SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-14061
STEEL TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0712014
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15415 Shelbyville Road, Louisville,
KY 40245 (Address of principal
executive offices) (Zip Code)
(502) 245-2110
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
There were 11,129,363 shares outstanding of the Registrant's common stock as of
July 31, 1999.
1
<PAGE>
STEEL TECHNOLOGIES INC.
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1999 (Unaudited) and September 30, 1998 (Audited) ..... 3
Condensed Consolidated Statements of Income Three months
and Nine months ended June 30, 1999 and 1998 (Unaudited) ....... 4
Condensed Consolidated Statements of Cash Flows
Nine months ended June 30, 1999 and 1998 (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
Item 3. Quantitative and Qualitative Disclosures About Market
Risk ............................................................. 11
PART II.OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................ 11
Signature............................................................ 12
2
<PAGE>
Part I. - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
STEEL TECHNOLOGIES INC.
Condensed Consolidated Balance Sheets
(Amounts in thousands) June 30 September 30
- --------------------------------------------------------------------------------
1999 1998
(Unaudited) (Audited)
------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................... $ 6,169 $ 4,778
Trade accounts receivable, net ................ 59,506 47,907
Inventories ................................... 70,718 76,523
Deferred income taxes ......................... 1,665 1,621
Prepaid expenses and other assets ............. 844 748
--------- ----------
Total current assets ....................... 138,902 131,577
--------- ---------
Property, plant and equipment, net ............... 108,413 106,631
Investments in corporate joint ventures .......... 19,390 18,163
Goodwill, net of amortization .................... 9,258 9,060
Other assets ..................................... 1,153 1,050
--------- --------
$ 277,116 $ 266,481
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable .............................. $ 35,735 $ 35,925
Accrued liabilities ........................... 9,133 6,231
Income tax payable ............................ 605 --
Long-term debt due within one year ............ 6,690 9,102
--------- ---------
Total current liabilities .................. 52,163 51,258
Long-term debt ................................... 91,277 88,300
Deferred income taxes ............................ 13,260 13,247
Other liabilities ................................ 575 --
--------- ---------
Total liabilities ............................ 157,275 152,805
--------- ---------
Commitments and contingencies .................... -- --
Shareholders' equity:
Preferred stock ............................... -- --
Common stock .................................. 17,033 16,928
Treasury stock ................................ (7,123) (3,792)
Additional paid-in capital .................... 4,909 4,909
Retained earnings ............................. 107,197 97,071
Foreign currency translation adjustment ....... (2,175) (1,440)
--------- ---------
119,841 113,676
--------- ---------
$ 277,116 $ 266,481
========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
3
<PAGE>
STEEL TECHNOLOGIES INC.
Condensed Consolidated Statements of Income
<TABLE>
<CAPTION>
(Amounts in thousands, Three Months Ended Nine Months Ended
except per share data, unaudited) June 30 June 30
- --------------------------------------------------------------------------------
1999 1998 1999 1998
------------------------------------------
<S> <C> <C> <C> <C>
Sales ................................ $109,248 $ 96,389 $314,342 $294,125
Cost of goods sold ................... 93,136 84,506 270,752 259,736
-------- -------- -------- --------
Gross profit ................... 16,112 11,883 43,590 34,389
Selling, general and
administrative expenses ........... 6,850 5,690 19,630 16,608
Equity in net income of unconsolidated
corporate joint venture ............ 355 8 627 768
-------- -------- -------- --------
Operating income .................. 9,617 6,201 24,587 18,549
Interest expense ..................... 2,412 1,372 5,940 4,421
-------- -------- -------- --------
Income before income taxes ........ 7,205 4,829 18,647 14,128
Provision for income taxes ........... 2,723 1,972 7,281 5,546
-------- -------- -------- --------
Net income ....................... 4,482 $ 2,857 $ 11,366 $ 8,582
-------- -------- -------- --------
Diluted weighted average number of
common shares outstanding ......... 11,157 12,035 11,281 12,043
======== ======== ======== ========
Diluted earnings per common share .... 0.40 $ 0.24 $ 1.01 $ 0.71
======== ======== ======== ========
Basic weighted average number of
common shares outstanding ......... 11,128 11,965 11,262 11,987
======== ======== ======== ========
Basic earnings per common share ...... 0.40 $ 0.24 $ 1.01 $ 0.72
======== ======== ======== ========
Cash dividends per common share ...... 0.06 $ 0.05 $ 0.11 $ 0.10
======== ======== ======== ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
4
<PAGE>
STEEL TECHNOLOGIES INC.
