10-Q 1 d10536e10vq.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2003 ------------------ 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: 0-2572 STEEL CITY PRODUCTS, INC. ------------------------- (Exact name of registrant as specified in its charter) DELAWARE 55-0437067 -------- ---------- (State of Incorporation) (I.R.S. Employer Identification No.) 2751 CENTERVILLE ROAD, SUITE 3131, WILMINGTON, DELAWARE 19808 ----- (Address of principal executive offices) (Zip Code) (817) 416-0717 -------------- (Registrant's telephone number, including area code) -------------------------------------------------------------------------------- (Former name, former address, and former fiscal year, if changed from last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such report(s), 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 described in Rule 12b-2 of the Exchange Act). Yes No X As of November 1, 2003, 3,238,061 shares of the Registrant's Common Stock, $0.01 par value per share were issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE None PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS STEEL CITY PRODUCTS, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets at September 30, 2003 and December 31, 2002.............................................. 3 Condensed Consolidated Statements of Operations for the three month periods ended September 30, 2003 and September 30, 2002............ 4 Condensed Consolidated Statements of Operations for the nine month periods ended September 30, 2003 and September 30, 2002............ 5 Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2003 and September 30, 2002............ 6 Notes to Condensed Consolidated Financial Statements............... 7

2 STEEL CITY PRODUCTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated financial statements 3 STEEL CITY PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated financial statements 4 STEEL CITY PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated financial statements 5 STEEL CITY PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated financial statements 6 STEEL CITY PRODUCTS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2003 1. INTERIM FINANCIAL STATEMENTS Business Activities Steel City Products, Inc. ("SCPI" or "the Company") is a wholesale distributor of automotive accessories, non-food pet supplies and lawn and garden products, operating under the trade name "Steel City Products", selling mainly to supermarket retailers, drug stores, discount retail chains and hardware and automotive specialty stores, based principally in the Northeastern United States. SCPI is a majority-owned subsidiary of Sterling Construction Company, Inc. ("Sterling"). Interim Financial Statements In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates included in the Company's financial statements include the allowance for doubtful accounts and estimates for the use of the Company's net operating loss carryforwards. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented have been included. All adjustments made are of a normal recurring nature. While the Company believes that the disclosures presented herein are adequate to make the information not misleading, it is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the audited financial statements for the fiscal year ended December 31, 2002 ("Fiscal 2002") as filed in the Company's Annual Report on Form 10-K. Certain prior year items have been reclassified to conform to the current year presentation. Specifically, warehouse expenses are now included as a component of cost of goods sold rather than as selling and administrative expense as in prior reporting periods. 2. NEW ACCOUNTING PRONOUNCEMENTS In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities, which addresses the consolidation of variable interest entities in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. FIN No. 46 was effective upon issuance for certain disclosure requirements and for variable interest entities created after January 31, 2003, and in the first fiscal year or interim period beginning after December 15, 2003 for all other variable interest entities. The Company does not expect any impact on its financial position, results of operations or cash flows from adoption of FIN No. 46. In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149 ("SFAS No. 149"), "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts. SFAS No. 149 was effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The 7 provisions of SFAS No. 149 are to be applied prospectively. Adoption of SFAS No. 149 has not had a impact on the Company's financial statements. In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This statement establishes standards for how an issuer classifies and measures in its financial position certain financial instruments with characteristics of both liabilities and equity. In accordance with this standard, financial instruments that embody obligations for the issuer are required to be classified as liabilities. SFAS No. 150 is effective for all financial instruments entered into on or modified after May 31, 2003. For existing financial instruments, SFAS No. 150 is effective at the beginning of the first interim period beginning after June 15, 2003. There is no impact on the Company's financial position, results of operations or cash flows from adoption of SFAS No. 150. 