-----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, TMEnhDA2qn/fY0zqsHyOS8jHC26TKp6AyilQO+F9qornwgnYsk3vAX5uJ/tAmxUD QFF6aTbTykxIUmMO+juYAQ== 0000950123-96-001525.txt : 19960402 0000950123-96-001525.hdr.sgml : 19960402 ACCESSION NUMBER: 0000950123-96-001525 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05365 FILM NUMBER: 96543225 BUSINESS ADDRESS: STREET 1: 555 THEODORE FREMD AVE CITY: RYE STATE: NY ZIP: 10580 BUSINESS PHONE: 9149215200 MAIL ADDRESS: STREET 1: 555 THEODORE FREMD AVE CITY: RYE STATE: NY ZIP: 10580 10-K 1 HANDY & HARMAN - FORM 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K ------------------------ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-5365 HANDY & HARMAN (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW YORK 13-5129420 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 250 PARK AVENUE NEW YORK, NY 10177 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 661-2400 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NUMBER OUTSTANDING NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS AS OF MARCH 27, 1996 WHICH REGISTERED - ------------------------------------------------ -------------------- ------------------------ Common Stock Par Value $1 Per Share............. 14,030,372 New York Stock Exchange Common Stock Purchase Rights.................... 14,030,372 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None 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 and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Registration S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / The aggregate market value of the Common Stock outstanding and held by non-affiliates (as defined in Rule 405 under the Securities Act of 1933) of the registrant, based upon the closing sale price of the Common Stock on the New York Stock Exchange on March 27, 1996 was $224,607,000. Certain portions of the respective documents listed below have been incorporated by reference into the indicated Part of this Annual Report on Form 10-K. (1) Annual Report to Shareholders for fiscal year ended December 31, Part I, Item 1 1995 Part II, Items 5-8 (2) Notice of Annual Meeting of Shareholders and Proxy Statement dated Part III, April 1, 1996 Items 10-13
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS GENERAL Handy & Harman (hereinafter "H&H" or the "Company"), was incorporated in the State of New York in 1905 as the successor to a partnership which commenced business in 1867. Unless the context indicates otherwise, the terms, "H&H" and the "Company", refer to Handy & Harman and its consolidated subsidiaries. Historically, until commencing a diversification program in 1966, the Company was engaged primarily in the manufacture of silver and gold alloys in mill forms and the refining of precious metals from jewelry and industrial scrap. The Company's markets were largely among silversmiths and manufacturing jewelers, users of silver brazing alloys, and manufacturers who required silver and gold primarily for the properties of those metals. As part of these precious metals operations, the Company still publishes a daily New York price for its purchases of silver and gold and now also publishes a daily price for its fabricated silver and gold. The silver price is recognized, relied on and used by others throughout the world. Further, a review entitled "The Silver Market", which was published annually by the Company until it was discontinued in 1994, had been widely distributed in trade and financial centers in this country and abroad. The diversification program has added lines of precious metals products and various specialty manufacturing operations, including stainless steel and specialty metal alloy products, for industrial users in a wide range of applications which include the electrical, electronic, automotive original equipment, office equipment, oil and other energy related, refrigeration, utility, telecommunications and medical industries. In September 1994, the Company acquired Sumco Inc., a precision electroplating firm, which does electroplating of electronic connector and connector stock for the automotive, telecommunications, electronic and computer industries. The Company's business segments are (a) manufacturing and selling of non-precious metal wire, cable and tubing products primarily stainless steel and specialty alloys; (b) manufacturing and selling precious metals products and providing refining services; and (c) manufacturing and selling other specialty products supplied to natural gas, electrical and water utility companies. Three-year financial data for the Company's business segments appear under the caption "The Company's Business" on pages 15 and 16 of the Handy & Harman 1995 Annual Report to Shareholders (hereinafter referred to as the "Annual Report") and are incorporated by reference herein. Export sales and revenues are not significant in the total sales and revenues of any of the Company's business segments. In June 1991 the Company announced a major restructuring program designed to strengthen the Company's balance sheet by reducing debt and interest expense, to provide a sound basis for improved profitability and to allow management to concentrate on those businesses which have demonstrated potential for above average growth. See Note 11 to the Consolidated Financial Statements included in the Annual Report. MANUFACTURING OF WIRE AND TUBING PRODUCTS The Company, through several subsidiaries, manufactures a wide variety of non-precious metal wire and tubing products. Small diameter precision drawn tubing fabricated from stainless steel, nickel alloy and carbon and alloy steel is produced in many sizes and shapes to critical specifications for use in the semi-conductor, aircraft, petrochemical, automotive, appliance, refrigeration and instrumentation industries. Additionally, tubular product is manufactured for the medical industry for use as implants, surgical supplies and instrumentation. Nickel alloy, galvanized, carbon steel and stainless steel wire products redrawn from rods are produced for such diverse applications as bearings, brushes, cable lashing, hose reinforcement, nails, knitted mesh, wire rope and cloth, air bags and antennas in the aerospace, automotive, chemical, communications, marine, medical, petrochemical, welding and other industries. 1 3 Raw Materials -- The raw materials used in this segment include stainless, galvanized and carbon steels, nickel alloys and a variety of high performance alloys. The Company purchases all such raw materials at open market prices from domestic and foreign suppliers. The Company has not experienced any problem in obtaining the necessary quantities of raw materials. Prices and availability, particularly of raw materials purchased from foreign suppliers, will be affected by world market conditions and governmental policies. Competition -- There are many companies, domestic and foreign, which manufacture wire and tubing products of the types manufactured by this segment. Competition is based on quality, service, price and new product introduction, each of which is of equal importance. Distribution -- Most of the products manufactured by this segment are sold directly to customers through Company sales personnel and the remainder are sold through manufacturer's representatives and distributors. PRECIOUS METALS PRODUCTS AND REFINING SERVICES The operational structure of the parent company's precious metals activities consists of two distinct profit centers: Products Operations and Refining Operations. Both of these profit centers and the activities of other precious metals subsidiaries are included in the following discussion of the precious metals segment of the Company's business. Within the precious metals segment of the Company's business, two principal classes of products are manufactured: wire products and rolled products. The table on page 16 of the Annual Report, showing percentages of gross shipments of these classes of precious metals products which contributed ten percent or more to total sales and revenues, is incorporated herein by reference. The Company's profits from the products manufactured in this segment are derived from the "value added" of processing and fabricating and not from the purchase and resale of precious metals. In accordance with general practice in the industry, prices to customers are a composite of two factors; namely, (1) the value of the precious metal content of the product plus (2) an amount referred to as "fabrication values" to cover the cost of base metals, labor, overhead, financing and profit. Wire Products -- In the manufacture of the Company's wire products, precious metal alloys are cast, extruded and then drawn into wire. The Company's precious metal wire products consist of sterling and other alloys of silver, and other precious metal alloys in drawn and coiled wire and rod forms of differing diameters, ranging from seven thousandths of an inch to one fourth of an inch. The Company also manufactures Easy-Flo(R), Sil-Fos(R) and other silver brazing alloys in wire form for making permanent, strong, leak-tight joints of the metals joined. Brazing alloy wire is also sold in preformed rings and special shapes. The Company's precious metal alloy wire products are marketed for electrical conductive and contact applications in a wide variety of industries, including the aerospace, electronics and appliance industries. Manufacturing jewelers use the Company's precious metal wire in a wide range of production applications, including, for example, necklaces, bracelets, earring parts and pins and clips. Rolled Products -- The Company's rolled products are manufactured from precious metals in sheets, strips and bars of varying thicknesses, widths and lengths. These precious metal rolled products range in standard thickness from foils five ten thousandths of an inch thick to strips or bars three eighths of an inch thick and in standard widths from strips one eighth of an inch wide to fifteen inches wide. Rolled products are shipped in lengths up to many hundred feet. The Company's rolled products include precious metals bonded with other metals in bimetallic and trimetallic strips which provide more versatile industrial applications at a lower cost than would be possible if a solid precious metal or a precious metal alloy were used. Because of the physical properties of precious metals and precious metal alloys, the Company's rolled products have a wide variety of applications by the Company's industrial customers. The Company's rolled products are sold to silversmiths for use as anodes in plating operations and for flatware and hollowware, to manufacturing jewelers for a variety of jewelry, to mints and others for coins, commemorative medals and ingots, to manufacturers of electrical and electronic devices for electrical contacts and circuitry, to the nuclear 2 4 power industry for control assemblies, to the defense industry as foil for batteries, and to the aerospace industry for use in guidance systems. Powder Products -- The Company produces silver/tin alloy powders for use in dental applications and silver/copper alloy powders, which are sold under the names Easy-Flo(R) and Sil-Fos(R) for use in industrial brazing applications. Precision Plating and Surface Finishing -- The Company produces precision electroplated materials and stamped parts (often using gold, silver, palladium and various base metals on such materials and stamped parts) for use in the semiconductor, telecommunications, automotive electronics and computer industries. Other Precious Metals Products -- The Company produces grain beads of various precious metal alloys by melting the metal and then pouring it through water. Grain beads are distinguished from the Company's precious metals powders, which are not as coarse and are produced by atomization spraying. The Company exited the karat gold fabricated product business in 1995. Karat gold was used in the production of wire products, rolled products and grain beads stated above. See Note 1 to the Consolidated Financial Statements included in the Annual Report. Refining Services -- The Company recovers precious metals from waste and scrap generated by users of the Company's precious metals products and other industrial users of precious metals, from metal-bearing objects delivered for that purpose, by non-manufacturing refining customers, and from high grade mining concentrates and bullion. The Company receives a fee for this service. After controlled sampling, assaying, weighing, determination of values and settlement with the customer, the Company purchases for its own use the precious metal resulting from such refining, or, upon request by the customer, returns an equivalent amount of metal to the customer. In addition to such precious metal recovery services, the Company is in the start-up phase of a component retrieval business which entails the disassembly services for computers and other electronic hardware, recovering and usable integrated circuits and recycling or appropriately disposing of the rest. Raw Materials -- The raw materials for the Company's precious metals products consist principally of silver, gold, copper, cadmium, zinc, nickel, tin and the platinum group metals in various forms. Gold and silver constitute the major portion of the value of the raw materials involved. In addition, the Company buys waste and scrap containing precious metals for recycling and refining as described above. The Company purchases all of its precious metals at free market prices from either refining customers, primary producers or bullion dealers. The prices of gold and silver are subject to fluctuations and are expected to continue to be affected by world market