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended
(Amounts in thousands, unaudited) June 30
- --------------------------------------------------------------------------------
1999 1998
-------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ......................................... $ 11,366 $ 8,582
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ................................... 9,271 8,689
Amortization ................................... 285 173
Deferred income taxes .......................... (270) 850
Equity in net income of unconsolidated corporate
joint venture .................................. (627) (767)
Loss on sale of assets ......................... 8 5
Increase (decrease) in cash resulting from
changes in:
Trade accounts receivable ................ (11,448) (5,989)
Inventories .............................. 5,276 4,430
Prepaid expenses and other assets ........ (1,003) 11,645
Accounts payable ......................... (287) 1,478
Accrued liabilities and income taxes ..... 5,190 585
-------- --------
Net cash provided by operating activities ............. 17,761 29,681
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ......... (13,171) (9,569)
Proceeds from sale of property, plant and equipment 1,365 --
Investment in unconsolidated joint venture ......... (600) --
-------- --------
Net cash used in investing activities ................. (12,406) (9,569)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ....................... 9,000 --
Principal payments on long-term debt ............... (8,435) (15,114)
Cash dividends on common stock ..................... (1,240) (1,199)
Repurchase of common stock ......................... (3,331) (792)
Net issuance of common stock under incentive
stock option plans ............................... 105 14
-------- --------
Net cash used in financing activities ................. (3,901) (17,091)
-------- --------
Effect of exchange rate changes on cash ............... (63) (156)
-------- --------
Net increase in cash and cash equivalents ............. 1,391 2,865
Cash and cash equivalents, beginning of year .......... 4,778 3,467
-------- --------
Cash and cash equivalents, end of period .............. $ 6,169 $ 6,332
======== ========
Supplemental Cash Flow Disclosures:
Cash payment for interest ............................. $ 5,554 $ 4,745
======== ========
Cash payment for income taxes ......................... $ 7,966 $ 4,163
======== ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
5
<PAGE>
STEEL TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION:
The condensed consolidated balance sheet as of June 30, 1999 and the condensed
consolidated statements of income for the three and nine months ended June 30,
1999 and 1998, and condensed consolidated cash flows for the nine months ended
June 30, 1999 and 1998 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 June 30, 1999 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, 1998. The results of operations for the nine months ended
June 30, 1999 are not necessarily indicative of the operating results for the
full year.
2. INVENTORIES:
<TABLE>
<CAPTION>
Inventory consists of:
(Amounts in thousands) June 30 September 30
- --------------------------------------------------------------------------------
1999 1998
Unaudited Audited
------------------------
<S> <C> <C>
Raw materials .......................................... $57,681 $66,033
Finished goods and work in process...................... 13,037 10,490
------- -------
$70,718 $76,523
======= =======
</TABLE>
3. FOREIGN CURRENCY TRANSLATION:
As of January 1, 1999, the Mexican subsidiary started to use the peso as the
functional currency. The Company uses the current rate method of translation and
reports translation adjustments as part of comprehensive income. The Mexican
economy was considered hyper-inflationary for financial reporting until January
1, 1999. Accordingly, the Company used monetary/non-monetary method of
accounting.
