<PAGE> 1
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 22, 1996
-------------------------
HUNTCO INC.
----------------
(Exact name of registrant as specified in its charter)
Missouri 1-13600 43-1643751
- - ----------------- ---------------------- --------------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
14323 S. Outer Forty, Suite 600N, Town & Country, Missouri 63017
- - ---------------------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 878-0155
---------------------------
Not applicable
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(Former name or former address, if changed since last report)
<PAGE> 2
Item 5. Other Events
Huntco Inc. (the "Company") issued a news release on May 22, 1996, with
respect to its release of earnings for its fourth quarter and year ended April
30, 1996, which news release includes forward-looking data. This news release
is incorporated herein by reference to Exhibit 99 attached hereto.
Achievement of the projections contained in the news release is dependent
upon numerous factors, circumstances and contingencies, certain of which are
beyond the control of the Company. Set forth herein is a further elaboration
of the principal factors and risks which the Company considers to be the most
likely to cause actual results to differ materially from the projections
included in the above-mentioned news release:
Impact of changing steel prices on the Company's results of operations
----------------------------------------------------------------------
As evidenced by the unfavorable impact on net income in fiscal 1996, the
Company's financial results can be significantly impacted by changing steel
prices. The Company's principal raw material is flat rolled carbon steel
coils. The steel industry is highly cyclical in nature and prices for the
Company's raw materials are influenced by numerous factors beyond the control
of the Company, including general economic conditions, competition, labor
costs, import duties and other trade restrictions and currency exchange rates.
Changing steel prices may cause the Company's results of operations to
fluctuate significantly.
To respond promptly to customer orders for its products, the Company
maintains a substantial inventory of steel coils in stock and on order. The
Company's commitments for steel purchases are generally at prevailing market
prices in effect at the time the Company places its orders. The Company has
no long-term, fixed-price steel purchase contracts. The Company generally
does not enter into fixed-price sales contracts with its steel processing
customers with terms longer than three months.
As steel producers change the effective selling price for the Company's
raw materials, competitive conditions will influence the amount of the change,
if any, in the Company's prices to its customers. Changing steel prices could
therefore affect the Company's net sales and net income, particularly as it
liquidates its inventory position. The Company believes that a major portion
of the effect of a steel price change on net income is likely to be
experienced within three months of the effective date of the change. When a
series of changes in steel prices occurs, the period in which net income may
be affected can extend beyond a three month period of time. Accordingly, the
Company believes that comparisons of its quarterly results of operations are
not necessarily meaningful in periods of changing steel prices.
Steel prices charged by the primary producers of steel coils have been
extremely volatile over the previous twelve months and conditions exist which
could cause this volatility to continue throughout the Company's 1997 fiscal
year. While the Company believes that the circumstances leading to the
significant decline in net income in the first two quarters of the 1996 fiscal
year, which decline was primarily caused by changing steel prices, are
unlikely to be repeated in fiscal 1997, no assurance can be given that
volatility in steel prices will not again negatively impact the Company's
results of operations and net income.
<PAGE> 3
Cyclicality of demand for Company products
------------------------------------------
Many of the Company's steel processing products are sold to industries
that experience significant fluctuations in demand based on economic
conditions, energy prices or other matters beyond the control of the Company.
The Company has increased the level of tons of steel sold and processed in
each of its last five fiscal years. However, no assurance can be given that
the Company will be able to increase or maintain its level of tons shipped,
especially in periods of economic stagnation or downturn. The expected
increase in tons processed and shipped assumes that the Company is able to
maintain the base volume of tons processed and shipped in the 1996 fiscal
year. This assumption is based upon the Company's experience, the most
relevant experience being over the previous five years, and an assumption that
economic conditions in the Company's primary market areas will reflect a
stable, slow-growth environment. There can be no assurance, however, that
economic conditions will continue to reflect a stable, slow-growth environment
or that other circumstances will not occur leading to an economic stagnation
or downturn.
Continued internal expansion involving new processes and markets
----------------------------------------------------------------
Notwithstanding the fact that the growth in the Company's net sales over
the previous five fiscal years has resulted from increasing levels of tons
processed and sold, with such increases in tonnage primarily occurring at
newly constructed facilities, there can be no assurance that the Company will
be successful in the start-up of its new facility in Gallatin, Kentucky, or in
the continued development and expansion of its cold rolling operations at its
Blytheville, Arkansas facility, or that these expansions will proceed as
quickly as the Company anticipates. Successful development of these projects
requires the Company to develop new customers, in new market territories and
absolute assurance cannot be given that this will occur on the timetable which
the Company expects, if ever.
In addition, the market areas covered by the new Gallatin, Kentucky
facility, the opening of the new stamping plant in Blytheville, Arkansas, and
the continued maturation of the Company's cold rolling operations will cause
the Company to face new competition.