conditions. Nonetheless, the Company has not experienced any problem in obtaining the necessary quantities of raw materials required for this segment and, in the normal course of business, receives precious metals from suppliers and customers. These metals are returnable in fabricated or commercial bar form under agreed upon terms. Since precious metals are fungible, the Company does not physically segregate supplier and customer metals from its own inventories. Therefore, to the extent that supplier or customer metals are used by the Company, the amount of inventory which the Company must own is reduced. All raw materials used in this segment are readily available from several sources. For a discussion of the Company's inventory purchasing and pricing and of the Company's practices to eliminate the economic risk of precious metal price fluctuations, see "The Company's Business" on page 15 of the Annual Report. Working Capital Items -- The Company maintains a constant level of inventory of fine and fabricated precious metals in various stages of processing and/or refining for customer delivery requirements and for a continuous supply of raw materials. Such inventories are carried under the Last-In, First-Out (LIFO) method of accounting. The LIFO carrying values are substantially less than the market values of the inventories. In the Notes to Consolidated Financial Statements, commencing on page 26 of the Annual Report, see Note 2 for a comparison of the cost and market values of the Company's precious metals inventories at December 31, 1995 and December 31, 1994 and Note 3 for a discussion of the effects of fluctuations in precious metals prices on the Company's credit requirements. Both Notes are incorporated by reference herein. Product Development, Patents and Trademarks -- While the Company holds a number of patents and trademarks related to its precious metals products and processes, and is licensed under others, the precious 3 5 metals business, as a whole, is not dependent upon such patents. The Company's trademarks are registered in the United States and in several foreign countries. The Company maintains a technical laboratory and staff in connection with its precious metals operations and a portion of the work of that staff is devoted to metallurgical products and development. Distribution Facilities -- The Company distributes precious metals products directly to customers from its plants and service branches, except that certain products, primarily brazing alloys, are distributed through independent distributors throughout the United States and Canada. The Company has a marketing organization trained to service its customers and dealers, to solicit orders for its precious metal and related products and to obtain refining business. This organization markets all of the Company's refining services and precious metals products and provides special technical assistance with respect to precious metals through product engineers and other technical personnel. The Company maintains customer service and sales offices at its various manufacturing and processing plants and in Chicago. It also has warehouse facilities to support sales and distribution at each of its manufacturing and processing plants and in Chicago. Competition -- The Company is one of the leading fabricators and refiners of precious metals. The Company currently sells its precious metal fabricated products to approximately 5,000 customers throughout the United States and Canada. Although there are no companies in the precious metals field whose operations exactly parallel those of H&H in every area, there are a number of competitors in each of the classes of the Company's precious metals products. Many of these competitors also carry on activities in other product lines in which the Company is not involved. Competition is based on quality, service and price, each of which is of equal importance. MANUFACTURING OF OTHER SPECIALTY PRODUCTS A subsidiary of the Company manufactures plastic and steel fittings and connections, plastic pipe and non-ferrous thermite welding powders for the natural gas, electrical and water distribution industries. Distribution -- Most of the Company's products comprising this segment are sold directly to customers through Company sales personnel. In particular, gas distribution supplies and fittings, thermite welding powders and certain other products are sold primarily through manufacturer's representatives to the ultimate users, with the remaining sales made by agents and manufacturer's representatives to distributors. Raw Materials -- The raw materials used in this segment include various steel alloys and various plastic compositions. The Company purchases all such raw materials at open market prices primarily from domestic suppliers. The Company has not experienced any problem in obtaining the necessary quantities of raw materials. Prices and availability, particularly as to raw materials purchased from foreign suppliers, will continue to be affected by world market conditions and governmental policies. Competition -- There are many companies, domestic and foreign, which manufacture products of the type manufactured by this segment. Some are larger than the Company and many are larger than the Company's operations with which they compete. Competition in portions of this segment's business is based primarily on price, and significant competition has come from lower priced foreign imports. Competition is otherwise generally based on quality, service and price, each of which is of equal importance. AUTOMOTIVE ORIGINAL EQUIPMENT During 1995 the Company sold, in two phases, its automotive segment which manufactured a wide variety of parts, cables, components and assemblies for North American automotive original equipment manufacturers. The cable operations were sold on July 20, 1995 and the remaining operations on December 29, 1995. See Note 1 to the Consolidated Financial Statements included in the Annual Report. 4 6 SHARE REPURCHASE The Company may, at the discretion of its Board of Directors, elect to repurchase additional shares (up to an aggregate of one and one-half million), of its currently outstanding Common Stock. GOVERNMENT REGULATION During the last fiscal year, the Company spent or committed approximately $4,800,000 in complying with federal, state and local occupational safety and health, environmental control and equal employment opportunity laws and regulations. These expenditures included monies spent by the Company in the clean-up of hazardous wastes and toxic substances under federal, state and local laws and regulations relating to protection of the environment. Typical of large domestic manufacturing concerns, the Company's operations may affect the environment. These operations may produce, process and dispose of materials and waste products which, under certain conditions, are toxic or hazardous under such environmental laws and regulations. The amount spent and committed above includes approximately $700,000 for operations which have been sold and are not expected to be repeated in the current fiscal year. Excluding these expenditures for operations which have been sold, the Company expects to make comparable expenditures and commitments during the current fiscal year, provided that no further changes are made in such laws and regulations or in their application. Such expenditures are not material to the competitive position or financial condition of the Company; however, such laws and regulations may require capital expenditures not now contemplated and may result in increased operating costs. See Item 3 Legal Proceedings. ENERGY The Company requires significant amounts of electricity, natural gas, fuel oil and propane to operate its facilities. The Company has few contracts covering natural gas or electricity, but has some one-year contracts for the delivery of fuel oil and propane at some facilities. These contracts are the result of competitive bidding. In an attempt to minimize the effects of any fuel shortages, the Company has made a number of process and equipment changes to allow use of alternate fuels in key processes, and the Company has equipped certain plants with alternate fuel reserves intended to reduce any curtailment upon a local shortage. A general and continuing shortage of such fuels, however, or a government allocation of supplies resulting in a general reduction in fuel supplies, could cause some curtailment of production. EMPLOYEES The Company had 2,567 employees on December 31, 1995. Of these, approximately 30 percent are covered by collective bargaining agreements, which expire at various times during the next three years. ITEM 2. PROPERTIES The Company has 26 active operating plants in the United States, Canada, England, Denmark and Singapore (50% owned) with a total area of approximately 2,000,000 square feet, including warehouse, office and laboratory space, but not including the plants used by the Singapore operation. The Company owns or leases sales, service and warehouse facilities at five other locations in the United States and England, which, with the Company's executive and general offices, have a total area of approximately 109,000 square feet and owns ten non-operating or discontinued locations with a total area of approximately 906,000 square feet. The Company considers its manufacturing plants and service facilities to be well maintained and efficiently equipped, and therefore suitable for the work being done. The productive capacity and extent of utilization of the Company's facilities is dependent in some cases on general business conditions and in other cases on the 5 7 seasonality of the utilization of its products. Productivity can be expanded readily to meet additional demands. A description of the Company's principal plants by industry segment is as follows: WIRE AND TUBING The headquarters of the wire portion of this segment is in Cockeysville, Maryland and the headquarters of the tubing portion of this segment is in Norristown, Pennsylvania. Manufacturing facilities are located in: Cockeysville, Maryland; Norristown, Pennsylvania; Willingboro and Middlesex, New Jersey; Oriskany, New York; Camden, Delaware; Evansville, Indiana; Retford, Notts. and Liversedge, Yorkshire, England; and Kolding, Denmark. All these plants are owned in fee except the Retford plant, which is leased. PRECIOUS METALS The Company's principal precious metal products and refining services operations are conducted in: Fairfield and South Windsor, Connecticut; and Attleboro, Massachusetts. Other precious metal operations are conducted in: Phoenix, Arizona; North Attleboro, Massachusetts; East Providence, Rhode Island; Cudahy, Wisconsin; Indianapolis, Indiana; Toronto, Canada and Singapore (50 percent owned). The Company owns all these operating plants in fee. OTHER SPECIALTY PRODUCTS The principal facilities currently engaged in the Company's other specialty products businesses are located in Tulsa and Broken Arrow, Oklahoma, and Bolton, England. The Oklahoma plants are owned in fee while the Bolton plant is leased. COMPANY'S OFFICES The Company's executive offices are in New York, New York and occupy 17,000 square feet under a lease. The Company has its general offices in leased premises containing approximately 30,000 square feet located in Rye, New York. ITEM 3. LEGAL PROCEEDINGS There are no pending legal proceedings to which the Company or any of its subsidiaries is a party or which any of their property is the subject, other than ordinary, routine litigation incidental to the business, none of which individually or in the aggregate is material to the business or financial condition of the Company, except as follows: Montvale, New Jersey Facility An action was commenced in April 1993 by the Borough of Park Ridge, New Jersey against Handy & Harman Electronic Materials Corporation, a subsidiary ("HHEM"), Handy & Harman and other defendants, in the Superior Court of New Jersey, Law Division, Bergen County, asserting that a chemical used at a formerly owned facility in Montvale, New Jersey, an adjoining municipality, had migrated and entered a drinking water supply of Park Ridge. This action seeks recovery of the alleged cost of treatment and remediation of water wells of the Borough of Park Ridge as a result of alleged contamination by the defendants. Although the precise amount of the Borough's claims is not known, a settlement demand of approximately $4.5 million has been made by the plaintiff. The presently scheduled trial date falls in September of 1996 but there is no assurance that the trial will take place during 1996. The Handy & Harman defendants deny responsibility for the alleged contamination of the Park Ridge wells and assert that if any such contamination exists as a result of operation of the Montvale facility, damages arising therefrom are the responsibility of the owner or operator thereof prior to the purchase of the facility by HHEM from Plessey Incorporated (Plessey). The Handy & Harman defendants have asserted substantial cross-claims against Plessey, GEC -- Marconi Materials Corp. and a vendor of the chemical involved. The 6 8 Handy & Harman defendants are seeking from the Plessey defendants, in the event that the Handy & Harman defendants are held to be responsible for any damages asserted by the Borough, return of the purchase price, repayment of amounts spent by HHEM in remediation of the site, contribution and indemnity. Plessey has asserted cross-claims for contribution and indemnity against the Handy & Harman defendants, as have other parties. Handy & Harman has filed a separate action, since consolidated with the above Park Ridge action, against Twin Cities Fire Insurance Company and