3. PREFERRED STOCK DIVIDENDS Through September 30, 2003, the Company had not declared or paid Series A Preferred Stock dividends totaling approximately $9.3 million, for the period from August 1994. Any such dividends would be payable to Sterling. Dividends declared and paid in earlier years were used by Sterling in reduction of intercompany debt owed by Sterling to the Company. Accordingly, if such dividends were declared and paid by the Company, the effect would be a decrease in the intercompany loans owed by Sterling to the Company to approximately $824,000. 4. GOODWILL AND OTHER ASSETS Other assets include goodwill associated with the acquisition of Steel City Products in 1969, which had been amortized over 40 years until the complete adoption of SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and other Intangibles". The unamortized carrying value at June 30, 2003 and December 31, 2002 is approximately $127,000. Accumulated amortization at June 30, 2003 and December 31, 2002 is approximately $128,000. In accordance with the provisions of SFAS No. 142, goodwill is no longer being amortized. In accordance with SFAS No. 144 "Accounting for Impairment or Disposal of Long-Lived Assets", the Company performed impairment testing in the second and fourth quarter of fiscal 2002. There were no impairment losses related to goodwill due to the application of SFAS No. 142 in fiscal 2002, nor were there any indications of impairment in the first nine months of fiscal 2003. 5. STOCK BASED COMPENSATION: Until January 1, 2003, the Company accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. In recent years, stock-based compensation in the form of options granted to employees of SCPI were options to purchase stock of SCPI's parent, Sterling. No stock-based employee compensation cost is reflected in net income, as all options granted under the Sterling stock option plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation", to stock-based employee compensation (dollars in thousands, except per share data). 8

Effective January 1, 2003, the Company adopted FASB No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosure" which amends FASB Statement No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. The Company will transition utilizing the prospective method for options granted after January 1, 2003. The Company does not believe the adoption of SFAS No. 148 will have a material effect on its financial position or results of operations. No Sterling options have been granted to employees of the Company to date in fiscal 2003. 6. SEGMENT INFORMATION The Company operates in three segments, automotive products, ("Auto"), non-food pet products, ("Pet") and lawn and garden products ("Lawn"). Maarten Hemsley, the Company's Chief Financial Officer and Terry Allan, its Chief Executive Officer and President, review the operating profitability and working capital needs of each segment to allocate financial resources. The Pet segment assets and the Lawn segment assets consist solely of their respective inventories, since other assets utilized in those segments cannot be accurately segregated. Therefore, the reported assets for the Auto segment include accounts receivable and other assets applicable to Pet and to Lawn.

7. BORROWING ARRANGEMENT In July 2001, the Company replaced its existing line of credit with financing from an institutional lender (the "Revolver"). The Revolver was for a term of two years in the amount of $4.5 million, subject to a borrowing base. The Revolver initially carried an interest rate equal to prime plus 1%. Due to concerns stemming from the bankruptcy filing of a significant customer, Ames, in August 2001, the Revolver was amended to shorten the term of the line and increase the interest rate to the prime rate plus 1.5%. Upon satisfaction to the lender of SCPI's ability to obtain new customers and maintain sales and profitability levels, the Revolver was amended in December 2001 to provide for a line of $5.0 million, subject to a borrowing base, and to extend the term to May 31, 2003. In fiscal 2002, further amendments to the Revolver were made to extend the maturity date to May 31, 2004 and to remove a restriction on the calculation of the borrowing base. At September 30, 2003, the outstanding balance on the Revolver was $3.3 million and the borrowing base was approximately $3.4 million. The rate of interest on the Revolver at September 30, 2003 was the prime rate plus 1.0% (effective rate of 5.50%). The Revolver is secured by the assets of SCPI and is subject to the maintenance of certain financial covenants. At June 30, 2003 and September 30, 2003, the Company breached its financial covenants under the Revolver. However, the Company expects to maintain its covenants in the future. After June 30, 2003, the parties agreed to amend the Revolver to extend its expiration to December 31, 2004, to reduce the interest rate to prime plus 1% and to waive the maintenance of its covenant restrictions for the trailing twelve-month period ended June 30, 2003. After September 30, 2003, it was further agreed to waive the covenant restriction for the trailing twelve month period ended September 30, 2003 and the two agreements were consolidated into one amendment. In December 2001, in conjunction with the December 2001 amendment to the Revolver and to improve the Company's working capital position through the purchase of additional