Gross profit on cold rolled products
------------------------------------
The Company expects that the per ton cost of operating its cold rolling
operation will continue to decline as the 1997 fiscal year progresses. The
Company also expects relative per ton selling values to increase as the
Company develops its relationship as a supplier with its new customers for
cold rolled products, and as more of the cold rolled tonnage sold by the
Company receives further processing (e.g., via slitting or blanking) before
sale. If these trends in per ton costs and selling prices develop as the
Company anticipates, gross profit on cold rolled sales could become additive
to the Company's overall gross profit percentage during the second quarter of
fiscal 1997. However, competitive conditions could delay the anticipated
increases in relative selling values for cold rolled products, as could
rapidly changing steel prices. The per ton costs incurred by the Company in
producing and processing cold rolled coils can be impacted by numerous factors
including volume levels, operator efficiency, utility costs and scrap
percentages.
<PAGE> 4
Competition
-----------
The principal markets served by the Company are highly competitive. The
Company has different competitors within each of its product lines.
Competition is based principally on price, service, production and delivery
scheduling.
Interest rates
--------------
Borrowings under the Company's revolving credit agreement are at interest
rates which float generally with the prime rate or with LIBOR. The level of
interest expense incurred by the Company under the revolving credit agreement
will therefore fluctuate in line with changes in these rates of interest and
based upon outstanding borrowings under the revolving credit agreement.
Income taxes
------------
The Company has estimated its effective federal income tax rate based
upon statutory rates in effect in the United States at the beginning of the
1997 fiscal year. State income taxes are estimated based upon the statutory
rates in effect in the states in which the Company conducts its operations and
earns taxable income.
- - ------------------------------------------------------------------------------
SIGNATURE
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 hereunto duly authorized.
HUNTCO INC.
By: /s/ Robert J. Marischen
-------------------------------------
Robert J. Marischen,
Vice Chairman & Chief Financial Officer
Date: May 22, 1996
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EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of Item
601 of Regulation S-K:
Exhibit No. Description
----------- ---------------------------------
99 News release of May 22, 1996
<PAGE> 1
HUNTCO INC.
14323 SOUTH OUTER FORTY - SUITE 600N
TOWN & COUNTRY, MISSOURI 63017
FOR IMMEDIATE RELEASE:
HUNTCO REPORTS RESULTS FOR THE FOURTH QUARTER AND YEAR ENDED APRIL 30, 1996.
PROVIDES FORWARD-LOOKING DATA FOR FISCAL 1997. $.03 DIVIDEND DECLARED.
TOWN & COUNTRY, MISSOURI, May 22, 1996 . . . . . Huntco Inc. (NYSE:"HCO"), a
Town & Country based intermediate steel processor, today announced results of
operations for its fourth quarter and for its fiscal year, both of which ended
April 30, 1996. Net sales for the quarter were a record $78.4 million, an
increase of 32.7% in comparison to the prior year's fourth quarter net sales
of $59.1 million. Net income for the quarter was $2.7 million, or $.30 per
share, which compares to net income of $3.2 million, or $.35 per share, in the
prior year's fourth quarter.
Net sales for the year ended April 30, 1996 were a record $264.1 million, an
increase of 34.0% in comparison to net sales for the year ended April 30, 1995
of $197.2 million. Net income for the year ended April 30, 1996 was $1.1
million, down from $10.0 million for the year ended April 30, 1995, while
earnings per share declined to $.12 per share, down from $1.11 per share for
the prior year.
The Company declared a dividend of $.03 per share for shareholders of record
on June 6, 1996, payable on June 20, 1996.
The Company processed and sold 222,086 tons of steel in the quarter ended
April 30, 1996, an increase of 23.7% in comparison to the quarter ended April
30, 1995. For the year ended April 30, 1996, the Company processed and sold
771,937 tons of steel, an increase of 36.2% over that processed in the prior
year. Both the fourth quarter and full year tonnage amounts for 1996
established new records for the Company. Included in the fourth quarter and
full year tonnage amounts for fiscal 1996 were 42,086 and 91,373 tons of cold
rolled steel products, respectively. Approximately 18.9% and 23.9% of the
tons processed in the fourth quarter and for the year ended April 30, 1996
represented customer-owned material processed on a per ton, fee basis.
Gross profit averaged 11.4% during the fourth quarter and 6.9% for the year
ended April 30, 1996. These percentages compare to gross profit of 13.2% in
the prior year's fourth quarter and 13.0% for the year ended April 30, 1995.
