Handy & Harman 10Q 2015 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-2394

HANDY & HARMAN LTD.

(Exact name of registrant as specified in its charter)



DELAWARE	13-3768097
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)



1133 Westchester Avenue, Suite N222 White Plains, New York	10604
(Address of principal executive offices)	(Zip Code)

914-461-1300

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer o	Accelerated filer x

Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

The number of shares of Common Stock outstanding as of July 28, 2015 was 10,782,910.

TABLE OF CONTENTS

HANDY & HARMAN LTD.



PART I - FINANCIAL INFORMATION		Page

Item 1.	Financial Statements (unaudited)	1

	Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	2

	Consolidated Income Statements for the three and six months ended June 30, 2015 and 2014	3

	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 and 2014	4

	Consolidated Statement of Changes in Stockholders' Equity for the six months ended June 30, 2015	5

	Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014	6

	Notes to Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22

Item 4.	Controls and Procedures	27

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 6.	Exhibits	30

SIGNATURES		31

Part I - FINANCIAL INFORMATION

Item 1. - Financial Statements (unaudited)

HANDY & HARMAN LTD.

CONSOLIDATED BALANCE SHEETS

(Unaudited)



	June 30,			December 31,
(in thousands, except par value)	2015			2014
ASSETS
Current Assets:
Cash and cash equivalents	$	18,748		$	31,649
Trade and other receivables - net of allowance for doubtful accounts of $1,533 and $1,742, respectively	92,534			59,463
Inventories, net	71,842			63,929
Deferred income tax assets - current	12,722			26,719
Prepaid and other current assets	5,971			7,111
Assets of discontinued operations	—			69,673
Total current assets	201,817			258,544
Property, plant and equipment at cost, less accumulated depreciation	69,361			67,621
Goodwill	89,499			68,253
Other intangibles, net	36,131			33,338
Investment in associated company	29,529			23,936
Deferred income tax assets	78,907			71,710
Other non-current assets	14,768			15,357
Total assets	$	520,012		$	538,759
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade payables	$	40,642		$	30,805
Accrued liabilities	22,064			23,368
Accrued environmental liabilities	2,018			2,424
Short-term debt	835			602
Current portion of long-term debt	6,256			6,378
Deferred income tax liabilities - current	205			186
Liabilities of discontinued operations	—			13,698
Total current liabilities	72,020			77,461
Long-term debt	84,823			196,423
Accrued pension liability	205,672			208,388
Other post-retirement benefit obligations	2,668			2,914
Other liabilities	4,220			4,184
Total liabilities	369,403			489,370
Commitments and Contingencies
Stockholders' Equity:
Common stock - $.01 par value; authorized 180,000 shares; issued 13,583 and 13,580 shares, respectively	136			136
Accumulated other comprehensive loss	(235,245		)	(235,822		)
Additional paid-in capital	571,427			570,256
Treasury stock, at cost - 2,800 shares	(70,375		)	(70,375		)
Accumulated deficit	(115,334		)	(214,806		)
Total stockholders' equity	150,609			49,389
Total liabilities and stockholders' equity	$	520,012		$	538,759

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HANDY & HARMAN LTD.

CONSOLIDATED INCOME STATEMENTS

(Unaudited)



	Three Months Ended					Six Months Ended
	June 30,					June 30,
(in thousands, except per share)	2015			2014		2015			2014
Net sales	$	166,475		$	168,545	$	304,457		$	304,032
Cost of goods sold	118,299			120,918		217,903			219,254
Gross profit	48,176			47,627		86,554			84,778
Selling, general and administrative expenses	30,892			28,937		61,751			59,630
Pension expense	2,072			1,105		4,145			2,210
Operating income	15,212			17,585		20,658			22,938
Other:
Interest expense	1,107			1,603		2,275			3,149
Realized and unrealized (gain) loss on derivatives	(312		)	606		(105		)	466
Other expense	113			77		204			146
Income from continuing operations before tax and equity investment	14,304			15,299		18,284			19,177
Tax provision	5,867			6,648		7,511			8,455
Loss from associated company, net of tax	2,161			1,242		1,239			6,540
Income from continuing operations, net of tax	6,276			7,409		9,534			4,182
Discontinued operations:
Income from discontinued operations, net of tax	—			3,667		565			6,482
(Loss) gain on disposal of assets, net of tax	(147		)	—		89,373			42
Net (loss) income from discontinued operations	(147		)	3,667		89,938			6,524
Net income	$	6,129		$	11,076	$	99,472		$	10,706
Basic and diluted income (loss) per share of common stock
Income from continuing operations, net of tax, per share	$	0.58		$	0.56	$	0.88		$	0.32
Discontinued operations, net of tax, per share	(0.01		)	0.28		8.35			0.50
Net income per share	$	0.57		$	0.84	$	9.23		$	0.82
Weighted-average number of common shares outstanding	10,784			13,114		10,782			13,055

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HANDY & HARMAN LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2015		2014		2015			2014
Net income	$	6,129	$	11,076	$	99,472		$	10,706

Other comprehensive income (loss), net of tax:
Changes in pension liability and other post-retirement benefit obligations	—		—		2,022			—
Tax effect of changes in pension liability and other post-retirement benefit obligations	—		—		(395		)	—
Foreign currency translation adjustments	347		110		(1,050		)	(119		)
Other comprehensive income (loss)	347		110		577			(119		)

Comprehensive income	$	6,476	$	11,186	$	100,049		$	10,587

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HANDY & HARMAN LTD.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)




	Common Stock			Accumulated Other Comprehensive			Additional Paid-In		Treasury Stock,			Accumulated			Total Stockholders'
(in thousands)	Shares	Amount		Loss			Capital		at Cost			Deficit			Equity
Balance, December 31, 2014	13,580	$	136	$	(235,822	)	$	570,256	$	(70,375	)	$	(214,806	)	$	49,389
Amortization, issuance and forfeitures of restricted stock grants	3	—		—			1,171		—			—			1,171
Changes in pension liability and post-retirement benefit obligations, net of tax	—	—		1,627			—		—			—			1,627
Foreign currency translation adjustments	—	—		(1,050		)	—		—			—			(1,050		)
Net income	—	—		—			—		—			99,472			99,472
Balance, June 30, 2015	13,583	$	136	$	(235,245	)	$	571,427	$	(70,375	)	$	(115,334	)	$	150,609

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HANDY & HARMAN LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Six Months Ended
	June 30,
(in thousands)	2015			2014
Cash flows from operating activities:
Net income	$	99,472		$	10,706
Net income from discontinued operations	(89,938		)	(6,524		)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	6,650			6,687
Non-cash stock-based compensation	2,051			2,399
Non-cash loss from investment in associated company, net of tax	1,239			6,540
Amortization of debt issuance costs	552			414
Deferred income taxes	5,735			6,337
Gain from asset dispositions	(140		)	(49		)
Non-cash gain from derivatives	(205		)	(89		)
Reclassification of net cash settlements on precious metal contracts to investing activities	100			554
Change in operating assets and liabilities, net of acquisitions:
Trade and other receivables	(30,949		)	(29,348		)
Inventories	(6,324		)	(16,129		)
Prepaid and other current assets	1,120			2,306
Other current liabilities	1,520			6,508
Other items, net	(137		)	269
Net cash used in continuing operations	(9,254		)	(9,419		)
Net cash (used in) provided by discontinued operations	(2,266		)	7,861
Net cash used in operating activities	(11,520		)	(1,558		)
Cash flows from investing activities:
Additions to property, plant and equipment	(6,979		)	(4,971		)
Net cash settlements on precious metal contracts	(100		)	(554		)
Acquisitions, net of cash acquired	(27,440		)	—
Proceeds from sale of assets	181			126
Investments in associated company	(7,607		)	—
Proceeds from sale of discontinued operations	152,889			—
Net cash used in investing activities of discontinued operations	(75		)	(1,490		)
Net cash provided by (used in) investing activities	110,869			(6,889		)



	Six Months Ended
	June 30,
(in thousands)	2015			2014
Cash flows from financing activities:
Proceeds from WHX CS Loan	—			4,500
Net revolver (repayments) borrowings	(111,475		)	10,350
Net borrowings on loans - foreign	268			323
Repayments of term loans - domestic	(176		)	(6,409		)
Deferred finance charges	(328		)	(88		)
Net change in overdrafts	(450		)	1,912
Purchases of treasury stock	—			(4,593		)
Other financing activities	9			(2		)
Net cash provided by financing activities of discontinued operations	—			1,495
Net cash (used in) provided by financing activities	(112,152		)	7,488
Net change for the period	(12,803		)	(959		)
Effect of exchange rate changes on cash and cash equivalents	(98		)	(20		)
Cash and cash equivalents at beginning of period	31,649			10,300
Cash and cash equivalents at end of period	$	18,748		$	9,321

Cash paid during the period for:
Interest	$	1,686		$	3,299
Taxes	$	2,881		$	3,496

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 – The Company and Nature of Operations

Handy & Harman Ltd. ("HNH") is a diversified manufacturer of engineered niche industrial products. HNH's diverse product offerings are marketed throughout the United States and internationally. HNH owns Handy & Harman Group Ltd. ("H&H Group"), which owns Handy & Harman ("H&H") and Bairnco, LLC ("Bairnco"), formerly Bairnco Corporation. HNH manages its group of businesses on a decentralized basis with operations principally in North America. HNH's business units encompass the following segments: Joining Materials, Tubing, Building Materials and Kasco Blades and Route Repair Services ("Kasco"). All references herein to "we," "our" or the "Company" refer to HNH together with all of its subsidiaries.

Note 2 – Basis of Presentation

The consolidated balance sheet as of December 31, 2014, which has been derived from audited financial statements, and the unaudited consolidated financial statements included herein have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") have been condensed or omitted in accordance with those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. This quarterly report on Form 10-Q should be read in conjunction with the Company's audited consolidated financial statements on Form 10-K for the year ended December 31, 2014. Certain amounts for the prior year have been reclassified to conform to the current year presentation.

