<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, 1997
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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
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(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, 1997, with
respect to its release of earnings for its fourth quarter and year ended April
30, 1997, 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 and fiscal
1997, 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 may influence the amount of the change, if
any, in the Company's selling 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, both domestic
and foreign, have been extremely volatile over the previous two years, and
conditions exist which could cause this volatility to continue throughout the
Company's 1998 fiscal year. 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
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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 1997 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 South Carolina, or in the
continued development and expansion of its cold rolling and hot roll tempering
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 South Carolina facility, the
continued ramp up of the new stamping plant in Blytheville, and the continued
maturation of the Company's cold rolling and tempering operations will cause
the Company to face new competition.
Competition
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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
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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.
<PAGE> 4
Income taxes
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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 1998
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.
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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, 1997
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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
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99 News release of May 22, 1997
<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, 1997.
PROVIDES FORWARD-LOOKING DATA FOR FISCAL 1998. $.035 DIVIDEND DECLARED.
TOWN & COUNTRY, MISSOURI, May 22, 1997 . . . . . Huntco Inc. (NYSE:"HCO"), an
intermediate steel processor, today announced results of operations for its
fourth quarter and for its fiscal year, both of which ended April 30, 1997.
Net sales for the quarter were $90.8 million, an increase of 15.7% in
comparison to the prior year's fourth quarter net sales of $78.4 million. Net
income available for common shareholders for the quarter was $1.3 million, or
$.15 per common share, which compares to $2.7 million, or $.30 per common
share, in the prior year's fourth quarter.
Net sales for the year ended April 30, 1997 were $326.6 million, an increase
of 23.7% in comparison to net sales for the year ended April 30, 1996 of
$264.1 million. Net income available for common shareholders for the year
ended April 30, 1997 was $6.4 million, up from $1.1 million for the year ended
April 30, 1996, while earnings per common share increased to $.72 per share,
up from $.12 per share for the prior year.
The Company declared a dividend of $.035 per common share for shareholders of
record on June 9, 1997, payable on June 23, 1997. The Company also declared a
dividend on its preferred stock of $.22 per preferred share, or $50,000.00 in
the aggregate, for its preferred shareholders of record on May 30, 1997, which
dividend is payable on June 2, 1997.
The Company processed and sold 260,643 tons of steel in the quarter ended
April 30, 1997, an increase of 17.4% in comparison to the quarter ended April
30, 1996. For the year ended April 30, 1997, the Company processed and sold
941,545 tons of steel, an increase of 22.0% over the level of tons processed
in the prior year. Both the fourth quarter and full year tonnage amounts for
1997 established new shipment records for the Company. Included in the fourth
quarter and full year tonnage amounts for fiscal 1997 were 56,087 and 181,313
tons of cold rolled steel products, respectively, which amounts represent
increases over prior fourth quarter and full year cold rolled shipments of
33.3% and 98.4%, respectively. Approximately 22.2% of the tons processed in
the fourth quarter and for the year ended April 30, 1997 represented customer-
owned material processed on a per ton, fee basis.
Gross profit, expressed as a percentage of net sales, averaged 9.0% during the
fourth quarter and 9.8% for the year ended April 30, 1997. These percentages
compare to gross profit of 11.4% in the prior year's fourth quarter and 6.9%
for the year ended April 30, 1996. Gross profit margins began to slowly
recover over the course of the fourth quarter of fiscal 1997 in comparison to
the third quarter of fiscal 1997 when the gross profit percentage was 7.9%, as
the Company lowered its average raw material costs by importing more of its
raw material requirements.
<PAGE> 2
The Company commenced operations at its new facility in Berkeley County, South
Carolina during late January, 1997, when it began operating a new, heavy
gauge, cut-to-length line, and also installed a slitting line at this facility
during April, 1997. The Company completed the capacity and quality
enhancements to its cold rolling mill at its Blytheville facility during the
fourth quarter of fiscal 1997, and enters fiscal 1998 with capacity for fully
annealed cold rolled products of approximately 35,000 tons per month. During
the Company's fourth quarter of fiscal 1997, the Company also successfully
restarted the hot rolled steel tempering facility which was acquired from
Coil-Tec on January 30, 1997, which is now being operated as a part of the
Company's Blytheville facility, with production levels approaching 10,000 tons
per month in April, 1997.
The Company presented certain forward-looking data regarding its outlook for
its 1998 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 1998 could increase by
approximately 20% over fiscal 1997 levels. The planned increase in net sales
is expected to reflect higher levels of tons sold which are expected to
increase to approximately 1,100,000 tons, with increased cold rolled and
tempered sales from the Blytheville facility and shipments from the new South
Carolina facility being the major contributors to this estimated growth in
sales volume. Because the expanded cold rolling and tempering capacity at the
Blytheville facility and the new South Carolina facility are expected to
produce and sell at increasingly higher levels of volume during the year, the
Company believes that it will ship approximately 10% more tonnage in the
second half of fiscal 1998 than in the first half of fiscal 1998, with the
fourth quarter of fiscal 1998 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 and
tempered 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 over the course of the full fiscal
year to around 20% of total tons sold for fiscal 1998.
