HUNTCO INC.
14323 SOUTH OUTER FORTY - SUITE 600N
TOWN & COUNTRY, MISSOURI 63017
NEWS RELEASE
FOR IMMEDIATE RELEASE:
HUNTCO REPORTS THIRD QUARTER RESULTS
TOWN & COUNTRY, MISSOURI, October 23, 2000. . . . . Huntco Inc. (NYSE:"HCO"),
an intermediate steel processor, today announced results of operations for its
third quarter ended September 30, 2000. Net sales for the third quarter of
2000 were $66.3 million, a decrease of 21.2% in comparison to net sales of
$84.2 million for the three months ended September 30, 1999. The Company
reported a net loss for common shareholders for the 2000 third quarter of $4.0
million ($.45 per share both basic and diluted), which compares to a net loss
for common shareholders for the 1999 third quarter of $1.0 million ($.11 per
share both basic and diluted).
Net sales for the nine months ended September 30, 2000 were $231.6 million, a
decrease of 12.8% in comparison to net sales of $265.4 million for the nine
months ended September 30, 1999. The Company reported a net loss for common
shareholders for the nine months ended September 30, 2000 of $4.7 million
($.52 per share both basic and diluted), which compares to a net loss of $10.0
million for the nine months ended September 30, 1999 ($1.11 per share both
basic and diluted), which included a net of tax extraordinary charge of $2.6
million ($.30 per share both basic and diluted) incurred in connection with
the early retirement of the Company's long term debt agreements in April 1999.
The Company also announced that it has retained Chase Securities, Inc. to act
as its financial advisor in responding to inquiries concerning a potential
sale or partnership relating to its cold rolling operations, as well as to
identify and pursue other appropriate opportunities in this regard.
Overshadowed by the extremely negative market environment that currently
exists is the substantial progress the Company has made in positioning its
cold rolling operations as a quality producer of light-gauge, wide material.
The decrease in net sales for the three and nine months ended September 30,
2000, versus the comparable periods of 1999, was primarily attributable to the
1999 fourth quarter sale of the Company's former South Carolina facility,
combined with lower shipping volumes at the Company's remaining operations,
especially during the second and third quarters of 2000. The former South
Carolina facility contributed $8.0 million and $22.9 million in net sales in
the three and nine months ended September 30, 1999.
The Company processed and shipped 235,533 and 747,731 tons of steel in the
three and nine months ended September 30, 2000, reflecting decreases of 6.3%
and 9.1% in relation to continuing operations for the comparable periods of
the prior year (i.e., exclusive of 1999 sales from the South Carolina
facility). Approximately 31.7% and 26.3% of the tons processed in the three
and nine months ended September 30, 2000 represented customer-owned material
processed on a per ton, fee basis, versus tolling percentages of 24.8% and
24.0% in the comparable periods of the prior year. For the three and nine
months ended September 30, 2000, the Company sold 42,801 and 170,934 tons of
cold rolled products, which compares to 66,504 and 195,328 tons for the
comparable periods of 1999.
Gross profit expressed as a percentage of net sales was .9% and 5.9% for the
three and nine months ended September 30, 2000, which compares to 6.7% and
4.3% for the comparable periods of 1999, respectively. The higher year-over-
year gross profit margin reflects the negative impact of steel selling price
declines in 1999, especially in cold rolled steel products. The lower gross
profit margin realized in the quarter ended September 30, 2000, versus that
realized year-to-date, is due to falling prices and weaker demand across all
product lines, which weakness began in the second quarter of 2000 and has
continued into the fourth quarter. Hot band prices have declined by over 30%
since early summer. The combination of interest rate hikes, higher energy
costs, the seasonal effect of summer manufacturing slowdowns, and higher
import levels encouraged by the decision of the International Trade Commission
not to follow the Commerce Department's preliminary finding to impose duties
on the import of cold rolled steel coils from twelve different countries, has
influenced the producing mills to lower their hot band prices to attract
demand. However, the lower hot band prices appear to have had little impact in
encouraging steel purchases. Rather, the prospect of lower prices in the
market and the apparent sufficient quantity of steel inventory in the
distribution channels have prompted distributors, processors (such as the
Company), and the Company's customers to reduce inventory positions in the
face of such rapidly falling prices. These operating margin pressures
continued through the 2000 third quarter and into the fourth quarter.
Notwithstanding the negative impact on the Company's operating results from
the dramatic decrease in steel prices which occurred in the 2000 third quarter
and the related slowdown in business activity levels, the Company was able to
reduce the level of its long-term debt obligations by $6.5 million during the
third quarter and to reduce the level of its trade obligations by $9.1 million
from balances at June 30, 2000. This was primarily accomplished through
improved working capital management. Net cash provided by operations during
the third quarter totaled $7.1 million. The Company expects to realize further
reductions in its investment in inventories of approximately $20.0 million
during the fourth quarter, helping to produce positive cash flow from
operations.
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 the Company's Form 10-K for the year ended December 31, 1999.
<PAGE>
HUNTCO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
------- ------- ------- ------
<S> <C> <C> <C> <C>
Net sales $231,595 $265,439 $ 66,313 $ 84,199
Cost of sales 217,890 254,094 65,702 78,589
------- ------- ------ ------
Gross profit 13,705 11,345 611 5,610
Selling, general and
administrative expenses 13,063 14,786 4,098 4,578
------- ------- ------ ------
Income (loss) from operations 642 (3,441) (3,487) 1,032
Interest, net (7,566) (7,503) (2,492) (2,496)
------- ------- ------ ------
Loss before income taxes (6,924) (10,944) (5,979) (1,464)
Benefit for income taxes (2,400) (3,772) (2,049) (517)
------- ------- ------ ------
Net loss before
extraordinary item (4,524) (7,172) (3,930) (947)
Extraordinary item, net of tax - (2,644) - -
------- ------- ------ ------
Net loss (4,524) (9,816) (3,930) (947)
Preferred dividends 150 150 50 50
------- ------- ------ ------
Net loss available
for common shareholders $ (4,674) $ (9,966) $(3,980) $ (997)
======= ======= ====== ======
Earnings per common share (basic and diluted):
Net loss before extraordinary item $ (.52) $ (.81) $ (.45) $ (.11)
Extraordinary item, net of tax - (.30) - -
Net loss (.52) (1.11) (.45) (.11)
Weighted average
common shares outstanding:
Basic and diluted 8,942 8,942 8,942 8,942
</TABLE>
<PAGE>
HUNTCO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---------- -----------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,140 $ 414
Accounts receivable, net 33,408 41,835
Inventories 70,447 77,832
Other current assets 2,010 2,380
-------- --------
107,005 122,461
Property, plant and equipment, net 118,803 123,548
Other assets 10,998 10,725
-------- --------
$236,806 $256,734
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 30,618 $ 43,279
Accrued expenses 2,558 2,657
Current maturities of long-term debt 205 248
-------- --------
33,381 46,184
-------- --------
Long-term debt 104,187 105,470
Deferred income taxes - 1,166
-------- --------
104,187 106,636
-------- --------
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 8,118 12,794
-------- --------
99,238 103,914
-------- --------
$236,806 $256,734
======== ========
</TABLE>