In the opinion of management, the interim financial statements reflect all normal and recurring adjustments necessary to present fairly the consolidated financial position and the results of operations and changes in cash flows for the interim periods. The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Estimates are based on historical experience, expected future cash flows and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the operating results for the full year.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and the guidance defines a five step process to achieve this core principle. The ASU is scheduled to be effective for the Company's 2017 fiscal year, however, the FASB has affirmed its proposal to defer the effective date of the new revenue standard for all entities by one year. The ASU may be applied either (i) retrospectively to each prior reporting period presented with an election for certain specified practical expedients, or (ii) retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application, with additional disclosure requirements. The Company is evaluating the potential impact of this new guidance, but does not currently anticipate that the application of ASU No. 2014-09 will have a significant effect on its financial condition, results of operations or its cash flows. We have not yet determined the method by which we will adopt the standard.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The amendments do not apply to inventory that is measured using the last-in, first-out ("LIFO") cost method. The Company is currently evaluating the potential impact of this new guidance, which is effective for the Company's 2017 fiscal year.

Note 3 – Acquisitions

On March 31, 2015, the Company, through its indirect subsidiary, OMG, Inc. ("OMG"), acquired certain assets and assumed certain liabilities of ITW Polymers Sealants North America Inc. ("ITW"), which are used in the business of manufacturing two-component polyurethane adhesive for the roofing industry, for a cash purchase price of $27.4 million, reflecting a final working capital adjustment of $0.4 million. The assets acquired and liabilities assumed primarily include net working capital of inventories and accrued liabilities; property, plant and equipment; and intangible assets, primarily unpatented technology, valued at $1.7

million, $0.1 million and $4.4 million, respectively, on a preliminary basis. ITW was the exclusive supplier of certain adhesive products to OMG, and this acquisition will provide OMG with greater control of its supply chain and allow OMG to expand its product development initiatives. The results of operations of the acquired business will be reported within the Company's Building Materials segment. In connection with the ITW acquisition, the Company has recorded goodwill totaling approximately $21.3 million on a preliminary basis, which is expected to be deductible for income tax purposes.

Note 4 – Discontinued Operations

The following business is classified as a discontinued operation in the consolidated financial statements.

Arlon, LLC

On December 18, 2014, H&H Group and Bairnco entered into a stock purchase agreement to sell all of the issued and outstanding equity interests of Arlon, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Bairnco, and its subsidiaries (other than Arlon India (Pvt) Limited) for $157.0 million in cash, less transaction fees, subject to a final working capital adjustment and certain potential reductions as provided in the stock purchase agreement. The closing of the sale occurred in January 2015. The operations of Arlon, LLC comprised substantially all of the Company's former Arlon Electronic Materials segment, which manufactured high performance materials for the printed circuit board industry and silicone rubber-based materials.

The assets and liabilities of discontinued operations were segregated on the consolidated balance sheet as of December 31, 2014. No balances from discontinued operations remain at June 30, 2015.



	December 31,
(in thousands)	2014
Assets of Discontinued Operations:
Trade and other receivables, net	$	16,044
Inventories, net	8,294
Prepaid and other current assets	811
Property, plant and equipment, net	24,754
Goodwill	9,298
Other intangibles, net	10,472
Total assets of discontinued operations	$	69,673

Liabilities of Discontinued Operations:
Trade payables	$	6,252
Accrued liabilities	3,986
Accrued pension liability	1,794
Other liabilities	1,666
Total liabilities of discontinued operations	$	13,698

The net (loss) income from discontinued operations includes the following:



	Three Months Ended					Six Months Ended
	June 30,					June 30,
(in thousands)	2015			2014		2015			2014
Net sales	$	—		$	26,946	$	5,952		$	53,306
Operating income	—			5,671		920			10,008
Interest expense and other income	—			3		(10		)	(10		)
Tax provision	—			2,001		365			3,536
Income from discontinued operations, net of tax	—			3,667		565			6,482
(Loss) gain on disposal of assets	(38		)	—		93,416			71
Tax provision	109			—		4,043			29
(Loss) gain on disposal of assets, net of tax	(147		)	—		89,373			42
Net (loss) income from discontinued operations	$	(147	)	$	3,667	$	89,938		$	6,524

Based on a tax reorganization completed in anticipation of the sale of Arlon, LLC, as well as the release of Arlon, LLC’s net deferred tax liabilities totaling $7.6 million, the effective tax rate on the gain on disposal of Arlon, LLC was 4.3%.

Note 5 – Inventories

Inventories, net at June 30, 2015 and December 31, 2014 were comprised of:



	June 30,			December 31,
(in thousands)	2015			2014
Finished products	$	24,471		$	24,424
In-process	12,810			10,310
Raw materials	14,319			12,346
Fine and fabricated precious metals in various stages of completion	20,432			17,094
	72,032			64,174
LIFO reserve	(190		)	(245		)
Total	$	71,842		$	63,929

In order to produce certain of its products, H&H purchases, maintains and utilizes precious metal inventory. H&H records certain of its precious metal inventory at the lower of LIFO cost or market, with any adjustments recorded through cost of goods sold. Remaining precious metal inventory is accounted for primarily at fair value.

Certain customers and suppliers of H&H choose to do business on a "pool" basis and furnish precious metal to H&H for return in fabricated form or for purchase from or return to the supplier. When the customer metal is returned in fabricated form, the customer is charged a fabrication charge. The value of this customer metal is not included on the Company's consolidated balance sheet. To the extent H&H is able to utilize customer precious metal in its production processes, such customer metal replaces the need for H&H to purchase its own inventory. As of June 30, 2015, customer metal in H&H's custody consisted of 148,478 ounces of silver, 538 ounces of gold and 1,392 ounces of palladium.



Supplemental inventory information:	June 30,		December 31,
(in thousands, except per ounce)	2015		2014
Precious metals stated at LIFO cost	$	7,811	$	4,684
Precious metals stated under non-LIFO cost methods, primarily at fair value	$	12,431	$	12,165
Market value per ounce:
Silver	$	15.79	$	15.75
Gold	$	1,170.50	$	1,199.25
Palladium	$	676.00	$	798.00

Note 6 – Goodwill and Other Intangibles

The changes in the net carrying amount of goodwill by reportable segment for the six months ended June 30, 2015 were as follows (in thousands):



Segment	Balance at January 1, 2015		Foreign Currency Translation Adjustments			Additions		Adjustments		Balance at June 30, 2015		Accumulated Impairment Losses
Joining Materials	$	16,238	$	(22	)	$	—	$	—	$	16,216	$	—
Tubing	1,895		—			—		—		1,895		—
Building Materials	50,120		—			21,268		—		71,388		—
Total	$	68,253	$	(22	)	$	21,268	$	—	$	89,499	$	—

Other intangible assets as of June 30, 2015 and December 31, 2014 consisted of:



(in thousands)	June 30, 2015							December 31, 2014
	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
Customer relationships	$	31,977	$	(9,509	)	$	22,468	$	31,977	$	(8,524	)	$	23,453
Trademarks, trade names and brand names	8,419		(2,254		)	6,165		8,419		(2,004		)	6,415
Patents and patent applications	5,488		(2,422		)	3,066		5,354		(2,229		)	3,125
Non-compete agreements	774		(691		)	83		709		(671		)	38
Other	5,653		(1,304		)	4,349		1,358		(1,051		)	307
Total	$	52,311	$	(16,180	)	$	36,131	$	47,817	$	(14,479	)	$	33,338

The $21.3 million addition to goodwill within the Building Materials segment during the six months ended June 30, 2015 was due to the Company's ITW acquisition discussed in Note 3 - "Acquisitions." Other intangible assets as of June 30, 2015 also include $4.4 million in intangible assets, primarily unpatented technology, associated with the ITW acquisition. These balances are subject to adjustment during the finalization of the purchase price allocation for the ITW acquisition.

Amortization expense totaled $0.9 million and $0.8 million for the three months ended June 30, 2015 and 2014, respectively, and $1.7 million and $1.6 million for the six months ended June 30, 2015 and 2014, respectively.

Note 7 – Investments

The Company holds an investment in the common stock of a public company, ModusLink Global Solutions, Inc. ("ModusLink"), which is classified as an investment in associated company on the consolidated balance sheet. The Company carries its ModusLink investment on the consolidated balance sheet at fair value, calculated based on the closing market price for ModusLink common stock, with unrealized gains and losses on the investment reported in net income or loss. HNH owned 8,436,715 and 6,383,005 shares of the common stock of ModusLink at June 30, 2015 and December 31, 2014, respectively, and the value of this investment increased from $23.9 million at December 31, 2014 to $29.5 million at June 30, 2015 due to the additional shares of ModusLink common stock purchased by the Company during 2015.

As of June 30, 2015, Steel Partners Holdings L.P. ("SPLP") and its associated companies, which include the Company, owned a combined total of 16,476,730 ModusLink common shares, which represented 31.5% of ModusLink's outstanding shares. SPLP is a majority shareholder of HNH, owning directly or indirectly through its subsidiaries in excess of 50% of HNH's common shares. The power to vote and dispose of the securities held by SPLP is controlled by Steel Partners Holdings GP Inc. ("SPH GP"). SPLP also holds warrants to purchase 2,000,000 additional shares of ModusLink common stock at an exercise price of $5.00 per share. These warrants will expire in March 2018.

