-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RtOkESkQcdNR/O6fc2JW236cQpz9RNYmPxeZXQvO93r/kf2rSKhHSSR89G157Ej1 9IobKSulGvX4vmfZ/y79Zg== 0000950123-97-004306.txt : 19970515 0000950123-97-004306.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950123-97-004306 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANDY & HARMAN CENTRAL INDEX KEY: 0000045333 STANDARD INDUSTRIAL CLASSIFICATION: ROLLING DRAWING & EXTRUDING OF NONFERROUS METALS [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: 97605242 BUSINESS ADDRESS: STREET 1: 555 THEODORE FREMD AVE CITY: RYE STATE: NY ZIP: 10580 BUSINESS PHONE: 9149254437 MAIL ADDRESS: STREET 1: 555 THEODORE FREMD AVE CITY: RYE STATE: NY ZIP: 10580 10-Q 1 HANDY & HARMAN 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 March 31, 1997 ----------------------------------------------------------- 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 May 13, 1997 was 11,934,544. 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 ------------------------------------ March 31, 1997 March 31, 1996 - -------------------------------------------------------------------------------- Sales $ 104,932 $ 108,340 Cost of sales 83,345 86,991 - -------------------------------------------------------------------------------- Gross profit 21,587 21,349 Selling, general and administrative expenses 11,814 11,424 - -------------------------------------------------------------------------------- 9,773 9,925 - -------------------------------------------------------------------------------- Other deductions (income): Interest expense-net 2,784 2,054 Other-net (118) 203 - -------------------------------------------------------------------------------- 2,666 2,257 - -------------------------------------------------------------------------------- Income from continuing operations before income taxes 7,107 7,668 Income tax provision 3,020 3,305 - -------------------------------------------------------------------------------- Income from continuing operations 4,087 4,363 - -------------------------------------------------------------------------------- Discontinued Operations: Loss from operations, net of tax benefit of $1,026 -- (1,354) Loss on disposal, net of tax benefit of $4,550 -- (8,300) - -------------------------------------------------------------------------------- -- (9,654) - -------------------------------------------------------------------------------- Net Income (loss) $ 4,087 ($ 5,291) ================================================================================ Earnings (loss) per share: Continuing operations $ .34 $ .31 Discontinued operations -- (.69) - -------------------------------------------------------------------------------- Net income (loss) $ .34 ($ .38) ================================================================================ Dividends per share $ .06 $ .06 ================================================================================ Average shares outstanding 11,994,000 14,019,000 ================================================================================
See Accompanying Notes to Consolidated Financial Statements. -1- 3 HANDY & HARMAN AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (thousands of dollars)
March 31, 1997 December 31, 1996 (unaudited) - --------------------------------------------------------------------------------------------------------- ASSETS Current Assets: Cash $ 3,840 $ 9,701 Accounts receivable, less allowance for doubtful accounts of $1,751 in 1997 and $1,686 in 1996 66,165 51,572 Inventories 75,914 70,357 Prepaid expenses, deposits and other current assets 4,874 7,044 - --------------------------------------------------------------------------------------------------------- Total current assets 150,793 138,674 - --------------------------------------------------------------------------------------------------------- Investment in affiliates, at equity 3,505 3,122 Property, plant and equipment - at cost 204,916 195,623 Less accumulated depreciation and amortization 114,707 112,418 - --------------------------------------------------------------------------------------------------------- 90,209 83,205 Prepaid retirement costs (net) 55,754 54,566 Intangibles, net of amortization 65,723 24,818 Other assets 12,696 12,079 - --------------------------------------------------------------------------------------------------------- $ 378,680 $ 316,464 ========================================================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term borrowings -- $ 15,000 Accounts payable $ 37,625 30,163 Futures payable 11,966 9,246 Federal and Foreign taxes on income 1,058 792 Other current liabilities 17,260 21,637 - --------------------------------------------------------------------------------------------------------- Total current liabilities 67,909 76,838 - --------------------------------------------------------------------------------------------------------- Long-term debt, less current maturities 198,022 127,500 Minority interest 1,326 1,259 Deferred income taxes 13,371 15,261 - --------------------------------------------------------------------------------------------------------- Shareholders' equity: Common stock - par value $1; 60,000,000 shares authorized; 14,611,432 shares issued 14,611 14,611 Capital surplus 13,461 13,432 Retained earnings 115,767 112,399 Foreign currency translation adjustment (936) (61) - --------------------------------------------------------------------------------------------------------- 142,903 140,381 Less: Treasury stock 2,618,088 shares - 1997 and 2,618,421 shares - 1996 at cost 44,443 44,308 Unearned compensation 408 467 - --------------------------------------------------------------------------------------------------------- Total shareholders' equity 98,052 95,606 - --------------------------------------------------------------------------------------------------------- $ 378,680 $ 316,464 =========================================================================================================
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 Three Months Ended ------------------------------------ March 31, 1997 March 31, 1996 - ------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income (loss) $ 4,087 ($ 5,291) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 3,228 3,315 Provision for doubtful accounts 283 232 (Gain) on disposal of property, plant and equipment (9) (6) Net prepaid retirement cost (1,188) (749) Equity in earnings of affiliates (371) (60) Minority interest in net income 67 -- Earned compensation - 1988 long-term incentive and outside director stock option plans 137 148 Discontinued operations reserves -- 12,850 Changes in assets and liabilities: Accounts receivable (11,109) (6,211) Inventories (1,270) 1,104 Prepaid expenses 3,955 115 Deferred charges and other assets (757) (1,075) Accounts payable and other current liabilities (3,525) (412) Federal and foreign taxes on income 266 (6,729) Deferred income taxes (1) (22) - ------------------------------------------------------------------------------------------------------ Net cash used by operating activities (6,207) (2,791) - ------------------------------------------------------------------------------------------------------ Cash flows from investing activities: Proceeds from sale of property, plant and equipment 13 85 Capital expenditures (4,488) (2,414) Acquisition;net of cash acquired (52,548) -- - ------------------------------------------------------------------------------------------------------ Net cash used by investing activities (57,023) (2,329) - ------------------------------------------------------------------------------------------------------ Cash flows from financing activities: Increase/(decrease)in short-term borrowings (15,000) 10,000 Increase in long-term debt 110,522 -- Net (decrease) in long-term revolving credit facilities (40,000) (5,000) Net (increase) in futures receivable -- (1,628) Net increase in futures payable 2,720 -- Dividends paid (720) (840) Purchase of treasury stock (net) (130) (773) - ------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 57,392 1,759 - ------------------------------------------------------------------------------------------------------ Effect of exchange rate changes on net cash (23) (9) - ------------------------------------------------------------------------------------------------------ Net change in cash (5,861) (3,370) Cash at beginning of year 9,701 6,637 - ------------------------------------------------------------------------------------------------------ Cash at end of period $ 3,840 $ 3,267 - ------------------------------------------------------------------------------------------------------
See Accompanying Notes to Consolidated Financial Statements. -3- 5 HANDY & HARMAN AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS a. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to a fair statement of the results for interim periods. 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, 1996). The results of operations for the quarter ended March 31, 1997 are not necessarily indicative of the results of the entire fiscal year. b. Inventories at March 31, 1997 and December 31, 1996 are comprised as follows (in thousands):
March 31, 1997 December 31, 1996 (unaudited) - -------------------------------------------------------------------------------- Precious metals: Fine and fabricated metals in various stages of completion $26,553 $26,569 Non-precious metals: Base metals, factory supplies and raw materials 23,220 20,993 Work in process 16,330 15,192 Finished goods 9,811 7,603 - -------------------------------------------------------------------------------- $75,914 $70,357 ================================================================================
