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THIS DOCUMENT IS A COPY OF THE FORM 1O-Q FILED ON MAY 16, 1996 PURSUANT TO A
RULE 201 TEMPORARY HARDSHIP EXEMPTION
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended March 31, 1996
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number: 1-5365
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HANDY & HARMAN
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(Exact name of registrant as specified in its charter)
STATE OF NEW YORK 13-5129420
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 Park Avenue, New York, New York 10177
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(Address of principal executive offices) (Zip code)
(212) 661-2400
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
year.)
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 X No
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The number of shares of issuer's Common Stock, par value $1.00 per share
outstanding as of May 13, 1996 was 14,037,304.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HANDY & HARMAN AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(unaudited-thousands of dollars except per share)
Three Months Ended
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March 31, 1996 March 31, 1995
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Sales and service revenues $ 108,340 $ 113,497
Cost of sales and services 86,991 90,748
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Gross profit 21,349 22,749
Selling, general and
administrative expenses 11,424 11,999
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9,925 10,750
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Other deductions (income):
Interest expense-net 2,054 3,430
Other-net 203 253
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2,257 3,683
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Income from continuing operations
before income taxes 7,668 7,067
Income tax provision 3,305 3,046
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Income from continuing operations 4,363 4,021
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Discontinued Operations:
Income/(loss) from operations, net of
income taxes (benefit) ($1,026) and $884 (1,354) 1,167
Loss on disposal, net of tax
benefit of $4,550 (8,300) --
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(9,654) 1,167
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Net Income (loss) ($ 5,291) $ 5,188
=========================================================================================
Earnings (loss) per share:
Continuing operations $ .31 $ .29
Discontinued operations (.69) .08
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Net income (loss) ($ .38) $ .37
=========================================================================================
Dividends per share $ .06 $ .06
=========================================================================================
Average shares outstanding 14,019,000 14,091,000
=========================================================================================
See Accompanying Notes to Consolidated Financial Statements.
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HANDY & HARMAN AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(thousands of dollars)
March 31, 1996 December 31, 1995
(unaudited)
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ASSETS
Current Assets:
Cash $ 3,267 $ 6,637
Accounts receivable, less allowance for doubtful accounts
of $2,355 in 1996 and $3,021 in 1995 54,892 61,036
Futures receivable 15,483 7,681
Inventories 76,770 84,422
Prepaid expenses, deposits and other current assets 2,720 3,325
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Total current assets 153,132 163,101
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Investment in affiliates, at equity 2,754 2,686
Property, plant and equipment - at cost 183,326 214,345
Less accumulated depreciation and amortization 105,253 122,939
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78,073 91,406
Prepaid retirement costs (net) 51,901 51,152
Intangibles, net of amortization 21,992 22,141
Other assets 11,443 10,563
Non-current assets of discontinued operations 9,000 --
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$ 328,295 $ 341,049
==================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 50,000 $ 40,000
Current maturities of long-term debt 3,500 3,500
Accounts payable 33,854 32,899
Federal and Foreign taxes on income 1,343 8,072
Other current liabilities 23,998 29,150
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Total current liabilities 112,695 113,621
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Long-term debt, less current maturities 88,500 93,500
Deferred income taxes 13,512 13,534
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Shareholders' equity:
Common stock - par value $1; 60,000,000
shares authorized; 14,611,432 shares issued 14,611 14,611
Capital surplus 13,103 12,033
Retained earnings 93,239 99,371
Foreign currency translation adjustment (751) (748)
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120,202 125,267
Less: Treasury stock 575,909 shares - 1996
and 603,800 shares - 1995 at cost 5,646 4,873
Unearned compensation 968 --
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Total shareholders' equity 113,588 120,394
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$ 328,295 $ 341,049
==================================================================================================
See Accompanying Notes to Consolidated Financial Statements.
