<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) January 28, 2000
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HUNTCO INC.
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(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>
Item 5. Other Events
Huntco Inc. (the "Company") issued a news release on January 28, 2000, with
respect to its release of earnings for its quarter and year ended December 31,
1999. This news release is incorporated herein by reference to Exhibit 99
attached hereto.
This Current Report on Form 8-K 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 future plans 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. 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 that the Company believes could cause
actual results to differ materially from the forward-looking data presented
include:
Impact of changing steel prices on the Company's results of operations:
As evidenced by the unfavorable impact on operating results recognized by the
Company in its recent fiscal periods, changing steel prices can significantly
impact the Company's financial results. 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 generally does
not enter into long-term, fixed-price steel purchase contracts, and does not
normally 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 steel price changes occurs, or the Company's inventories are at
greater than normal levels at the time of such steel price changes, the period
in which operating results 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 hot rolled steel coils, both
domestic and foreign, have been extremely volatile over the previous three
years. No assurance can be given that volatility in steel prices will not
again negatively impact the Company's results of operations.
Continued internal growth:
There can be no assurance that the Company will be successful in the continued
development of its pickling, cold rolling, and hot roll tempering operations
at its Blytheville, Arkansas facility, or that the utilization and development
of these operations will proceed as quickly as the Company anticipates.
Successful development of these business units requires the Company to develop
new customers, in new market territories, and absolute assurance cannot be
given that this will occur on the timetable that the Company expects, if ever.
The Company is attempting to convert a significant portion of its cold rolling
capacity to toll conversion as opposed to direct steel sales. There is no
guarantee that the Company will be successful in these attempts or that the
toll conversion business will be more profitable or sustainable over the long-
term than direct steel sales.
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.
Cyclical 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. Over the
past five years the Company has either increased or substantially maintained
the amount of steel it has sold and processed. 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.
Liquidity:
The Company's liquidity can be significantly impacted by domestic and global
competitive conditions surrounding raw material inventory supply and sourcing
issues for steel purchases. The Company's investment in raw material
inventories is substantially lower when it is able to obtain sufficient
quantities of hot rolled steel coils at competitive prices from domestic
sources. Greater lead times are typically required to place orders and
receive shipment from foreign concerns than from the Company's domestic
suppliers. However, the resulting need to invest greater amounts of the
Company's liquidity into raw material inventories is oftentimes necessary when
such import sources offer similar product at more competitive prices than are
available domestically. During such times of higher import requirements, the
Company is faced with committing a greater amount of its liquidity to its
inventory.
Interest rates:
Borrowings under the Company's revolving credit agreement are at interest
rates that 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>
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/ Anthony J. Verkruyse
-------------------------------------
Anthony J. Verkruyse,
Vice President & CFO
Date: January 28, 2000
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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 January 28, 2000
<PAGE> 1
HUNTCO INC.
14323 SOUTH OUTER FORTY - SUITE 600N
TOWN & COUNTRY, MISSOURI 63017
NEWS RELEASE
FOR IMMEDIATE RELEASE:
HUNTCO REPORTS FINANCIAL RESULTS FOR FOURTH QUARTER AND YEAR ENDED DECEMBER
31, 1999.
TOWN & COUNTRY, MISSOURI, January 28, 2000 . . . . . Huntco Inc. (NYSE:"HCO"),
an intermediate steel processor, today announced results of operations for the
fourth quarter and year ended December 31, 1999. Net sales for the fourth
quarter were $84.5 million, an increase of 5.1% in comparison to net sales of
$80.4 million for the three months ended December 31, 1998. The Company
incurred a net loss for common shareholders for the quarter of $1.4 million,
or $.15 per share both basic and diluted, which compares to a net loss for
common shareholders of $4.4 million, or $.49 per share, both basic and
diluted, in the prior year's fourth quarter. Included in the 1999 fourth
quarter results was a non-recurring loss associated with the sale of the
Company's South Carolina facility of $1.1 million, or $.12 per share, both
basic and diluted, net of related tax benefits.