other carriers, claiming coverage under various liability insurance policies. Although the final outcome of this matter cannot be assured, the Company believes that it will not have a materially adverse affect on the financial position of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None during the fourth quarter of the year ended December 31, 1995. EXECUTIVE OFFICERS OF THE COMPANY As of March 27, 1996, the executive officers of the Company, their ages, their present positions and offices, and their recent business experience and employment, are as follows: Richard N. Daniel -- age 60; Chairman (since 1988) and Chief Executive Officer of the Company (since 1983); a Director (since 1974). Frank E. Grzelecki -- age 58; President and Chief Operating Officer of the Company (since 1992); prior thereto Vice Chairman of the Board (since 1989); a Director (since 1988). Paul E. Dixon -- age 51; Vice President, General Counsel and Secretary (since 1993); prior thereto Vice President and General Counsel (since 1992); prior thereto Senior Vice President and General Counsel of The Warnaco Group (since prior to 1990). Dennis C. Kelly -- age 44; Controller (since 1993) of the Company; prior thereto Assistant Controller (since 1989). John M. McLoone -- age 53; Vice President -- Financial Services (since 1992); prior thereto Group Vice President, Information Technologies for W. R. Grace & Co. (a multinational company) (since prior to 1990). Stephen B. Mudd -- age 64; Vice President (since 1983) and Treasurer (since 1977). Richard P. Schneider -- age 49; Vice President -- Corporate Development (since 1993); prior thereto Vice President -- Corporate Development of Sequa Corporation (a diversified manufacturing company) (since prior to 1990). Robert M. Thompson -- Age 63; Vice President (since 1994); prior thereto Group Vice President (since 1984). There are no family relationships between any of the executive officers. The regular term of office for all executive officers is one year, beginning on May 1. There are no arrangements or understandings between any of the executive officers and any other person pursuant to which such officer was elected to be an officer. 7 9 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The information for this Item is incorporated by reference to the section entitled "Stock Trading and Dividends" on page 16 of the Annual Report and to Note 6 of the Notes to Consolidated Financial Statements included in the Annual Report. ITEM 6. SELECTED FINANCIAL DATA The information for this Item is incorporated by reference to the section entitled "Five Year Selected Financial Data" on page 17 of the Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information for this Item is incorporated by reference to the section entitled "Management's Discussion and Analysis" on pages 18 through 20 of the Annual Report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information for this Item is incorporated by reference to the Consolidated Financial Statements contained on pages 21 through 24 of the Annual Report and by reference to the Summary of Significant Accounting Policies contained on page 25 of the Annual Report and the Notes to Consolidated Financial Statements commencing on page 26 of the Annual Report and by reference to the Independent Auditors' Report set forth on page 32 of the Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The information for this Item is incorporated by reference to the section entitled "Election of Directors," on pages 2 and 3 of the Company's Proxy Statement, dated April 1, 1996 (the "Proxy Statement"), for the 1996 Annual Meeting of Shareholders and by reference to the item captioned "Executive Officers of the Company" at the end of Part I of this Annual Report on Form 10-K. No person who was during the 1995 fiscal year a director, officer or beneficial owner of more than ten percent of any class of equity securities of the registrant failed to file on a timely basis reports required by Section 16(a) of the Exchange Act of 1934, as amended. ITEM 11. EXECUTIVE COMPENSATION The information for this Item is incorporated by reference to the sections entitled "Executive Compensation," "Base Salaries," "Annual Incentive Awards for 1995," "Stock Options," "Long-Term Incentive Plan," "Compensation Committee Report on Executive Compensation," "Pensions," "Compensation of Directors," "Employment Contracts and Termination of Employment and Change-in-Control Agreements" on pages 4 to 11 of the Proxy Statement. 8 10 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information for this Item is incorporated by reference to the sections entitled "Voting Rights and Principal Holders Thereof" and "Election of Directors" on pages 1, 2 and 3, respectively, of the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information for this Item is incorporated by reference to the section entitled "Election of Directors" on pages 2 and 3 of the Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) DOCUMENTS FILED AS A PART OF THIS REPORT 1. FINANCIAL STATEMENTS The Consolidated Financial Statements (pages 21 through 24 of the Annual Report), the Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements (pages 25 through 31 of the Annual Report), the Independent Auditors' Report (page 32 of the Annual Report) and the items of Supplementary Information incorporated by reference in Part II, Item 8 of this Report are incorporated by reference. 2. FINANCIAL STATEMENT SCHEDULE The following Financial Statement Schedule is filed as a part of this Report, beginning herein at the respective pages indicated: (i) Report and Consent of Independent Auditors (page F-1). (ii) Schedule II -- Valuation and Qualifying Accounts and Reserves (page S-1). All other Schedules are omitted because they are not applicable or not required or because the required information is included in the Consolidated Financial Statements or Notes thereto. 3. EXHIBITS REQUIRED TO BE FILED The following exhibits required to be filed as part of this Report have been included: (3) CERTIFICATE OF INCORPORATION AND BY-LAWS. (a) The Restated Certificate of Incorporation of Handy & Harman (Filed as Exhibit 3(a) to the Company's 1989 Annual Report on Form 10-K and incorporated herein by reference). (b) The By-Laws as amended (Filed as Exhibit 3(b) to the Company's 1990 Annual Report on Form 10-K and incorporated herein by reference). (4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES. (a) Revolving Credit Agreement dated as of September 28, 1994 among the Company, certain financial institutions as lenders, The Bank of Nova Scotia, Chemical Bank and The Bank of New York as Co-Agents and The Bank of Nova Scotia, as the Administrative Agent (Filed as Exhibit 10.3 to the Company's Current Report on Form 8-K dated October 12, 1994 and incorporated herein by reference). (b) Short Term Revolving Credit Agreement dated as of September 28, 1994 among the Company, certain financial institutions as lenders, The Bank of Nova Scotia, Chemical Bank and The Bank of New York as Co-Agents and The Bank of Nova Scotia, as the Administrative Agent (Filed as Exhibit 10.4 to the Company's Current Report on Form 8-K dated October 12, 1994 and incorporated herein by reference). 9 11 (c) Fee Consignment Agreement dated as of September 28, 1994 between the Company and The Bank of Nova Scotia (Filed as Exhibit 10.5 to the Company's Current Report on Form 8-K dated October 12, 1994 and incorporated herein by reference). (d) Short Term Fee Consignment Agreement dated as of September 28, 1994 between the Company and The Bank of Nova Scotia, (Filed as Exhibit 10.6 to the Company's Current Report on Form 8-K dated October 12, 1994 and incorporated herein by reference). (e) Dollar Supply Agreement dated as of September 28, 1994 among the Company, certain financial institutions as lenders, The Bank of Nova Scotia, Chemical Bank and The Bank of New York as Co-Agents and The Bank of Nova Scotia, as the Administrative Agent (Filed as Exhibit 10.7 to the Company's Current Report on Form 8-K dated October 12, 1994 and incorporated herein by reference). (f) Short Term Dollar Supply Agreement dated as of September 28, 1994 among the Company, certain financial institutions as lenders, The Bank of Nova Scotia, Chemical Bank and The Bank of New York as Co-Agents and The Bank of Nova Scotia, as the Administrative Agent (Filed as Exhibit 10.8 to the Company's Current Report on Form 8-K dated October 12, 1994 and incorporated herein by reference). No other required to be filed. The Company agrees to furnish to the Securities and Exchange Commission upon its request therefor a copy of each instrument omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. (10) MATERIAL CONTRACTS. (a) 1982 Stock Option Plan (Filed as Exhibit 1 to the Company's Registration Statement on Form S-8 (Registration No. 2-78264) under the Securities Act of 1933 and incorporated herein by reference). (b) Amendment to 1982 Stock Option Plan approved in December 1988 (Filed as Exhibit 10(a) to the Company's Report on Form 8-K for December 1988 and incorporated herein by reference). (c) Handy & Harman Management Incentive Plan Corporate Group Participants, as amended and restated on December 15, 1994. (d) Subsidiary, Division, Group or Unit Management Incentive Plan, as amended and restated on December 15, 1994. (e) Handy & Harman Deferred Fee Plan For Directors, as amended and restated on December 15, 1994, effective as of January 1, 1995. (f) Form of Executive Agreement entered into with the Company's executive officers in September 1986 (Filed as Exhibit 10(d) to the Company's 1986 Annual Report on Form 10-K and incorporated herein by reference). (g) Amendment to Executive Agreement approved in December 1988 (Filed as Exhibit 10(b) to the Company's Report on Form 8-K for December 1988 and incorporated herein by reference). (h) 1988 Long-Term Incentive Plan (Filed as Exhibit 10(h) to the Company's 1988 Annual Report on Form 10-K and incorporated herein by reference). (i) Amendment to 1988 Long-Term Incentive Plan approved in December 1988 (Filed as Exhibit 10(c) to the Company's Report on Form 8-K for December 1988 and incorporated herein by reference). (j) Amendment to 1988 Long-Term Incentive Plan approved in June 1989 (Filed as Exhibit 10(j) to the Company's 1989 Annual Report on Form 10-K and incorporated herein by reference). (k) Agreement dated as of May 1, 1989, between the Company and R. N. Daniel (Filed as Exhibit 10(k) to the Company's 1989 Annual Report on Form 10-K and incorporated herein by reference). (l) Amendment to Agreement between the Company and R. N. Daniel approved by the Company on May 11, 1993, (Filed as Exhibit 10(m) to the Company's 1993 Annual Report on Form 10-K and incorporated herein by reference). 10 12 (m) Supplemental Executive Retirement Plan approved and restated by the Company in December 1994. (n) Outside Directors' Stock Option Plan (Filed as Exhibit 10(m) to the Company's 1990 Annual Report on Form 10-K and incorporated herein by reference). (o) Amended and Restated Joint Venture Agreement dated as of June 1, 1990, by and between Allen Heat Transfer Products Inc. and Handy & Harman Radiator Corporation (Filed as Exhibit 2 to the Company's Report on Form 8-K for June 1990 and incorporated herein by reference). (p) Handy & Harman Long-Term Incentive Stock Option Plan (Filed as Exhibit 10(p) to the Company's 1991 Annual Report on Form 10-K and incorporated herein by reference). (q) Handy & Harman Supplemental Executive Plan (Filed as Exhibit 10(q) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference). (r) Amended and Restated Agreement between the Company and Mr. Grzelecki (Filed as Exhibit 10(r) to this Annual Report on Form 10-K. (s) Press Release of the Company dated November 6, 1995 (Filed as Exhibit 10(s) to this Annual report on Form 10-K. (t) 1995 Omnibus Stock Incentive Plan (Filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8 (Registration No. 33-80803) on December 22, 1995, under the Securities Act of 1933 and incorporated herein by reference. (11) Statement re computation of per share earnings. Incorporated by reference to Item (h) of Summary of Significant Accounting Policies on page 25 of the Annual Report. (13) Pages 15 through 32 of the Company's Annual Report to Shareholders for 1995. Except for those portions which are expressly incorporated by reference in this Annual Report on Form 10-K, this exhibit is furnished for the information of the Commission and is not deemed to be filed as part of this Annual Report on Form 10-K. (21) List of Subsidiaries of the Company. Filed as Exhibit 21 to this Annual Report on Form 10-K. (23) Report and Consent of Independent Auditors. Included as part of the Report and Consent of Independent Auditors on page F-1 filed with the Financial Statement Schedule as part of this Annual Report on Form 10-K pursuant to Part IV hereof and incorporated herein by reference thereto. (B) REPORTS ON FORM 8-K The Company filed a Report on Form 8-K on January 10, 1996, with respect to the sale of the assets of the Handy & Harman Automotive Group, Inc. For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant's Registration Statements on Form S-8 Nos. 2-78264 (filed July 1,1982), 33-37919 (filed November 21, 1990), 33-43709 (filed October 31, 1991) and 33-80803 (filed December 22, 1995): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 11 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Handy & Harman has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HANDY & HARMAN Dated: March 28, 1996 By /s/ R. N. Daniel R. N. Daniel Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company, in the capacities and on the respective dates indicated.