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HANDY & HARMAN AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited-thousands of dollars)
Increase (Decrease) in Cash
Three Months Ended
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March 31, 1996 March 31, 1995
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Cash flows from operating activities:
Net income (loss) ($ 5,291) $ 5,188
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities:
Depreciation and amortization 3,315 4,356
Provision for doubtful accounts 232 274
(Gain) loss on disposal of property, plant
and equipment (6) 45
Net prepaid retirement cost (749) (505)
Equity in earnings of affiliates (60) (22)
Earned compensation - 1988 long-term incentive
and outside director stock option plans 148 68
Discontinued operations reserves 12,850 --
Changes in assets and liabilities:
Accounts receivable (37) (11,960)
Inventories 1,104 (2,474)
Prepaid expenses 115 71
Deferred charges and other assets (1,075) (973)
Accounts payable and other current liabilities (412) 3,913
Advances from smelter -- (3,381)
Federal and foreign taxes on income (6,729) 1,291
Deferred income taxes (22) 453
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Net cash provided/(used) by operating activities 3,383 (3,656)
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Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment 85 12
Capital expenditures (2,414) (6,964)
Investment in affiliates -- (100)
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Net cash used by investing activities (2,329) (7,052)
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Cash flows from financing activities:
Proceeds from short-term borrowings 10,000 9,100
Net increase/(decrease) in long-term
revolving credit facilities (5,000) 25,000
Net (increase) in futures receivable (7,802) --
Net decrease in futures payable -- (20,427)
Dividends paid (840) (846)
Purchase of treasury stock (net) (773) --
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Net cash (used)/provided by financing activities (4,415) 12,827
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Effect of exchange rate changes on net cash (9) 4
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Net change in cash (3,370) 2,123
Cash at beginning of year 6,637 2,559
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Cash at end of period $ 3,267 $ 4,682
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See Accompanying Notes to Consolidated Financial Statements.
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HANDY & HARMAN AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
a. In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments necessary to a fair statement
of the results for the interim periods.
b. Inventories at March 31, 1996 and December 31, 1995 are comprised as
follows (in thousands):
March 31, 1996 December 31, 1995
(unaudited)
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Precious metals:
Fine and fabricated metals in
various stages of completion $31,080 $34,230
Non-precious metals:
Base metals, factory supplies
and raw materials 22,790 21,797
Work in process 13,755 19,384
Finished goods 9,145 9,011
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$76,770 $84,422
=============================================================================
Lifo inventory - the excess of period end market value over Lifo cost was
$150,494,000 at March 31, 1996 and $141,458,000 at December 31, 1995.
c. These statements should be read in conjunction with the Summary of
Significant Accounting Policies and notes contained in the registrant's
Annual Report (Form 10-K for the year ending December 31, 1995).
d. On May 14, 1996, Handy & Harman announced that it has decided to exit the
refining business, exclusive of the Company's satellite refining
operations located in Singapore and Canada. The Company is currently
negotiating a sale of the Handy & Harman Refining Division and expects the
transaction to be completed on or about June 30, 1996. Accordingly,
operations for this major division have been classified as discontinued
operations in the first quarter of 1996. A onetime charge associated with
exiting this business of $12,850,000 ($8,300,000 after-tax or $.59 per
share) was recorded in the first quarter of 1996.
This dicontinued operation's revenues for the first quarter of 1996 and
1995 were $45,514,000 and $39,920,000, respectively and its net property,
plant and equipment at March 31, 1996 was $12,451,000.
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HANDY & HARMAN AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
e. The following table presents certain selected financial data by industry
segment (expressed in thousands of dollars) for the three months ended
March 31, 1996 and 1995:
March 31, 1996 March 31, 1995
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Sales and service revenues:
Wire/Tubing $ 47,025 $ 45,540
Precious metals 57,286 63,910
Other non-precious
metal businesses 4,029 4,047
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Total $ 108,340 $ 113,497
============================================================================
Profit contribution before
unallocated expenses:
Wire/Tubing $ 5,042 $ 5,224
Precious metals 4,632 5,231
Other non-precious
metal businesses 498 492
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Total 10,172 10,947
General corporate expenses (450) (450)
Interest expense (net) (2,054) (3,430)
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Income from continuing
operations before taxes $ 7,668 $ 7,067
============================================================================
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA
The Company's precious metal inventories, consisting principally of gold and
silver, is readily convertible to cash. Furthermore, these precious metal
inventories which are stated in the Balance Sheet at LIFO cost have a market
value of $150,494,000 in excess of such cost as of March 31, 1996.