ModusLink's fiscal year ends on July 31. Summarized unaudited information as to assets, liabilities and results of operations of ModusLink for the quarter ended April 30, 2015, its most recently completed fiscal quarter, and the comparable prior periods are as follows:



	April 30,			July 31,
(in thousands)	2015			2014
Current assets	$	438,875		$	405,768
Non-current assets	$	36,700		$	45,878
Current liabilities	$	238,811		$	198,594
Non-current liabilities	$	84,718		$	81,434
Stockholders' equity	$	152,046		$	171,618

	Three Months Ended						Six Months Ended
	April 30,						April 30,
(in thousands)	2015			2014			2015			2014
Net revenue	$	106,234		$	173,274		$	254,544		$	367,285
Gross profit	$	9,012		$	15,699		$	25,606		$	38,279
Loss from continuing operations	$	(12,106	)	$	(9,478	)	$	(13,662	)	$	(8,415	)
Net loss	$	(12,106	)	$	(9,478	)	$	(13,662	)	$	(8,414	)

Note 8 – Debt

Debt at June 30, 2015 and December 31, 2014 was as follows:



	June 30,		December 31,
(in thousands)	2015		2014
Short-term debt
Foreign	$	835	$	602
Long-term debt
Revolving facilities	81,900		193,375
Other H&H debt - domestic	7,839		8,014
Foreign loan facilities	1,340		1,412
Sub total	91,079		202,801
Less portion due within one year	6,256		6,378
Total long-term debt	84,823		196,423
Total debt	$	91,914	$	203,403

Senior Credit Facilities

On August 29, 2014, H&H Group entered into an amended and restated senior credit agreement ("Senior Credit Facility"), which provides for an up to $365.0 million senior secured revolving credit facility, including a $20.0 million sublimit for the issuance of letters of credit and a $20.0 million sublimit for the issuance of swing loans. Borrowings under the Senior Credit Facility bear interest, at H&H Group's option, at either LIBOR or the Base Rate, as defined, plus an applicable margin as set forth in the loan agreement (1.75% and 0.75%, respectively, for LIBOR and Base Rate borrowings at June 30, 2015), and the revolving facility provides for a commitment fee to be paid on unused borrowings. The weighted-average interest rate on the revolving facility was 1.97% at June 30, 2015. H&H Group's availability under the Senior Credit Facility was $153.8 million as of June 30, 2015.

On January 22, 2015, H&H Group, and certain subsidiaries of H&H Group, entered into an amendment to its Senior Credit Facility to, among other things, provide for the consent of the administrative agent and the lenders, subject to compliance with certain conditions, for the tender offer by HNH Group Acquisition LLC, a newly formed subsidiary of H&H Group, for the shares of JPS Industries, Inc. ("JPS"), including the use of up to $71.0 million under the Senior Credit Facility to purchase such shares, and certain transactions related thereto. In addition, HNH Group Acquisition LLC and HNH Acquisition LLC, another newly formed subsidiary of H&H Group, became guarantors under the Senior Credit Facility pursuant to the amendment. See further discussion regarding the JPS transaction in Note 19 - "Subsequent Events."

The Senior Credit Facility will expire, with all amounts outstanding due and payable, on August 29, 2019. The Senior Credit Facility is guaranteed by substantially all existing and thereafter acquired or created domestic and Canadian wholly-owned subsidiaries of H&H Group, and obligations under the Senior Credit Facility are collateralized by first priority security interests in and liens upon all present and future assets of H&H Group and these subsidiaries. The Senior Credit Facility restricts H&H Group's ability to transfer cash or other assets to HNH, subject to certain exceptions, including required pension payments to the WHX Corporation Pension Plan ("WHX Pension Plan"). The Senior Credit Facility is subject to certain mandatory prepayment provisions and restrictive and financial covenants, which include a maximum ratio limit on Total Leverage and a minimum ratio limit on Fixed Charge Coverage, as defined, as well as a minimum liquidity level. The Company was in compliance with all debt covenants at June 30, 2015.

The Company's prior senior credit facility, as amended, consisted of a revolving credit facility in an aggregate principal amount not to exceed $110.0 million and a senior term loan. On August 5, 2014, this agreement was further amended to, among other things, permit a new $40.0 million term loan and permit H&H Group to make a distribution to HNH of up to $80.0 million. The revolving facility provided for a commitment fee to be paid on unused borrowings. Borrowings under the prior senior credit facility bore interest, at H&H Group's option, at a rate based on LIBOR or the Base Rate, as defined, plus an applicable margin as set forth in the loan agreement. On August 29, 2014, all amounts outstanding under this agreement were repaid.

Interest Rate Swap Agreements

H&H Group entered into an interest rate swap agreement in February 2013 to reduce its exposure to interest rate fluctuations. Under the interest rate swap, the Company receives one-month LIBOR in exchange for a fixed interest rate of 0.569% over the life of the agreement on an initial $56.4 million notional amount of debt, with the notional amount decreasing by $1.1 million, $1.8 million and $2.2 million per quarter in 2013, 2014 and 2015, respectively. The agreement expires in February 2016. H&H Group entered into a second interest rate swap agreement in June 2013, also to reduce its exposure to interest rate fluctuations. Under the interest rate swap, the Company receives one-month LIBOR in exchange for a fixed interest rate of 0.598% over the life of the agreement on an initial $5.0 million notional amount of debt, with the notional amount decreasing by $0.1 million, $0.2 million and $0.2 million per quarter in 2013, 2014 and 2015, respectively. The agreement expires in February 2016.

WHX CS Loan

On June 3, 2014, WHX CS Corp., a wholly-owned subsidiary of the Company, entered into a credit agreement ("WHX CS Loan"), which provided for a term loan facility with borrowing availability of up to a maximum aggregate principal amount of $15.0 million. The amounts outstanding under the WHX CS Loan bore interest at LIBOR plus 1.25%. On August 29, 2014, the WHX CS Loan was terminated and all outstanding amounts thereunder were repaid.

Note 9 – Derivative Instruments

Precious Metal and Commodity Inventories

H&H's precious metal and commodity inventories are subject to market price fluctuations. H&H enters into commodity futures and forward contracts to mitigate the impact of price fluctuations on its precious and certain non-precious metal inventories that are not subject to fixed price contracts. The Company's hedging strategy is designed to protect it against normal volatility; therefore, abnormal price changes in these commodities or markets could negatively impact HNH's earnings. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes.

As of June 30, 2015, the Company had the following outstanding forward contracts with settlement dates through September 2015. There were no futures contracts outstanding at June 30, 2015.



			Notional Value
Commodity	Amount		($ in millions)
Silver	885,000	ounces	$	14.0
Gold	1,100	ounces	$	1.3
Copper	350,000	pounds	$	0.9
Tin	40	metric tons	$	0.6

H&H accounts for these contracts as either fair value hedges or economic hedges under the guidance in Accounting Standards Codification ("ASC") 815, Derivatives and Hedging.

Fair Value Hedges. Of the total forward contracts outstanding, 650,000 ounces of silver and substantially all of the copper contracts are designated and accounted for as fair value hedges under ASC 815. The fair values of these derivatives are recognized as derivative assets and liabilities on the consolidated balance sheet. The net change in fair value of the derivative assets and liabilities, and the change in the fair value of the underlying hedged inventory, are recognized in the consolidated income statement, and such amounts principally offset each other due to the effectiveness of the hedges. The fair value hedges are associated primarily with the Company's precious metal inventory carried at fair value.

Economic Hedges. The remaining outstanding forward contracts for silver, and all of the contracts for gold and tin, are accounted for as economic hedges. As these derivatives are not designated as accounting hedges under ASC 815, they are accounted for as derivatives with no hedge designation. The derivatives are marked to market, and both realized and unrealized gains and losses are recorded in current period earnings in the consolidated income statement. The economic hedges are associated primarily with the Company's precious metal inventory valued using the LIFO method.

The forward contracts were made with a counter party rated A+ by Standard & Poors. Accordingly, the Company has determined that there is minimal credit risk of default. The Company estimates the fair value of its derivative contracts through the use of market quotes or with the assistance of brokers when market information is not available. The Company maintains collateral on account with the third-party broker. Such collateral consists of both cash that varies in amount depending on the value of open contracts, as well as ounces of precious metal held on account by the broker.

Debt Agreements

H&H Group has entered into two interest rate swap agreements to reduce its exposure to interest rate fluctuations. See Note 8 - "Debt" for further discussion of the terms of these arrangements. These derivatives are not designated as accounting hedges under U.S. GAAP; they are accounted for as derivatives with no hedge designation. The Company records the gains or losses both from the mark-to-market adjustments and net settlements in interest expense in the consolidated income statement as the hedges are intended to offset interest rate movements.

Effect of Derivative Instruments in the Consolidated Income Statements - Income/(Expense)



(in thousands)		Three Months Ended						Six Months Ended
		June 30,						June 30,
Derivative	Income Statement Line	2015			2014			2015			2014
Commodity contracts	Cost of goods sold	$	893		$	(783	)	$	(21	)	$	(909	)
	Total derivatives designated as hedging instruments	893			(783		)	(21		)	(909		)
Commodity contracts	Cost of goods sold	131			(6		)	278			(27		)
Commodity contracts	Realized and unrealized gain (loss) on derivatives	312			(606		)	105			(466		)
Interest rate swap agreements	Interest expense	(18		)	(80		)	(63		)	(125		)
	Total derivatives not designated as hedging instruments	425			(692		)	320			(618		)
	Total derivatives	$	1,318		$	(1,475	)	$	299		$	(1,527	)

Fair Value of Derivative Instruments on the Consolidated Balance Sheets - Asset/(Liability)



(in thousands)		June 30,			December 31,
Derivative	Balance Sheet Location	2015			2014
Commodity contracts	Prepaid and other current assets	$	603		$	667
	Total derivatives designated as hedging instruments	603			667
Commodity contracts	Prepaid and other current assets	243			97
Interest rate swap agreements	Other liabilities	(103		)	(138		)
	Total derivatives not designated as hedging instruments	140			(41		)
	Total derivatives	$	743		$	626

Note 10 – Pension and Other Post-Retirement Benefits

The following table presents the components of net periodic pension expense for the Company's pension plan for the three and six months ended June 30, 2015 and 2014:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2015			2014			2015			2014
Interest cost	$	4,760		$	5,248		$	9,520		$	10,496
Expected return on plan assets	(5,518		)	(6,050		)	(11,035		)	(12,100		)
Amortization of actuarial loss	2,830			1,907			5,660			3,814
Total	$	2,072		$	1,105		$	4,145		$	2,210

The actuarial loss occurred principally because the historical investment returns on the assets of the WHX Pension Plan have been lower than the actuarial assumptions. The actuarial losses are being amortized over the average future lifetime of the participants, which is expected to be approximately 20 years. The Company believes that use of the future lifetime of the participants is appropriate because the WHX Pension Plan is completely inactive.

