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:
Quarter Master Industries, Inc. Profit Sharing Plan and Trust
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
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE (UNAUDITED)
Quarter Master Industries, Inc. Profit Sharing Plan and Trust
December 31, 2003 and 2002 and Year Ended December 31, 2003
Quarter Master Industries, Inc. Profit Sharing Plan and Trust
Financial Statements and Supplemental Schedule
December 31, 2003 and 2002 and
Year Ended December 31, 2003
TABLE OF CONTENTS
Financial Statements
Statements of Net Assets Available for Benefits (Unaudited)........................ 1
Statement of Changes in Net Assets Available for Benefits (Unaudited).............. 2
Notes to Financial Statements (Unaudited).......................................... 3
Supplemental Schedule
Schedule H, Line 4i--Schedule of Assets (Held at End of Year) (Unaudited)........... 8
Quarter Master Industries, Inc. Profit Sharing Plan and Trust
Statements of Net Assets Available for Benefits (Unaudited)
DECEMBER 31,
2003 2002
-----------------------
ASSETS
Investments, at fair value:
Pooled separate accounts $ - $501,287
Separate contract accounts 7,734 5,889
Hawk Corporation common stock - 1,306
Guaranteed Income Fund, at contract fund - 104,045
-----------------------
7,734 612,527
Contributions receivable:
Employer - 287
Employee - 759
-----------------------
- 1,046
-----------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 7,734 $613,573
=======================
See notes to financial statements.
1
Quarter Master Industries, Inc. Profit Sharing Plan and Trust
Statement of Changes in Net Assets Available for Benefits (Unaudited)
Year Ended December 31, 2003
Additions:
Interest income $ 391
Contributions:
Employer 16,607
Employee 44,500
Employee rollovers 2,047
---------
63,154
---------
Total additions 63,545
Deductions:
Benefit payments 356,231
Fees and expenses 818
---------
Total deductions 357,049
Net realized and unrealized appreciation
in fair value of investments 111,547
Net transfers to Friction Products Co. Profit Sharing Plan (423,882)
---------
Net decrease (605,839)
Net assets available for benefits at beginning of year 613,573
---------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 7,734
=========
See notes to financial statements.
2
Quarter Master Industries, Inc. Profit Sharing Plan and Trust
Notes to Financial Statements (Unaudited)
December 31, 2002 and 2001 and
Year Ended December 31, 2002
1. DESCRIPTION OF THE PLAN
The following description of the Quarter Master Industries, Inc. Profit Sharing
Plan and Trust (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, 1985 as a defined contribution plan covering
all non-union full time employees of Quarter Master Industries, Inc. (the
Company and Plan Sponsor) who have completed ninety days of service (one year 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 Plan Sponsor makes a matching contribution equal to 50% of
the participant's contribution up to 4% of the participant's compensation. The
Plan also allows for discretionary contributions by the Plan Sponsor. The Plan
Sponsor did not make a discretionary contribution for the 2003 or 2002 Plan
years.
Forfeited balances are used to reduce future Plan Sponsor contributions and Plan
expenses. Plan expenses for the years ended December 31, 2003 and 2002 were
reduced by $741 and $13, respectively. Plan Sponsor contributions for the years
ended December 31, 2003 and 2002 were reduced by $0 and $1,460, respectively.
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.
3
Quarter Master Industries, Inc. Profit Sharing Plan and Trust
Notes to Financial Statements--Continued
December 31, 2003 and 2002 and
Year Ended December 31, 2003
1. DESCRIPTION OF THE PLAN - CONTINUED
VESTING AND DISTRIBUTIONS
Participants are immediately vested in their contributions and discretionary
contributions, plus actual earnings thereon. On December 23, 2003 all active
participants in the Plan became 100% vested in all Plan Sponsor matching
contributions. Prior to that date, vesting of Plan Sponsor matching
contributions plus actual earnings thereon was based upon years of continuous
service. A participant was 100% vested after six 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 or the Trustee). A participant may direct Plan Sponsor and employee
contributions in any of several investment options, including the Hawk
Corporation common stock. Participants may change their investment options and
transfer funds between investment options daily.
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 net investment return in each participant's account.
2. SUMMARY OF ACCOUNTING POLICIES
INVESTMENT VALUATION
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
4
Quarter Master Industries, Inc. Profit Sharing Plan and Trust
Notes to Financial Statements--Continued
December 31, 2003 and 2002 and
Year Ended December 31, 2003
2. SUMMARY OF ACCOUNTING POLICIES - CONTINUED
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.
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.
All other investments are stated at fair value. All investments of the Plan are
fully participant-directed.
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.
5
Quarter Master Industries, Inc. Profit Sharing Plan and Trust
Notes to Financial Statements--Continued
December 31, 2003 and 2002 and
Year Ended December 31, 2003
3. INVESTMENTS
During 2002, the Plan's investments (including investments purchased, sold, as
well as held, during the year) depreciated in fair value as follows:
NET REALIZED
AND UNREALIZED
APPRECIATION
IN FAIR VALUE
OF INVESTMENTS
--------------
Pooled separate accounts $ 108,687
Separate contract accounts 1,875
Hawk Corporation common stock 985
---------------
$ 111,547
===============
The fair value of individual investments that represent 5% or more of the Plan's
net assets are as follows:
DECEMBER 31
2003 2002
-------- --------
Mid Cap Growth/Artisan Partners(1) $ 75,573
CIGNA Lifetime 50 Fund(1) 60,437
Janus Worldwide Fund(1) 35,634
S&P 500 Index Fund(1) 136,637
Guaranteed Income Fund(1) 104,045
Large Cap Value/John A. Levin & Co. Fund(1) 35,829
Small Cap Value/Berger(1) 35,439
State Street Global Adv Intermediate Bond Fund(1) 30,755
Penn Mutual separate contract accounts $ 7,734
(1) Net assets were transferred into the Friction Products Co. Profit Sharing
Plan during December 2003. Therefore, the December 31, 2003 fair value is
less than 5% of net assets.
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.
6
Quarter Master Industries, Inc. Profit Sharing Plan and Trust
Notes to Financial Statements--Continued
December 31, 2003 and 2002 and
Year Ended December 31, 2003
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 held by CIGNA
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 provision of, the Successor Plan.
7
Quarter Master Industries, Inc. Profit Sharing Plan and Trust
Employer Identification Number: 34-1608009
Plan Number: 005
Schedule H, Line 4i--Schedule of Assets (Held at End of Year) (Unaudited)
December 31, 2003
Identity of Issue, Borrower, Lessor or Current
Similar Party/Description of Investment Value
- --------------------------------------------------------------------------------------------------
* Penn Mutual
Separate contract accounts $ 7,734
---------------------
$ 7,734
=====================
* Indicates a party-in-interest to the Plan.
8
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.
Quarter Master Industries, Inc. Profit Sharing Plan and Trust
Date: June 24, 2004
By: /s/ Thomas A. Gilbride
----------------------
Thomas A. Gilbride
Plan Administrator