 12.5%
NBD Bank 25%
Third National Bank in Nashville 25%
TOTAL 100%