The Company expects to have required minimum contributions to the WHX Pension Plan of $10.3 million for the remainder of 2015, and $14.3 million, $15.3 million, $17.0 million, $18.3 million and $56.4 million in 2016, 2017, 2018, 2019, and for the five years thereafter, respectively. Required future contributions are estimated based upon assumptions regarding such matters as discount rates on future obligations, assumed rates of return on plan assets and legislative changes. Actual future pension costs and required funding obligations will be affected by changes in the factors and assumptions described in the previous sentence, as well as other changes such as any plan termination or other acceleration events.

In addition to its pension plan, which is included in the table above, the Company also maintains several other post-retirement benefit plans covering certain of its employees and retirees. The approximate aggregate expense for these plans was $0.4 million and $0.5 million for the three months ended June 30, 2015 and 2014, respectively, and $0.9 million and $0.9 million for the six months ended June 30, 2015 and 2014, respectively.

Note 11 – Stockholders' Equity

Accumulated Other Comprehensive Loss

Changes, net of tax, in accumulated other comprehensive loss and its components follow:



(in thousands)	Foreign Currency Translation Adjustments			Changes in Net Pension and Other Benefit Obligations			Total
Balance at December 31, 2014	$	(1,957	)	$	(233,865	)	$	(235,822	)
Current period (loss) income	(1,050		)	1,627			577
Balance at June 30, 2015	$	(3,007	)	$	(232,238	)	$	(235,245	)

The current period foreign currency translation adjustments include a $0.2 million increase in accumulated other comprehensive loss associated with the sale of Arlon, LLC. The changes in net pension and other benefit obligations of $1.6 million are also related to the sale of Arlon, LLC, which sponsored a defined benefit pension plan that had an accumulated other comprehensive loss. See Note 4 - "Discontinued Operations" for further discussion of the sale of Arlon, LLC.

Note 12 – Stock-Based Compensation

During the six months ended June 30, 2015, the Compensation Committee of the Company's Board of Directors approved the grant of an aggregate of 52,714 shares of restricted stock under the 2007 Incentive Stock Plan, as amended ("2007 Plan"), to certain employees, members of the Board of Directors and service providers. Restricted stock grants made to employees are in lieu of a long-term incentive plan component in the Company's bonus plan for those individuals who receive shares of restricted stock.

Compensation expense is measured based on the fair value of the stock-based awards on the grant date, as measured by the NASDAQ closing price for the Company's common stock. Compensation expense is recognized in the consolidated income statement on a straight-line basis over the requisite service period, which is the vesting period. The restricted stock grants made to employees and service providers in 2015 vest in approximately equal annual installments over a three year period from the grant date. The restricted stock grants to the Company's non-employee directors vest one year from the grant date.

The Company allows certain grantees to forego the issuance of shares to meet applicable income tax withholding due as a result of the vesting of restricted stock. Such shares are returned to the unissued shares of the Company's common stock.

Restricted stock activity under the 2007 Plan was as follows for the six months ended June 30, 2015:



	Employees
	and Service
(shares)	Providers		Directors	Total
Balance, January 1, 2015	616,248		785,000	1,401,248
Granted	12,439		40,275	52,714
Forfeited	(7,854	)	—	(7,854	)
Reduced for income tax obligations	(41,401	)	—	(41,401	)
Balance, June 30, 2015	579,432		825,275	1,404,707

Vested	492,960		785,733	1,278,693
Non-vested	86,472		39,542	126,014

The Company recognized compensation expense related to restricted shares of $0.7 million and $1.3 million for the three months ended June 30, 2015 and 2014, respectively, and $2.1 million and $2.4 million for the six months ended June 30, 2015 and 2014, respectively. Unearned compensation expense related to restricted shares at June 30, 2015 is $2.6 million, which is net of an estimated 5% forfeiture rate for employees and service providers. This amount will be recognized over the remaining vesting period of the restricted shares.

Note 13 – Income Taxes

For the three months ended June 30, 2015 and 2014, tax provisions from continuing operations of $5.9 million and $6.6 million, respectively, were recorded. The effective tax rates in the three months ended June 30, 2015 and 2014 were 41.0% and 43.5%, respectively. For the six months ended June 30, 2015 and 2014, tax provisions from continuing operations of $7.5 million and $8.5 million, respectively, were recorded. The effective tax rates in the six months ended June 30, 2015 and 2014 were 41.1% and 44.1%, respectively. The provision for income taxes is based on the current estimate of the annual effective tax rate, adjusted for discrete items that occurred within the respective periods. Changes in the effective tax rate arise principally from differences in the mix of income between taxable jurisdictions, including the impact of foreign sourced income, as well as changes in estimates associated with our projected annual state tax expense.

Note 14 – Earnings Per Share

The computation of basic earnings per share of common stock is calculated by dividing net income by the weighted-average number of shares of the Company's common stock outstanding, as follows:



	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands, except per share)	2015			2014		2015		2014
Income from continuing operations, net of tax	$	6,276		$	7,409	$	9,534	$	4,182
Weighted-average number of common shares outstanding	10,784			13,114		10,782		13,055
Income from continuing operations, net of tax, per share	$	0.58		$	0.56	$	0.88	$	0.32
Net (loss) income from discontinued operations	$	(147	)	$	3,667	$	89,938	$	6,524
Weighted-average number of common shares outstanding	10,784			13,114		10,782		13,055
Discontinued operations, net of tax, per share	$	(0.01	)	$	0.28	$	8.35	$	0.50
Net income	$	6,129		$	11,076	$	99,472	$	10,706
Weighted-average number of common shares outstanding	10,784			13,114		10,782		13,055
Net income per share	$	0.57		$	0.84	$	9.23	$	0.82

Diluted earnings per share gives effect to dilutive potential common shares outstanding during the reporting period. The Company had potentially dilutive common share equivalents, in the form of outstanding stock options, during the three and six months ended June 30, 2015 and 2014, although none were dilutive because the exercise price of these equivalents exceeded the market value of the Company's common stock during those periods. As of June 30, 2015, stock options for an aggregate of 35,600 shares are excluded from the calculations above.

Note 15 – Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the "exit price") in an orderly transaction between market participants at the measurement date. Fair value measurements are broken down into three levels based on the reliability of inputs as follows:

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The valuation under this approach does not entail a significant degree of judgment ("Level 1").

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates and yield curves observable at commonly quoted intervals or current market) and contractual prices for the underlying financial instrument, as well as other relevant economic measures ("Level 2").

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date ("Level 3").

The fair value of the Company's financial instruments, such as cash and cash equivalents, trade and other receivables, and trade payables, approximate carrying value due to the short-term maturities of these assets and liabilities. Carrying cost approximates fair value for the Company's long-term debt which has variable interest rates.

The fair value of the Company's investment in associated company is a Level 1 measurement because the underlying security is listed on a national securities exchange.

The precious metal and commodity inventories associated with the Company's fair value hedges (see Note 9 - "Derivative Instruments") are reported at fair value. Fair values of these inventories are based on quoted market prices on commodity exchanges and are considered Level 1 measurements. The derivative instruments that the Company purchases in connection with its precious metal and commodity inventories, specifically commodity futures and forward contracts, are also valued at fair value. The futures contracts are Level 1 measurements since they are traded on a commodity exchange. The forward contracts are entered into with a counterparty and are considered Level 2 measurements.

The Company's interest rate swap agreements are considered Level 2 measurements as the inputs are observable at commonly quoted intervals.

The following table summarizes the Company's assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014:



	Asset (Liability) as of June 30, 2015
(in thousands)	Total			Level 1		Level 2			Level 3
Investment in associated company	$	29,529		$	29,529	$	—		$	—
Precious metal and commodity inventories recorded at fair value	$	13,195		$	13,195	$	—		$	—
Commodity contracts on precious metal and commodity inventories	$	846		$	—	$	846		$	—
Interest rate swap agreements	$	(103	)	$	—	$	(103	)	$	—



	Asset (Liability) as of December 31, 2014
(in thousands)	Total			Level 1		Level 2			Level 3
Investment in associated company	$	23,936		$	23,936	$	—		$	—
Precious metal and commodity inventories recorded at fair value	$	13,249		$	13,249	$	—		$	—
Commodity contracts on precious metal and commodity inventories	$	764		$	764	$	—		$	—
Interest rate swap agreements	$	(138	)	$	—	$	(138	)	$	—

The Company's non-financial assets and liabilities measured at fair value on a non-recurring basis include goodwill and other intangible assets, any assets and liabilities acquired in a business combination, or its long-lived assets written down to fair value. To measure fair value for such assets and liabilities, the Company uses techniques including an income approach, a market approach and/or appraisals (Level 3 inputs). Long-lived assets consisting of land and buildings used in previously operating businesses and currently unused, which total $8.4 million as of June 30, 2015, are carried at the lower of cost or fair value, and are included primarily in other non-current assets on the consolidated balance sheet. A reduction in the carrying value of such long-lived assets is recorded as an asset impairment charge in the consolidated income statement.

Note 16 – Commitments and Contingencies

Environmental Matters

Certain H&H Group subsidiaries have existing and contingent liabilities relating to environmental matters, including capital expenditures, costs of remediation, and potential fines and penalties relating to possible violations of national and state environmental laws. Those subsidiaries have remediation expenses on an ongoing basis, although such costs are continually being readjusted based upon the emergence of new techniques and alternative methods. The Company had approximately $2.0 million accrued related to estimated environmental remediation costs as of June 30, 2015. The Company also has insurance coverage available for several of these matters and believes that excess insurance coverage may be available as well. During the quarter ended March 31, 2015, the Company recorded an insurance reimbursement of $1.2 million for previously incurred remediation costs.