During the fourth quarter of fiscal 1996, the Company started production on
three light-gauge, cut-to-length lines, one each at its Madison, Illinois,
Catoosa, Oklahoma, and Chattanooga, Tennessee facilities. Gross profit for
the full year ended April 30, 1996 was negatively effected by a lower of cost
or market inventory adjustment of approximately $8.0 million (before related
income tax benefits) which was reported by the Company in its quarter ended
October 31, 1995. Also negatively impacting the 1996 fiscal year were start-
up expenses relating to the Company's new cold rolling operation at its
Blytheville, Arkansas facility. Net sales of cold rolled products totaled
approximately $40.5 million for the year ended April 30, 1996. Gross profits
realized on these sales, while increasing as the year progressed, have not yet
reached levels where they are additive to the Company's overall gross profit
margin percentage.
<PAGE> 2
The Company commenced operations at its new facility in Gallatin, Kentucky
during the first week of May, 1996.
The Company also presented certain forward-looking data regarding its outlook
for its 1997 fiscal year, as well as a summary of the principal factors or
risks which the Company considers to be the most likely to cause actual
results to differ materially from this projected, forward-looking data.
The Company anticipates that its net sales in fiscal 1997 could increase by as
much as 30% to 35% over fiscal 1996 levels. The anticipated increase in net
sales is expected to reflect higher levels of tons sold which are expected to
increase to a range of 925,000 to 1,000,000 tons, with increased cold rolled
sales and shipments from the new Gallatin facility being the major
contributors to this increased sales volume. Because these new facilities are
expected to produce at increasingly higher levels of volume during the year,
the Company expects to ship approximately 10% more tonnage in the second half
of fiscal 1997 than in the first half of fiscal 1997, with the fourth quarter
of fiscal 1997 being the strongest in terms of tons expected to be shipped.
Net sales are expected to increase by a higher percentage than tons sold
because of higher average unit selling prices for cold rolled steel, when
compared to the average unit selling values for the Company's traditional hot
rolled steel sales, and due to a lower tolling percentage which is expected to
decline to a range of 17% to 20% of total tons sold for fiscal 1997. The
Company anticipates that its gross profit margins, expressed as a percentage
of net sales, could range between 11% and 13%, yielding pretax margins in the
range of 5% to 7% of net sales. The Company expects that its effective tax
rate will range between 38.0% and 38.5%. The Company expects to spend
approximately $35,000,000 as a part of its ongoing internal expansion program,
with the previously announced expansion of the Blytheville cold rolling and
pickling operations, as well as construction and equipping of the new facility
in South Carolina representing the major projects.
Achievement of these forward-looking results is dependent upon numerous
factors, circumstances and contingencies, certain of which are beyond the
control of the Company. Certain of the more important factors which the
Company believes could cause actual results to differ from the forward-looking
data presented in the previous paragraph follow:
1) Notwithstanding the fact that the growth in the Company's net sales over
the previous five fiscal years has resulted from increasing levels of tons
processed and sold, with such increases in tonnage primarily occurring at
newly constructed facilities, there can be no assurance that the Company will
be successful in the start-up of its new facility in Gallatin, Kentucky, or in
the continued development and expansion of its cold rolling operations at its
Blytheville facility, or that these expansions will proceed as quickly as the
Company currently anticipates. Successful development of these projects
requires the Company to develop new customers, in new market territories and
absolute assurance cannot be given that this will occur on the timetable which
the Company expects, if ever.
2) The expected increase in tons processed and shipped assumes that the
Company is able to maintain the base volume of tons processed and shipped in
the 1996 fiscal year. This assumption is based upon the Company's experience,
the most relevant experience being over the previous five years, and an
assumption that economic conditions in the Company's primary market areas will
reflect a stable, slow-growth environment. Many of the Company's products are
sold to industries that experience significant fluctuations in demand based on
economic conditions beyond the control of the Company. No assurance can be
given that the Company will be able to increase or maintain its level of tons
shipped, especially in periods of economic stagnation or downturn.
<PAGE> 3
3) As evidenced by the unfavorable impact on net income in fiscal 1996, the
Company's financial results can be significantly impacted by changing steel
prices. The Company's principal raw material is flat rolled carbon steel
coils. The steel industry is highly cyclical in nature and prices for the
Company's raw materials are influenced by numerous factors beyond the control
of the Company. As steel producers change the effective selling price for the
Company's raw materials, competitive conditions will influence the amount of
change, if any, in the Company's prices to its customers. Steel prices
charged by the primary producers of steel coils have been extremely volatile
over the previous twelve months and conditions exist which could cause this
volatility to continue throughout the Company's 1997 fiscal year. While the
Company believes that the circumstances leading to the significant decline in
its net income in the first two quarters of the 1996 fiscal year, which
decline was primarily caused by changing steel prices, are unlikely to be
repeated in fiscal 1997, no assurance can be given that volatility in steel
prices will not again negatively impact the Company's results of operations
and net income.