As it enters fiscal 1998, the Company estimates that its gross profit margins
for the first quarter, expressed as a percentage of net sales, could range
from 9.5% to 11%. The Company also projects that it will spend approximately
$9,000,000 on capital expenditures, primarily during the first half of fiscal
1998, as it completes the second coil pickling line at its Blytheville
facility, which represents the last of the projects previously announced by
the Company in the current phase of its internal expansion program.
This press release contains certain statements that are forward-looking and
involve risks and uncertainties. Words such as "expects," "anticipates,"
"projects," "estimates," "plans," "believes," and variations of such words and
similar expressions are intended to identify such forward-looking statements.
These statements are based on current expectations and projections concerning
the Company's plans for fiscal 1998 and about the steel processing industry in
general, as well as assumptions made by Company management and are not
guarantees of future performance. Therefore, actual events, outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking statements.
<PAGE> 3
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 materially from the
forward-looking data presented in this press release follow:
1) As evidenced by the unfavorable impact on net income in fiscal 1996 and
1997, 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 two years and conditions exist which
could cause this volatility to continue throughout the Company's 1998 fiscal
year. No assurance can be given that volatility in steel prices will not again
negatively impact the Company's results of operations and net income.
2) 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 and on newly-acquired equipment, there can be no
assurance that the Company will be successful in the start-up of its new
facility in South Carolina, or in the continued development and expansion of
its cold rolling, tempering and pickling 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.
3) 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 1997 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, or during
periods of rapidly changing steel prices.
The Company plans to file a Form 8-K with the Securities and Exchange
Commission and the New York Stock Exchange concurrently with this news
release, which Form 8-K contains a more complete discussion of these and
other factors which may cause the forward-looking data to differ materially
from actual results. The Company encourages those who make use of this
forward-looking data to make reference to the aforementioned Form 8-K . The
Company undertakes no obligation to update any forward-looking statements in
this press release.
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
1997 1996 1997 1996
------- ------- ------ ------
(audited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $326,563 $264,087 $90,759 $78,423
Cost of sales 294,455 245,863 82,626 69,521
------- ------- ------ ------
Gross profit 32,108 18,224 8,133 8,902
Selling, general and
administrative expenses 15,383 13,147 4,178 3,518
------- ------- ------ ------
Income from operations 16,725 5,077 3,955 5,384
Interest, net (6,239) (3,268) (1,757) (1,080)
------- ------- ------ ------
Income before income taxes 10,486 1,809 2,198 4,304
Provision for income taxes 3,997 701 836 1,602
------- ------- ------ ------
Net income $ 6,489 $ 1,108 1,362 $ 2,702
Preferred dividends 50 - 50 -
------- ------- ------ ------
Net income available
for common shareholders $ 6,439 $ 1,108 $ 1,312 $ 2,702
======= ======= ====== ======
Earnings per common share $ .72 $ .12 $ .15 $ .30
===== ===== ===== =====
Weighted average
common shares outstanding 8,942 8,948 8,942 8,972
===== ===== ===== =====
</TABLE>
<PAGE> 5
HUNTCO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(audited, amounts in thousands)
<TABLE>
<CAPTION>
April 30,
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,124 $ 2,737
Accounts receivable, net 46,452 36,804
Inventories 105,569 53,964
Other current assets 3,983 1,926
------- -------
157,128 95,431
Property, plant and equipment, net 141,436 120,338
Other assets 8,754 6,668
------- -------
$307,318 $222,437
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 72,569 $ 29,003
Accrued expenses 4,868 3,934
Current maturities of long-term debt 189 189
------- -------
77,626 33,126
------- -------
Long-term debt 100,877 73,066
Deferred income taxes 7,754 4,879
------- -------
108,631 77,945
------- -------
Shareholders' equity:
Series A preferred stock (issued and outstanding,
225 and none, stated at liquidation value) 4,500 -
Common stock:
Class A (issued and outstanding, 5,292) 53 53
Class B (issued and outstanding, 3,650) 37 37
Additional paid-in-capital 86,530 86,567
Retained earnings 29,941 24,709
------- -------
121,061 111,366
------- -------
$307,318 $222,437
======= =======
</TABLE>
<PAGE> 6
HUNTCO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(audited, dollars in thousands)
<TABLE>
<CAPTION>
Year Ended April 30,
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,489 $ 1,108
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Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 8,225 6,561
Other (675) (5)
Decrease (increase) in:
accounts receivable (9,648) (7,662)
inventories (51,605) 23,762
other current assets (2,057) (961)
other assets (2,632) (910)
Increase (decrease) in:
accounts payable 43,566 3,485
accrued expenses 934 2,470
non-current deferred taxes 2,875 2,091
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Total adjustments (11,017) 28,831
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Net cash provided (used) by operations (4,528) 29,939
------- -------
Cash flows from investing activities:
Acquisition of property,
plant and equipment, net (28,102) (34,153)
------- -------
Net cash used by investing activities (28,102) (34,153)
------- -------
Cash flows from financing activities:
Issuance of Series A preferred stock 4,500 -
Net proceeds from newly-issued debt 28,000 50,000
Net payments on long-term debt (189) (45,621)
Common stock dividends (1,207) (1,028)
Other (87) 34
------- -------
Net cash provided by financing activities 31,017 3,385
------- -------
Net (decrease) in cash (1,613) (829)
Cash, beginning of year 2,737 3,566
------- -------
Cash, end of year $ 1,124 $ 2,737
======= =======
</TABLE>