In addition, certain H&H Group subsidiaries have been identified as potentially responsible parties ("PRPs") under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or similar state statutes at sites and are parties to administrative consent orders in connection with certain properties. Those subsidiaries may be subject to joint and several liabilities imposed by CERCLA on PRPs. Due to the technical and regulatory complexity of remedial activities and the difficulties attendant in identifying PRPs and allocating or determining liability among them, the subsidiaries are unable to reasonably estimate the ultimate cost of compliance with such laws.

Based upon information currently available, however, the H&H Group subsidiaries do not expect that their respective environmental costs, including the incurrence of additional fines and penalties, if any, will have a material adverse effect on them or that the resolution of these environmental matters will have a material adverse effect on the financial position, results of operations or cash flows of such subsidiaries or the Company, but there can be no such assurances. The Company anticipates that the H&H Group subsidiaries will pay any such amounts out of their respective working capital, although there is no assurance that they will have sufficient funds to pay them. In the event that the H&H Group subsidiaries are unable to fund their liabilities, claims could be made against their respective parent companies, including H&H Group and/or HNH, for payment of such liabilities.

Among the sites where certain H&H Group subsidiaries may have more substantial environmental liabilities are the following:

H&H has been working with the Connecticut Department of Energy and Environmental Protection ("CTDEEP") with respect to its obligations under a 1989 consent order that applies to a property in Connecticut that H&H sold in 2003 ("Sold Parcel") and an adjacent parcel ("Adjacent Parcel") that together with the Sold Parcel comprises the site of a former H&H manufacturing facility. Remediation of all soil conditions on the Sold Parcel was completed on April 6, 2007. On September 11, 2008, the CTDEEP advised H&H that it had approved H&H's December 28, 2007 Soil Remediation Action Report, as amended, thereby concluding the active remediation of the Sold Parcel. The remaining remediation, monitoring and regulatory administrative costs for the Sold Parcel are expected to approximate $0.1 million. With respect to the Adjacent Parcel, an ecological risk assessment has been completed and the results, along with proposed clean up goals, will be submitted to the CTDEEP for their review and approval. The total remediation costs for the Adjacent Parcel cannot be reasonably estimated at this time. Accordingly, there can be no assurance that the resolution of this matter will not be material to the financial position, results of operations or cash flows of H&H or the Company.

In 1986, Handy & Harman Electronic Materials Corporation ("HHEM"), a subsidiary of H&H, entered into an administrative consent order ("ACO") with the New Jersey Department of Environmental Protection ("NJDEP") with regard to certain property that it purchased in 1984 in New Jersey. The ACO involves investigation and remediation activities to be performed with regard to soil and groundwater contamination. Thereafter, in 1998, HHEM and H&H settled a case brought by the local municipality in regard to this site and also settled with certain of its insurance carriers. HHEM is actively remediating the property and continuing to investigate effective methods for achieving compliance with the ACO. A remedial investigation report was filed with the NJDEP in December 2007. By letter dated December 12, 2008, the NJDEP issued its approval with respect to additional investigation and remediation activities discussed in the December 2007 remedial investigation report. HHEM anticipates entering into discussions with the NJDEP to address that agency's potential natural resource damage claims, the ultimate scope and cost of which cannot be estimated at this time. Pursuant to a settlement agreement with the former owner/operator of the site, the responsibility for site investigation and remediation costs, as well as any other costs, as defined in the settlement agreement, related to or arising from environmental contamination on the property (collectively, "Costs") are contractually allocated 75% to the former owner/operator (with separate guaranties by the two joint venture partners of the former owner/operator for 37.5% each) and 25% jointly to HHEM and H&H after the first $1.0 million. The $1.0 million was paid solely by the former owner/operator. As of June 30, 2015, over and above the $1.0 million, total investigation and remediation costs of approximately $4.6 million and $1.5 million have been expended by the former owner/operator and HHEM, respectively, in accordance with the settlement agreement. Additionally, HHEM is currently being reimbursed indirectly through insurance coverage for a portion of the Costs for which HHEM is responsible. HHEM believes that there is additional excess insurance coverage, which it intends to pursue as necessary. HHEM anticipates that there will be additional remediation expenses to be incurred once a final remediation plan is agreed upon. There is no assurance that the former owner/operator or guarantors will continue to timely reimburse HHEM for expenditures and/or will be financially capable of fulfilling their obligations under the settlement agreement and the guaranties. The final Costs cannot be reasonably estimated at this time, and accordingly, there can be no assurance that the resolution of this matter will not be material to the financial position, results of operations or cash flows of HHEM or the Company.

HHEM is continuing to comply with a 1987 consent order from the Massachusetts Department of Environmental Protection ("MADEP") to investigate and remediate the soil and groundwater conditions at a commercial/industrial property in Massachusetts. On June 30, 2010, HHEM filed a Response Action Outcome report to close the site since HHEM's licensed site professional concluded that groundwater monitoring demonstrated that the groundwater conditions have stabilized or continue to improve at the site. On June 20, 2013, HHEM received the MADEP's Notice of Audit Findings and Notice of Noncompliance ("Notice"). HHEM and its consultant held meetings with the MADEP to resolve differences identified in the Notice. As a result of those meetings and subsequent discussions, HHEM initiated additional sampling, testing and well installations. The additional work was completed in the second quarter of 2015, and we expect to submit a follow-up response report to the MADEP in the third quarter of 2015. The cost of this additional work is estimated at $0.2 million. Additional costs could result from these testing activities and final acceptance of the remediation plan by the MADEP, which cannot be reasonably estimated at this time.

Other Litigation

In the ordinary course of our business, we are subject to periodic lawsuits, investigations, claims and proceedings, including, but not limited to, contractual disputes, employment, environmental, health and safety matters, as well as claims associated with our historical acquisitions and divestitures. There is insurance coverage available for many of the foregoing actions. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations, claims and proceedings asserted against us, we do not believe any currently pending legal proceeding to which we are a party will have a material adverse effect on our business, prospects, financial condition, cash flows, results of operations or liquidity.

Note 17 – Related Party Transactions

As of June 30, 2015, SPLP owned directly or indirectly through its subsidiaries 7,131,185 shares of the Company's common stock, representing approximately 66.1% of outstanding shares. The power to vote and dispose of the securities held by SPLP is controlled by SPH GP. Warren G. Lichtenstein, our Chairman of the Board of Directors, is also the Executive Chairman of SPH GP. Certain other affiliates of SPH GP hold positions with the Company, including Jack Howard, as Vice Chairman and Principal Executive Officer, James F. McCabe, Jr., as Chief Financial Officer and Leonard J. McGill, as Chief Legal Officer.

The Company has entered into a management services agreement, as amended ("Management Services Agreement"), with SP Corporate Services LLC ("SP Corporate"). SP Corporate is an affiliate of SPLP. Pursuant to the Management Services Agreement, SP Corporate provides the Company with certain executive and corporate services, including, without limitation, legal, tax, accounting, treasury, consulting, auditing, administrative, compliance, environmental health and safety, human resources, marketing, investor relations and other similar services rendered for the Company or its subsidiaries. The Management Services Agreement further provided that the Company pay SP Corporate a fixed annual fee of approximately $8.89 million, consisting of (a) $1.74 million in consideration of the executive services provided by SP Corporate under the Management Services Agreement and (b) $7.15 million in consideration of the corporate services provided by SP Corporate under the Management Services Agreement. On May 3, 2015, the Company and SP Corporate entered into an amendment to the Management Services Agreement to add operating group management services to the scope of corporate services to be provided pursuant to the Management Services Agreement and to adjust the fee for corporate services provided under the Management Services Agreement from $7.15 million to $8.81 million. In connection with the amendment, the Company also entered into a transfer agreement, dated May 3, 2015, with Steel Partners LLC ("Steel Partners"), pursuant to which three employees of the Company and its subsidiaries were transferred to Steel Partners, which will assume the cost of compensating those employees and providing applicable benefits.

During the three months ended June 30, 2015 and 2014, the Company reimbursed SP Corporate and its affiliates approximately $0.2 million and $0.1 million, respectively, for business expenses incurred on its behalf pursuant to the Management Services Agreement. Such reimbursements totaled approximately $0.2 million and $0.2 million, respectively, during the six months ended June 30, 2015 and 2014.

The fees payable under the Management Services Agreement are subject to an annual review and such adjustments as may be agreed upon by SP Corporate and the Company. The Management Services Agreement has a term of one year and automatically renews for successive one-year periods unless and until terminated in accordance with the terms set forth therein, which include, under certain circumstances, the payment by the Company of a termination fee to SP Corporate.

Note 18 – Reportable Segments

HNH is a diversified holding company whose strategic business units encompass the following segments: Joining Materials, Tubing, Building Materials and Kasco. For a more complete description of the Company's segments, see "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - The Company."

Management has determined that certain operating companies should be aggregated and presented within a single segment on the basis that such segments have similar economic characteristics and share other qualitative characteristics. Management reviews net sales, gross profit and operating income to evaluate segment performance. Operating income for the segments generally includes costs directly attributable to the segment and excludes other unallocated general corporate expenses. Interest expense, other income and expense, and income taxes are not presented by segment since they are excluded from the measures of segment profitability reviewed by the Company's management.

