Steel Technologies Announces Second Quarter, First Half Results
Posted on: Tuesday, 25 April 2006, 09:00 CDT
Steel Technologies Inc. (NASDAQ/NM: STTX) today reported results for the second fiscal quarter and six-month period ended March 31, 2006.
As previously announced, the Company completed the sale of its Custom Steel, Inc. unit in March 2006. Accordingly, results from Custom Steel, Inc. are treated as discontinued operations and detailed as such in the accompanying financial tables.
For the three months ended March 31, 2006, sales from continuing operations were $238.3 million compared with a record $275.3 million in the same period a year ago. Income from continuing operations for the second quarter totaled $2.3 million or $0.18 per diluted share versus $14.3 million or $1.09 per diluted share in the same period last year. Net income for the quarter, including a $246,000 gain on the sale of Custom Steel, was $3.0 million or $0.23 per diluted share compared with net income of $15.4 million or $1.17 per diluted share in the year-earlier period. Results for the second quarter of 2005 included an income tax benefit of $0.06 per diluted share, reflecting changes in tax laws effective January 1, 2005, for the Company's Mexican operations.
For the first six months of fiscal 2006, sales from continuing operations were $439.5 million compared with a record $521.0 million for the same period last year. Income from continuing operations for the first half totaled $5.1 million or $0.39 per diluted share versus $28.0 million or $2.14 per diluted share for the same period last year. Year-to-date net income for fiscal 2006 was $6.2 million or $0.47 per diluted share compared with a record $29.9 million or $2.28 per diluted share in the first six months of fiscal 2005.
"In the second fiscal quarter of 2006, volume shipped from our continuing operations totaled 308,000 tons, a 20% increase from the first fiscal quarter of 2006," said Bradford T. Ray, Chairman and Chief Executive Officer. "Although our operating margins in the quarter were well below historic levels, current market demand is favorable and we have implemented several initiatives focused on improving our performance, product mix and returns.
"Our Mi-Tech Steel joint venture continued to make solid contributions to our earnings," Ray continued. "Our joint-venture operations continue to play an important role in our North American platform that supplies automotive transplant and domestic customers."
As previously reported, the Company recently announced that it has signed a binding letter of intent to acquire all the outstanding stock of privately held Kasle Steel Corporation in Dearborn, Michigan. Through its five processing facilities, including three joint ventures, Kasle Steel is North America's largest independent supplier of automotive steel blanks, shipping over 1.5 million tons annually across a variety of platforms. The purchase price is approximately $49 million, subject to closing adjustments, which includes the assumption of approximately $19 million of liabilities. The Company expects to finance the transaction with its existing credit facility. Subject to the completion of final due diligence and the negotiation of a definitive stock purchase agreement, the Company expects to close the acquisition on or about May 4, 2006.
"Kasle Steel and its joint ventures have a proud history and excellent reputation as world-class suppliers servicing the automotive industry," Ray added. "This acquisition will expand Steel Technologies' blanking capabilities considerably and will strengthen our position with key automotive customers. In addition, the combination substantially broadens our processing platform and enhances opportunities to grow with our existing customer base. Upon completion, we expect this acquisition to be immediately accretive to earnings."
Ray noted that, in connection with the Company's sale of its Custom Steel subsidiary to American Railcar Industries, Inc. (NASDAQ: ARII) ("ARI"), it received total proceeds of approximately $17 million, including approximately $4 million for inventories. Steel Technologies used the entire proceeds to reduce indebtedness under its revolving credit agreement.
Steel Technologies processes flat-rolled steel to specific thickness, width, temper, finish and shape requirements for automotive, appliance, lawn and garden, office furniture, agriculture, construction, hardware, and consumer goods. The Company has 19 facilities, including its joint venture operations, located throughout the United States and Mexico. More information about the Company may be found on the World Wide Web at www.steeltechnologies.com.
Statements contained in this release, which are not historical facts, are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties (contained in the Company's SEC filings), which could cause actual results to differ materially from those projected. These include, without limitation, statements regarding the anticipated completion date of our acquisition of Kasle Steel Corporation. The acquisition of Kasle Steel Corporation is subject to customary closing conditions, including further due diligence and the execution of a definitive stock purchase agreement; we cannot guarantee that the acquisition will be completed on schedule, if at all. SEC filings may be obtained from the SEC or by contacting the Company.
