Steel Technologies Announces Second Quarter Results

Steel Technologies Inc. (NASDAQ: STTX) today reported results for the second quarter ended March 31, 2007.

For the three months ended March 31, 2007, income from continuing operations was $2.9 million or $0.22 per diluted share, up 27% from income from continuing operations of $2.2 million or $0.17 per diluted share posted in the second quarter last year. For the quarter, the Company recorded after-tax expenses of $552,000 or $0.04 per share related to its announced merger transaction with a subsidiary of Mitsui & Co., Ltd. Income from discontinued operations for the second quarter of 2007 was negligible, compared with $645,000 or $0.05 per diluted share in the same period last year. The Company’s net income for the quarter was $2.9 million or $0.22 per diluted share, unchanged from the second quarter last year. Sales for the quarter were $251.5 million, 6% above the year-earlier period. The increases in sales and net income were driven by higher average selling prices and increased volumes.

For the first six months of fiscal 2007, sales from continuing operations were $452.3 million compared with $439.5 million for the same period last year. Income from continuing operations for the first half of fiscal 2007 totaled $3.7 million or $0.28 per diluted share versus $5.1 million or $0.39 per diluted share for the same period last year. Net income for the first six months of fiscal 2007 was $3.7 million or $0.28 per diluted share compared with $6.2 million or $0.48 per diluted share in the first six months of fiscal 2006.

“As we discussed in our last conference call, we expected demand to improve in our second quarter after the very slow December quarter, and we anticipated stronger operating results,” said Bradford T. Ray, Chairman and Chief Executive Officer. “This is in fact what we experienced as our volumes increased throughout the quarter and March shipments were very strong. Current shipment levels and forecasts point to continued volume and income improvements during our third quarter.”

Commenting on the previously announced merger with a subsidiary of Mitsui & Co., Ltd., Ray said, “The $30 per share transaction price represents an outstanding value to our shareholders. Subject to approval by our shareholders and other customary closing conditions, we remain on schedule to complete the merger by the end of our third fiscal quarter of 2007.”

A live broadcast of Steel Technologies’ conference call will begin at 10:00 a.m. Eastern Time today. An online replay will be available approximately two hours following the conclusion of the live broadcast and will continue through May 24, 2007. A link to this event is available at the Company’s website.

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 now has 25 facilities, including its joint venture operations, located throughout the United States, Mexico and Canada. 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 Securities and Exchange Commission filings), which could cause actual results to differ materially from those projected. These include, without limitation, statements herein regarding the anticipated completion of the contemplated merger with Mitsui USA. SEC filings may be obtained from the SEC or by contacting the Company.

Important Information

In connection with the proposed merger, Steel Technologies filed a preliminary proxy statement with the SEC on March 30, 2007. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, AS IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER AND THE SPECIAL SHAREHOLDER MEETING. Investors and security holders may obtain a free copy of the definitive proxy statement, when available, and other documents filed by Steel Technologies at the SEC’s web site at http://www.sec.gov. Steel Technologies and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from its shareholders in connection with the proposed merger. Information concerning the interests of Steel Technologies’ participants in the solicitation, which may be different from or in addition to the interests of Steel Technologies’ shareholders generally, is set forth in Steel Technologies’ proxy statement and Annual Report on Form 10-K filings (filed with the SEC on December 21, 2006, and December 14, 2006, respectively) and in the proxy statement relating to the merger.

STEEL TECHNOLOGIES INC.

Condensed Consolidated Balance Sheets

 

March 31

September 30

(In thousands)

2007 

2006 

ASSETS

Current assets:

Cash and cash equivalents

$ 10,257 

$ 12,066 

Trade accounts receivable, net

139,757 

104,356 

Inventories

167,085 

181,267 

Deferred income taxes

1,942 

1,688 

Prepaid expenses and other assets

4,734 

6,607 

Total current assets

323,775 

305,984 

 

Property, plant and equipment, net

113,602 

112,642 

 

Investments in unconsolidated affiliates

64,733 

63,626 

 

Goodwill

25,472 

25,678 

 

Other assets

5,378 

5,687 

$ 532,960 

$ 513,617 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$ 70,304 

$ 62,204 

Bank overdrafts

6,204 

13,617 

Accrued liabilities

19,237 

15,993 

Income taxes payable

4,115 

2,500 

Current portion of debt and capital lease obligations

1,992 

2,074 

Total current liabilities

101,852 

96,388 

 

Long-term debt and capital lease obligations

134,884 

119,911 

Deferred income taxes

17,750 

20,243 

Other long-term liabilities

4,247 

3,941 

258,733 

240,483 

 

Commitments and contingencies

 

Minority interest

3,588 

3,374 

 

Shareholders’ equity:

Preferred stock

- 

- 

Common stock

71,285 

71,176 

Treasury stock

(24,496)

(24,486)

Additional paid-in capital

6,963 

6,551 

Retained earnings

221,731 

219,971 

Accumulated other comprehensive loss

(4,844)

(3,452)

Total shareholders’ equity

270,639 

269,760 

$ 532,960 

$ 513,617 

STEEL TECHNOLOGIES INC.

Condensed Consolidated Statements of Income

 

For the Three

Months Ended

For the Six

Months Ended

(In thousands, except per share results)

March 31

March 31

2007 

2006 

2007 

2006 

Sales

$ 251,501 

$ 238,336 

$ 452,317 

$ 439,521 

Cost of goods sold

236,647 

225,697 

427,189 

414,644 

Gross profit

14,854 

12,639 

25,128 

24,877 

 

Selling, general and administrative expenses

(11,239)

(9,274)

(20,756)

(17,822)

Gain on disposals of property, plant and equipment

239 

4 

243 

6 

 

Operating income

3,854 

3,369 

4,615 

7,061 

 

Interest expense

(2,105)

(942)

(4,097)

(1,741)

Interest income

192 

192 

397 

531 

Minority interest

(197)

(132)

(362)

(368)

Equity in net income of unconsolidated affiliates, net

2,443 

627 

4,713 

1,476 

 

Income before income taxes

4,187 

3,114 

5,266 

6,959 

 

Provision for income taxes

1,341 

874 

1,525 

1,848 

 

Income from continuing operations

2,846 

2,240 

3,741 

5,111 

 

Discontinued operations, net of tax

- 

645 

(22)

1,114 

 

Net income

$ 2,846 

$ 2,885 

$ 3,719 

$ 6,225 

 

 

Diluted weighted average number of common shares outstanding

13,170 

13,101 

13,153 

13,093 

 

Diluted earnings per common share:

From continuing operations

$ 0.22 

$ 0.17 

$ 0.28 

$ 0.39 

From discontinued operations

- 

0.05 

(0.00)

0.09 

$ 0.22 

$ 0.22 

$ 0.28 

$ 0.48 

 

Basic weighted average number of common shares outstanding

12,982 

12,948 

12,980 

12,942 

 

Basic earnings per common share:

From continuing operations

$ 0.22 

$ 0.17 

$ 0.29 

$ 0.39 

From discontinued operations

- 

0.05 

(0.00)

0.09 

$ 0.22 

$ 0.22 

$ 0.29 

$ 0.48 

 

Cash dividends per common share

$ - 

$ - 

$ 0.15 

$ 0.15