SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO ___________
COMMISSION FILE NUMBER: 333-68583
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Hawk Corporation 401(k) Savings and Retirement Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Hawk Corporation
200 Public Square, Suite 1500
Cleveland, Ohio 44114
AUDITED FINANCIAL STATEMENTS
Hawk Corporation 401(k) Savings and Retirement Plan
December 31, 2003 and 2002 and Year Ended December 31, 2003
with Reports of Independent Registered Public Accounting Firms
Hawk Corporation 401(k) Savings and Retirement Plan
Audited Financial Statements
December 31, 2003 and 2002 and
Year Ended December 31, 2003
TABLE OF CONTENTS
Reports of Independent Registered Public Accounting Firms............ 1
Audited Financial Statements
Statements of Net Assets Available for Benefits...................... 3
Statement of Changes in Net Assets Available for Benefits............ 4
Notes to Financial Statements........................................ 5
Report of Independent Registered Public Accounting Firm
Plan Administrator
Hawk Corporation 401(k) Savings and Retirement Plan
We have audited the accompanying statement of net assets available for benefits
of the Hawk Corporation 401(k) Savings and Retirement Plan (the Plan) as of
December 31, 2003, and the related statement of changes in net assets available
for benefits for the year ended December 31, 2003. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2003, and the changes in its net assets available for benefits for
the year ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Grant Thornton LLP
Cleveland, Ohio
June 15, 2004
1
Report of Independent Registered Public Accounting Firm
Plan Administrator
Hawk Corporation 401(k) Savings and Retirement Plan
We have audited the accompanying statement of net assets available for benefits
of the Hawk Corporation 401(k) Savings and Retirement Plan as of December 31,
2002. This financial statement is the responsibility of the Plan's management.
Our responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2002, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Cleveland, Ohio
June 13, 2003
2
Hawk Corporation 401(k) Savings and Retirement Plan
Statements of Net Assets Available for Benefits
DECEMBER 31,
2003 2002
-------- ----------
ASSETS
Investments, at fair value:
Pooled separate accounts $ - $1,011,606
Hawk Corporation common stock - 52,833
Guaranteed Income Fund, at contract value - 300,731
Participant loans - 62,886
--------- ----------
- 1,428,056
Contributions receivable:
Employer - 2,954
Employee - 8,817
--------- ----------
- 11,771
--------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $ - $1,439,827
========= ==========
See notes to financial statements.
3
Hawk Corporation 401(k) Savings and Retirement Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2003
Additions:
Interest income $ 13,346
Contributions:
Employer 92,637
Employee 274,488
Employee rollovers 48,797
-----------
415,922
-----------
Total additions 429,268
Deductions:
Benefit payments 128,251
Fees and expenses 1,069
-----------
Total deductions 129,320
Net realized and unrealized appreciation
in fair value of investments 374,804
Transfer of net assets to the Friction Products Co. Profit Sharing Plan (see Note 7) (2,114,579)
-----------
Net decrease (1,439,827)
Net assets available for benefits at beginning of year 1,439,827
-----------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ -
===========
4
See notes to financial statements.
Hawk Corporation 401(k) Savings and Retirement Plan
Notes to Financial Statements
December 31, 2003 and 2002 and
Year Ended December 31, 2003
1. DESCRIPTION OF THE PLAN
The following description of the Hawk Corporation 401(k) Savings and Retirement
Plan (the Plan) provides only general information. Participants should refer to
the summary plan description or Plan agreement for a more complete description
of the Plan's provisions.
GENERAL
The Plan was established January 1, 1999 as a defined contribution plan. The
participating employer of the Hawk Corporation 401(k) Savings and Retirement
Plan is Allegheny Clearfield, Inc. (the Company and Plan Sponsor). The Plan
covers all non-union employees of the Company who have completed ninety days of
service (six months of service prior to a July 1, 2003 Plan amendment that
changed the eligibility requirement), as defined. The Company is a wholly owned
subsidiary of Hawk Corporation. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
CONTRIBUTIONS
Participants may elect to contribute 1% to 50% (1% to 15% prior to a July 1,
2003 Plan amendment that changed the contribution percentage) of their pretax
compensation to the Plan subject to maximum limitations set by the Internal
Revenue Code. Participants may also contribute amounts representing
distributions from other qualified plans, commonly referred to as rollover
contributions. The Company makes a matching contribution equal to 50% of the
participant's contributions up to 4% of the participant's compensation, as
defined. The Plan also provides that the Plan Sponsor may make additional
discretionary contributions. The Plan Sponsor did not make a discretionary
contribution for the 2003 or 2002 Plan years.
