-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DW4Y1XGuk8ueNNyvNzBIPRoBMibDkJ4WG9OfTvK/iovRnNYjO5PhXzx0EoW5dnY0 g0VYlo9Jzj2j7mM8wkd12w== 0000905722-99-000001.txt : 19990210 0000905722-99-000001.hdr.sgml : 19990210 ACCESSION NUMBER: 0000905722-99-000001 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 ITEM INFORMATION: FILED AS OF DATE: 19990209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNTCO INC CENTRAL INDEX KEY: 0000905722 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 431643751 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13600 FILM NUMBER: 99524369 BUSINESS ADDRESS: STREET 1: 14323 SOUTH OUTER FORTY STREET 2: STE 600 N CITY: TOWN & COUNTRY STATE: MO ZIP: 63017 BUSINESS PHONE: 3148780155 MAIL ADDRESS: STREET 1: 14323 S OUTER FORTY STREET 2: STE 600N CITY: TOWN & COUNTRY STATE: MO ZIP: 63017 8-K 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) February 8, 1999 ------------------------- 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 ------------------------------------------------------------ (Former name or former address, if changed since last report) Item 5. Other Events Huntco Inc. (the "Company") issued a news release on February 8, 1999, with respect to its release of earnings for its year ended December 31, 1998. 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 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 hot rolled steel coils, both domestic and foreign, have been extremely volatile over the previous three years, and conditions exist which could cause this volatility to continue during 1999. No assurance can be given that volatility in steel prices will not again negatively impact the Company's results of operations and net income. Continued internal growth involving new processes and markets: There can be no assurance that the Company will be successful in the continued development of its pickling, cold rolling, stamping 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. 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. Further, new competition is expected in the sale of cold rolled and pickled products as new pickling and/or cold rolling capacity is added by Nucor in Hickman, Arkansas, and by Worthington Industries, Steel Technologies (through its MI-Tech joint venture) and Trico in Decatur, Alabama. 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. 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. 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. Recent global and domestic economic and competitive conditions compelled the Company to source a greater portion of its raw material supply needs via imports. 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 pricing and/or payment structures 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. This greater commitment of liquidity to inventory can act to limit the Company's ability to negotiate and realize the benefits of quick pay discounts from its vendors, as it negotiates terms on such purchases in view of staying in compliance with its long-term debt and revolving credit financing commitments. 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. Year 2000 Compliance: The Company has utilized software and related computer technologies essential to its operations and to certain products that use two digits rather than four to specify the year, which could result in a date recognition problem with the transition to the year 2000. The Company has established a plan, utilizing internal resources, to assess the potential impact of the year 2000 on the Company's systems and operations and to implement solutions to address this issue. The Company is also dependent upon various third parties, including certain product suppliers, to conduct its business operations. The failure of mission-critical third parties to achieve year 2000 compliance could have a material effect on the Company's operations. The Company is diligently quantifying issues and developing contingency sources to mitigate the risks associated with interruptions in its supply chain due to year 2000 problems. The bulk of the Company's primary steel suppliers have year 2000 compliance projects in process, and the Company plans to continue to monitor their progress on a quarterly basis. The Company also continues to monitor concerns that utility companies and any inbound or outbound shipping suppliers will continue their services on an uninterrupted basis given year 2000 compliance concerns. The Company plans to develop a contingency plan by May 1, 1999, in the event its systems or its mission-critical vendors do not achieve year 2000 compliance. However, there can be no assurance that the Company will not experience unanticipated costs and/or business interruptions due to year 2000 problems in its internal systems, its supply chain, or from customer product migration issues. 