Lifo inventory - the excess of period end market value over Lifo cost was $103,940,000 at March 31, 1997 and $97,996,000 at December 31, 1996. c. On February 28, 1997 the Company acquired 100% of the outstanding shares of Olympic Manufacturing Group, Inc. for approximately $53,000,000. 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 estimated fair value of assets acquired is $17,000,000 and liabilities assumed is $5,000,000. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed was $41,000,000 and is being amortized over a period of 40 years. The excess purchase price has a tax deductible basis of approximately $10,000,000. This business is not material to the revenues of the Company. d. Subsequent to March 31, 1997 the Company completed additional long-term financing for $125,000,000 at a fixed rate of 7.31% due 2004. The Company's long-term revolving credit facility along with this new long-term financing gives the Company the ability to classify certain short-term obligations amounting to $110,522,000 as long-term debt as of March 31, 1997. -4- 6 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, 1997 and 1996:
March 31, 1997 March 31, 1996 - -------------------------------------------------------------------------------- Sales: Wire/Tubing $ 43,248 $ 47,025 Precious metals 54,444 57,286 Other non-precious metal businesses 7,240 4,029 - -------------------------------------------------------------------------------- Total $ 104,932 $ 108,340 ================================================================================ Profit contribution before unallocated expenses: Wire/Tubing $ 4,452 $ 5,042 Precious metals 5,024 4,632 Other non-precious metal businesses 865 498 - -------------------------------------------------------------------------------- Total 10,341 10,172 General corporate expenses (450) (450) Interest expense (net) (2,784) (2,054) - -------------------------------------------------------------------------------- Income from continuing operations before taxes $ 7,107 $ 7,668 ================================================================================
f. Revenues and expenses for the first quarter of 1996 reflect the sale (announced May 14, 1996 and completed in the third quarter of 1996) of the Company's Refining Division business, exclusive of the Company's satellite refining operations located in Singapore and Canada, accounted for as a discontinued operation. A 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. -5- 7 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 $103,940,000 in excess of such cost as of March 31, 1997. 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. 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 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/sold for future receipt/delivery, and gold and silver received from suppliers and customers on a consignment basis. The Company has a $200,000,000 Revolving Credit Facility which provides $150,000,000 for a three year period and $50,000,000 for 364 days. As of March 31, 1997 there were only borrowings of $80,000,000 under the long-term facility. In addition to the Revolving Credit Facilities, banks also provide $111,750,000 of Gold and Silver Fee Consignment Facilities. The Fee Consignment Facility of $83,812,500 is for a three-year period and the short-term Fee Consignment Facility of $27,937,500 is for 364 days. All gold and silver consigned to the Company pursuant to these Consignment agreements is located at the Company's plant in Fairfield, Connecticut. As of March 31, 1997 there were 9,970 ounces of gold and 14,543,000 ounces of silver leased under these fee consignment facilities. Subsequent to March 31, 1997 the Company completed additional long-term financing for $125,000,000 at a fixed rate of 7.31% due 2004. -6- 8 On May 14, 1996, Handy & Harman announced that it had decided to exit the precious metals refining business, exclusive of the Company's minor satellite refining operations located in Singapore and Canada. The Company completed the sale of the Handy & Harman Refining Division in the third quarter of 1996. Accordingly, operations for this major division have been classified as discontinued operations. A charge associated with exiting this business of $22,350,000 ($13,161,000 after-tax) was recorded in 1996. The sale of this division released a significant portion of the Company's owned precious metal inventory position, making this potential liquidity, along with the Company's credit facilities, available for deployment to continuing operations, acquisition of new businesses and repurchase of 1.8 million shares of the Company's common stock via a "Dutch Auction", completed in December 1996. On February 28, 1997 the Company acquired Olympic Manufacturing Group, Inc. for approximately $53,000,000. Subsequent to March 31, 1997, a lifo gain of approximately $4,700,000 was realized from the sale of gold inventories. During 1997 the Financial Accounting Standards Board issued SFAS No.128 "Earnings per Share" effective for interim and annual periods ending after December 31, 1997. The adoption of this standard has no effect on the Company's earnings per share calculation since, under the prior method which had considered common stock equivalents for primary earnings per share, there was no dilutive effect for outstanding stock options. -7- 9 Statements contained in Management's Discussion and Analysis are forward-looking statements and are made