Net sales for the year ended December 31, 1999 were $349.9 million, a decrease
of 10.5% in comparison to net sales of $391.2 million for the year ended
December 31, 1998. During 1999 the Company incurred a net loss for common
shareholders of $11.3 million, or $1.27 per share both basic and diluted,
which compares to a 1998 net loss for common shareholders of $4.5 million, or
$.50 per share both basic and diluted. Included in the 1999 net loss is an
extraordinary charge of $2.6 million ($.30 per share both basic and diluted)
incurred during the Company's second quarter in connection with the early
retirement of the Company's previously outstanding long term debt agreements,
as well as the above-mentioned $.12 per share non-recurring loss associated
with the sale of the Company's South Carolina facility.
The Company's lower net sales are primarily the result of lower selling
prices. The effect of historically high imports of steel products into the
United States during late 1998 and early 1999 resulted in significant declines
in selling values realized by the Company and the steel processing industry in
general. The Company's average per ton selling values declined 4.5% and 9.2%
for the three and twelve months ended December 31, 1999, in comparison to
prior year levels.
Also reflected in the lower net sales for 1999 were reduced direct sales
volumes. Direct (i.e., non-tolling) sales volume measured in tons shipped
decreased 2.1% for 1999, although direct sales volume did show a 5.8% quarter-
over-quarter increase in the 1999 fourth quarter. The Company processed and
shipped 275,533 and 1,203,972 tons of steel in the quarter and year ended
December 31, 1999, compared to 249,378 and 1,208,255 tons for the quarter and
year ended December 31, 1998. Approximately 23.6% and 23.9% of the tons
processed in the three and twelve month periods ended December 31, 1999,
represented customer-owned material processed on a per ton, fee basis, versus
a tolling percentage of 20.3% and 22.5% in the comparable periods of the prior
year. The Company sold 62,452 and 257,780 tons of cold rolled products during
the quarter and year ended December 31, 1999, as compared to 45,156 and
261,914 tons in the corresponding 1998 periods.
Gross profit, expressed as a percentage of net sales, was 7.6% and 5.1% for
the quarter and year ended December 31, 1999, respectively, compared to 0.8%
and 5.4% for the comparable periods of the prior year. During 1999 the gross
profit margin percentages realized by the Company have steadily increased, as
steel pricing and sales and production volumes slowly recovered from the
depressed levels of late 1998 and early 1999. The higher quarter-over-quarter
gross profit percentage is attributable to the recent improvement in industry-
wide steel pricing, versus the deterioration in market prices that began in
earnest in the third quarter of 1998. The lower year-over-year gross profit
percentage reflects the devastating impact that steel selling price declines
had on the Company in early 1999, especially in cold rolled steel product
pricing and volumes.
Exclusive of the non-recurring loss incurred on the sale of the Company's
South Carolina facility, the Company reported income from operations of $2.1
million for the fourth quarter of 1999, an improvement of $1.1 million from
the 1999 third quarter and the first fourth quarter operating profit the
Company has realized since 1996. Further, inventories have been reduced by
over $50.0 million from the peak levels reached during the first quarter of
1999.
The Company recently secured several commitments for toll conversion at its
cold rolling mill and is negotiating and conducting trials for additional
commitments which it expects to conclude during the first quarter of 2000. The
Company expects these commitments to commence around the beginning of the
second quarter, ramping up to a level of approximately 15,000 tons per month
by the middle of 2000. Included is an anticipated 10,000 tons per month of
full hard cold rolled steel, which product utilizes previously unsold capacity
on the Company's coil pickling lines and on the cold rolling mill itself. This
incremental business is expected to increase the Company's cold rolled product
sales to over 30,000 tons per month. The Company's objective is to convert as
much as one half of its cold rolling capacity to toll conversion business on
an ongoing basis. This is expected to reduce working capital needs for the
Rolling Mill Division, simplify material procurement and to result in more
consistent financial performance. The Company's recent successes in this area
provide evidence of the significant improvements made in product quality and
service capabilities in its cold rolling operation.
The addition of a significant complement of full hard cold rolled business,
which utilizes previously unsold capacity, should further lower the Company's
conversion costs due to higher absorption of fixed costs and should increase
the Company's ability to compete at more acceptable levels of profitability.
This change in the Company's sales mix along with generally improving market
conditions cause the Company to believe that its Rolling Mill Division could
achieve pretax profitability by the end of the 2000 first quarter, with
continuing improvement expected over the balance of 2000.