6
<PAGE>
4. NET INCOME PER SHARE COMPUTATIONS:
The following is a reconciliation of the numerator and the denominator of the
basic and diluted per share computations:
<TABLE>
<CAPTION>
(Amounts in thousands, Three Months Ended Nine Months Ended
except per share data, unaudited) June 30 June 30
- --------------------------------------------------------------------------------
1999 1998 1999 1998
------------------------------------------
<S> <C> <C> <C> <C>
Net income ........................... $ 4,482 $ 2,857 $11,366 $ 8,582
------- ------- ------- -------
Shares (denominator) used for
diluted per share computations:
Weighted average shares of common
stock outstanding ............. 11,128 11,965 11,262 11,987
Plus: dilutive effect of stock
options ....................... 29 70 19 50
------- ------- ------- -------
Diluted weighted average shares 11,157 12,035 11,281 12,037
------- ------- ------- -------
Shares (denominator) used for
basic per share computations:
Weighted average shares of common
stock outstanding ............. 11,128 11,965 11,262 11,987
------- ------- ------- -------
Net income per share data:
Diluted .......................... $ 0.40 $ 0.24 $ 1.01 $ 0.71
======= ======= ======= =======
Basic ............................ $ 0.40 $ 0.24 $ 1.01 $ 0.72
======= ======= ======= =======
</TABLE>
Options to purchase 518,000 and 70,000 shares were outstanding at June 30, 1999,
and 1998, respectively and were excluded from the calculation above because the
exercise prices on the options were greater than the average market price of the
Company's stock for the periods.
5. COMPREHENSIVE INCOME:
Effective October 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" issued by the Financial
Accounting Standards Board in June 1997. Comprehensive income is defined as all
changes in equity during the period except those resulting from shareholder
equity contributions and distributions. Comprehensive income comprises net
income and unrealized gains and losses on foreign currency translations.
Comprehensive income is summarized as follows:
<TABLE>
<CAPTION>
(Amounts in thousands, Three Months Ended Nine Months Ended
except per share data, unaudited) June 30 June 30
- --------------------------------------------------------------------------------
1999 1998 1999 1998
---------------------------------------------
<S> <C> <C> <C> <C>
Net income ........................ $ 4,482 $ 2,857 $ 11,366 $ 8,582
Foreign currency translation
adjustment ................ 26 -- (735) --
-------- -------- -------- --------
Comprehensive income .......... $ 4,508 $ 2,857 $ 10,631 $ 8,582
======== ======== ======== ========
</TABLE>
The Company does not provide for U.S. income taxes on foreign currency
translation adjustments because it does not provide for such taxes on
undistributed earnings of foreign subsidiaries.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
When used in the following discussion, the word "expects" and other similar
expressions are intended to identify forward-looking statements, which are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those projected. Specific risks and uncertainties include, but are not limited
to, general business and economic conditions; cyclicality of demand in the steel
industry, specifically in the automotive market; work stoppages; risks of year
2000 noncompliance or other business interruptions affecting automotive
manufacturers; competitive factors such as pricing and availability of steel;
reliance on key customers; and potential equipment malfunctions. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
republish revised forward-looking statements to reflect the occurrence of
unanticipated events or circumstances after the date hereof.
Results of Operations
Steel Technologies posted record third quarter sales of $109,248,000 for the
fiscal quarter ended June 30, 1999, an increase of 13% from sales of $96,389,000
for the third quarter ended June 30, 1998. The Roberts Steel Company (now a
wholly owned subsidiary of Steel Technologies Ohio) acquired on July 1, 1998
added $5,555,000 of revenues for the third quarter of fiscal 1999. Sales of
existing Steel Technologies processing operations increased by approximately
$7,304,000 or 8% from a year ago.
Sales for the nine months ended June 30, 1999 increased by 7%, to $314,342,000
compared to $294,125,000 for the nine months ended June 30, 1998. Steel
Technologies Ohio contributed $16,300,000 in revenues for the nine months ended
June 30, 1999. Sales of existing Steel Technologies processing operations
increased by approximately $3,917,000 or 1% from the previous year's first nine
months.
The Company continues to focus significant resources on the automotive industry
and generates a major portion of business from selling to customers who are
manufacturing component parts to the automotive industry.
