-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, aNzhqw7M71fydsruqgJre53SlZZOSG5dyeqPVUS1DtmZdE9TiNXe0AWf8knYMQ1k mYFKR6gTEecTLMy/mBV+IA== 0000950123-94-001848.txt : 19941116 0000950123-94-001848.hdr.sgml : 19941116 ACCESSION NUMBER: 0000950123-94-001848 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANDY & HARMAN CENTRAL INDEX KEY: 0000045333 STANDARD INDUSTRIAL CLASSIFICATION: 3350 IRS NUMBER: 135129420 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05365 FILM NUMBER: 94559026 BUSINESS ADDRESS: STREET 1: 250 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10177 BUSINESS PHONE: 2126612400 MAIL ADDRESS: STREET 2: 250 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10177 10-Q 1 HANDY & HARMAN -- FORM 10-Q 1 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 September 30, 1994 ------------------------------------------------------- or / / 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: 1-5365 ------------------------------------------------ HANDY & HARMAN ----------------------------------------------------- (Exact name of registrant as specified in its charter) STATE OF NEW YORK 13-5129420 - ----------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 250 Park Avenue, New York, New York 10177 - ----------------------------------------------------------------------- (Address of principal executive offices) (Zip code)
(212) 661-2400 ---------------------------------------------------- (Registrant's telephone number, including area code) --------------------------------------------------------------- (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 ---- ---- The number of shares of issuer's Common Stock, par value $1.00 per share outstanding as of November 9, 1994 was 14,063,380. 2 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 Nine Months Ended ------------------------------------ ------------------------------------- Sept 30, 1994 Sept 30, 1993 Sept 30, 1994 Sept 30, 1993 - ----------------------------------------------------------------------------------------------------------------------------- Sales and service revenues $194,743 $162,017 $583,206 $481,817 Cost of sales and service 169,183 143,439 503,220 415,062 - ----------------------------------------------------------------------------------------------------------------------------- Gross profit 25,560 18,578 79,986 66,755 - ----------------------------------------------------------------------------------------------------------------------------- Selling, general and administrative expenses 15,528 11,989 45,792 40,864 - ----------------------------------------------------------------------------------------------------------------------------- Income from operations 10,032 6,589 34,194 25,891 - ----------------------------------------------------------------------------------------------------------------------------- Other deductions (income): Interest expense-net 3,815 3,796 11,624 12,396 Other (net) 240 2,428 269 2,258 - ----------------------------------------------------------------------------------------------------------------------------- 4,055 6,224 11,893 14,654 - ----------------------------------------------------------------------------------------------------------------------------- Income before taxes on income 5,977 365 22,301 11,237 Income tax provision 2,500 152 9,300 4,566 - ----------------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of accounting change 3,477 213 13,001 6,671 Cumulative effect of accounting change -- -- -- 576 - ----------------------------------------------------------------------------------------------------------------------------- Net Income $ 3,477 $ 213 $ 13,001 $ 7,247 ============================================================================================================================= Earnings per share before cumulative effect of accounting change $ .25 $ .02 $ .93 $ .48 Cumulative effect of accounting change per share -- -- -- .04 - ----------------------------------------------------------------------------------------------------------------------------- Earnings per share $ .25 $ .02 $ .93 $ .52 ============================================================================================================================= Dividends per share $ -- $ -- $ .15 $ .15 ============================================================================================================================= Average shares outstanding 14,063,000 14,023,000 14,043,000 14,020,000 =============================================================================================================================
See Accompanying Notes to Consolidated Financial Statements. -1- 3 HANDY & HARMAN AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (thousands of dollars)
Sept 30, 1994 December 31, 1993 (unaudited) - ------------------------------------------------------------------------------------------------------------------------------ ASSETS Current Assets: Cash $ 5,013 $ 3,320 Receivables (Note b) 113,708 127,743 Refundable income taxes -- 500 Inventories - at cost (Note c) 88,313 88,692 Prepaid expenses and deposits 10,808 9,946 Current assets of discontinued operations (net) 467 2,999 - ------------------------------------------------------------------------------------------------------------------------------ Total current assets 218,309 233,200 - ------------------------------------------------------------------------------------------------------------------------------ Investment in 50% or less owned companies 2,200 1,824 Property, plant and equipment - at cost 270,908 249,384 Less accumulated depreciation and