The following table presents information about the Company's reportable segments for the three and six months ended June 30, 2015 and 2014:



Income Statement Data	Three Months Ended						Six Months Ended
(in thousands)	June 30,						June 30,
	2015			2014			2015			2014
Net sales:
Joining Materials	$	50,941		$	56,462		$	98,735		$	108,175
Tubing	20,870			21,361			41,949			42,066
Building Materials	79,378			76,301			134,365			124,833
Kasco	15,286			14,421			29,408			28,958
Total net sales	$	166,475		$	168,545		$	304,457		$	304,032
Segment operating income:
Joining Materials	$	5,594		$	6,387		$	11,841		$	11,897
Tubing	3,346			3,806			6,426			6,874
Building Materials	12,025			11,917			15,258			14,926
Kasco	836			659			1,699			1,385
Total segment operating income	21,801			22,769			35,224			35,082
Unallocated corporate expenses and non-operating units	(4,602		)	(4,106		)	(10,561		)	(9,983		)
Unallocated pension expense	(2,072		)	(1,105		)	(4,145		)	(2,210		)
Gain from asset dispositions	85			27			140			49
Operating income	15,212			17,585			20,658			22,938
Interest expense	(1,107		)	(1,603		)	(2,275		)	(3,149		)
Realized and unrealized gain (loss) on derivatives	312			(606		)	105			(466		)
Other expense	(113		)	(77		)	(204		)	(146		)
Income from continuing operations before tax and equity investment	$	14,304		$	15,299		$	18,284		$	19,177

Note 19 – Subsequent Events

Effective July 2, 2015, H&H Group completed its acquisition of JPS pursuant to the Agreement and Plan of Merger, dated as of May 31, 2015 ("Merger Agreement"), by and among the Company, H&H Group, HNH Group Acquisition LLC, a Delaware limited liability company and a subsidiary of H&H Group ("H&H Acquisition Sub"), HNH Group Acquisition Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of H&H Acquisition Sub ("Sub"), and JPS. JPS is a major U.S. manufacturer of mechanically formed glass and aramid substrate materials for specialty applications in a wide expanse of markets requiring highly engineered components. At the effective time of the Merger (as defined below), Sub was merged with and into JPS ("Merger"), with JPS being the surviving corporation in the Merger, and each outstanding share of JPS common stock (other than shares held by the Company and its affiliates, including SPH Group Holdings LLC ("SPH Group Holdings"), a subsidiary of Steel Partners Holdings L.P., the parent company of the Company, and a significant stockholder of JPS), was converted into the right to receive $11.00 in cash. The aggregate merger consideration of $70.3 million was funded primarily by H&H Group and also by SPH Group Holdings. H&H Group's funding of the aggregate merger consideration totals approximately $65.7 million, financed through additional borrowings under the Company's Senior Credit Facility.

As a result of the closing of the Merger, JPS is indirectly owned by both H&H Group and SPH Group Holdings. Following the expiration of the 20-day period provided in Section 262(d)(2) of the Delaware General Corporation Law for JPS stockholders to exercise appraisal rights in connection with the Merger, and in accordance with the Exchange Agreement, dated as of May 31, 2015, by and between H&H Group and SPH Group Holdings, the Company will issue ("Issuance") to H&H Group a currently estimated 1,429,407 shares of the Company’s common stock and, following the Issuance, H&H Group will exchange ("Exchange") those newly issued shares of Company common stock for all shares of JPS Common Stock held by SPH Group Holdings. As a result of the Exchange, H&H Group will own 100% of JPS and intends to merge JPS with and into its wholly-owned subsidiary, HNH Acquisition LLC, a Delaware limited liability company, which will be the surviving entity in the merger and be renamed JPS Industries Holdings LLC.

Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations

The Company

Handy & Harman Ltd. ("HNH") is a diversified manufacturer of engineered niche industrial products with leading market positions in many of the markets it serves. Through its wholly-owned operating subsidiaries, HNH focuses on high margin products and innovative technology and serves customers across a wide range of end markets. HNH's diverse product offerings are marketed throughout the United States and internationally. HNH owns Handy & Harman Group Ltd. ("H&H Group"), which owns Handy & Harman ("H&H") and Bairnco, LLC, formerly Bairnco Corporation. HNH manages its group of businesses on a decentralized basis with operations principally in North America. HNH's business units encompass the following segments: Joining Materials, Tubing, Building Materials and Kasco Blades and Route Repair Services ("Kasco"). All references herein to "we," "our" or the "Company" refer to HNH together with all of its subsidiaries.

Joining Materials segment primarily fabricates precious metals and their alloys into brazing alloys. Brazing alloys are used to join similar and dissimilar metals, as well as specialty metals and some ceramics, with strong, hermetic joints. Joining Materials segment offers these metal joining products in a wide variety of alloys, including gold, silver, palladium, copper, nickel, aluminum and tin. These brazing alloys are fabricated into a variety of engineered forms and are used in many industries, including electrical, appliance, transportation, construction and general industrial, where dissimilar material and metal joining applications are required. Operating income from precious metal products is principally derived from the "value added" of processing and fabricating and not from the direct purchase and resale of precious metals. Joining Materials segment enters into commodity futures and forward contracts to mitigate the impact of price fluctuations on its precious and certain non-precious metal inventories that are not subject to fixed price contracts. We believe that the business unit that comprises our Joining Materials segment is the North American market leader in many of the markets that it serves.

Tubing segment manufactures a wide variety of steel tubing products. We believe that the Tubing segment manufactures the world's longest continuous seamless stainless steel tubing coils, in excess of 5,000 feet, serving the petrochemical infrastructure and shipbuilding markets. In addition, we believe it is the number one supplier of small diameter (less than 3 mm) coil tubing to industry leading specifications serving the aerospace, defense and semiconductor fabrication markets. This segment also manufactures welded carbon steel tubing in coiled and straight lengths with a primary focus on products for the transportation, appliance and heating, and oil and gas industries. In addition to producing bulk tubing, it produces value added fabrications for several of these industries.

Building Materials segment manufactures and supplies products primarily to the commercial construction and building industries. It manufactures fasteners and fastening systems for the U.S. commercial low slope roofing industry, which are sold to building and roofing material wholesalers, roofing contractors and private label roofing system manufacturers, and a line of engineered specialty fasteners for the building products industry for fastening applications in the remodeling and construction of homes, decking and landscaping. We believe that our primary business unit in the Building Materials segment is the market leader in fasteners and accessories for commercial low-slope roofing applications and that the majority of the net sales for the segment are for the commercial construction repair and replacement market. On March 31, 2015, the Company acquired certain assets and assumed certain liabilities of ITW Polymers Sealants North America Inc. ("ITW"), which are used in the business of manufacturing two-component polyurethane adhesive for the roofing industry. ITW was the exclusive supplier of certain adhesive products to the Company. The results of the Building Materials segment include the operations of ITW from the acquisition date.

Kasco provides meat-room blade products, repair services and resale products for the meat and deli departments of supermarkets, restaurants, meat and fish processing plants, and for distributors of electrical saws and cutting equipment, principally in North America and Europe. Kasco also provides wood cutting blade products for the pallet manufacturing, pallet recycler and portable saw mill industries in North America.

Discontinued Operations

The results of operations of Arlon, LLC have been reported as a discontinued operation in the Company's consolidated financial statements and are not reflected in the tables and discussion of the Company's continuing operations below.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2015 and 2014

The Company's consolidated operating results for the three and six months ended June 30, 2015 and 2014 are summarized in the following table:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2015			2014			2015			2014
Net sales	$	166,475		$	168,545		$	304,457		$	304,032
Gross profit	48,176			47,627			86,554			84,778
Gross profit margin	28.9		%	28.3		%	28.4		%	27.9		%
Selling, general and administrative expenses	30,892			28,937			61,751			59,630
Pension expense	2,072			1,105			4,145			2,210
Operating income	15,212			17,585			20,658			22,938
Other:
Interest expense	1,107			1,603			2,275			3,149
Realized and unrealized (gain) loss on derivatives	(312		)	606			(105		)	466
Other expense	113			77			204			146
Income from continuing operations before tax and equity investment	14,304			15,299			18,284			19,177
Tax provision	5,867			6,648			7,511			8,455
Loss from associated company, net of tax	2,161			1,242			1,239			6,540
Income from continuing operations, net of tax	$	6,276		$	7,409		$	9,534		$	4,182

Net Sales

Net sales for the three months ended June 30, 2015 decreased by $2.1 million, or 1.2%, to $166.5 million, as compared to $168.5 million for the same period in 2014. The change in net sales reflects a net increase from core growth of approximately $2.4 million, which was offset by a reduction of approximately $4.5 million in net sales due to lower average silver prices. Value added sales, defined as net sales less revenue from the direct purchase and resale of precious metals, increased by approximately $2.4 million on higher volume, primarily from the Building Materials segment. The average silver market price was approximately $16.44 per troy ounce in the second quarter of 2015, as compared to $19.64 per troy ounce in the same period in 2014.

Net sales for the six months ended June 30, 2015 increased by $0.4 million, or 0.1%, to $304.5 million, as compared to $304.0 million for the same period in 2014. The change in net sales reflects a net increase from core growth of approximately $9.5 million, which was partially offset by a reduction of approximately $9.1 million in net sales due to lower average silver prices. Value added sales increased by approximately $9.5 million on higher volume, primarily from the Building Materials segment. The average silver market price was approximately $16.58 per troy ounce in the first half of 2015, as compared to $19.89 per troy ounce in the same period in 2014.

Gross Profit

Gross profit for the three months ended June 30, 2015 increased to $48.2 million, as compared to $47.6 million for the same period in 2014, and as a percentage of net sales, increased to 28.9%, as compared to 28.3% in the second quarter last year. The change in gross profit reflects a net increase from core growth of approximately $1.2 million, which was partially offset by a reduction of approximately $0.6 million in gross profit due to lower average silver prices. Higher sales volume from the Building Materials and Kasco segments led to the increase in gross profit from our core business. The gross profit margin improvement of 0.6% was principally due to lower manufacturing costs as a result of the ITW acquisition in the Building Materials segment and lower average silver prices.

Gross profit for the six months ended June 30, 2015 increased to $86.6 million, as compared to $84.8 million for the same period in 2014, and as a percentage of net sales, increased to 28.4%, as compared to 27.9% during the same period of last year. The change in gross profit reflects a net increase from core growth of approximately $2.9 million, which was partially offset

by a reduction of approximately $1.1 million in gross profit due to lower average silver prices. Higher sales volume from the Building Materials segment led to the increase in gross profit from our core business. The gross profit margin improvement of 0.5% was principally due to lower average silver prices and higher manufacturing absorption costs in the Kasco segment.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") for the three months ended June 30, 2015 were $30.9 million, as compared to $28.9 million for the same period a year ago. The higher SG&A in the second quarter of 2015 was primarily driven by higher personnel costs and higher business development expenses, primarily associated with the acquisition of JPS Industries, Inc. ("JPS"), which were partially offset by lower stock-based compensation charges.