pursuant to the safe harbor provision of the private securities litigation reform act of 1995. Forward-looking statements involve a number of risks and uncertainties including, but not limited to, product demand, pricing, market acceptance, precious metal and other raw materials price fluctuations, intellectual property rights and litigation, risks in product and technology development and other risk factors detailed in the Company's Securities and Exchange Commission filings. OPERATING ACTIVITIES Net cash used by operating activities amounted to $6,207,000 in 1997 and $2,791,000 in 1996. The increase of $3,416,000 in cash used for 1997 over 1996 was primarily due to increased working capital requirements. INVESTING ACTIVITIES Net cash used by investing activities amounted to $57,023,000 in 1997 and $2,329,000 in 1996. The net cash used in 1997 was primarily composed of approximately $53,000,000 for the purchase of Olympic Manufacturing Group, Inc. on February 28, 1997 and for capital expenditures amounting to $4,488,000 which includes a major modernization program at our precious metal product facility in Fairfield, Connecticut and the retrofitting of the former karat gold facility in East Providence, Rhode Island by the Electronic Materials Group. Net cash used in investing activities in 1996 was primarily composed of capital expenditures for plant expansion at one of the Handy & Harman Electronic Materials Group facilities and machinery and equipment for the wire and tubing segment. FINANCING ACTIVITIES Net cash provided by financing activities amounted to $57,392,000 in 1997 compared to $1,759,000 in 1996. 1997's primary financing activity was the purchase of Olympic Manufacturing Group, Inc. with long-term debt for approximately $53,000,000. The Company's foreign operations consist of four wholly owned subsidiaries, (one in Canada, two 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. -8- 10 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. COMPARISON OF FIRST QUARTER OF 1997 VERSUS FIRST QUARTER OF 1996 Sales for the wire and tubing segment decreased $3,777,000 (8%) primarily due to decreased sales of stainless steel tubing caused by the continued weakness in the semiconductor fabrication industry and the effects of the strengthening British pound against other European currencies on our United Kingdom subsidiary's export sales. The profit contribution (pre-tax income before deducting interest and Corporate expenses) decreased $590,000 (12%) due to the decreased sales noted above. Management has implemented cost cutting measures to limit the effects of the above market conditions on profit contribution. As market conditions improve, profit contribution from this segment should return to expected levels. Sales for the precious metal segment decreased $2,842,000 (5%). The decrease in sales was primarily due to the exit from low margin business in Canada and the effect of lower precious metal prices on the dollar volume of sales, partially offset by sales of ele Corporation, acquired on June 27, 1996. The average price of silver was $5.01 per ounce in 1997 and $5.54 per ounce in 1996. The average price of gold was $351.35 per ounce in 1997 and $400.10 per ounce in 1996. The profit contribution increased $392,000 (8%) primarily due to improved operating performance of the Precious Metals Fabrication Group of companies. Capital projects in progress should enhance this segment's profit contribution in 1997. In the other nonprecious metal segment, sales increased $3,211,000 (80%) and profit contribution increased by $367,000 (74%) primarily due to the addition of Olympic Manufacturing Group, Inc. purchased on February 28, 1997. Due to Olympic's business cycle, a significant increase in profit contribution from this segment is expected in the second and third quarter. Interest expense increased $730,000 (36%) due to increased borrowings as a result of the purchase of Olympic Manufacturing Group, Inc. on February 28, 1997 and the purchase of 1.8 million shares of the Company's common stock via a "Dutch Auction" completed in December 1996. The Company's income taxes are primarily composed of U.S. Federal and state income taxes. -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, 1996, 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: On January 28, 1997 the Company filed a current report on Form 8-K with respect to the acquisition by the Company of all the shares of capital stock of Olympic Manufacturing Group, Inc. -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: May 14, 1997 R.F. Burlinson /s/ -------------------------------- R.F. Burlinson, Vice President - Treasurer Date: May 14, 1997 D.C. Kelly /s/ -------------------------------- D.C. Kelly - Controller -11- EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 U.S.DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 3,840 0 67,916 1,751 75,914 150,793 204,916 114,707 378,680 67,909 198,022 0 0 14,611 83,441 378,680 104,932 104,932 83,345 83,345 (118) 283 2,784 7,107 3,020 4,087 0 0 0 4,087 .34 .34
-----END PRIVACY-ENHANCED MESSAGE-----