Forfeitures are used to reduce future Plan Sponsor contributions. At December
31, 2003 and 2002, there were no forfeitures available to reduce future
contributions. Plan Sponsor contributions for the year ended December 31, 2003
and 2002 are net of $1,344 and $19,855 in forfeitures, respectively.
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Hawk Corporation 401(k) Savings and Retirement Plan
Notes to Financial Statements
December 31, 2003 and 2002 and
Year Ended December 31, 2003
1. DESCRIPTION OF THE PLAN -- CONTINUED
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions and
allocations of (a) the Plan Sponsor's contributions and (b) Plan net earnings.
Allocations are based on participant earnings or account balances, as defined.
The benefit to which a participant is entitled is the benefit that can be
provided from the participant's account.
VESTING AND DISTRIBUTIONS
Participants are immediately vested in their contributions plus actual earnings
thereon. On December 23, 2003, all active participants in Plan became 100%
vested in all Plan Sponsor discretionary and matching contributions plus actual
earnings thereon. Prior to that date, vesting of Plan Sponsor contributions plus
actual earnings thereon was based upon years of continuous service. A
participant was 100% vested after five years of credited service based on a
graded vesting schedule.
Distributions from a participant's account are limited to termination of
employment, death, retirement or proven hardship.
INVESTMENT OPTIONS
Prior to the Plan merger (see Note 7), the Plan's funds were primarily held in a
group annuity contract issued by Connecticut General Life Insurance Company
(CIGNA). Upon enrollment in the Plan, a participant may direct Plan Sponsor and
employee contributions to any of the investment fund options offered by the
Plan, including the Hawk Corporation common stock. Participants may change their
investment options and transfer funds between investment options daily.
PARTICIPANT LOANS
Participants may borrow from their fund accounts up to the lesser of $50,000 or
50% of their vested balance attributable to employee pre-tax, employer matching
and rollover contributions. Loan terms range from 1 to 5 years.
6
Hawk Corporation 401(k) Savings and Retirement Plan
Notes to Financial Statements
December 31, 2003 and 2002 and
Year Ended December 31, 2003
1. DESCRIPTION OF THE PLAN -- CONTINUED
The loans are secured by the balance in the participant's account. The loans
bear interest at a fixed rate commensurate with local prevailing rates at the
time of application. Principal and interest is paid ratably through monthly
payroll deductions.
PAYMENT OF BENEFITS
In the case of normal retirement, death, permanent disability or termination
prior to retirement, a participant may elect to receive the payout of his or her
vested account balance in the form of installments, an annuity or lump sum.
EXPENSES
The Plan Sponsor pays substantially all costs of Plan administration. Brokers'
fees are reflected in the investment return in each participant's account.
2. SUMMARY OF ACCOUNTING POLICIES
INVESTMENT VALUATION -- GUARANTEED INCOME FUND
The Plan has entered into an investment contract, the Guaranteed Income Fund
(Fund), with CIGNA. CIGNA maintains the contributions to this Fund in a general
account, which is credited with earnings on the underlying investments and
charged for participant withdrawals and administrative expenses. Investments in
the Guaranteed Income Fund are included in the financial statements at contract
value, as determined by CIGNA, which approximates fair value. Contract value
represents contributions made under the contract, plus earnings and transfers
in, less participant withdrawals, administrative expenses and transfers out.
Participants may ordinarily direct the withdrawal or transfer of all or a
portion of their investment at contract value. However, CIGNA has the right to
defer certain disbursements (excluding retirement, termination, and death or
disability disbursements) or transfers from the Fund when total amounts
disbursed from the pool in a given calendar year exceed 10% of the total assets
in that pool on January 1 of that year.