It is the Company's policy to obtain funds necessary to finance inventories
and receivables from various banks under commercial credit facilities.
Fluctuations in the market prices of gold and silver have a direct effect on the
dollar volume of sales and the corresponding amount of customer receivables
resulting from sale of precious metal products. In addition, receivables
resulting from the sale of precious metal bullion for future delivery are also
financed by bank borrowings. The Company adjusts the level of its credit
facilities from time to time in accordance with its borrowing needs for
receivables and inventories and maintains bank credit facilities well in excess
of anticipated requirements.
Consistent with other precious metal refining and fabricating companies,
some of the Company's gold and silver requirements are furnished by customers
and suppliers on a consignment basis. Title to the consigned gold and silver
remains with the Consignor. The value of consigned gold and silver held by the
Company is not included in the Company's Balance Sheet. The Company's gold and
silver requirements are provided from a combination of owned inventories,
precious metals which have been purchased and sold for future delivery, and gold
and silver received from suppliers and customers on a consignment basis.
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During the third quarter of 1994, the Company finalized $215,000,000 of
Revolving Credit Facilities with twenty banks which provided $161,250,000 for a
three year period and $53,750,000 for 364 days. Due to the sale of Handy &
Harman's automotive segment, the three year portion of the credit facility was
reduced to $96,250,000. As of March 31, 1996, $20,000,000 was borrowed under the
long-term agreement and there were no borrowings under the short-term agreement.
In addition to the Revolving Credit Facilities, the banks also provided
$250,750,000 of Gold and Silver Fee Consignment Facilities. These facilities
have been reduced to $158,500,000 after the Company's exit from the karat gold
business in 1995. The Fee Consignment Facility of $79,250,000 is for a
three-year period and the short-term Fee Consignment Facility of $79,250,000 is
for 364 days. All gold and silver consigned to the Company pursuant to these
Consignment Agreements will be located at the Company's plant in Fairfield,
Connecticut. As of March 31, 1996, 10,900 ounces of gold and 12,224,000 ounces
of silver were leased under this fee consignment facility.
In addition to the Revolving Credit Facilities the Company has arrangements
with four institutional lenders for $50,000,000 of long-term borrowings at a
rate of 8.83% maturing in 2002.
On May 14, 1996, Handy & Harman announced that it has decided to exit the
refining business, exclusive of the Company's satellite refining operations
located in Singapore and Canada. The Company is currently negotiating a sale of
the Handy & Harman Refining Division and expects the transaction to be completed
on or about June 30, 1996. Accordingly, operations for this major division have
been classified as discontinued operations in the first quarter of 1996. A
onetime charge associated with exiting this business of $12,850,000 ($8,300,000
after-tax or $.59 per share) was recorded in the first quarter of 1996. The sale
of this division will release a significant portion of the Company's owned
precious metal inventory position, making that capital available for further
deployment to our continuing operations and acquisition of new businesses.
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CASH PROVIDED/USED IN OPERATING ACTIVITIES
Net cash provided by operating activities amounted to $3,383,000 in 1996
compared to net cash used by operating activities of $3,656,000 in 1995. The
cash provided by operating activities increased $7,039,000 primarily due to the
increase of $1,035,000 in net income after adjustment for noncash income and
expense items and also the reduction in working capital requirements of
$6,004,000.
CASH USED IN INVESTING ACTIVITIES
Net cash used by investing activities amounted to $2,329,000 in 1996 and
$7,052,000 in 1995. The decrease in expenditures of $4,723,000 is primarily due
to cash used in 1995 for a new tubing facility in Denmark and the expansion of
production capacity in our specialty wire company in Great Britain, partially
offset by the continued expansion of production capacity in our precision
electroplating companies in 1996.