amortization 156,158 143,164 - ------------------------------------------------------------------------------------------------------------------------------ 114,750 106,220 Prepaid retirement costs (net) 46,065 43,627 Intangibles, net of amortization 23,018 1,120 Deferred charges 3,076 1,696 Other assets 1,643 1,518 Noncurrent assets of discontinued operations 23,551 23,714 - ------------------------------------------------------------------------------------------------------------------------------ $432,612 $412,919 ============================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term borrowings $ 15,000 $ 28,000 Current maturities of long-term debt 7,000 7,000 Accounts payable 76,868 53,739 Advances from smelter 8,282 8,935 Other current liabilities 25,245 23,619 - ------------------------------------------------------------------------------------------------------------------------------ Total current liabilities 132,395 121,293 - ------------------------------------------------------------------------------------------------------------------------------ Long-term debt, less current maturities 185,760 188,750 Deferred income taxes 11,299 11,276 Shareholders' equity: Common stock - par value $1; 60,000,000 shares authorized; 14,611,432 shares 14,611 14,611 Capital surplus 11,691 11,296 Retained earnings 81,308 70,414 Foreign currency translation adjustment (608) (951) - ------------------------------------------------------------------------------------------------------------------------------ 107,002 95,370 Less: Treasury stock 548,052 shares - 1994 and 588,252 shares - 1993 at cost 3,568 3,770 Unearned compensation 276 -- - ------------------------------------------------------------------------------------------------------------------------------ Total shareholders' equity 103,158 91,600 - ------------------------------------------------------------------------------------------------------------------------------ $ 432,612 $ 412,919 ==============================================================================================================================
See Accompanying Notes to Consolidated Financial Statements. -2- 4 HANDY & HARMAN AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited-thousands of dollars)
Increase (Decrease) in Cash Nine Months Ended ------------------------------------------ Sept 30, 1994 Sept 30, 1993 - -------------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 13,001 $ 7,247 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 11,376 11,919 Provision for doubtful accounts 587 612 Provision for sale of business units -- 2,800 (Gain) loss on disposal of property, plant and equipment 62 131 Net retirement cost (2,438) (2,845) Equity in earnings of 50% or less-owned companies (267) (49) Earned compensation - 1988 long-term incentive and outside director stock option plans 185 168 Changes in assets and liabilities: Accounts receivable 16,410 (2,248) Refundable income taxes 500 -- Inventories 1,167 (7,961) Prepaid expenses (825) 1,160 Deferred financing costs (1,886) -- Deferred charges and other assets 39 (276) Accounts payable and accrued liabilities 22,990 13,230 Deferred income tax 23 2,727 - -------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 60,924 26,615 - -------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from sale of property, plant and equipment 29 426 Capital expenditures (12,170) (11,032) Divestitures, net of cash sold -- 2,123 Investment in 50% or less owned companies -- (229) Acquisition, net of cash acquired (25,568) -- Net investing activities of discontinued operations 500 -- - -------------------------------------------------------------------------------------------------------------------------- Net cash used by investing activities (37,209) (8,712) - -------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Short-term borrowings (13,000) (22,500) Current maturities of long-term debt -- (83) Increase (decrease) in long-term debt (6,911) 5,711 Dividends paid (2,107) (2,103) - -------------------------------------------------------------------------------------------------------------------------- Net cash used by financing activities (22,018) (18,975) - -------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on net cash (4) (26) - -------------------------------------------------------------------------------------------------------------------------- Net change in cash 1,693 (1,098) Cash at beginning of year 3,320 2,812 - -------------------------------------------------------------------------------------------------------------------------- Cash at end of period $ 5,013 $ 1,714 - --------------------------------------------------------------------------------------------------------------------------
See Accompanying Notes to Consolidated Financial Statements. -3- 5 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. Accounts receivable at September 30, 1994 and December 31, 1993 is comprised as follows (in thousands):
Sept 30, 1994 December 31, 1993 ------------- ----------------- (Unaudited) Trade accounts $104,742 $ 70,761 Notes 144 221 Allowance for doubtful accounts (3,454) (3,721) ---------------------------------------------------------------------------------------------------- 101,432 67,261 Sales of precious metals for future delivery 12,276 60,482 ---------------------------------------------------------------------------------------------------- $113,708 $127,743 ====================================================================================================
c. Inventories at September 30, 1994 and December 31, 1993 is comprised as follows (in thousands):