The largest component of the Company's processing business, the Flat Rolled
Products Division, was solidly profitable during 1999, especially during the
second half of the year, and is expected to continue to be so throughout 2000.
The Company's cylinder operations, which are included in its Custom Products
Division, achieved record sales and earnings in 1999 and are expected to have
a solid year in 2000.
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 2000 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 Form 8-K, filed simultaneously with this News Release.
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
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended December 31,
1999 1998 1999 1998
------- ------- ------- -------
(audited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $349,947 $391,181 $84,508 $80,438
Cost of sales 332,215 369,864 78,121 79,795
------- ------- ------ ------
Gross profit 17,732 21,317 6,387 643
Selling, general and
administrative expenses 19,062 19,939 4,277 5,325
Non-recurring loss on
sale of plant facility 1,720 - 1,720 -
------- ------- ------ ------
Income (loss) from operations (3,050) 1,378 390 (4,682)
Interest, net (10,140) (8,113) (2,637) (2,101)
------- ------- ------ ------
Loss before income taxes (13,190) (6,735) (2,247) (6,783)
Benefit for income taxes (4,687) (2,444) (915) (2,462)
------- ------- ------ ------
Net loss before extraordinary item (8,503) (4,291) (1,332) (4,321)
Extraordinary item, net of tax (2,644) - - -
------- ------- ------ ------
Net loss (11,147) (4,291) (1,332) (4,321)
Preferred dividends 200 200 50 50
------- ------- ------ ------
Net loss for common shareholders $(11,347) $ (4,491) $(1,382) $(4,371)
======= ======= ====== ======
Loss per common share
(basic and diluted):
Net loss before extraordinary item $ (.97) $ (.50) $ (.15) $ (.49)
Extraordinary item, net of tax (.30) - - -
----- ----- ----- -----
Net loss for common shareholders $(1.27) $ (.50) $ (.15) $ (.49)
===== ===== ===== =====
Weighted average
common shares outstanding:
(basic and diluted) 8,942 8,942 8,942 8,942
===== ===== ===== =====
</TABLE>
<PAGE>
HUNTCO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(audited, in thousands)
<TABLE>
<CAPTION>
December 31,
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 414 $ 21
Accounts receivable, net 41,835 43,579
Inventories 77,832 92,240
Other current assets 2,380 2,914
-------- --------
122,461 138,754
Property, plant and equipment, net 123,548 143,401
Other assets 10,725 11,076
-------- --------
$256,734 $293,231
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 43,279 $ 56,923
Accrued expenses 2,657 3,451
Current maturities of long-term debt 248 7,352
-------- --------
46,184 67,726
-------- --------
Long-term debt 105,470 102,555
Deferred income taxes 1,166 7,376
-------- --------
106,636 109,931
-------- --------
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 12,794 24,454
-------- --------
103,914 115,574
-------- --------
$256,734 $293,231
======== ========
</TABLE>
<PAGE>
HUNTCO INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(audited, in thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(11,147) $ (4,291)
------- -------
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 11,395 10,265
Loss on early extinguishment of debt 4,067 -
Loss on sale of property, plant and equipment 1,732 (65)
Decrease (increase) in:
accounts receivable 1,744 (1,936)
inventories 14,409 (10,628)
other current assets 534 2,101
other assets (446) (1,049)
Increase (decrease) in:
accounts payable (13,645) 16,896
accrued expenses (795) (428)
non-current deferred taxes (6,211) (2,039)
------- -------
Total adjustments 12,784 13,117
------- -------
Net cash provided by operations 1,637 8,826
------- -------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (904) (8,782)
Proceeds from sale of property, plant and equipment 9,815 2,121
------- -------
Net cash provided (used) by investing activities 8,911 (6,661)
------- -------
Cash flows from financing activities:
Retirement of long-term notes (50,000) -
Debt repurchase premiums (3,816) -
Net proceeds from revolving credit facilities 46,661 978
Payments on debt and capital lease obligations (849) (2,010)
Payments for debt issuance costs (1,638) -
Common stock dividends (313) (939)
Preferred stock dividends (200) (200)
------- -------
Net cash used by financing activities (10,155) (2,171)
------- -------
Net increase (decrease) in cash 393 (6)
Cash, beginning of period 21 27
------- -------
Cash, end of period $ 414 $ 21
======= =======
</TABLE>
