<PAGE>
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) October 23, 1998
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HUNTCO INC.
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(Exact name of registrant as specified in its charter)
Missouri 1-13600 43-1643751
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(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
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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 October 23, 1998, with
respect to its release of earnings for its three and nine months ended
September 30, 1998. This news release is incorporated herein by reference to
Exhibit 99 attached hereto.
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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
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Robert J. Marischen,
Vice Chairman & Chief Financial Officer
Date: October 23, 1998
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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 October 23, 1998
<PAGE> 1
HUNTCO INC.
14323 SOUTH OUTER FORTY - SUITE 600N
TOWN & COUNTRY, MISSOURI 63017
FOR IMMEDIATE RELEASE:
HUNTCO REPORTS THIRD QUARTER RESULTS OF OPERATION. $.035 DIVIDEND DECLARED.
TOWN & COUNTRY, MISSOURI, October 23, 1998 . . . . . Huntco Inc. (NYSE:"HCO"),
an intermediate steel processor, today announced results of operations for its
third quarter which ended September 30, 1998. Net sales for the quarter were
$95.6 million, an increase of 1.9% in comparison to net sales of $93.9 million
for the three months ended September 30, 1997. The Company incurred a net
loss for common shareholders for the quarter of $1.2 million, or ($.13) per
share both basic and diluted, which compares to net income available for
common shareholders of $1.1 million, or $.13 per share, both basic and
diluted, in the prior year's third quarter. Net sales for the nine months
ended September 30, 1998 were $310.7 million, an increase of 13.8% in
comparison to net sales of $273.1 million for the nine months ended September
30, 1997. For the nine months ended September 30, 1998, the Company incurred
a net loss for common shareholders of $.1 million, or ($.01) per share, both
basic and diluted, which compares to net income available for common
shareholders of $3.9 million, or $.43 per share, both basic and diluted, for
the nine months ended September 30, 1997.
The Company declared a dividend of $.035 per common share for common
shareholders of record on November 4, 1998, and payable on November 16, 1998.
If business conditions improve in early 1999, as the Company expects, and the
Huntco Inc. Class A common stock price remains at or near the current
depressed levels, the Company will consider implementing a stock repurchase
program in lieu of continuing periodic declarations of common dividends.
The Company processed and shipped 288,044 and 958,877 tons of steel in the
three and nine months ended September 30, 1998, compared to 295,535 and
815,257 tons for the three and nine months ended September 30, 1997. Direct
(i.e., non-tolling) sales volume measured in tons shipped increased 3.7% and
17.9% in the third quarter and for the nine months ended September 30, 1998,
while tolling volume in the third quarter of 1998 declined year over year.
Approximately 21.0% and 23.1% of the tons processed in the three and nine
month periods ended September 30, 1998, represented customer-owned material
processed on a per ton, fee basis, versus a tolling percentage of 25.7% and
23.3% in the comparable periods of the prior year. The Company sold 58,789
and 216,758 tons of cold rolled products during the three and nine months
ended September 30, 1998, which compares to 59,883 and 161,249 tons in the
corresponding 1997 periods.
The reduction in tons shipped in the third quarter of 1998 reflected lower
shipping rates, primarily at the Company's Blytheville, Arkansas facility,
where the Company experienced a slow-down in its tolling volume, and lower
sales levels for processed hot rolled steel products and cold rolled master
coil sales. Tons shipped from the Blytheville facility generally represent up
to 50% of the Company's total shipments. The reduced level of tolling volume
at Blytheville reflects a move to off-shore purchasing by certain of the
Company's tolling customers who traditionally buy from the Nucor mill at
Hickman, Arkansas and use the Company's Blytheville facility for toll slitting
and pickling.
Sharply lower shipping levels of processed hot rolled products and cold rolled
master coils were also experienced at the Blytheville facility during the
month of August, 1998 and into September, as the Company installed its new
computer system at this facility. Blytheville is the last of the Company's
facilities to be converted to the new computer system.
Also negatively impacting volume levels was the continuing rapid deterioration
in steel prices which is encouraging inventory liquidations and delays in
purchases by the Company's customers. This was especially acute in the
markets served by the Blytheville facility, reflecting the substantial
disparity between hot rolled steel prices charged by local, domestic suppliers
and the landed cost of imported hot bands. Average per ton selling values
declined 5.2% and 5.5% for the three and nine months ended September 30, 1998,
in relation to the corresponding periods of the prior year.
Gross profit expressed as a percentage of net sales was 5.4% and 6.7% for the
three and nine months ended September 30, 1998, respectively, which declined
from 8.7% and 9.0% for the comparable prior year periods. The lower gross
profit margins in 1998 primarily reflect the continuing declines in steel
prices.
As detailed in the Company's news release of September 23, 1998, the Company
expects that the volume of tons of steel to be sold in the second half of 1998
will decline approximately 20% from the record tons sold in the first half of
1998. Despite the rapid declines in steel prices, gross margin spreads,
measured against material costs, have improved since mid-summer. These gross
margin improvements are currently being offset by the lower shipping and
production volumes which negatively impact fixed cost absorption and which are
expected to result in somewhat lower net margin percentages for the second
half of 1998, when compared to the first half of 1998.