SG&A for the six months ended June 30, 2015 was $61.8 million, as compared to $59.6 million for the same period a year ago. The higher SG&A during the six month period of 2015 was driven by higher personnel costs and higher business development expenses, primarily associated with the acquisition of JPS, which were partially offset by the recording of an insurance reimbursement of $1.2 million for previously incurred environmental remediation costs.

Pension Expense

Non-cash pension expenses were $2.1 million and $4.1 million for the three and six months ended June 30, 2015 respectively, which were $1.0 million and $1.9 million higher than the three and six months ended June 30, 2014, respectively. We currently expect non-cash pension expense to be approximately $8.3 million in 2015, as compared to $3.7 million in 2014, due to a decline in discount rates based on changes in corporate bond yields, an increase in participant life expectancy reflected in revised mortality assumptions, and also due to the fact that the investment returns on the assets of the WHX Corporation Pension Plan ("WHX Pension Plan") were lower than actuarial assumptions during 2014.

Interest Expense

Interest expense for the three and six months ended June 30, 2015 was $1.1 million and $2.3 million, respectively, as compared to $1.6 million and $3.1 million for the three and six months ended June 30, 2014, respectively. The lower interest expense for both three and six months ended June 30, 2015 was primarily due to lower borrowing levels in 2015.

Realized and Unrealized (Gain) Loss on Derivatives

H&H utilizes commodity forward and futures contracts to mitigate the impact of price fluctuations on its precious metal and certain non-precious metal inventories. The factors that affect the gain or loss on these derivative instruments are changes in the price of the associated metals and the amount of ounces hedged.

Tax Provision

Loss from Associated Company

The Company carries its investment in ModusLink Global Solutions, Inc. ("ModusLink") at fair value, calculated based on the closing market price for ModusLink common stock, and the losses recorded during the three and six months ended June 30, 2015 and 2014 are due entirely to changes in the share price of ModusLink's common stock.

Segment Analysis

Segment net sales and operating income data for the three and six months ended June 30, 2015 and 2014 are shown in the following table:



	Three Months Ended June 30,						Six Months Ended June 30,
					%						%
(in thousands)	2015		2014		Change		2015		2014		Change
Net sales:
Joining Materials	$	50,941	$	56,462	(9.8	)%	$	98,735	$	108,175	(8.7	)%
Tubing	20,870		21,361		(2.3	)%	41,949		42,066		(0.3	)%
Building Materials	79,378		76,301		4.0	%	134,365		124,833		7.6	%
Kasco	15,286		14,421		6.0	%	29,408		28,958		1.6	%
Total net sales	$	166,475	$	168,545	(1.2	)%	$	304,457	$	304,032	0.1	%
Segment operating income:
Joining Materials	$	5,594	$	6,387	(12.4	)%	$	11,841	$	11,897	(0.5	)%
Tubing	3,346		3,806		(12.1	)%	6,426		6,874		(6.5	)%
Building Materials	12,025		11,917		0.9	%	15,258		14,926		2.2	%
Kasco	836		659		26.9	%	1,699		1,385		22.7	%
Total segment operating income	$	21,801	$	22,769	(4.3	)%	$	35,224	$	35,082	0.4	%

Joining Materials

For the three months ended June 30, 2015, the Joining Materials segment net sales decreased by $5.5 million, or 9.8%, to $50.9 million, as compared to net sales of $56.5 million for the same period in 2014. The change in net sales is primarily due to lower precious metal prices, including a reduction of approximately $4.5 million in net sales due to a $3.20 per troy ounce decline in the average market price of silver.

Segment operating income for the second quarter of 2015 decreased by $0.8 million, or 12.4%, to $5.6 million, as compared to $6.4 million for the same period in 2014. The effect of lower average silver prices reduced operating income by approximately $0.6 million on a quarter versus prior year's quarter basis.

For the six months ended June 30, 2015, the Joining Materials segment net sales decreased by $9.4 million, or 8.7%, to $98.7 million, as compared to net sales of $108.2 million for the same period in 2014. The change in net sales reflects a reduction of approximately $9.1 million in net sales due to a $3.31 per troy ounce decline in the average market price of silver.

Segment operating income for the six months ended June 30, 2015 decreased by $0.1 million, or 0.5%, to $11.8 million, as compared to $11.9 million for the same period in 2014. Lower gross profit from the 2015 period was due principally to lower silver prices, which were partially offset by lower SG&A due to higher severance and recruitment costs incurred during the same period of 2014. The effect of lower average silver prices reduced operating income by approximately $1.1 million on a year to date versus prior year's year to date basis.

Tubing

For the three months ended June 30, 2015, the Tubing segment net sales decreased by $0.5 million, or 2.3%, to $20.9 million, as compared to $21.4 million in the second quarter of 2014. The decrease was primarily driven by lower sales volume of our steel tubing products in the oil and gas exploration and chemical processing markets.

Segment operating income for the second quarter of 2015 decreased by $0.5 million or 12.1%, to $3.3 million, as compared to $3.8 million for the second quarter of 2014. Lower gross profit during the second quarter of 2015 was driven by lower sales volume and associated unfavorable production variances, as compared to the second quarter of 2014. SG&A was also higher during the second quarter of 2015, as compared to the same period of 2014, due to higher personnel costs.

For the six months ended June 30, 2015, the Tubing segment net sales were $41.9 million, as compared to $42.1 million in the same period in 2014. The decrease was primarily driven by lower sales volume of our steel tubing products in the oil and gas exploration and chemical processing markets for the six months ended June 30, 2015, as compared to the same period of 2014.

Segment operating income for the six months ended June 30, 2015 decreased by $0.4 million or 6.5%, to $6.4 million, as compared to $6.9 million for the same period of 2014. Lower operating income was primarily due to higher SG&A, as a result of higher personnel costs, as compared to the same period of 2014.

Building Materials

For the three months ended June 30, 2015, the Building Materials segment net sales increased by $3.1 million, or 4.0%, to $79.4 million, as compared to $76.3 million for the same period in 2014. Sales of both our roofing and FastenMaster products were higher, as compared to the second quarter of 2014, due to growth from our private label roofing products and increased demand from home centers for our FastenMaster products.

Segment operating income increased by $0.1 million, or 0.9%, to $12.0 million for the three months ended June 30, 2015, as compared to $11.9 million for the same period in 2014. Gross profit increased during the second quarter of 2015 due to the higher sales volume. Gross profit margin for the three months ended June 30, 2015 was higher, as compared to the three months ended June 30, 2014, primarily due to higher sales volume and lower manufacturing costs as a result of the recent ITW acquisition. SG&A was also higher during the 2015 period, reflecting increased employee headcount and promotional expenses.

For the six months ended June 30, 2015, the Building Materials segment net sales increased by $9.5 million, or 7.6%, to $134.4 million, as compared to $124.8 million for the same period in 2014. Sales of both our roofing and FastenMaster products were higher, as compared to the six months ended June 30, 2014, due to strong growth from our private label roofing products and strong demand from home centers and lumberyards for our FastenMaster products.

Segment operating income increased by $0.3 million, or 2.2%, to $15.3 million for the six months ended June 30, 2015, as compared to $14.9 million for the same period in 2014. Gross profit increased during the six months ended June 30, 2015 due to the higher sales volume, but gross profit margin for the six months ended June 30, 2015 was lower, as compared to the six months ended June 30, 2014, primarily due to changes in sales mix and higher freight costs, in part due to the West Coast port slowdown, as well as costs associated with the consolidation of our Midwest manufacturing and warehouse facilities into a single location, which were partially offset by lower manufacturing costs as a result of the ITW acquisition. SG&A also increased, reflecting increased employee headcount, benefit costs and promotional expenses during the 2015 period.

Kasco

For the three months ended June 30, 2015, the Kasco segment net sales increased by $0.9 million, or 6.0%, to $15.3 million, as compared to $14.4 million for the same period in 2014, primarily due to higher sales from its domestic route business, partially offset by the unfavorable impact of foreign currency exchange rates from its Canadian and European operations.

Segment operating income increased by $0.2 million to $0.8 million for the three months ended June 30, 2015, as compared to $0.7 million for the same period in 2014, as a result of the higher sales and lower fuel costs, partially offset by increased personnel costs to support the higher sales.

For the six months ended June 30, 2015, the Kasco segment net sales increased by $0.5 million, or 1.6%, to $29.4 million, as compared to $29.0 million for the same period in 2014, due to higher sales from its domestic route business, partially offset by lower sales from its European operations primarily due to a negative impact from changes in foreign currency exchange rates.

Segment operating income increased by $0.3 million to $1.7 million for the six months ended June 30, 2015, as compared to $1.4 million for the same period in 2014. Gross margin improved for the six months ended June 30, 2015, primarily due to the higher net sales, as well as lower fuel costs, as compared with the same period of the prior year.

Discussion of Consolidated Cash Flows

Comparison of the Six Months Ended June 30, 2015 and 2014

The following table provides a summary of the Company's consolidated cash flows for the six months ended June 30, 2015 and 2014:



	Six Months Ended
	June 30,
(in thousands)	2015			2014
Net cash used in operating activities	$	(11,520	)	$	(1,558	)
Net cash provided by (used in) investing activities	110,869			(6,889		)
Net cash (used in) provided by financing activities	(112,152		)	7,488
Net change for the period	$	(12,803	)	$	(959	)

Operating Activities

Operating cash flows for the six months ended June 30, 2015 were $10.0 million lower, as compared to the same period in 2014. Discontinued operations used $2.3 million during 2015, as compared to a cash inflow of $7.9 million in 2014. Inventories used $6.3 million during the six month period of 2015, as compared to $16.1 million for the same period in 2014. The lower inventory usage during the 2015 period was primarily driven by lower silver prices, as compared to the same period of 2014, and effective inventory control in our Tubing segment. Other current liabilities provided $1.5 million, as compared to $6.5 million provided during the same period of 2014, primarily driven by timing of payments associated with trade payables.