Tons shipped in the third quarter and nine months of fiscal 1999 increased
approximately 17% and 13%, respectively compared to the third quarter and nine
months of fiscal 1998. Average selling prices of steel for the third quarter and
nine months of fiscal 1999 decreased approximately 4% and 5%, respectively from
the previous year. The sales outlook is solid based on order activity and
backlogs.
The gross profit margin was 14.8% and 13.9% in the third quarter and nine months
of fiscal 1999, respectively compared to 12.3% and 11.7% in the third quarter
and nine months of fiscal 1998, respectively. The improvements are primarily a
result of product mix improvements, productivity increases, a reduction in raw
materials prices and other operating cost reductions. The Company expects stable
and, in some cases, a slight increase in the price of raw materials, especially
in hot rolled steel. Strong demand for steel products and reduction in the
amount of foreign steel imports have resulted in firmer raw material prices. As
a result of trade suits initiated by U.S. producers against Japan, Russia and
Brazil, the supply of steel from foreign producers has declined in 1999 as
compared to 1998, and most likely will result in domestic producers increasing
raw material prices. Should raw material prices increase, margins would be
negatively impacted in the event that corresponding sales price increases are
not passed on to customers. The production cost efficiencies associated with
anticipated higher sales volumes is expected to positively impact gross margins.
Additionally, the Company's pickling facility and blanking lines are expected to
increase the amount of higher margin toll processing revenue. Toll processing,
primarily of customer-owned steel, generates higher gross margin percentages
than the traditional processing of Company-owned steel.
Steel Technologies continues to actively manage the level at which selling,
general and administrative costs are added to its cost structure. Selling,
general and administrative costs increased approximately 20% and 18%,
respectively from the comparable third quarter and nine months of fiscal 1998
period. Selling, general and administrative expenses as a percentage of sales
were 6.3% for the third quarter of fiscal 1999 as compared to 5.9% for the third
quarter of fiscal 1998. Selling, general and administrative expenses as a
percentage of sales were 6.2% for the nine months ended June 30, 1999, compared
to 5.7% for the nine months ended June 30, 1998. The increase was primarily
attributable to the additional expenses from the addition of Steel Technologies
Ohio, and additional marketing expenses to support sales growth of Steel
Technologies Carolinas and Mexico.
The Company's share of the income of Mi-Tech Steel, Inc., (Mi-Tech) an
unconsolidated corporate joint venture, was $355,000 and $627,000, respectively
for the third quarter and nine months of fiscal 1999 compared to $8,000 and
$768,000, respectively for the third quarter and nine months ended June 30,
1998. Improvements in demand for Mi-Tech products and services positively
impacted Mi-Tech's profitability for the third quarter of fiscal 1999 as
compared to the comparable period of fiscal 1998. The Company expects a positive
contribution from Mi-Tech for the final quarter of fiscal 1999.
8
<PAGE>
Interest expense was $2,412,000 and $5,940,000 for the third quarter and nine
months of fiscal 1999 compared to $1,372,000 and $4,421,000 for the third
quarter and nine months of fiscal 1998. The increase is the result of higher
average borrowings used to finance the acquisition of Roberts Steel Company and
the charges from an interest rate swap valuation. The interest rate swap was
terminated on June 30, 1999 and a deferred gain will be amortized as a reduction
of interest expense starting in July 1999.
The Company's effective income tax rate was approximately 37.8% and 39.1%,
respectively for the third quarter and nine months of fiscal 1999 compared to
40.8% and 39.3% for the comparable periods of fiscal 1998. The decrease is
attributable to a higher percentage of overall earnings from the Mi-Tech joint
venture, which are not fully taxable to the Company. Also, the decrease reflects
a lower effective rate for the Mexican subsidiary.
Liquidity and Capital Resources
At June 30, 1999, Steel Technologies had $86,739,000 of working capital,
maintained a current ratio of 2.7:1 and had total debt at 45% of total
capitalization. The Company continues to manage the levels of accounts
receivable, inventories and other working capital items in relation to the
trends in sales and the overall market. For the first nine months of fiscal
1999, increased profit levels contributed to the generation of $17,761,000 of
cash flows from operations. Cash flows from operations and available borrowing
capabilities are expected to meet the needs of the Company throughout the
balance of fiscal 1999.