inventory, SCPI's parent Sterling Construction Company, Inc. ("Sterling") advanced $500,000 under a subordinated promissory note (the "Subordinated Sterling Note"). The Subordinated Sterling Note matures in a single installment in December 2004, and bears interest at 12% per annum, payable monthly. In January 2003 in order to further improve the Company's working capital position, certain members of SCPI's management and others loaned the Company an aggregate of $250,000 under short- 10 term promissory notes initially maturing in July 2003. The notes bear interest at 10% per annum, payable monthly. The notes may be repaid after March 31, 2003 but prior to maturity as long as the Company is in compliance with the Revolver's financial covenants and excess availability of at least $100,000 remains under the line of credit after repayment of the notes. The notes were extended to mature December 31, 2003. 8. SUBSEQUENT EVENT In October 2003, the Board of Directors of the Company approved a 1 for 300,000 reverse split of the Company's common stock and deregistration of the common stock as a listed equity security. The transaction was approved by Sterling, the Company's majority stockholder. Holders of less than one share as a result of the reverse stock split are entitled to receive cash in lieu of fractional shares at the rate of $0.0168 per pre-split share (one point six eight cents). ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Steel City Products, Inc. ("SCPI", or the "Company") is a special, limited purpose, majority-owned subsidiary of Sterling Construction Company, Inc. ("Sterling"). Through Sterling's ownership of SCPI, primarily in the form of preferred stock, Sterling retains substantially all the value of SCPI, and receives substantially all of the benefit of operations through its entitlement to dividends on the preferred stock. Sterling's ownership of SCPI is designed to facilitate the preservation and utilization of SCPI's and Sterling's net operating tax loss carry-forwards that amounted to approximately $110 million at December 31, 2002. LIQUIDITY AND CAPITAL RESOURCES In addition to cash derived from operations, SCPI's liquidity and financing requirements are determined principally by the working capital needed to support its level of business, together with the need for capital expenditures and the cash required to repay its debt. SCPI's working capital needs fluctuate primarily due to the amounts of inventory it carries which can change seasonally, the size and timeliness of payment of receivables from its customers and the amount of credit extended to SCPI by its suppliers. Since March 2002, cash has been transferred to Sterling as needed to pay corporate expenses. Cash transferred is reflected as an addition to advances made to Sterling. Such advances bear interest at a rate sufficient to offset the interest rate incurred by the Company on its revolving line of credit. At September 30, 2003, SCPI's debt consisted primarily of revolving debt (the "Revolver") of approximately $3.3 million, with unused availability under the borrowing base of approximately $100,000. The Revolver has a maximum availability of $5.0 million and carries an interest rate of prime plus 1.0% (current effective rate of 5.50%). The Revolver is secured by the assets of SCPI and is subject to the maintenance of certain financial covenants. Following an amendment agreed to in July 2003, the Revolver expires on December 31, 2004. In December 2001, in conjunction with a December 2001 amendment to the Revolver and in order to strengthen SCPI's working capital position through the purchase of additional inventory, Sterling funded SCPI $500,000 through a subordinated promissory note (the "Subordinated Sterling Loan"). The Subordinated Sterling Loan, which is repayable in a single installment in December 2004, bears interest at 12% per annum, payable monthly. In January 2003 in order to further improve the Company's working capital position, certain members of SCPI's management and others loaned the Company an aggregate of $250,000 under short-term promissory notes that initially matured in July 2003. The notes bear interest at 10% per annum, payable monthly. The notes may be repaid after March 31, 2003 but prior to maturity as long as the Company is in compliance with the Revolver's financial covenants and excess availability of at least 11 $100,000 remains under the line of credit after repayment of the notes. The maturity date of the notes has been extended to December 31, 2003. Management believes that in addition to expected cash flow from operations, the Revolver and the Subordinated Sterling Loan will provide adequate funding for SCPI's working capital, debt service and capital expenditure requirements, including seasonal fluctuations, for at least the next twelve months, assuming no material deterioration in current sales levels or gross profit margin. STOCKHOLDERS' DEFICIENCY Through September 30, 2003, the Company had not declared or paid Series A Preferred Stock dividends totaling approximately $9.3 million, for the period from August 1994. Any such dividends would be payable to Sterling. Dividends declared and paid in earlier years were used by Sterling in reduction of intercompany debt owed by Sterling to the Company. Accordingly, if such dividends were declared and paid by the Company, the effect would be a decrease in the