CASH USED/PROVIDED BY FINANCING ACTIVITIES
Net cash used by financing activities amounted to $4,415,000 in 1996
compared to net cash provided by financing activities of $12,827,000 in 1995.
The net cash used by financing activities in the first quarter of 1996 was due
to an increase of futures receivable (the sale of precious metal inventory for
future delivery) of $7,802,000, the payment of dividends of $840,000 and net
treasury stock transactions of $773,000, partially offset by an increase in debt
of $5,000,000. The comparable period for 1995 provided cash by an increase in
debt of $34,100,000, partially offset by the payment of futures payable (the
purchase of precious metal inventory for future receipt) of $20,427,000 and the
payment of dividends of $846,000.
The Company's foreign operations consist of five wholly owned subsidiaries,
(one in Canada, three in the United Kingdom and one in Denmark), and one equity
investment in Asia. Substantially all unremitted earnings of such entities are
free from legal or contractual restrictions.
The Company's program to expand productive capacity through acquisition of
new businesses and expenditures for new property, plant and equipment will
continue to be financed with internally generated funds and long-term debt, if
necessary.
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COMPARISON OF FIRST QUARTER OF 1996 VERSUS FIRST QUARTER OF 1995
Sales for the wire/tubing segment increased $1,485,000 (3%) due to a strong
increase in demand for stainless steel tubing brought about by rapid growth in
the semi-conductor fabrication industry. Increased sales were also experienced
by the Company's U.K. business unit in response to an increasing European
economy. These increases were partially offset by decreased sales in the
Company's domestic wire units due to decreased sales to the telecommunications
industry. The profit contribution (pre-tax income before deducting interest and
Corporate expenses) decreased $182,000 (3%) due to decreased sales and increased
raw material costs in the Company's domestic wire units partially offset by the
increase sales of stainless steel tubing mentioned above. The significant
backlog for stainless steel seamless tubing as well as additional approved
capital spending for this facility's expansion provides this segment future
opportunity for increased profits.
Sales for the precious metal segment decreased $6,624,000 (10%). The
decrease in sales was primarily due to the elimination of the karat gold
fabricated product line announced on June 5, 1995. A decrease in sales was also
experienced in the precision plating and surface finishing companies due to
changing customer needs. The average price for gold was $400.10 per ounce and
the average price for silver was $5.54 per ounce representing increases of 5.5%
and 17.9%, respectively, from the prior year. The profit contribution decreased
$599,000 (11%) primarily due to the decrease in sales experienced in the
precision plating and surface finishing companies mentioned above, partially
offset by improvements in earnings of the precious metal fabricated products
which was aided by the discontinuance of karat gold fabricated products in
1995. To further improve this segment's contribution, the Company has committed
to capital spending in excess of $3 million in 1996 on a mill modernization
project. Production space at Sumco added in January 1996 as well as
retrofitting the Company's 120,000 square foot East Providence facility (which
will add significant capacity in early 1997) also should further improve this
segment's future contribution.
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In the other nonprecious metal segment, sales decreased $18,000. Profit
contribution increased by $6,000 (1%) due to growth of this business units
thermOweld(R) product line, particularly in foreign markets.
Interest expense decreased $1,376,000 (40%) due to substantially decreased
levels of borrowings primarily caused by proceeds from the completion of the
sales of the Company's automotive segment and investment in GO/DAN Industries in
the last half of 1995.
The Company's income taxes are primarily composed of U.S. Federal and state
income taxes.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the Company's Form 10-K Annual Report for the
year ended December 31, 1995, and to the proceedings described therein
under Part I, Item 3. Legal Proceedings. Negotiations and discovery
procedures are continuing in this matter.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits as required by Item 601 of Regulation S-K:
None required.
(b) Reports on Form 8-K:
None filed during the quarter for which this report is submitted.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HANDY & HARMAN
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(Registrant)
Date: May 15, 1996 J.M. McLoone /s/
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J.M. McLoone, Vice President -
Financial Services
Date: May 15, 1996 D.C. Kelly /s/
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D.C. Kelly - Controller
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