Capital expenditures for the nine months of fiscal 1999 totaled $13,171,000. The
major expenditures were for the construction of the new Berkley, South Carolina
plant, the partial construction of the Ohio plant expansion, the purchase of the
building for the Ohio operation and the purchase of property and building for
the North Carolina operation. Steel Technologies continues to expand production
capacity and processing facilities to serve the growing needs of customers. The
capital additions for all facilities are expected to approximate $16,000,000 for
fiscal 1999.
Steel Technologies maintains an equity investment of approximately $8,739,000 in
its 90% owned Mexican subsidiary. The Mexican economy was considered
hyper-inflationary for financial reporting until January 1, 1999. Accordingly,
the Company used the monetary/non-monetary method of accounting. As of January
1, 1999, the Mexican subsidiary uses the peso as the functional currency. The
Company started using the current rate method of translating the peso
denominated financial information in U.S. dollar and reports translation
adjustments in comprehensive income. Due to the costs of hedging currency risks,
the Company has not entered into any hedging arrangements
Steel Technologies maintains an equity investment, principally in the preferred
stock of Processing Technology, Inc., a corporate joint venture. The Company
periodically evaluates the possible conversion of the preferred stock investment
into common stock of Processing Technology, Inc. The decision to convert the
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 $8,700,000 of the joint venture's loan and lease commitments. The
conversion is not expected to occur in the near term.
In December 1998, the Company increased the limit on the unsecured bank line of
credit from $80,000,000 to $100,000,000. As of June 30, 1999, there was
$58,000,000 outstanding on the credit facility. At this time the Company has no
known material obligations, commitments or demands which must be met beyond the
next twelve months other than the ten-year private placement notes and the
unsecured bank line of credit. Any additional funds will be used for growth,
including strategic acquisitions, investment in joint ventures, construction of
new plant capacity, and investment in production and processing capabilities.
The form of such financing may vary depending upon the prevailing market and
related conditions, and may include short or long-term borrowings or the
issuance of debt or equity securities.
At June 30, 1999, Steel Technologies had $91,277,000 of long-term debt
outstanding. Under various debt agreements, the Company agrees 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
loan covenants, and none of these covenants would restrict the completion of
currently planned capital expenditures.
On June 30, Steel Technologies terminated its long-term interest rate swap
agreement, which was entered into to reduce the risk of interest rate
variability. Under the contract, the Company agreed with another party to
exchange quarterly the difference between variable-rate and fixed-rate amounts
calculated on a notional principal amount of $30,000,000. The transaction
generated a deferred gain of $958,000 of which $383,000 was classified as short
term and $575,000 was classified as long term on June 30, 1999. The gain will be
amortized over a period of 30 months as a reduction of interest expense
beginning on July 1, 1999.
9
<PAGE>
Pursuant to a joint venture agreement, Steel Technologies has guaranteed
$8,250,000 of the bank financing required for the working capital purposes of
Mi-Tech. In October 1998, Steel Technologies contributed $600,000 in equity to
Mi-Tech for the start-up of a steel processing facility in San Diego,
California. Additional equity contributions to the joint venture are not
expected for the foreseeable future, but if required would be financed with
available funds from the Company's bank line of credit.
During 1998, the Board of Directors approved a plan under which Steel
Technologies may repurchase up to 1,500,000 shares of its common stock. Shares
may be purchased from time to time at prevailing prices in open market
transactions, subject to market conditions, share price and other
considerations. During the third quarter of fiscal 1999, the Company repurchased
7,000 shares of its common stock at prevailing market prices. As of June 30,
1999, the Company had repurchased a total of approximately 880,000 shares of
common stock at prevailing market prices.
Steel Technologies believes all manufacturing facilities are in compliance with
applicable federal and state environmental regulations. The Company is not
presently aware of any fact or circumstance, which would require the expenditure
of material amounts for environmental compliance.