SIGNATURE TITLE DATE - ---------------------------------------- ------------------------------------ --------------- /s/ R.N. DANIEL Chairman and Director (Principal March 28, 1996 - ---------------------------------------- Executive Officer) (R.N. Daniel) /s/ F.E. GRZELECKI President and Director (Chief March 28, 1996 - ---------------------------------------- Operating Officer) (F.E. Grzelecki) /s/ J.M. MCLOONE Vice President -- Financial Services March 28, 1996 - ---------------------------------------- (Principal Financial Officer) (J.M. McLoone) /s/ D.C. KELLY Controller (Principal Accounting March 28, 1996 - ---------------------------------------- Officer) (D.C. Kelly) /s/ C.A. ABRAMSON Director March 28, 1996 - ---------------------------------------- (C.A. Abramson) /s/ R.E. CORNELIA Director March 28, 1996 - ---------------------------------------- (R.E. Cornelia) /s/ G.G. GARBACZ Director March 28, 1996 - ---------------------------------------- (G.G. Garbacz) /s/ G.M. NICHOLS Director March 28, 1996 - ---------------------------------------- (G.M. Nichols) /s/ H.P. SOTOS Director March 28, 1996 - ---------------------------------------- (H.P. Sotos) /s/ E.J. SUSSMAN Director March 28, 1996 - ---------------------------------------- (E.J. Sussman) /s/ R.E. TETRAULT Director March 28, 1996 - ---------------------------------------- (R.E. Tetrault)
12 14 F-1 REPORT AND CONSENT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS AND SHAREHOLDERS HANDY & HARMAN: Under the date of February 12, 1996 we reported on the consolidated balance sheet of Handy & Harman and Subsidiaries as of December 31, 1995 and 1994 and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the 1995 Annual Report to Shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year 1995. In connection with our audit of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule on page S-1. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this consolidated financial statement schedule based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in the Summary of Significant Accounting Policies, the Company adopted Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes" in 1993. We also consent to the incorporation by reference in the Registration Statements on Form S-8 (Registration Nos. 2-78264, 33-37919, 33-43709 and 33-80803) of Handy & Harman of our report dated February 12, 1996. KPMG PEAT MARWICK LLP New York, New York March 28, 1996 13 15 THE COMPANY'S BUSINESS The Company's industry segments are: manufacturing of specialty wire and tubing, manufacturing of precious metals products and refining services, and manufacturing of other non-precious metal products. The table below presents information about the segments with additional segment information for 1995, 1994 and 1993 found in Note 7 of the Notes to Consolidated Financial Statements on page 29. A further analysis of the industry segments can be found under "Management's Discussion and Analysis" beginning on page 18. The wire and tubing segment has two basic product types. Stainless steel wire is drawn from rod to a wide range of smaller diameters. Applications are widespread and include springs, telecommunication support cables, antennas, brushes, and belts. Tubing is manufactured from carbon steel, stainless steel, and a variety of specialty alloys. Applications are similarly numerous including refrigeration, automotive, hydraulic, medical and aerospace. The precious metals segment is engaged in precision plating and surface finishing for electronic and electrical components, the manufacturing of a variety of products, generally in mill forms, containing silver, gold and other precious metals in combination (alloys) with non-precious metals, and the sale of such products to users in a wide range of industries, including silverware and jewelry, electrical and electronic, automotive and appliance. The Company also provides metal refining services for the recovery of precious metals from jewelry and industrial scrap as well as the recovery of high grade mining concentrates and bullion. It is the Company's operating policy to maintain constant inventory levels under the last-in, first-out (LIFO) method of accounting. Precious metals are purchased at the same prices and quantities as selling commitments to customers. In the normal course of business, the Company accepts precious metals from suppliers and customers, which quantities are returnable in fabricated or commercial bar form under agreed upon terms. Since precious metals are fungible, the Company does not physically segregate the supplier and customer metals. Therefore, to the extent such metals are used by the Company to meet its operating requirements, the amount of inventory which the Company must own is reduced. The Company's inventory positions are sufficient to protect against any losses in connection with these supplier and customer accounts. To the extent that additional inventory is required to support operations, precious metals are purchased and immediately sold for future delivery, eliminating the economic risk of price fluctuations. Such purchases and sales are not included in either sales or cost of sales. From time to time, management reviews the appropriate inventory levels and may elect to make adjustments. A high percentage of the selling price for precious metals products is the cost of the precious metal content. Therefore, both sales and cost of sales are influenced by fluctuations in the prices of precious metals. Service revenues, which represent charges to customers for processing refining lots, do not include the value of precious metals. In addition, certain customers choose to do business on a "toll" basis, that is, to furnish bullion to Handy & Harman for fabrication. When the metals are returned to the customer in fabricated form, the customer pays only a fabrication charge, and the precious metal value of this consignment business is not included in sales or cost of sales. The business unit in the other non-precious metal businesses segment manufactures products using steel and plastic which are sold principally to water and natural gas distribution companies. Certain subsidiaries sold in 1993 manufactured a variety of specialty metal products using copper, steel, nickel, plastics and other raw materials. 14 16 The following table provides details of sales and service revenues from continuing operations, as well as profit contribution by each reportable segment before general corporate and interest expenses. See "Management's Discussion and Analysis" beginning on page 18.
1995 1994 1993 -------- -------- -------- (Thousands of dollars) Sales and service revenues: Wire/Tubing.............................................. $175,092 $153,750 $139,344 Precious metals.......................................... 404,505 434,671 340,725 Other non-precious metal businesses...................... 15,900 15,078 25,032 -------- -------- -------- $595,497 $603,499 $505,101 ======== ======== ======== Profit contribution before unallocated expenses: Wire/Tubing.............................................. $ 18,225 $ 14,395 $ 11,898 Precious metals.......................................... 13,287 13,582 9,418 Other non-precious metal businesses...................... 2,275 1,938 (2,673) -------- -------- -------- 33,787 29,915 18,643 General corporate expenses................................. (1,800) (1,850) (2,075) Interest expense (net)..................................... (17,337) (13,427) (13,588) -------- -------- -------- Income from continuing operations before income taxes and cumulative effect of accounting change................... $ 14,650 $ 14,638 $ 2,980 ======== ======== ========
The following table segregates identifiable assets to the three reported segments, corporate and discontinued operations.
ASSETS ---------------------------------- 1995 1994 1993 -------- -------- -------- (Thousands of dollars) Wire/Tubing................................................ $103,939 $ 92,696 $ 80,442 Precious metals............................................ 158,868 150,812 171,397 Other non-precious metal businesses........................ 10,568 16,149 17,160 Corporate.................................................. 67,674 51,318 47,614 Discontinued operations.................................... -- 94,043 89,547 -------- -------- -------- $341,049 $405,018 $406,160 ======== ======== ========
The comparison of Handy & Harman's precious metals segment sales dollars from year to year is affected by changing market values of the silver, gold and other precious metals which comprise a substantial portion of the sales price. The table below shows all classes of similar precious metals products (measured by gross weight of shipments as a percentage of total segment shipments) which contributed 10% or more to total sales and revenues during 1995, 1994 and 1993.
PERCENT OF SHIPMENTS ---------------------- 1995 1994 1993 ---- ---- ---- Rolled Products........................................................ 33% 43% 50% Wire Products.......................................................... 53% 43% 33% Bullion................................................................ 2% 2% 1%
STOCK TRADING AND DIVIDENDS Handy & Harman Common Stock is traded on the New York Stock Exchange. The following table sets forth, for the quarterly periods indicated, the reported high and low sales prices for the Common Stock on the New York Stock Exchange and the dividends paid on the Common Stock during such periods. 15 17 At February 15, 1996, there were 3,096 holders of record of Common Stock of Handy & Harman. Dividend payments are subject to the restrictions described in Note 3 to the Consolidated Financial Statements.
COMMON STOCK SALES PRICES DIVIDEND PAID ON ------------- COMMON STOCK HIGH LOW PER SHARE ---- ---- ---------------- 1995 January 1-March 31.......................................... $16 1/2 $14 1/8 6c April 1-June 30............................................. 16 1/2 14 7/8 6c July 1-September 30......................................... 16 7/8 14 5/8 6c October 1-December 31....................................... 16 5/8 13 5/8 6c 1994 January 1-March 31.......................................... $16 1/4 $14 3/8 5c April 1-June 30............................................. 14 3/4 13 5c July 1-September 30......................................... 17 5/8 13 5/8 5c October 1-December 31....................................... 17 1/8 13 1/2 5c
SELECTED QUARTERLY DATA Summarized financial data for interim periods of 1995 and 1994 (expressed in thousands of dollars, except per share data) are shown below.