intercompany loans owed by Sterling to the Company to approximately $824,000. As a result of the Sterling Transaction completed in July 2001, Sterling has significant positive net worth arising from its investment in Sterling Houston Holdings ("SHH"), but covenants under SHH's bank facility currently limit upstreaming of operating cash flow by SHH to Sterling, so that Sterling is not currently able to fund any repayment of loans owed by it to the Company. Accordingly, Sterling and the Company have not agreed to repayment terms for such loans, and generally accepted accounting principles require the Company to record advances to Sterling as a component of stockholders' equity (thereby creating a deficiency) until such time as formal repayment terms are agreed. If outstanding Series A Preferred dividends at September 30, 2003 had been declared and paid to Sterling and applied in reduction of the intercompany loan, and payment terms on the balance of such loan had been agreed, the effect would have been to reclassify the remaining loan amount of approximately $824,000 as an asset, rather than a reduction in stockholders' equity, with the result that the Company's stockholders' deficiency at September 30, 2003 would have improved from a deficiency of $1.0 million to a deficiency of $175,000. CASH FLOWS Net cash used by operations increased by $153,000 in the nine months ended September 30, 2003 compared with the nine months ended September 30, 2002. The increase was due to higher inventories, reductions in vendor credit and reductions in other accrued expenses offset by reductions in accounts receivables. Cash provided by financing activities increased in the current year period by $180,000, mostly as a result of borrowings from a $250,000 short-term note to fund the increased levels of working capital and to a decrease in the amount of advances to Sterling during the current year compared with the prior year. FORWARD LOOKING STATEMENTS From time to time the information provided by the Company or statements made by its employees may contain so-called "forward-looking" information that involves risks and uncertainties. In particular, statements contained in this Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations," which are not historical facts (including, but not limited to statements concerning anticipated sales, profit levels, customers and cash flows) are forward-looking statements. The Company's actual future results may differ significantly from those stated in any forward-looking statements. Factors that may cause such differences include, but are not limited to the factors discussed above as well as the accuracy of the Company's internal estimates of revenue and operating expense levels. Each of these factors and others are discussed from time to time in the Company's Securities and Exchange Commission filings. 12 CERTIFICATION This Form 10-Q has been certified by Terrance W. Allan, Chief Executive Officer of the Company, and by Maarten D. Hemsley, Chief Financial Officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code); such certification is attached as Exhibit 32.0. MATERIAL CHANGES IN FINANCIAL CONDITION As of September 30, 2003, there had been no material changes in the Company's financial condition from December 31, 2002, other than those caused by seasonal fluctuations as discussed in Item 7 of the Company's Annual Report on Form 10-K for fiscal 2002. MATERIAL CHANGES IN RESULTS OF OPERATIONS Operations include the results of SCPI's operating division, Steel City Products, a distributor of automotive accessories, non-food pet supplies, and lawn and garden products, headquartered in McKeesport, Pennsylvania. THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2002 Automotive segment Sales of automotive accessories decreased by $308,000 in the third quarter of the current year compared with sales in the same period last year. Most of the decrease was attributable to the liquidation of a significant customer, Ames Department Stores, in July 2002; sales to Ames in the third quarter of fiscal 2002 totaled $285,000. Gross profit in the third quarter of fiscal 2003 was $446,000, or 12.6% of sales, compared with $524,000, or 13.6% of sales in the prior year. The decrease of $78,000 was due principally to the reduced sales volumes, offset by reduced buying, occupancy and warehouse expenses, including fewer overtime hours, of $21,000. Operating profit for the automotive segment decreased from the prior year by approximately $117,000, due primarily to the lower sales and margins. Pet segment Sales of pet supplies in the third quarter were $774,000, a decrease of $99,000 compared with the third quarter of the prior year, due principally to the liquidation in July 2002 of Ames. Sales to Ames of pet supplies in the third quarter of the prior year totaled approximately $171,000. Offsetting the loss of Ames were increased sales to existing customers that opened new locations. Gross profit was $212,000, or 27.4% of sales, compared with $232,000, or 26.6% of sales in the third quarter of the prior year. Sales in the prior year attributable to Ames were generally at lower margins than the current year product mix; in addition, due to the loss of the Ames business, operating expenses were lower in the current year. The pet segment reported operating profit in the third quarter of $167,000, an increase of $14,000 compared with the prior year, resulting from the improved margins and lower operating expenses offsetting the effect of lower sales. 