Investing Activities

Investing activities provided $110.9 million of cash for the six months ended June 30, 2015 and used $6.9 million during the same period of 2014. Investing activities for the six months ended June 30, 2015 included net proceeds of $152.9 million from the sale of Arlon, LLC, partially offset by acquisition costs of $27.4 million related to the ITW acquisition. Capital spending of $7.0 million in the 2015 period was relatively comparable with $5.0 million in the 2014 period. The Company also invested approximately $7.6 million, including brokerage commissions, in the common stock of ModusLink during the six month period of 2015.

Financing Activities

For the six months ended June 30, 2015, the Company's financing activities used $112.2 million of cash. Borrowings under the Company's revolving credit facility decreased by $111.5 million during the six months ended June 30, 2015, primarily driven by cash proceeds from the sale of Arlon, LLC.

For the six months ended June 30, 2014, the Company's financing activities provided $7.5 million of cash. The Company increased net borrowings on its revolving credit facility by $10.4 million and initiated $4.5 million in borrowings on its WHX CS Loan facility, which were partially offset by repayments of $6.4 million on its domestic term loans. The Company also used $4.6 million for the repurchase of the Company's common stock during the first half of 2014.

Liquidity and Capital Resources

The Company's principal source of liquidity is its cash flows from operations. As of June 30, 2015, the Company's current assets totaled $201.8 million, its current liabilities totaled $72.0 million and its net working capital was $129.8 million, as compared to net working capital of $181.1 million as of December 31, 2014. The Company's debt is principally held by H&H Group, a wholly-owned subsidiary of HNH. HNH's subsidiaries borrow funds in order to finance capital expansion programs and for working capital needs. The terms of certain of those financing arrangements place restrictions on distributions of funds to HNH, the parent company, subject to certain exceptions including required pension payments to the WHX Pension Plan. The Company does not expect these restrictions to have an impact on its ability to meet its cash obligations. HNH's ongoing operating cash flow requirements consist primarily of arranging for the funding of the minimum requirements of the WHX Pension Plan and paying HNH's administrative costs. The Company expects to have required minimum contributions to the WHX Pension Plan of $10.3 million for the remainder of 2015, and $14.3 million, $15.3 million, $17.0 million, $18.3 million and $56.4 million in 2016, 2017, 2018, 2019, and for the five years thereafter, respectively. Required future contributions are estimated based upon assumptions regarding such matters as discount rates on future obligations, assumed rates of return on plan assets and legislative changes. Actual future pension costs and required funding obligations will be affected by changes in the factors and assumptions described in the previous sentence, as well as other changes such as any plan termination or other acceleration events.

The Company believes it has access to adequate resources to meet its needs for normal operating costs, capital expenditures, mandatory debt redemptions and working capital for its existing business. These resources include cash and cash equivalents, cash

provided by operating activities and unused lines of credit. On August 29, 2014, H&H Group entered into an amended and restated senior credit agreement, which provides for an up to $365.0 million senior secured revolving credit facility. As of June 30, 2015, H&H Group's availability under its senior secured revolving credit facility was $153.8 million. The Company's ability to satisfy its debt service obligations, to fund planned capital expenditures and required pension payments, and to make acquisitions will depend upon its future operating performance, which will be affected by prevailing economic conditions in the markets in which it operates, as well as financial, business and other factors, some of which are beyond its control. In addition, the Company's senior secured revolving credit facility is subject to certain mandatory prepayment provisions and restrictive and financial covenants. There can be no assurances that H&H Group will continue to have access to its lines of credit if its financial performance does not satisfy the financial covenants set forth in the financing agreements. If H&H Group does not meet certain of its financial covenants, and if it is unable to secure necessary waivers or other amendments from the respective lenders on terms acceptable to management, its ability to access available lines of credit could be limited, its debt obligations could be accelerated by the respective lenders and liquidity could be adversely affected.

Management is utilizing the following strategies to continue to enhance liquidity: (1) continuing to implement improvements, using the HNH Business System, throughout all of the Company's operations to increase sales and operating efficiencies, (2) supporting profitable sales growth both internally and potentially through acquisitions and (3) evaluating from time to time and as appropriate, strategic alternatives with respect to its businesses and/or assets. The Company continues to examine all of its options and strategies, including acquisitions, divestitures and other corporate transactions, to increase cash flow and stockholder value. Consistent with this philosophy, the Company completed the acquisition of JPS on July 2, 2015. Under the terms of the associated agreements, the Company's aggregate acquisition consideration includes approximately $65.7 million in cash, financed through additional borrowings under the Company's senior secured revolving credit facility, and the issuance of a currently estimated 1,429,407 shares of the Company's common stock.

Off-Balance Sheet Arrangements

It is not the Company's usual business practice to enter into off-balance sheet arrangements such as guarantees on loans and financial commitments, indemnification arrangements and retained interests in assets transferred to an unconsolidated entity for securitization purposes. Certain customers and suppliers of the Joining Materials segment choose to do business on a "pool" basis. Such customers or suppliers furnish precious metal to subsidiaries of H&H for return in fabricated form or for purchase from or return to the supplier. When the customer's precious metal is returned in fabricated form, the customer is charged a fabrication charge. The value of pooled precious metal is not included on the Company's consolidated balance sheet. As of June 30, 2015, customer metal in H&H's custody consisted of 148,478 ounces of silver, 538 ounces of gold and 1,392 ounces of palladium.

Cautionary Statement Regarding Forward-Looking Statements

When used in Management's Discussion and Analysis of Financial Condition and Results of Operations, the words "anticipate," "estimate" and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, general economic conditions, the ability of the Company to develop markets and sell its products and the effects of competition and pricing. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate.

Item 4. - Controls and Procedures

Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, the Company conducted an evaluation under the supervision and with the participation of its management, including the Principal Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Chief Financial Officer concluded that as of June 30, 2015, the Company's disclosure controls and procedures are effective in ensuring that all information required to be disclosed in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to company management, including the Principal Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

No change in internal control over financial reporting occurred during the quarter ended June 30, 2015 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. - Legal Proceedings

Information in this Item 1 is incorporated by reference to Part I, Notes to Consolidated Financial Statements (unaudited), Note 16 - "Commitments and Contingencies," of this report.

Item 1A. - Risk Factors

In addition to the information set forth below and elsewhere in this Form 10-Q, you should carefully consider the factors discussed under "Cautionary Statement Regarding Forward-Looking Statements" above and under "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2014, and those risk factors set forth below. These risks could materially and adversely affect our business, financial condition and results of operations. These enumerated risks are not the only risks we face. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business.

Transfer restrictions contained in our charter and other factors could hinder the development of an active market for our common stock.

There can be no assurance as to the volume of shares of our common stock or the degree of price volatility for our common stock traded on the NASDAQ Capital Market. There are transfer restrictions contained in our charter to help preserve our net operating tax loss carryforwards that will generally prevent any person from acquiring amounts of our common stock such that such person would hold 5% or more of our common stock, for up to three years after July 29, 2015, as specifically provided in our charter. The transfer restrictions could hinder development of an active market for our common stock.

Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds

2(c) - Issuer Purchases of Equity Securities

During the three months ended June 30, 2015, 2,258 shares of common stock were foregone by certain employees and service providers, at their option, for income tax obligations attributable to the vesting of shares of restricted stock previously granted to such individuals.

The following table provides information on the shares foregone for income tax obligations attributable to the vesting of restricted stock during the three months ended June 30, 2015:



	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
Period	(a)	(b)		(c)	(d)
April 1, 2015 to April 30, 2015	1,486	$	36.78	—	N/A
May 1, 2015 to May 31, 2015	772	$	35.76	—	N/A
June 1, 2015 to June 30, 2015	—	N/A		—	N/A
	2,258			—	N/A

Item 6. - Exhibits



Exhibit 2.1 Agreement and Plan of Merger, dated as of May 31, 2015, by and among Handy & Harman Ltd., Handy & Harman Group, Ltd., HNH Group Acquisition LLC, HNH Group Acquisition Sub LLC and JPS Industries, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed June 1, 2015)

Exhibit 3.1 Certificate of Amendment to the Certificate of Incorporation of Handy & Harman Ltd. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed May 29, 2015)

Exhibit 10.1 Second Amendment to Management Services Agreement, dated as of May 3, 2015, by and among SP Corporate Services LLC, Handy & Harman Ltd. and Handy & Harman Group Ltd. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed May 5, 2015)

Exhibit 10.2 Exchange Agreement, dated as of May 31, 2015, by and between Handy & Harman Group, Ltd. and SPH Group Holdings LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 1, 2015)

Exhibit 31.1 Certification of Principal Executive Officer pursuant to Rule 13a-15(f) or 15d-15(f) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ⁽¹⁾

Exhibit 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-15(f) or 15d-15(f) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ⁽¹⁾

Exhibit 32 Certification of Principal Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of Chapter 63 of Title 18 of United States Code. ⁽¹⁾

Exhibit 101.INS XBRL Instance Document ⁽¹⁾

Exhibit 101.SCH XBRL Taxonomy Extension Schema ⁽¹⁾

Exhibit 101.CAL XBRL Taxonomy Extension Calculation Linkbase⁽¹⁾

Exhibit 101.DEF XBRL Taxonomy Extension Definition Linkbase ⁽¹⁾

Exhibit 101.LAB XBRL Taxonomy Extension Label Linkbase ⁽¹⁾

Exhibit 101.PRE XBRL Taxonomy Extension Presentation Linkbase⁽¹⁾


(1)	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	HANDY & HARMAN LTD.

	/s/ James F. McCabe, Jr.
	James F. McCabe, Jr. Senior Vice President and Chief Financial Officer (Principal Accounting Officer)

July 29, 2015

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Handy & Harman 10-Q2015 Q2 Quarterly report

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