Shipping rates at the Company's Blytheville facility have begun to recover as
the turmoil caused by the systems conversion lessens and the Company has begun
to see the return of its tolling business subsequent to recent domestic price
reductions. These trends are expected to continue through the fourth quarter
and into 1999. Further, the Company has secured feed stock supply for its
cold mill for much of 1999 at prices which it anticipates will allow it to
operate the cold mill at more adequate levels of profitability. Delays in the
receipt of the early shipments of this feed stock have stalled progress at the
cold mill during much of the third quarter, but improvement late in the
quarter was realized. In addition, recent improvements to the cold mill have
positioned the Company to participate in markets which have been less price
sensitive than the markets which have been served by Huntco's cold mill since
its opening in 1995. The Company is currently conducting trials with
customers and expects that these new markets could represent a meaningful
portion of the Company's cold rolled sales in 1999. The Company is also
taking aggressive steps to lower its operating expenses, which the Company
anticipates will become more apparent once the steep slide in steel prices
bottoms out. Fourth quarter results, which are expected to result in a net
loss in the magnitude of the third quarter net loss, could be influenced by
progress in the recent pending trade cases, as well as by business activity
levels around the November and December holidays. The Company is cautiously
optimistic about the business environment it sees developing for 1999, and
anticipates a return to profitability in the first quarter of 1999.
This press release contains certain statements that are forward-looking and
involve risks and uncertainties. Words such as "expects," "believes," and
"anticipates," 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 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. The Company encourages those who make use of this forward-looking
data to make reference to a complete discussion of the factors which may cause
the forward-looking data to differ materially from actual results which is
contained in the Company's Transitional Annual Report and in Form 10-K, both
for the eight month transition period ended December 31, 1997.
Huntco Inc. is a major, intermediate steel processor, specializing in the
processing of flat rolled carbon steel.
<PAGE>
HUNTCO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
(unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30 Ended September 30
1998 1997 1998 1997
------- ------- ------- ------
<S> <C> <C> <C> <C>
Net sales $310,744 $273,061 $95,646 $93,903
Cost of sales 290,070 248,489 90,490 85,736
------- ------- ------ ------
Gross profit 20,674 24,572 5,156 8,167
Selling, general and
administrative expenses 14,615 12,603 4,897 4,287
------- ------- ------ ------
Income from operations 6,059 11,969 259 3,880
Interest, net (6,012) (5,557) (1,995) (1,976)
------- ------- ------ ------
Income (loss) before income taxes 47 6,412 (1,736) 1,904
Provision (benefit) for income taxes 17 2,419 (632) 707
------- ------- ------ ------
Net income (loss) 30 3,993 (1,104) 1,197
Preferred dividends 150 133 50 50
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Net income (loss) available
for common shareholders $ (120) $ 3,860 $(1,154) $ 1,147
======= ======= ====== ======
Earnings (loss) per common share
(basic and diluted) $ (.01) $ .43 $ (.13) $ .13
===== ===== ===== =====
Weighted average
common shares outstanding:
Basic 8,942 8,942 8,942 8,942
===== ===== ===== =====
Diluted 8,962 8,946 8,942 8,954
===== ===== ===== =====
</TABLE>
<PAGE>
HUNTCO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
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(unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 18 $ 27
Accounts receivable, net 49,714 41,643
Inventories 88,524 81,612
Other current assets 2,341 5,015
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140,597 128,297
Property, plant and equipment, net 146,575 145,777
Other assets 11,436 11,191
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$298,608 $285,265
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 47,792 $ 40,027
Accrued expenses 2,754 3,879
Current maturities of long-term debt 7,358 209
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57,904 44,115
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Long-term debt 111,153 110,730
Deferred income taxes 9,293 9,415
-------- --------
120,446 120,145
-------- --------
Shareholders' equity:
Series A preferred stock (issued and
outstanding, 225; stated at liquidation value) 4,500 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 86,530
Retained earnings 29,138 29,885
-------- --------
120,258 121,005
-------- --------
$298,608 $285,265
======== ========
</TABLE>
<PAGE>
HUNTCO INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
1998 1997
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 30 $ 3,993
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Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 7,453 6,524
Other (428) (185)
Decrease (increase) in:
accounts receivable (8,071) (12,873)
inventories (6,911) (27,893)
other current assets 2,673 1,139
other assets (888) (4,725)
Increase in:
accounts payable 7,765 29,771
accrued expenses (1,125) 1,391
non-current deferred taxes (122) 1,271
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Total adjustments 346 (5,580)
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Net cash provided (used) by operations 376 (1,587)
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Cash flows from investing activities:
Cash used to acquire property, plant and equipment (7,182) (16,982)
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Cash flows from financing activities:
Issuance of Series A preferred stock - 4,500
Net proceeds from newly-issued debt 7,978 14,500
Payments on long-term debt (405) (142)
Common stock dividends (626) (939)
Preferred stock dividends (150) (133)
Other - (37)
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Net cash provided by financing activities 6,797 17,749
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Net decrease in cash (9) (820)
Cash, beginning of period 27 1,759
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Cash, end of period $ 18 $ 939
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</TABLE>