Year 2000 Compliance
Steel Technologies' Year 2000 project (Project) addresses the issue of using two
digits, rather than four, to define the century. Any programs with a time
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000, which could result in miscalculations or systems failures.
The Project focuses primarily in the following areas: infrastructure,
applications, manufacturing, third party suppliers and customers. Steel
Technologies has contracted Electronic Data Systems (EDS) to manage the Project
and make the necessary remediations.
The Project addresses nine phases: inventorying of Year 2000 compliance items;
assessing priorities to identified items; determining the materiality of the
Year 2000 compliance items; repairing or replacing material items not Year 2000
compliant; testing material items; and implementing contingency and business
continuation plans for each Company location.
The infrastructure section consists of hardware and systems software other than
application software. The Company completed all of the testing, remediating,
upgrading or replacing of hardware and systems software as of June 30, 1999.
The application software section includes both the conversion of application
software that is not Year 2000 compliant and, where applicable, the replacement
of software. As of June 30, 1999, all of the application software was tested and
remedied.
The manufacturing section of the Project relates to the hardware, software and
associated embedded computer chips that are used in the operation of all
facilities. The Company estimates that 10 percent of the manufacturing equipment
is dependent on date sensitive software and that all of the manufacturing
equipment is Year 2000 compliant at June 30, 1999.
The third party suppliers and customers section includes the process of
identifying and prioritizing critical suppliers and customers and communicating
with them about their plans and progress in addressing the Year 2000 problem.
Detailed evaluations of the most critical third parties were completed as of
December 31, 1998 and communications with third parties are continuing.
Contingency planning for all areas started in January 1999 was completed as of
June 30, 1999. Alternate suppliers have been defined and additional inventories
of raw and finished goods will be added. In some areas, manual methods have been
defined for possible use.
The total cost related to becoming Year 2000 compliant is not expected to be
material to the Company's financial position. The acquisition of a mid-range
computer in 1995 minimized the exposure to Year 2000 problems. The estimated
cost of the Year 2000 Project is approximately $200,000 of which approximately
$150,000 was expensed in the first nine months of fiscal 1999 and $50,000 was
expensed as of the end of the Company's fiscal year ended September 30, 1998.
The failure to correct a material Year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting mostly from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Year 2000 Project is expected
to significantly reduce the Company's level of uncertainty about the Year 2000
problem and, in particular, about the Year 2000 compliance and readiness of its
material external agents. The Company believes that, with the completion of the
Project as scheduled, the possibility of significant interruptions of normal
operations should be reduced.
10
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change during the first nine months ended June 30,
1999, other than the termination of the interest rate swap agreement, from the
disclosures about market risk provided in the Company's Annual Report 10-K for
the year ended September 30, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is filed as a part of this report:
EXHIBIT 27 -- FINANCIAL DATA SCHEDULE
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 _____________________________
Joseph P. Bellino
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
Dated August 13, 1999
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary fianncial information extracted from the
condensed consolidated balance sheet at June 30, 1999 and consensed consolodated
statement of income for the six months ended June 30, 1999 and is qualified in
its entirety by reference to such statements.
</LEGEND>
<CIK> 0000771790
<NAME> Steel Technologies Inc.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 6,159
<SECURITIES> 0
<RECEIVABLES> 60,620
<ALLOWANCES> (1,114)
<INVENTORY> 70,718
<CURRENT-ASSETS> 138,902
<PP&E> 178,030
<DEPRECIATION> (69,617)
<TOTAL-ASSETS> 277,116
<CURRENT-LIABILITIES> 52,163
<BONDS> 91,277
0
0
<COMMON> 17,033
<OTHER-SE> 119,841
<TOTAL-LIABILITY-AND-EQUITY> 277,116
<SALES> 109,248
<TOTAL-REVENUES> 109,248
<CGS> 93,136
<TOTAL-COSTS> 93,136
<OTHER-EXPENSES> 6,495
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,412
<INCOME-PRETAX> 7,205
<INCOME-TAX> 2,723
<INCOME-CONTINUING> 4,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,482
<EPS-BASIC> .40
<EPS-DILUTED> .40
</TABLE>