13 Lawn segment Sales of lawn and garden products increased from the third quarter of the prior year by $91,000, due principally to sales to new customers, despite the bankruptcy filing of one customer during the third quarter. Gross profit was $17,000, or 4.0% of sales compared with $11,000 or 3.3% of sales in the third quarter of last year. The lawn segment reported an operating profit of $50,000 in the third quarter, compared with a loss of $21,000 last year. Corporate Corporate expenses decreased by approximately $131,000 compared with the third quarter of the prior year, due to lower management fees to the parent company in the current year. NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2002 Automotive segment Sales of automotive accessories decreased by $1.7 million in the first nine months of the current fiscal year compared with the same period last year. Much of the decrease was attributable to the liquidation of Ames Department Stores and to certain customers having changed purchasing practices and buying more products directly from manufacturers. Rainy weather throughout much of the second quarter slowed sales of automotive products, especially cleaners and wax products. Gross profit for the first nine months of fiscal 2003 was $1.5 million, or 14.2% of sales, compared with $1.9 million, or 15.2% of sales in the prior year. The decrease of $365,000 was due principally to the reduced sales volume offset somewhat by reduced buying, occupancy and warehouse expenses of $88,000. Operating profit for the automotive segment decreased from the prior year by approximately $323,000, due primarily to the lower sales and margins. Pet segment Sales of pet supplies in the first nine months of fiscal 2003 were $2.2 million, a decrease of $1.7 million compared with the first nine months of the prior year, due principally to the liquidation in July 2002 of Ames. Gross profit was $632,000, or 28.1% of sales, compared with $931,000, or 23.7% of sales in the first nine months of the prior year. The improved margin reflected the fact that lower margins were earned on Ames business in the prior year period, and lower operating expenses resulting from the loss of the Ames business, which was labor-intensive. The pet segment reported operating profits in the nine months of $486,000, a decrease of $174,000 compared with the prior year, principally due to the loss of the Ames business. Lawn segment Sales of lawn and garden products increased from the prior year by $1.1 million, due to increased sales to existing customers of $235,000 and sales to new customers of $900,000, despite poor weather during the second quarter that hampered sales. The Lawn segment began operations in November 2000. For the first nine months, lawn segment gross profit was $248,000, or 7.3% of sales compared with $172,000 or 7.7% of sales last year. The lawn segment reported an operating profit of $216,000 in the 14 first nine months, compared with $133,000 in the first nine months of the prior year, due to the increased sales level. Corporate Corporate expenses decreased by approximately $212,000 compared with the first nine months of the prior year, due to higher accounting and legal fees in the prior year, and to lower management fees to the parent company in the current year, offset in the current year in part by higher office expenses. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK SCPI is exposed to certain market risks from transactions that are entered into during the normal course of business. The Company's policies do not permit active trading or, speculation in, derivative financial instruments. The Company's primary market risk exposure relates to interest rate risk. SCPI manages its interest rate risk by attempting to balance its exposure between fixed and variable rates while attempting to minimize its interest costs. A change in interest rates of 1% would have changed interest expense by approximately $37,000 for the nine months ended September 30, 2003. ITEM 4. CONTROLS AND PROCEDURES Within the 90 days prior to the date of this report, the Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are adequate and effective in timely alerting them to material information relating to the Company required to be included in the Company's periodic filings with the SEC. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date the Company carried out its evaluation. 15 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no material legal proceedings outstanding against the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the quarter for which this report is filed. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits *31.1 Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer *31.2 Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer *32.0 Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer (b) No reports on Form 8-K were filed during the quarter for which this report is filed. ---------- * filed herewith 16 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 10, 2003 By: /s/ Terrance W. Allan ------------------------ Terrance W. Allan Chief Executive Officer Date: November 10, 2003 By: /s/ Maarten D. Hemsley ------------------------- Maarten D. Hemsley Chief Financial Officer 17

STEEL CITY PRODUCTS INC 10-Q