4) The Company expects that the per ton costs of operating its cold rolling
operation will continue to decline as the 1997 fiscal year progresses and that
relative per ton selling values will increase as the Company develops its
relationship as a supplier with its new customers for cold rolled products and
as more of the cold rolled tonnage sold by the Company receives further
processing (e.g. slitting or blanking) before sale. If these trends in per
ton costs and selling prices develop as the Company expects, gross profit on
cold rolled sales could become additive to the Company's overall gross profit
percentage during the second quarter of fiscal 1997. Competitive conditions
could delay the anticipated increases in relative selling values for cold
rolled products, as could rapidly changing steel prices. The per ton costs
incurred by the Company in producing and processing cold rolled coils can be
impacted by numerous factors including volume levels, operator efficiency,
utility costs and scrap percentages.
The Company plans to file a Form 8-K concurrently with this news release which
contains a more complete discussion of these and other factors which the
Company believes may cause the forward-looking data to differ materially from
actual results and encourages those who make use of this forward-looking data
to make reference to the aforementioned Form 8-K .
Huntco Inc. is an intermediate steel processor, specializing in the processing
of flat rolled carbon steel.
* * * * *
for further information contact:
Robert J. Marischen - Vice Chairman
(314) 878-0155
<PAGE> 4
HUNTCO INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended Three Months
April 30 Ended April 30
1996 1995 1996 1995
------- ------- ------ ------
(audited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $264,087 $197,195 $78,423 $59,072
Cost of sales 245,863 171,521 69,521 51,279
------- ------- ------ ------
Gross profit 18,224 25,674 8,902 7,793
Selling, general and
administrative expenses 13,147 9,638 3,518 2,629
------- ------- ------ ------
Income from operations 5,077 16,036 5,384 5,164
Other income (expense):
Interest, net (3,274) 1 (1,075) (97)
Other, net 6 4 (5) -
------- ------- ------ ------
Income before income taxes 1,809 16,041 4,304 5,067
Provision for income taxes 701 6,037 1,602 1,902
------- ------- ------ ------
Net income $ 1,108 $ 10,004 $ 2,702 $ 3,165
======= ======= ====== ======
Earnings per share $ .12 $ 1.11 $ .30 $ .35
===== ===== ===== =====
Weighted average
common shares outstanding 8,948 9,048 8,972 9,026
===== ===== ===== =====
</TABLE>
<PAGE> 5
HUNTCO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(audited, amounts in thousands)
<TABLE>
<CAPTION>
April 30,
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,737 $ 3,566
Accounts receivable, net 36,804 29,142
Inventories 53,964 77,726
Other current assets 1,926 965
------- -------
95,431 111,399
Property, plant and equipment, net 120,338 92,225
Goodwill 5,001 5,290
Other assets 1,667 984
------- -------
$222,437 $209,898
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,003 $ 25,518
Accrued expenses 3,934 1,464
Current maturities of long-term debt 189 371
------- -------
33,126 27,353
------- -------
Long-term debt 73,066 68,505
Deferred income taxes 4,879 2,788
------- -------
77,945 71,293
------- -------
Shareholders' equity:
Preferred stock (issued and outstanding, none) - -
Common stock:
Class A (issued and outstanding, 5,292 and 5,290) 53 53
Class B (issued and outstanding, 3,650) 37 37
Additional paid-in-capital 86,567 86,533
Retained earnings 24,709 24,629
------- -------
111,366 111,252
------- -------
$222,437 $209,898
======= =======
</TABLE>
<PAGE> 6
HUNTCO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(audited, dollars in thousands)
<TABLE>
<CAPTION>
Year Ended April 30,
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,108 $ 10,004
------- -------
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 6,561 3,589
Other (5) (5)
Decrease (increase) in:
accounts receivable (7,662) (9,977)
inventories 23,762 (45,085)
other current assets (961) 94
other assets (910) (653)
Increase (decrease) in:
accounts payable 3,485 18,057
accrued expenses 2,470 300
non-current deferred taxes 2,091 1,118
------- -------
Total adjustments 28,831 (32,562)
------- -------
Net cash provided (used) by operations 29,939 (22,558)
------- -------
Cash flows from investing activities:
Acquisition of property, plant and equipment (34,214) (54,273)
Proceeds from sale of property, plant and equipment 61 21
------- -------
Net cash used by investing activities (34,153) (54,252)
------- -------
Cash flows from financing activities:
Net proceeds from newly-issued debt 50,000 67,250
Payments on long-term debt (45,621) (362)
Common stock dividends (1,028) (849)
Other 34 -
------- -------
Net cash provided by financing activities 3,385 66,039
------- -------
Net (decrease) in cash (829) (10,771)
Cash, beginning of year 3,566 14,337
------- -------
Cash, end of year $ 2,737 $ 3,566
======= =======
</TABLE>