Sept 30, 1994 December 31, 1993 ------------- ----------------- (Unaudited) Precious metals: Fine and fabricated metals in various stages of completion $ 38,149 $ 38,879 Non-precious metals: Base metals, factory supplies and raw materials 23,497 25,635 Work in process 18,611 14,893 Finished goods 8,056 9,285 ---------------------------------------------------------------------------------------------------- $ 88,313 $ 88,692 ====================================================================================================
Lifo inventory - the excess of period end market value over Lifo cost was $152,104,000 at September 30, 1994 and $141,273,000 at December 31, 1993. d. 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, 1993). e. In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". The Company has adopted this standard in 1993, the cumulative effect of which is a benefit of $576,000 or $ .04 per share recorded in the first quarter of 1993. f. In 1994 and 1993, the third quarter dividend, in the amount of $.05 was declared in the second quarter to be paid in the third quarter. -4- 6 HANDY & HARMAN AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS g. The following table presents certain selected financial data by industry segment (expressed in thousands of dollars) for the three months ended and nine months ended September 30, 1994 and 1993:
Three Months Ended Nine Months Ended ----------------------------------- ------------------------------------ Sept 30, 1994 Sept 30, 1993 Sept 30, 1994 Sept 30, 1993 ---------------------------------------------------------------------------------------------------------------------- Sales and service revenues: Precious metals $110,278 $ 91,129 $321,276 $240,557 Automotive (OEM) 41,906 32,436 136,255 116,763 Wire/Tubing 38,542 32,507 114,361 103,789 Other non-precious metal businesses 4,017 5,945 11,314 20,708 ---------------------------------------------------------------------------------------------------------------------- Total $194,743 $162,017 $583,206 $481,817 ====================================================================================================================== Profit contribution before unallocated expenses: Precious metals $ 3,589 $ 3,534 $ 10,403 $ 7,291 Automotive (OEM) 2,194 765 11,596 9,928 Wire/Tubing 3,863 2,855 11,808 10,381 Other non-precious metal businesses 596 (2,543) 1,468 (2,517) ---------------------------------------------------------------------------------------------------------------------- Total 10,242 4,611 35,275 25,083 General corporate expenses (450) (450) (1,350) (1,450) Interest expense (net) (3,815) (3,796) (11,624) (12,396) ---------------------------------------------------------------------------------------------------------------------- Earnings before income taxes $ 5,977 $ 365 $ 22,301 $ 11,237 ---------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------
h. On September 9, 1994 the Company acquired 100% of Sumco Inc.'s shares outstanding for $26,000,000. The acquisition has been accounted for as a purchase; accordingly, the purchase price has been allocated to the underlying assets and liabilities based on their respective estimated fair values at the date of acquisition. The preliminary estimated fair value of assets acquired is approximately $11,000,000 and liabilities assumed is $7,000,000. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed was $22,000,000 and is being amortized over a period of 40 years. The results of operations of the acquired company have been included in the Company's results of operations since the date of acquisition. -5- 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The Company's precious metal inventories, consisting principally of gold and silver, may be considered as an equivalent to cash. Furthermore, these precious metal inventories which are stated in the Balance Sheet at LIFO cost have a market value of $152,104,000 in excess of such cost as of September 30, 1994. 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; therefore; 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. During the third quarter of 1994, the Company finalized $215,000,000 of Revolving Credit Facilities with twenty banks which replaced the existing Credit Facilities dated March 16, 1992. These Credit Facilities provided $161,250,000 for a three year period and $53,750,000 for 364 days. As of September 30, 1994, $102,000,000 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. The Fee Consignment Facility of -6- 8 $125,375,000 is for a three-year period and the short-term Fee Consignment Facility of $125,375,000 is for 364 days. All gold and silver consigned to the Company pursuant to these Consignment Agreements will be located at the Company's plants in Fairfield, Connecticut and East Providence, Rhode Island. No gold or silver was consigned under these agreements at September 30, 1994. 