1995 QUARTER ENDED ----------------------------------------------- MAR. 31 JUNE 30 SEPT. 30 DEC. 31 -------- -------- -------- -------- Sales........................................... $153,417 $154,358 $137,349 $150,373 Gross profit.................................... 25,695 24,737 20,369 19,499 Earnings (loss): Continuing operations......................... 4,166 (1,261) 2,337 2,482 Discontinued operations....................... 1,022 140 (629) 10,383 -------- -------- -------- -------- Net income (loss)............................... $ 5,188 $ (1,121) $ 1,708 $ 12,865 -------- -------- -------- -------- Earnings (loss) per share: Continuing operations......................... $ .30 $ (.09) $ .16 $ .18 Discontinued operations....................... .07 .01 (.04) .73 -------- -------- -------- -------- Net income (loss)............................... $ .37 $ (.08) $ .12 $ .91 ======== ======== ======== ========
1994 QUARTER ENDED ----------------------------------------------- MAR. 31 JUNE 30 SEPT. 30 DEC. 31 -------- -------- -------- -------- Sales........................................... $143,091 $153,098 $153,668 $153,642 Gross profit.................................... 18,476 20,564 20,147 21,742 Earnings: Continuing operations......................... 1,754 2,288 2,252 2,240 Discontinued operations....................... 2,699 2,783 1,225 1,270 -------- -------- -------- -------- Net income...................................... $ 4,453 $ 5,071 $ 3,477 $ 3,510 -------- -------- -------- -------- Earnings per share: Continuing operations......................... $ .13 $ .16 $ .16 $ .16 Discontinued operations....................... .19 .20 .09 .09 -------- -------- -------- -------- Net income...................................... $ .32 $ .36 $ .25 $ .25 ======== ======== ======== ========
The 1995 continuing operations second quarter includes the after tax impact of nonrecurring charges of $6,150,000 or $.44 per share. 16 18 The 1995 discontinued operation's fourth quarter includes the gain from its sale of $11,496,000, net of taxes. FIVE YEAR SELECTED FINANCIAL DATA
1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- (Dollars in thousands except per share figure) OPERATIONS Sales and service revenues........... $595,497 $603,499 $505,101 $434,483 $416,143 Income (loss) from continuing operations......................... 7,724 8,534 2,312(a) 5,454 (12,786) Income (loss) from discontinued operations......................... 10,916 7,977 7,164 6,243 (21,723) Net income (loss).................... 18,640 16,511 9,476(a) 11,697 (34,509) Dividends............................ 3,383 2,811 2,803 2,801 6,013 -------- -------- -------- -------- -------- PER SHARE DATA Income (loss) from continuing operations......................... .55 .61 .17(a) .39 (.92) Income (loss) from discontinued operations......................... .77 .57 .51 .45 (1.55) Net income (loss).................... 1.32 1.18 .68(a) .84 (2.47) Dividends............................ .24 .20 .20 .20 .43 Average shares outstanding (thousands)........................ 14,092 14,050 14,021 14,001 13,985 -------- -------- -------- -------- -------- FINANCIAL POSITION (AT DECEMBER 31) Current assets....................... 163,101 187,336 226,441 200,613 191,072 Current liabilities.................. 113,621 153,593 114,534 92,444 96,004 Working capital...................... 49,480 33,743 111,907 108,169 95,068 Property, plant and equipment-net.... 91,406 117,200 106,220 109,605 112,363 Total assets......................... 341,049 405,018 406,160 371,351 358,708 Long-term debt....................... 93,500 131,750 188,750 186,287 181,329 Deferred income taxes................ 13,534 13,551 11,276 7,681 4,059 Shareholders' equity................. 120,394 106,124 91,600 84,939 77,316 LIFO reserve(b)...................... 141,458 139,068 141,273 105,416 111,209 -------- -------- -------- -------- -------- STATISTICAL DATA Property, plant and equipment acquired through capital expenditures....................... 23,143 18,567 15,147 14,440 12,728 Depreciation and amortization........ 16,668 15,683 15,816 14,854 16,372 Interest expense (net)-continuing operations......................... 17,337 13,427 13,588 14,171 19,409 Number of shareholders............... 3,096 2,259 2,238 3,046 3,218 Number of employees at December 31... 2,567 4,826 4,246 4,478 4,333 -------- -------- -------- -------- -------- FINANCIAL RATIOS Return on average shareholders' equity............................. 16.5% 16.7% 10.7% 14.4% (35.4%) Current ratio........................ 1.4 1.2 2.0 2.2 2.0 ======== ======== ======== ======== ========
- --------------- (a) Includes a benefit of $576,000 or $.04 per share, from cumulative effect of accounting change. (b) Excess of year-end market value of LIFO inventory over cost. 17 19 MANAGEMENT'S DISCUSSION AND ANALYSIS LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA The Company's precious metal inventory, 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 $141,458,000 in excess of such cost as of December 31, 1995. 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. 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 December 31, 1995, $25,000,000 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 as part of the refinancing in 1994. These facilities have been reduced to $158,500,000 after the Company exited 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 are located at the Company's plant in Fairfield, Connecticut. As of December 31, 1995, 10,000 ounces of gold and 13,687,000 ounces of silver were leased under these fee consignment facilities. In 1994 as a result of this fee consignment facility the Company was able to realize $53,087,000 of futures receivables on sales of precious metals for future delivery and increase futures payable for purchases of precious metals for future receipt by approximately $37,772,000 which enabled the Company to reduce its bank borrowings. 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. Over the past three years the Company's operating activities and investing activities have provided net cash of $78,370,000 and $16,801,000, respectively, which were used for financing activities amounting to $91,208,000. CASH FLOW FROM OPERATING ACTIVITIES Net cash provided by operating activities amounted to $20,246,000 in 1995, $9,145,000 in 1994 and $48,979,000 in 1993. Net cash flow from operating activities increased $11,101,000 from 1994 to 1995 primarily due to a decrease in working capital requirements of $20,543,000, an increase in net income of $2,129,000, non-cash restructuring and nonrecurring charges of $8,369,000, partially offset by the gain on sale of business segment of $19,716,000. The decrease in working capital requirements was due primarily to a decrease in accounts receivable caused by the exit of the karat gold business as well as lower sales of the discontinued automotive segment. 18 20 Net cash flow from operating activities decreased $39,834,000 from 1993 to 1994 primarily due to a use of cash to support an increase in accounts receivable related to higher levels of sales in 1994 versus 1993 and an increase in liabilities in 1993 providing a source of cash in 1993 not duplicated in 1994 as described below. This increase in liabilities was primarily attributable to purchases of precious metals and advances from smelter in 1993 by the Company's refining business. Although the level of liabilities associated with the refining business decreased in 1994, other operating units accounts payable increased, which maintained comparable levels of liabilities between 1994 and 1993. CASH PROVIDED/(USED) IN INVESTING ACTIVITIES Net cash provided/(used) in investing activities amounted to $70,637,000 in 1995, ($47,703,000) in 1994 and ($6,133,000) in 1993. Net cash provided by investing activities increased $118,340,000 in 1995 over 1994 primarily due to net proceeds of $68,032,000 from the sale of the automotive (OEM) segment, an increase of $24,250,000 in net investing activities of discontinued operations due to 1994's remaining discontinued operations net assets being realized in 1995 from the sale of the Company's investment in and receivable from GO/DAN Industries, a joint venture, payments in 1994 for the purchase of Sumco Inc. in the amount of $26,000,000 and related acquired debt of $3,921,000, offset partially by the 1995 increase in capital expenditures of $4,576,000, primarily for plant expansion and machinery and equipment in the wire/tubing segment. Net cash used for investing activities increased $41,570,000 in 1994 over 1993 primarily due to the payments in 1994 for the purchase of Sumco Inc. in the amount of $26,000,000 and related acquired debt of $3,921,000, the decrease in proceeds from net investing activities of discontinued operations of $2,531,000 in 1994 from 1993, the increase in capital expenditures of $3,565,000 for plant expansion and machinery and equipment in the wire/tubing and discontinued automotive segments, and the proceeds from the sale of business units in 1993 for $5,072,000. CASH USED IN FINANCING ACTIVITIES During this past three year period the Company's net financing activities were the repayment of $81,844,000 in debt, cash provided by the net decrease in futures receivable of $1,015,000, dividend payments of $8,997,000, and the purchase of Company stock of $1,382,000 for a total net cash usage of $91,208,000. The net cash used in financing activities was $86,718,000 in 1995 primarily due to the decrease in futures payable of $37,772,000 and increase in futures receivable of $7,681,000 (futures previously described), repayment of debt of $36,500,000, payment of dividends of $3,383,000 and purchase of the Company's common stock amounting to $1,382,000 (cash -- settlement basis) which is part of a plan to buy back up to 1.5 million shares of the Company's common stock announced on November 6, 1995. The net cash provided by financing was $37,798,000 in 1994 due to the Company's ability to realize its futures receivable of $53,087,000 and increase futures payable by $37,772,000, as previously described, offset by the repayment of debt of $50,250,000 and payment of dividends of $2,811,000. Net cash used by financing was $42,288,000 in 1993 primarily due to the purchases of precious metals by the Company's refining business and related immediate sale for future delivery which eliminates the economic risk of precious metal price fluctuations. 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. 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. 19 21 COMPARISON OF 1995 VERSUS 1994 Sales for the wire/tubing segment increased $21,342,000 (14%) due to the strong demand for wire products, most notably in Europe through the Company's U.K. business unit and also a strong increase in demand for seamless stainless steel tubing brought about by rapid growth in the semiconductor fabrication industry. Profit contribution (pre-tax income before deducting interest and Corporate expenses) increased $3,830,000 (27%) due to the increased sales above, reduced production costs stemming from new and/or improved manufacturing equipment and facilities, and reduced raw material costs all of which were partially offset by start up costs of the new tubing facility in Europe. Capital investment as well as new product development has created the potential for increased profits from this segment. Sales for the precious metal segment decreased $30,166,000 (7%). Sales of refining outturn, primarily in kilo bar and grain form, decreased from $157,142,000 in 1994 to $127,742,000 in 1995. 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 significantly less than margins on other products in this segment. The average price of gold in 1995 was $384.19 per ounce and in 1994 was $384.14 per ounce. The average price of silver in 1995 was $5.19 per ounce and in 1994 was $5.29 per ounce. Decreased product sales due to exiting the karat gold fabricated product line, discussed below, were primarily offset by increased sales of the precision plating and surface finishing companies. The profit contribution decreased $295,000 (2%). In 1995 nonrecurring charges of $5,342,000 for severance costs, asset write-downs and other costs related to the decision to exit the karat gold fabricated product line in East Providence, Rhode Island and $4,207,000 of additional costs, primarily asset write-downs, related to the Company's ongoing operation in Fairfield, Connecticut were recorded. Excluding these nonrecurring charges the profit contribution increased $9,254,000 (68%) due to the increased sales of the precision plating and surface finishing companies as well as controlling operating costs. We anticipate earnings progress in our precious metal fabrication business, however, we still have concerns about the current performance of our refining operations. In the other non-precious metal segment, sales increased $822,000 (5%) and profit contribution increased $337,000 (17%) primarily due to substantial growth of this business unit's thermOweld(R) product line, which is anticipated to continue in 1996. Interest expense increased $3,910,000 (29%) primarily due to higher interest rates on borrowings and leased metal during the year. The effective income tax rate for 1995 was 47.3% and 1994 was 41.7%. The reason for the higher effective income tax rate for 1995 over 1994 is attributable to the valuation allowance for the deferred tax asset on foreign losses as well as goodwill amortization associated with the acquisition of Sumco Inc. in September 1994. During 1995 the Financial Accounting Standards Board issued SFAS No. 121 "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and SFAS No. 123 "Accounting for Stock-based Compensation", both effective for fiscal years beginning after December 15, 1995. The Company will implement SFAS No. 123 using the proforma disclosure method described in the pronouncement. The future adoption in 1996 of SFAS No. 121 is not expected to have a material effect on the Company's consolidated financial position or results of operations. COMPARISON OF 1994 VERSUS 1993 Sales for the wire/tubing segment increased $14,406,000 (10%) due to the improved economy, both domestic and European. The profit contribution increased $2,497,000 (21%) due to increased sales as well as improved manufacturing performance through capital investment which increased capacity in both the wire and tubing companies. Sales for the precious metal segment increased $93,946,000 (28%). Sales of refining outturn, primarily in kilo bar and grain form, increased from $102,018,000 in 1993 to $157,142,000 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 significantly less than the margins on other 20 22 products in this segment. The average price for gold in 1994 was $384.14 per ounce and in 1993 was $359.84 per ounce. The average price for silver in 1994 was $5.29 per ounce and in 1993 was $4.30 per ounce. The profit contribution increased $4,164,000 (44%) primarily due to strong sales and operating profits of our precision plating and surface finishing companies offset by lower sales for other industrial products caused by overcapacity and intense price competition. In the other non-precious metal segment, sales decreased $9,954,000 (40%) primarily due to the sale of three businesses in 1993. Profit contribution increased $4,611,000. Excluding the charge of $2,800,000 in 1993 relating to the sale of Valley Metals, Inc. and New Industrial Techniques, Inc. and operating losses of $1,125,000 of the sold businesses, the profit contribution increased $686,000 due to the increased sales to the natural gas industry by this segment's remaining unit. The Company's income taxes are primarily composed of U.S. Federal and state income taxes. The effective income tax rate was similar for 1994 and 1993. 