STEEL TECHNOLOGIES INC. Condensed Consolidated Balance Sheets March 31 Sept. 30 (In thousands) 2006 2005 --------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 11,732 $ 30,991 Trade accounts receivable, net 121,599 112,033 Inventories 154,400 121,423 Deferred income taxes 620 605 Prepaid expenses and other assets 7,485 6,289 --------- --------- Total current assets 295,836 271,341 Property, plant and equipment, net 110,715 110,501 Investments in unconsolidated affiliates 26,512 25,182 Goodwill 8,991 18,148 Other assets 3,395 2,751 --------- --------- $ 445,449 $ 427,923 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 65,636 $ 59,559 Accrued liabilities 16,246 13,394 Income taxes payable 3,750 1,244 Deferred income taxes 118 254 Long-term debt due within one year -- -- --------- --------- Total current liabilities 85,750 74,451 Long-term debt 80,000 80,000 Deferred income taxes 13,496 14,956 Other long-term liabilities 4,594 3,757 --------- --------- 183,840 173,164 Commitments and contingencies Shareholders' equity: Preferred stock -- -- Common stock 70,912 70,662 Treasury stock (24,486) (24,475) Additional paid-in capital 6,068 5,494 Retained earnings 211,382 207,116 Accumulated other comprehensive loss (2,267) (4,038) --------- --------- Total shareholders' equity 261,609 254,759 --------- --------- $ 445,449 $ 427,923 ========= ========= STEEL TECHNOLOGIES INC. Condensed Consolidated Statements of Income For the For the (In thousands, except per Three Months Ended Six Months Ended share results) March 31 March 31 ---------------------------------------------------------------------- 2006 2005 2006 2005 -------- -------- -------- -------- Sales $238,336 $275,278 $439,521 $520,954 Cost of goods sold 225,839 245,788 415,010 460,636 -------- -------- -------- -------- Gross profit 12,497 29,490 24,511 60,318 Selling, general and administrative expenses 9,270 9,327 17,816 19,225 Equity in net income of unconsolidated affiliates 627 1,746 1,475 3,217 -------- -------- -------- -------- Operating income 3,854 21,909 8,170 44,310 Interest expense, net 750 1,066 1,209 2,021 -------- -------- -------- -------- Income before income taxes 3,104 20,843 6,961 42,289 Provision for income taxes 776 6,566 1,868 14,256 -------- -------- -------- -------- Income from continuing operations $ 2,328 $ 14,277 $ 5,093 $ 28,033 Discontinued operations, net (including gain on disposal of $246, net for the three and six months ended March 31, 2006) 645 1,077 1,114 1,838 -------- -------- -------- -------- Net income $ 2,973 $ 15,354 $ 6,207 $ 29,871 ======== ======== ======== ======== Diluted weighted average number of common shares outstanding 13,101 13,104 13,093 13,097 ======== ======== ======== ======== Diluted earnings per common share: From continuing operations $ 0.18 $ 1.09 $ 0.39 $ 2.14 From discontinued operations 0.05 0.08 0.09 0.14 -------- -------- -------- -------- $ 0.23 $ 1.17 $ 0.47 $ 2.28 ======== ======== ======== ======== Basic weighted average number of common shares outstanding 12,948 12,890 12,942 12,865 ======== ======== ======== ======== Basic earnings per common share: From continuing operations $ 0.18 $ 1.11 $ 0.39 $ 2.18 From discontinued operations 0.05 0.08 0.09 0.14 -------- -------- -------- -------- $ 0.23 $ 1.19 $ 0.48 $ 2.32 ======== ======== ======== ======== Cash dividends per common share $ -- $ -- $ 0.15 $ 0.10 ======== ======== ======== ======== STEEL TECHNOLOGIES INC. Income Statement Data of Custom Steel, Inc. (A Discontinued Operation) For the For the (In thousands, except per Three Months Ended Six Months Ended share results) March 31 March 31 ---------------------------------------------------------------------- 2006 2005 2006 2005 -------- -------- -------- -------- Sales $ 12,101 $ 11,680 $ 23,470 $ 20,020 Gross profit 1,142 2,200 2,315 3,818 Income before income taxes (including gain on disposal of $246 for the three and six months ended March 31, 2006) 948 1,657 1,669 2,828 Provision for income taxes 303 580 555 990 -------- -------- -------- -------- Net income $ 645 $ 1,077 $ 1,114 $ 1,838 ======== ======== ======== ======== Diluted weighted average number of common shares outstanding 13,101 13,104 13,093 13,097 Diluted earnings per common share: From discontinued operations 0.05 0.08 0.09 0.14 -------- -------- -------- -------- $ 0.05 $ 0.08 $ 0.09 $ 0.14 ======== ======== ======== ======== Basic weighted average number of common shares outstanding 12,948 12,890 12,942 12,865 Basic earnings per common share: From discontinued operations 0.05 0.08 0.09 0.14 -------- -------- -------- -------- $ 0.05 $ 0.08 $ 0.09 $ 0.14 ======== ======== ======== ========Source: Business Wire
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