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Hawk Corporation 401(k) Savings and Retirement Plan
Notes to Financial Statements
December 31, 2003 and 2002 and
Year Ended December 31, 2003
2. SUMMARY OF ACCOUNTING POLICIES -- CONTINUED
There are no reserves against contract value for credit risk of the contract
issuer or otherwise. The average yield and crediting interest rates were
approximately 3.0% and 4.4% for 2003 and 2002, respectively. The crediting
interest rate is based on a formula agreed upon with the issuer, based on the
yields of the underlying investments and considering factors such as projected
investment earnings, the current interest environment, investment expenses, and
a profit and risk component. The rate may never be less than 0% nor may it be
reduced by more than 2.10% during any calendar year. Interest rates are declared
in advance and guaranteed for six month periods.
INVESTMENT VALUATION -- ALL OTHER INVESTMENTS
All other investments are stated at fair value as determined by CIGNA, on the
last business day of the Plan year. All investments of the Plan are fully
participant-directed.
All participant loans were transferred to the Friction Products Co. Profit
Sharing Plan during December 2003 (see Note 7). Prior to the transfer,
participant loans were valued at their outstanding balance, which approximated
fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
3. INVESTMENTS
During 2003, the Plan's investments (including investments purchased, sold, as
well as held, during the year) appreciated in fair value as follows:
NET REALIZED
AND UNREALIZED
APPRECIATION
IN FAIR VALUE
OF INVESTMENTS
--------------
Pooled separate accounts $ 334,654
Hawk Corporation common stock 40,150
-----------
$ 374,804
===========
8
Hawk Corporation 401(k) Savings and Retirement Plan
Notes to Financial Statements
December 31, 2003 and 2002 and
Year Ended December 31, 2003
3. INVESTMENTS -- CONTINUED
The fair value of individual investments that represented 5% or more of the
Plan's net assets at December 31, 2002 are as follows:
Janus Fund $354,677
Guaranteed Income Fund 300,731
S&P 500 Index Fund 206,827
Janus Worldwide Fund 132,245
CIGNA Lifetime 40 Fund 76,247
4. PLAN TERMINATION
The Plan Sponsor has the right under the Plan to discontinue its contributions
at any time and to terminate the Plan subject to the provisions of ERISA. In the
event of Plan termination, participants will become 100% vested in their
accounts and all participant account balances would be distributed based upon
the value of the participant's account balance on the termination date.
5. INCOME TAX STATUS
The Plan has received an opinion letter from the Internal Revenue Service dated
February 6, 2002, stating that the written form of the underlying prototype plan
document is qualified under Section 401 (a) of the Internal Revenue Code (the
Code), and that any employer adopting this form of a plan will be considered to
have a plan qualified under Section 401 (a) of the Code. Therefore, the related
trust is exempt from taxation. Once qualified, the Plan is required to operate
in conformity with the Code to maintain its qualification. The Plan
administrator believes the Plan is being operated in compliance with the
applicable requirements of the Code and, therefore, believes that the Plan is
qualified and the related trust is tax exempt.
6. PARTIES-IN-INTEREST
Transactions with parties-in-interest consist of purchases and sales of CIGNA
sponsored funds. Such transactions are exempt from being prohibited
transactions.
7. PLAN MERGER
In December 2003, the Plan merged with, and all of its net assets were
transferred, on a participant account basis, into the Friction Products Co.
Profit Sharing Plan (Merged Plan). Effective January 1, 2004, the Merged Plan
was renamed the Hawk Corporation 401(k) Retirement Plan (Successor Plan).
Effective January 1, 2004, the participants of the Merged Plan became
participants in, and subject to the provisions of the Successor Plan.
9
INDEX TO EXHIBITS
23.1 Consent of Grant Thornton LLP
23.2 Consent of Ernst & Young LLP
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Hawk Corporation 401(k) Savings and Retirement Plan
Date: June 25, 2004
By: /s/ Thomas A. Gilbride
----------------------
Thomas A. Gilbride
Plan Administrator
10