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. International Operations The Company's foreign operations consist of five subsidiaries, one in Canada, two in the United Kingdom and two in Mexico, and two equity investments in Asia and Brazil. Substantially, all unremitted earnings of such foreign entities are free from legal contractual restrictions. -7- 9 Comparison of Third Quarter of 1994 vs. Third Quarter of 1993 Sales for the precious metal segment increased $19,149,000 (21%). Sales of refining outturn, primarily in kilo bar and grain form, increased from $47,792,000 in 1993 to $55,525,000 in 1994. This type of precious metal sales can fluctuate significantly from period to period, however, the profit contribution effect for such fluctuation is minor since the profit margin on these sales is less than the margins on other products in this segment. The average price for gold was $385.39 per ounce and the average price for silver was $5.32 per ounce representing increases of 3% and 14%, respectively, from the third quarter of 1993. The profit contribution (pre-tax income before deducting interest and Corporate expenses) increased $55,000 (2%) due to strong telecommunication industry sales offset by lower sales for other industrial products caused by competitive pressures. Management is focused on improving the profit contribution from this segment by its expansion into the precision industrial electroplating market, as evidenced by the acquisition of Sumco Inc. on September 9, 1994, by expanding capacity at Handy & Harman Electronic Materials Corporation, and by rationalizing its facilities where necessary. Refinery earnings continue to be subject to precious metal price fluctuations as well as its ability to generate foreign earnings. The automotive (OEM) segment sales increased $9,470,000 (29%) and the profit contribution increased $1,429,000 (187%) due to the continued strength of the automotive industry which is anticipated to continue for the balance of the year. Sales for the wire/tubing segment increased $6,035,000 (19%) due to the improved economy both domestic and European. The profit contribution increased $1,008,000 (35%) due to the increased sales as well as improved manufacturing performance through recent capital investment which increased capacity in both the wire and tubing companies. This segment's current level of operating performance is expected to continue for the balance of the year. In the other non-precious metal segment, sales decreased $1,928,000 (32%) primarily due to the sale of three businesses in 1993. Profit contribution increased $3,139,000. Excluding the charge of $2,800,000 in 1993 relating to the sale of Valley Metals, Inc. and New Industrial Techniques, Inc. the profit contribution increased $339,000 primarily due to the increased sales to the natural gas industry by this segment's remaining unit. The effective income tax rate was 41.8% for 1994 and 41.6% for 1993. -8- 10 Comparison of Nine Months of 1994 vs. Nine Months of 1993 Sales for the precious metals segment increased $80,719,000 (34%). Sales of refining outturn, primarily in kilo bar and grain form, increased from $109,169,000 in 1993 to $158,457,000 in 1994. This type of precious metal sales can fluctuate significantly from period to period, however, the profit contribution effect for such fluctuations is minor since the profit margin on these sales is less than the margins on other products in this segment. The average price of gold was $383.90 per ounce, an increase of 8%, and the average price of silver was $5.33 per ounce, an increase of 27%, from the nine months of the previous year. The profit contribution increased $3,112,000 (43%) primarily due to strong telecommunications industry sales, along with gains in shipments to the electronic, semiconductor and computer industries. The automotive (OEM) segment sales increased $19,492,000 (17%) and the profit contribution increased $1,668,000 (17%) as previously discussed in the quarterly analysis. Sales for the wire/tubing segment increased $10,572,000 (10%) and the profit contribution increased $1,427,000 (14%) primarily due to the sales to the telecommunications industry, gradual improvement in sales to the medical industry as well as improved manufacturing performance through recent capital investment. In the other non-precious metals segment sales decreased $9,394,000 (45%) and the profit contribution increased $3,985,000 as previously discussed in the quarterly analysis as well as the elimination of operating losses associated with the sale of three businesses in 1993. Interest expense decreased $772,000 (6%) primarily due to lower effective interest rates in 1994. The effective income tax rate, was 41.7% for 1994 and 40.6% for 1993. -9- 11 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, 1993, and to the proceedings described therein under Part I, Item 3. Legal Proceedings and under Part II, Item I. Legal Proceedings of the Company's Form 10-Q for the quarters ended March 31, 1994 and June 30, 1994. As of the date hereof, with respect to the Montvale, New Jersey Facility, extensive discovery procedures are being undertaken by the Borough of Park Ridge in order to attempt to obtain evidence to support its claims in the litigation. 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: On October 12, 1994 the Company filed a current report on Form 8-K with respect to (i) the acquisition by the Company on September 9, 1994 of all the shares of capital stock of Sumco Inc. and (ii) the execution of certain credit agreements by the Company on September 28, 1994. -10- 12 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 ------------------------------- (Registrant) Date: November 10, 1994 J.M. McLoone /s/ ------------------------------- J.M. McLoone, Vice President - Financial Services Date: November 10, 1994 D.C. Kelly /s/ ------------------------------- D.C. Kelly - Controller -11- 13 EXHIBIT INDEX ------------- Exhibit No. Description ----------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 Financial Data Schedule 1000 U.S. DOLLARS 9-MOS DEC-31-1994 JAN-01-1994 SEP-30-1994 1 5,013 0 117,162 3,454 88,313 218,309 270,908 156,158 432,612 132,395 185,760 14,611 0 0 88,547 432,612 583,206 583,206 503,220 503,220 0 587 11,624 22,301 9,300 13,001 0 0 0 13,001 14,043 14,043
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