21 23 CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, ---------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ Sales and service revenues........................ $595,497,000 $603,499,000 $505,101,000 Cost of sales and service......................... 505,197,000 522,570,000 441,052,000 ------------ ------------ ------------ Gross profit...................................... 90,300,000 80,929,000 64,049,000 Selling, general, and administrative expenses..... 52,256,000 50,273,000 45,266,000 Restructuring charge.............................. 5,342,000 -- -- ------------ ------------ ------------ Continuing operations: operating income........... 32,702,000 30,656,000 18,783,000 ------------ ------------ ------------ Other deductions: Interest expense (net).......................... 17,337,000 13,427,000 13,588,000 Other (net)..................................... 715,000 2,591,000 2,215,000 ------------ ------------ ------------ 18,052,000 16,018,000 15,803,000 ------------ ------------ ------------ Income from continuing operations before income taxes and cumulative effect of accounting change.......................................... 14,650,000 14,638,000 2,980,000 Income tax provision.............................. 6,926,000 6,104,000 1,244,000 ------------ ------------ ------------ Income from continuing operations before cumulative effect of accounting change.......... 7,724,000 8,534,000 1,736,000 Cumulative effect of accounting change............ -- -- 576,000 ------------ ------------ ------------ Income from continuing operations................. 7,724,000 8,534,000 2,312,000 ------------ ------------ ------------ Discontinued operations: Income/(loss) from operations, net of income taxes/(benefit)($401,000), $5,706,000, $5,103,000................................... (580,000) 7,977,000 7,164,000 Gain on disposal, net of income taxes -- $8,220,000.......................... 11,496,000 -- -- ------------ ------------ ------------ 10,916,000 7,977,000 7,164,000 ------------ ------------ ------------ Net income........................................ $ 18,640,000 $ 16,511,000 $ 9,476,000 ============ ============ ============ Earnings per share: Continuing operations: Income from continuing operations before cumulative effect of accounting change..... $ .55 $ .61 $ .13 Cumulative effect of accounting change....... -- -- .04 ------------ ------------ ------------ Total continuing operations..................... .55 .61 .17 Discontinued operations......................... .77 .57 .51 ------------ ------------ ------------ Net income........................................ $ 1.32 $ 1.18 $ .68 ------------ ------------ ------------ Average number of shares outstanding.............. 14,092,000 14,050,000 14,021,000 ============ ============ ============
- --------------- The accompanying summary of significant accounting policies and notes are an integral part of the financial statements. 22 24 CONSOLIDATED BALANCE SHEET
DECEMBER 31, ----------------------------- 1995 1994 ------------ ------------ ASSETS Current assets: Cash........................................................... $ 6,637,000 $ 2,559,000 Accounts receivable, less allowance for doubtful accounts of $3,021,000 in 1995 and $3,597,000 in 1994................... 61,036,000 82,733,000 Futures receivable............................................. 7,681,000 -- Inventories.................................................... 84,422,000 89,939,000 Prepaid expenses, deposits and other current assets............ 3,325,000 12,105,000 ------------ ------------ Total current assets............................................. 163,101,000 187,336,000 ------------ ------------ Investments in affiliates, at equity............................. 2,686,000 2,207,000 Property, plant and equipment.................................... 214,345,000 273,018,000 Less accumulated depreciation and amortization................. 122,939,000 155,818,000 ------------ ------------ 91,406,000 117,200,000 Prepaid retirement costs (net)................................... 51,152,000 47,459,000 Intangibles, net of amortization................................. 22,141,000 22,991,000 Other assets..................................................... 10,563,000 4,930,000 Noncurrent assets of discontinued operations..................... -- 22,895,000 ------------ ------------ $341,049,000 $405,018,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings.......................................... $ 40,000,000 $ 34,750,000 Current maturities of long-term debt........................... 3,500,000 7,000,000 Accounts payable............................................... 32,899,000 45,044,000 Futures payable................................................ -- 37,772,000 Advances from smelter.......................................... -- 4,118,000 Federal and foreign taxes on income............................ 8,072,000 1,342,000 Other current liabilities...................................... 29,150,000 23,567,000 ------------ ------------ Total current liabilities........................................ 113,621,000 153,593,000 ------------ ------------ Long-term debt, less current maturities.......................... 93,500,000 131,750,000 Deferred income taxes............................................ 13,534,000 13,551,000 Commitments ------------ ------------ Shareholders' equity: Common stock -- par value $1; 60,000,000 shares authorized; 14,611,432 shares issued.................................... 14,611,000 14,611,000 Capital surplus................................................ 12,033,000 11,830,000 Retained earnings.............................................. 99,371,000 84,114,000 Foreign currency translation adjustment........................ (748,000) (720,000) ------------ ------------ 125,267,000 109,835,000 Less: Treasury stock 1995 -- 603,800 shares; 1994 -- 532,652 shares -- at cost.............................................. 4,873,000 3,491,000 Unearned compensation....................................... -- 220,000 ------------ ------------ Total shareholders' equity....................................... 120,394,000 106,124,000 ------------ ------------ $341,049,000 $405,018,000 ============ ============
- --------------- The accompanying summary of significant accounting policies and notes are an integral part of the financial statements. 23 25 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1995 ------------------------------------------------------------------------------------------------- FOREIGN PAR VALUE $1 CURRENCY TOTAL COMMON CAPITAL RETAINED TRANSLATION TREASURY UNEARNED SHAREHOLDERS' STOCK SURPLUS EARNINGS ADJUSTMENT STOCK COMPENSATION EQUITY ------------ ----------- ----------- ----------- ----------- ------------ ------------- Balance, January 1, 1993... $14,611,000 $11,213,000 $63,741,000 $(693,000) $(3,797,000) $ (136,000) $ 84,939,000 Net income................. 9,476,000 9,476,000 Cash dividends on common stock -- $.20 per share.................... (2,803,000) (2,803,000 ) Remeasurement and amortization of stock issued under 1988 long-term incentive plan..................... 12,000 136,000 148,000 Stock awarded under outside director stock option plan (awarded 5,236 -- issued 5,553 shares).................. 71,000 28,000 99,000 Stock issued under the incentive stock option plan (2,513 shares)...... (1,000) (1,000 ) Translation adjustment..... (258,000) (258,000 ) ----------- ----------- ------------ ----------- ------------ ----------- - ------------ Balance, December 31, 1993..................... 14,611,000 11,296,000 70,414,000 (951,000) (3,770,000) -- 91,600,000 Net income................. 16,511,000 16,511,000 Cash dividends on common stock -- $.20 per share.................... (2,811,000) (2,811,000 ) Stock issued under 1988 long-term incentive plan (28,600 shares).......... 296,000 144,000 (220,000) 220,000 Stock awarded under outside director stock option plan (awarded 4,110 shares).................. 36,000 36,000 Stock issued under the incentive stock option plan (27,000 shares)..... 202,000 135,000 337,000 Translation adjustment..... 231,000 231,000 ----------- ----------- ------------ ----------- ------------ ----------- - ------------ Balance, December 31, 1994..................... 14,611,000 11,830,000 84,114,000 (720,000) (3,491,000) (220,000) 106,124,000 Net income................. 18,640,000 18,640,000 Cash dividends on common stock -- $.24 per share.................... (3,383,000) (3,383,000 ) Remeasurement and amortization of stock issued under 1988 long- term incentive plan...... 4,000 (6,000) 220,000 218,000 Stock awarded under outside director stock option plan (awarded 3,290 -- issued 2,852 shares).................. 34,000 14,000 48,000 Stock issued under the incentive stock option plan (22,800 shares)..... 165,000 115,000 280,000 Shares purchased by Company for treasury (95,500 shares).................. (1,505,000) (1,505,000 ) Translation adjustment..... (28,000) (28,000 ) ----------- ----------- ------------ ----------- ------------ ----------- - ------------ Balance, December 31, 1995..................... $14,611,000 $12,033,000 $99,371,000 $(748,000) $(4,873,000) -- $120,394,000 =========== =========== ============ ============ ============ ============ ============
- --------------- The accompanying summary of significant accounting policies and notes are an integral part of the financial statements. 24 26 CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, ------------------------------------------ 1995 1994 1993 ------------ ------------ ------------ INCREASE (DECREASE) IN CASH Cash flows from operating activities: Net income...................................................... $ 18,640,000 $ 16,511,000 $ 9,476,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................... 16,668,000 15,683,000 15,816,000 Provision for doubtful accounts............................. 329,000 784,000 1,195,000 Loss/(gain) on disposal of property, plant and equipment.... 91,000 454,000 (7,000) (Gain)/loss on disposal of business units................... (460,000) 1,300,000 2,800,000 Net prepaid retirement costs................................ (2,339,000) (3,832,000) (4,793,000) Equity in earnings of affiliates............................ (451,000) (338,000) (117,000) Earned compensation -- 1988 long-term incentive and outside director stock option plans............................... 266,000 277,000 214,000 Restructuring and nonrecurring charges...................... 8,369,000 -- -- Gain on sale of business segment............................ (19,716,000) -- -- Changes in assets and liabilities, net of effects from acquisitions and divestitures: Accounts receivable....................................... 3,369,000 (12,813,000) 2,119,000 Inventories............................................... (7,877,000) (459,000) (3,714,000) Prepaid expenses.......................................... 1,210,000 (1,425,000) 556,000 Deferred financing costs.................................. -- (1,832,000) -- Deferred charges and other assets......................... (1,671,000) (714,000) 880,000 Accounts payable and other current liabilities............ 1,223,000 (2,996,000) 12,024,000 Advances from smelter..................................... (4,118,000) (4,817,000) 8,935,000 Federal and foreign taxes on income....................... 6,730,000 1,342,000 -- Deferred income taxes..................................... (17,000) 2,020,000 3,595,000 -------------- -------------- -------------- Net cash provided by operating activities....................... 20,246,000 9,145,000 48,979,000 -------------- -------------- -------------- Cash flows from investing activities: Proceeds from sale of property, plant and equipment........... 