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, President & CFO Date: February 8, 1999 - ------------------------------------------------------------------------------ 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 February 8, 1999 EX-99 2 PRESS RELEASE 1 HUNTCO INC. 14323 SOUTH OUTER FORTY - SUITE 600N TOWN & COUNTRY, MISSOURI 63017 NEWS RELEASE FOR IMMEDIATE RELEASE: HUNTCO REPORTS NET LOSS FOR FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 1998. TOWN & COUNTRY, MISSOURI, February 8, 1999 . . . . . Huntco Inc. (NYSE:"HCO"), an intermediate steel processor, today announced results of operations for the fourth quarter and year ended December 31, 1998. Net sales for the fourth quarter were $80.4 million, a decrease of 14.0% in comparison to net sales of $93.5 million for the three months ended December 31, 1997. The Company incurred a net loss for common shareholders for the quarter of $4.4 million, or ($.49) per share both basic and diluted, which compares to a net loss for common shareholders of $1.3 million, or ($.14) per share, both basic and diluted, in the prior year's fourth quarter. Net sales for the year ended December 31, 1998 were $391.2 million, an increase of 6.7% in comparison to net sales of $366.6 million for the year ended December 31, 1997. The Company incurred a net loss for common shareholders of $4.5 million, or ($.50) per share, both basic and diluted, for the year ended December 31, 1998, which compares to net income available for common shareholders of $2.6 million, or $.29 per share, both basic and diluted, for the year ended December 31, 1997. The Company declared a dividend of $.035 per common share for common shareholders of record on February 15, 1999, and payable on March 1, 1999. The Company processed and shipped 249,378 and 1,208,255 tons of steel in the quarter and year ended December 31, 1998, compared to 276,055 and 1,091,312 tons for the quarter and year ended December 31, 1997. Direct (i.e., non- tolling) sales volume measured in tons shipped increased 12.1% for the year ended December 31, 1998, but direct tons shipped in the fourth quarter declined 5.1% in comparison to the 1997 fourth quarter and 12.6% in relation to the 1998 third quarter. Tolling volume increased 6.1% in 1998, but declined sharply in the fourth quarter which saw a 24.0% decrease from the 1997 fourth quarter and a decrease of 16.6% from the 1998 third quarter. Approximately 20.3% and 22.5% of the tons processed in the quarter and year ended December 31, 1998, represented customer-owned material processed on a per ton, fee basis, versus a tolling percentage of 24.1% and 23.5% in the comparable periods of the prior year. The Company sold 45,156 and 261,914 tons of cold rolled products during the quarter and year ended December 31, 1998, which compares to 54,779 and 216,028 tons in the corresponding 1997 periods. The reduction in tons shipped in the fourth 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 can 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 and increased competition for toll pickle business. 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 Company's cold rolling mill located at its Blytheville facility. Weighted average per ton selling values declined 8.7% and 6.3% for the quarter and year ended December 31, 1998, in relation to the corresponding periods of the prior year. Gross profit, expressed as a percentage of net sales, was 0.8% and 5.5% for the quarter and year ended December 31, 1998, respectively, representing declines from 4.7% and 7.9% in the comparable prior year periods. The lower gross profit margins in 1998 primarily reflect declining steel prices throughout the year and lower sales and production volumes during the second half of 1998, especially at the Company's Blytheville facility. With respect to the Company's Blytheville facility, lower production volume at the cold rolling operation, combined with an extremely weak pricing environment for cold rolled products, resulted in a pretax loss of approximately $2.8 million in the 1998 fourth quarter. The poor market fundamentals for cold rolled products reflect the high levels of foreign cold rolled available in the Company's market territories at extremely depressed prices. Further, the Company's metal stamping and custom slitting and blanking operations caused pretax losses of approximately $2.5 million in the balance of the Company's Blytheville operations in the 1998 fourth quarter due to low pricing and low utilization of equipment. In addition to the negative results incurred during the fourth quarter at its Blytheville facility, the Company's Madison facility recognized a pretax loss of approximately $.7 million during the 1998 fourth quarter relating to the sale of one of the slitters operated at this plant and liquidation of related inventory. The Company also announced that it had effected certain organizational changes, including adopting a formalized, divisional structure for its operations. Mr. Fred Dupy, who had previously served as Executive Vice President of Huntco Steel, Inc., returned to the Company in a full time capacity as President of the Flat Rolled Products Division. This division includes the entirety of the Company's operations in Catoosa, Pasadena, Madison, Chattanooga, South Carolina and Kentucky, as well as the hot rolled steel cut-to-length and slitting operation at the Company's Blytheville facility. Mr. David Hartman, President of the Company's Midwest Products, Inc. subsidiary, was named as President of the Custom Products Division. This division includes the Company's cylinder operations, its metal stamping operation at the Blytheville facility and the custom blanking and slitting operations at the Blytheville facility. Mr. Jackie Ivy retains responsibility for the Company's cold rolling, tempering and pickling operations as President of the Rolling Mill Division. The Company expects that its operating conditions will improve somewhat in the first quarter of 1999, primarily due to increased capacity utilization, but the difficult pricing environment caused by falling prices continues and the Company's inventory levels remain high. Notwithstanding this, the Company believes that it can achieve break-even results for the first quarter if no further deterioration in market conditions occurs. The Company is presently negotiating a new, multi-year credit agreement to replace its existing bank revolver, as well as modifications to the terms of its long-term notes, to provide increased near-term borrowing capacity. It expects to have these negotiations completed and new or amended agreements in place around the end of the first quarter. 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 1999 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. HUNTCO INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATION (in thousands, except per share amounts)
Year Ended Three Months December 31, Ended December 31, 1998 1997 1998 1997 ------- ------- ------- ------- (audited) (unaudited) (unaudited) Net sales $391,181 $366,553 $80,438 $93,492 Cost of sales 369,864 337,575 79,795 89,086 ------- ------- ------ ------ Gross profit 21,317 28,978 643 4,406 Selling, general and administrative expenses 19,939 17,059 5,325 4,456 ------- ------- ------ ------ Income (loss) from operations 1,378 11,919 (4,682) (50) Interest, net (8,113) (7,550) (2,101) (1,993) ------- ------- ------ ------ Income (loss) before income taxes (6,735) 4,369 (6,783) (2,043) Provision (benefit) for income taxes (2,444) 1,579 (2,462) (840) ------- ------- ------ ------ Net income (loss) (4,291) 2,790 (4,321) (1,203) Preferred dividends 200 183 50 50 ------- ------- ------ ------ Net income (loss) available for common shareholders $ (4,491) $ 2,607 $(4,371) $(1,253) ======= ======= ====== ====== Earnings (loss) per common share (basic and diluted) $ (.50) $ .29 $ (.49) $ (.14) ===== ===== ===== ===== Weighted average common shares outstanding: (basic and diluted) 8,942 8,942 8,942 8,942 ===== ===== ===== =====
HUNTCO INC. CONDENSED CONSOLIDATED BALANCE SHEETS (audited, in thousands)
December 31, 1998 1997 --------- --------- ASSETS Current assets: Cash $ 21 $ 27 Accounts receivable, net 43,579 41,643 Inventories 92,240 81,612 Other current assets 2,914 5,015 -------- -------- 138,754 128,297 Property, plant and equipment, net 143,401 145,777 Other assets 11,076 11,191 -------- -------- $293,231 $285,265 ======== ======== LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 56,923 $ 40,027 Accrued expenses 3,451 3,879 Current maturities of long-term debt 7,352 209 -------- -------- 67,726 44,115 -------- -------- Long-term debt 102,555 110,730 Deferred income taxes 7,376 9,415 -------- -------- 109,931 120,145 -------- -------- 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 24,454 29,885 -------- -------- 115,574 121,005 -------- -------- $293,231 $285,265 ======== ======== HUNTCO INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)
Year Ended December 31, 1998 1997 ------- ------- (audited) (unaudited) Cash flows from operating activities: Net income (loss) $ (4,291) $ 2,790 ------- ------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 10,265 8,883 Other (65) (175) Decrease (increase) in: accounts receivable (1,936) (8,943) inventories (10,628) (9,122) other current assets 2,101 (1,293) other assets (1,049) (5,440) Increase (decrease) in: accounts payable 16,896 21,889 accrued expenses (428) 1,701 non-current deferred taxes (2,039) 2,782 ------- ------- Total adjustments 13,117 10,282 ------- ------- Net cash provided by operations 8,826 13,072 ------- ------- Cash flows from investing activities: Cash used to acquire property, plant and equipment (6,661) (22,141) ------- ------- Cash flows from financing activities: Issuance of Series A preferred stock - 4,500 Net proceeds from newly-issued debt 978 4,500 Payments on long-term debt (2,010) (191) Common stock dividends (939) (1,252) Preferred stock dividends (200) (183) Other - (37) ------- ------- Net cash provided (used) by financing activities (2,171) 7,337 ------- ------- Net decrease in cash (6) (1,732) Cash, beginning of period 27 1,759 ------- ------- Cash, end of period $ 21 $ 27 ======= =======
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