520,000 307,000 945,000 Capital expenditures.......................................... (23,143,000) (18,567,000) (15,002,000) Acquisition, net of cash and debt acquired.................... -- (29,943,000) -- Divestitures, net of cash sold................................ 68,032,000 -- 5,072,000 Investment in affiliates -- net............................... 478,000 -- (179,000) Net investing activities of discontinued operations........... 24,750,000 500,000 3,031,000 -------------- -------------- -------------- Net cash provided/(used) in investing activities................ 70,637,000 (47,703,000) (6,133,000) -------------- -------------- -------------- Cash flows from financing activities: Proceeds from short-term borrowings........................... 5,250,000 6,750,000 5,500,000 Repayment of other long-term debt............................. (11,750,000) (7,000,000) (10,594,000) Net increase/(decrease) in long-term revolving credit facilities.................................................. (30,000,000) (50,000,000) 10,000,000 Net (increase)/decrease in futures receivable................. (7,681,000) 53,087,000 (44,391,000) Net increase/(decrease) in futures payable.................... (37,772,000) 37,772,000 -- Dividends paid................................................ (3,383,000) (2,811,000) (2,803,000) Purchase of treasury stock.................................... (1,382,000) -- -- -------------- -------------- -------------- Net cash provided/(used) in financing activities................ (86,718,000) 37,798,000 (42,288,000) -------------- -------------- -------------- Effect of exchange rate changes on net cash..................... (87,000) (1,000) (50,000) -------------- -------------- -------------- Net change in cash.............................................. 4,078,000 (761,000) 508,000 Cash at beginning of year....................................... 2,559,000 3,320,000 2,812,000 -------------- -------------- -------------- Cash at end of year............................................. $ 6,637,000 $ 2,559,000 $ 3,320,000 ============== ============== ============== Cash paid during the year for: Interest, net of contango on futures and forward contracts and interest rate swap.......................................... $ 20,979,000 $ 15,721,000 $ 15,719,000 Income taxes.................................................. $ 6,365,000 $ 8,709,000 $ 2,668,000 ============== ============== ==============
- --------------- The accompanying summary of significant accounting policies and notes are an integral part of the financial statements. 25 27 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A -- PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany items have been eliminated. Investments in affiliates, which are 20%-50% owned companies, are accounted for by the equity basis of accounting. B -- INVENTORIES Precious metals inventories are valued at cost as computed under the last-in, first-out (LIFO) method, which is lower than market. Non-precious metals inventories are stated at the lower of cost (principally average) or market. For precious metals inventories no segregation among raw materials, work in process and finished goods is practicable. C -- PROPERTY, PLANT AND EQUIPMENT, AND DEPRECIATION Property, plant and equipment are stated at cost. Depreciation and amortization are provided principally on the straight-line method for financial reporting purposes and on accelerated methods for tax purposes. D -- INTANGIBLES AND AMORTIZATION Purchased patents are stated at cost, which is amortized over the respective remaining lives of the patents. The excess of purchase price over net assets acquired in business combinations is being amortized on the straight-line method over 40 years. The Company uses undiscounted cash flows when evaluating annually the recoverability of the unamortized balance for the excess of purchase price over net assets acquired in a business combination. The assessment of the recoverability of goodwill will be impacted if estimated future operating cash flows are not achieved. E -- FUTURES CONTRACTS Consistent with the Company's policy of maintaining constant inventory levels under the last-in, first-out (LIFO) method of accounting, precious metals are purchased at the same prices and quantities as shipments to customers. Additionally, to the extent that an increase in inventory is required to support operations, precious metals are purchased and immediately sold for future delivery, creating a futures receivable and eliminating the economic risk of price fluctuations. Also to the extent there is a decrease in the inventory required to support operations, precious metals are sold and immediately purchased for future receipt, creating a futures payable and also eliminating the economic risk of price fluctuations. Future sales and purchases of precious metals are excluded from sales and cost of sales in the accompanying income statement. The related margin deposits are included with the futures receivable/ payable. The income/expense from future sales/purchases of precious metals is amortized over the contract period and is included in interest expense. F -- SALES AND SERVICE A high percentage of the sales prices for the Company's precious metals products is the value of the precious metals content. Changes in the unit sales price of such precious metals result in corresponding changes in sales and cost of sales. The Company includes in both sales and cost of sales the precious metal value of sales of fabricated products if the customer purchased the precious metal from the Company, whether or not the precious metal is sold at the same time as the fabricated product. In addition, certain customers choose to do business on a "toll" basis, that is, to furnish bullion to Handy & Harman for fabrication. When the metals are returned to the customer in fabricated form, the customer pays only a fabrication charge, and the precious metal value of this consignment business is not included in sales or cost of sales. 26 28 Service revenues, which represent charges to customers for processing refining lots, are recognized in income when the lots are settled with the customer as to precious metal content. Additional costs and smelter charges relating to the settled lots are accrued at that time. G -- TAXES ON INCOME The Financial Accounting Standards Board Statement No. 109 ("SFAS 109"), "Accounting for Income Taxes", was issued in February 1992 and was adopted by the Company in the first quarter of 1993. Although SFAS No. 109 superseded SFAS No. 96, "Accounting for Income Taxes" adopted by the Company in 1987, it maintained the same requirement, among other things, that deferred tax liabilities or assets at the end of each period be determined using the tax rate expected to be in effect when taxes are actually paid or recovered. The significant change in SFAS No. 109 over SFAS No. 96 was the recognition of deferred tax assets with measurement based on the likelihood of realization of a tax benefit in future years. The cumulative effect of this change to January 1, 1993 amounted to $576,000 and is shown as a separate item in the Consolidated Statement of Income on page 21. H -- INCOME PER SHARE Per share amounts are based on the weighted average number of shares outstanding during the year. Outstanding stock options are considered common stock equivalents using the treasury stock method and are included in the calculation when their effect would be dilutive; however they had no dilutive effect in 1995, 1994 and 1993. I -- FOREIGN CURRENCY TRANSLATION Assets and liabilities of foreign subsidiaries have been translated at current exchange rates, and related revenues and expenses have been translated at average rates of exchange in effect during the year. Resulting cumulative translation adjustments have been recorded as a separate component of shareholders' equity. J -- FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value amounts for cash, receivables (net), and short-term borrowings approximate carrying amounts due to the short maturities of these instruments. The fair value of long-term debt was estimated based on the current rates offered to the Company for debt of the same remaining maturities. The fair value of long-term debt exceeded its carrying value by approximately $8,000,000. The Company has no plans to retire significant portions of its long-term debt prior to scheduled maturity. K -- RECLASSIFICATIONS Certain reclassifications have been made to the 1994 and 1993 consolidated financial statements to conform to the 1995 presentation. L -- NEW FINANCIAL ACCOUNTING STANDARDS During 1995 the Financial Accounting Standards Board issued SFAS No. 121 "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and SFAS No. 123 "Accounting for Stock-based Compensation", both effective for fiscal years beginning after December 15, 1995. The Company will implement SFAS No. 123 using the proforma disclosure method described in the pronouncement. The future adoption in 1996 of SFAS No. 121 is not expected to have a material effect on the Company's consolidated financial position or results of operations. 27 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: ACQUISITIONS, DIVESTITURES, RESTRUCTURING AND OTHER CHARGES The Company sold its automotive (OEM) segment in two phases during 1995 and recorded a net gain on its sale amounting to $19,716,000. The first phase was the sale of this segment's cable operations on July 20, 1995 for which the Company received cash of $3,211,000. The cable operations' working capital retained by the Company also generated approximately $3,000,000 in cash. The second phase was the sale of this segment's remaining operations on December 29, 1995 for which the Company received $64,821,000 (net of cash sold) with an additional amount due of $5,246,000 in 1996. Accordingly, the results of this segment for all years presented are reported in the accompanying consolidated statement of income as discontinued operations. Revenues from this segment for 1995, 1994, and 1993 were $150,629,000, $181,866,000 and $156,607,000, respectively. The assets and liabilities of this discontinued operation included in the consolidated balance sheet for 1994 are as follows: Working capital -- $25,582,000, Net property, plant and equipment -- $24,813,000, Other assets -- $318,000. During 1995 the Company exited the karat gold fabricated product line located in its East Providence, Rhode Island facility. A restructuring charge to exit the business amounting to $5,342,000 was recorded as follows: employee separation (155 employees) -- $733,000, asset write-downs -$3,819,000, and other exit costs -- $790,000. This action was substantially completed at December 31, 1995. In addition to this restructuring charge, a charge of $4,207,000, primarily asset write-downs, was recorded relating to the Company's ongoing operation in Fairfield, Connecticut. Included in other deductions for 1995 is a gain on the sale of the Company's joint venture in Brazil amounting to $460,000. On September 9, 1994 the Company acquired 100% of Sumco Inc.'s outstanding shares 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 estimated fair value of assets acquired is $11,100,000 and liabilities assumed is $7,100,000 (inclusive of $3,921,000 of debt). 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. This business was not material to the revenues of the Company. Included in Other Deductions are provisions for the disposals of the Company's interest in a Mexican joint venture of $1,300,000 and land and building of $400,000. In 1993 the Company received $5,072,000 in cash and $800,000 in notes for the sale of Valley Metals Inc., O&M Manufacturing Co. Division and New Industrial Techniques, Inc. The assets sold amounted to $8,294,000 and the liabilities assumed by the purchasers amounted to $1,233,000. A loss of $2,800,000 was recorded in 1993 on the sale of two of these units. These businesses were not material to the revenues of the Company. NOTE 2: INVENTORIES AND FEE CONSIGNMENT FACILITIES The components of inventories at December 31, 1995 and 1994 are as follows:
1995 1994 ----------- ----------- Precious Metals: Fine and Fabricated metals in various stages of completion...... $34,230,000 $37,825,000 Non-Precious Metals: Base metals, factory supplies and raw materials................. 21,797,000 25,175,000 Work in process................................................. 19,384,000 18,521,000 Finished goods.................................................. 9,011,000 8,418,000 ----------- ----------- $84,422,000 $89,939,000 =========== ===========
28 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED OTHER INVENTORY INFORMATION AT DECEMBER 31, 1995 AND 1994:
1995 1994 ------------ ------------ Precious metals stated at LIFO cost............................. $ 28,870,000 $ 32,450,000 ============ ============ LIFO inventory-excess of year-end market value over LIFO cost... $141,458,000 $139,068,000 ============ ============ Dec. 31 market value per ounce: Silver.......................................................... $ 5.11 $ 4.87 Gold............................................................ $ 386.95 $ 382.40 ============ ============
Consigned precious metal ounces due to/(from) customers and suppliers:
1995 1994 ---------- ---------- Silver ounces Net open account.................................................... 6,130,000 (2,135,000) Leased.............................................................. 11,987,000 19,517,000 ---------- ---------- Total............................................................... 18,117,000 17,382,000 ========== ========== Gold ounces Net open account.................................................... 9,000 (32,000) Leased.............................................................. 113,000 326,000 ---------- ---------- Total............................................................... 122,000 294,000 ========== ==========
In 1994 the Company finalized a Gold and Silver Fee Consignment Facility amounting to $250,750,000 of which $158,500,000 remains after exiting 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. As of December 31, 1995, 13,687,000 ounces of silver and 10,000 ounces of gold were leased to the Company and are included in leased amounts above. The fee rate at December 31, 1995 for gold was 3.75% and silver was 2.00%. NOTE 3: DEBT AND CREDIT AGREEMENTS The Company's borrowing requirements are primarily related to the level of inventories, the market value of precious metals, and changes in the Company's receivables. The Company adjusts the level of its credit facilities from time to time in accordance with its borrowing needs. At December 31, 1995, the Company had short-term credit facilities of $53,750,000; (see discussion below regarding revolving credit facilities) short-term bank borrowing amounted to $40,000,000. The corresponding amounts for December 31, 1994 were: credit facilities -- $53,750,000 and short-term bank borrowings -- $34,750,000. At December 31, 1995, 1994, and 1993 the average interest rate for outstanding short-term borrowing was 6.0%, 6.9% and 4.0%, respectively. During 1995, the average month-end short-term borrowing was $54,300,000; the weighted average interest rate of 6.5% was computed on the basis of the number of days the borrowings were outstanding; and the maximum month-end short-term borrowing was $75,500,000. The corresponding amounts for the years ended December 31, 1994 and 1993 were: average month-end borrowing-$53,777,000 and $15,688,000 weighted average interest rate 5.4% and 4.3%, and maximum month-end borrowing-$117,000,000 and $36,000,000. 29 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED Long-term debt at December 31, 1995 and 1994 is summarized as follows:
1995 1994 ----------- ------------ Credit facility.................................................. $25,000,000 $ 55,000,000 8.83% notes due 2002............................................. 50,000,000 50,000,000 9.37% note due 1999.............................................. 14,500,000 18,000,000 10.20% note due 1998............................................. -- 8,250,000 Industrial revenue bonds, floating rate, due 2004 -- 2005........ 7,500,000 7,500,000 ----------- ------------ 97,000,000 138,750,000 Less installments due within year................................ 3,500,000 7,000,000 ----------- ------------ Total long-term debt............................................. $93,500,000 $131,750,000 =========== ============
Maturities of long-term debt in each of the next five years are as follows (in thousands): $3,500, $3,500, $38,500, $14,000 and $10,000. During the third quarter of 1994, the Company finalized $215,000,000 of Revolving Credit Facilities with twenty banks. These Credit Facilities provided both $161,250,000 for a three year period and $53,750,000 for 364 days. Due to the sale of the Company's automotive segment, the three year portion of the credit facility was reduced to $96,250,000. Under both of these credit facilities interest is payable at the prime rate or LIBOR plus 1%, at the Company's option. All the above loans have restrictive covenants which, under the most restrictive covenants of the Company's long-term loan agreements $17,280,000 of consolidated retained earnings were unrestricted at December 31, 1995, as to the declaration of cash dividends and the acquisition of capital stock by the Company. Additionally, the agreements require the maintenance of specified ratios and a minimum tangible net worth of $134,000,000. At December 31, 1995 the Company was in compliance with all covenants. NOTE 4: INCOME TAXES The components of pre-tax income are as follows (in thousands):
1995 1994 1993 ------- ------- ------- Continuing operations -- domestic............................. $13,270 $13,249 $ 2,585 Continuing operations -- foreign.............................. 1,380 1,389 395 ------- ------- ------- 14,650 14,638 2,980 Discontinued operations -- domestic........................... 18,735 13,683 12,267 ------- ------- ------- Total....................................................... $33,385 $28,321 $15,247 ======= ======= =======
30 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The provision for taxes on income was comprised of the following (in thousands):
1995 ------------------------------- CURRENT DEFERRED TOTAL ------- ------- ------- CONTINUING OPERATIONS Federal....................................................... $ 2,902 $ 1,792 $ 4,694 FOREIGN....................................................... 1,594 (386) 1,208 STATE AND LOCAL............................................... 256 768 1,024 ------- ------- ------- 4,752 2,174 6,926 ------- ------- ------- DISCONTINUED OPERATIONS Federal....................................................... 7,598 (1,655) 5,943 STATE AND LOCAL............................................... 2,412 (536) 1,876 ------- ------- ------- 10,010 (2,191) 7,819 ------- ------- ------- TOTAL....................................................... $14,762 $ (17) $14,745 ======= ======= =======
1994 ------------------------------ CURRENT DEFERRED TOTAL ------ ------ -------- CONTINUING OPERATIONS Federal........................................................ $1,940 $2,116 $ 4,056 Foreign........................................................ 748 (25) 723 State and local................................................ 1,325 -- 1,325 ------ ------ ------- 4,013 2,091 6,104 ------ ------ ------- DISCONTINUED OPERATIONS Federal........................................................ 4,154 184 4,338 State and local................................................ 1,368 -- 1,368 ------ ------ ------- 5,522 184 5,706 ------ ------ ------- Total........................................................ $9,535 $2,275 $ 11,810 ====== ====== =======
1993 ----------------------------- CURRENT DEFERRED TOTAL ------- ------ ------ CONTINUING OPERATIONS Federal......................................................... $(3,083) $3,803 $ 720 Foreign......................................................... 160 91 251 State and local................................................. 573 (300) 273 ------- ------ ------ (2,350) 3,594 1,244 ------- ------ ------ DISCONTINUED OPERATIONS Federal......................................................... 3,875 1 3,876 State and local................................................. 1,227 -- 1,227 ------- ------ ------ 5,102 1 5,103 ------- ------ ------ Total......................................................... $ 2,752 $3,595 $6,347 ======= ====== ======
31 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1995 and 1994 follow (in thousands):
1995 ---------------------------------------------- DEFERRED TAX DEFERRED TAX NET DEFERRED ASSETS LIABILITIES LIABILITY ------------ ------------ ------------ Prepaid retirement costs.............................. $ 17,903 $(17,903) Property, plant and equipment......................... 5,054 (5,054) Restructuring and discontinued operations............. $ 5,972 -- 5,972 All other............................................. 6,254 1,913 4,341 Valuation allowance................................... (890) -- (890) ------- ------- -------- Total............................................... $ 11,336 $ 24,870 $(13,534) ======= ======= ========
1994 ---------------------------------------------- DEFERRED TAX DEFERRED TAX NET DEFERRED ASSETS LIABILITIES LIABILITY ------------ ------------ ------------ Prepaid retirement costs.............................. $ 16,610 $(16,610) Property, plant and equipment......................... 9,229 (9,229) Restructuring and discontinued operations............. $ 6,797 -- 6,797 Foreign tax credit carryforwards...................... 495 -- 495 All other............................................. 7,255 2,077 5,178 Valuation allowance................................... (182) -- (182) ------- ------- -------- Total................................................. $ 14,365 $ 27,916 $(13,551) ======= ======= ========
Due to the Company's current taxable income and expected future taxable income, management believes it is more likely than not that the Company will realize the benefit of the existing deferred tax assets other than the deferred tax asset on foreign losses for which a valuation allowance has been provided. Principal items making up the change in the net deferred tax liability follow (in thousands):
1995 1994 1993 ------- ------- ------- Prepaid retirement costs...................................... $ 1,293 $ 1,340 $ 1,643 Property plant and equipment.................................. (4,175) (257) (1,372) Restructuring................................................. 825 558 2,510 Foreign tax credit carryforwards.............................. 495 689 (919) Investment tax credit carryforwards........................... -- 1,502 -- Effect of 1993 income tax rate change on deferred taxes....... -- -- 275 All other..................................................... 1,545 (1,557) 1,458 ------- ------- ------- $ (17) $ 2,275 $ 3,595 ======= ======= =======
Deferred income taxes have not been provided on the undistributed earnings of foreign subsidiaries and other foreign investments carried at equity. These earnings have been substantially reinvested and the Company does not plan to initiate any action that would precipitate the payment of income taxes thereon. 32 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The major elements contributing to the difference between the U.S. Federal statutory tax rate and the consolidated effective tax rate for continuing operations are as follows:
1995 1994 1993 ---- ---- ---- U.S. Federal effective statutory tax rate.............................. 35.0% 35.0% 34.0% State and local income taxes, net of Federal income tax benefit........ 4.6 5.9 6.0 Foreign tax credit..................................................... -- -- (11.5) Valuation allowance.................................................... 4.8 1.2 2.0 Effect of 1993 income tax rate change on deferred taxes................ -- -- 9.2 Net effect of foreign tax rates........................................ 0.1 0.4 1.9 Other.................................................................. 2.8 (0.8) -- ---- ---- ---- 47.3% 41.7% 41.6% ==== ==== ====
NOTE 5: COMMITMENTS Commitments at December 31, 1995 for the purchase of additional property, plant and equipment approximated $1,450,000. Rent expense for 1995, 1994, and 1993 was $3,591,000, $3,460,000 and $3,363,000, respectively. Operating lease and rental commitments for future years are as follows: 1996............................................................................ $ 1,974,000 1997............................................................................ 1,482,000 1998............................................................................ 1,219,000 1999............................................................................ 918,000 2000............................................................................ 847,000 2001 and beyond ................................................................ 6,490,000 ----------- Total lease and rental commitments.............................................. $12,930,000 ===========
NOTE 6: INCENTIVE PLANS HANDY & HARMAN 1995 OMNIBUS STOCK INCENTIVE PLAN (SUCCESSOR TO THE HANDY & HARMAN LONG-TERM INCENTIVE STOCK OPTION PLAN ADOPTED IN 1991) After incorporating 1994's remaining "shares available for option" of the predecessor plan the combined number of shares subject to award under this succeeding plan adopted in 1995 shall not exceed 1,000,000 shares of Common Stock. The compensation committee of the Board of Directors may grant options, stock appreciation rights (tandem or stand alone), shares of restricted or phantom stock, and stock bonuses, in such amounts and with such terms and conditions as the compensation committee shall determine, subject to the provisions of the plan. Through 1995 only options have been awarded under the successor and predecessor plans and, commencing one year after the date of grant, each option becomes exercisable cumulatively at the rate of 25% per year (20% for predecessor plan awarded options). These options expire ten years from the date 33 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED such options were granted. Successor and predecessor plans' transactions are as follows:
SHARES SHARES UNDER OPTION AVAILABLE ---------------------------- FOR RANGE OF OPTION SHARES PRICE -------- ------- ---------------- Balance, January 1, 1993............................. 474,000 526,000 $ 9.625-14.125 Options granted...................................... (171,000) 171,000 $ 12.937-15.3125 Options exercised.................................... -- (3,800) $ 9.625-12.625 Options expired...................................... 45,200 (45,200) $ 12.625-15.312 -------- ------- --------------- Balance, December 31, 1993........................... 348,200 648,000 $ 9.625-15.3125 Options granted...................................... (118,000) 118,000 $ 13.75 -16.625 Options exercised.................................... -- (27,000) $ 9.625-12.625 Options expired...................................... 23,000 (23,000) $ 12.625-15.312 -------- ------- --------------- Balance, December 31, 1994........................... 253,200 716,000 $ 9.625-16.625 Increase in shares subject to award.................. 746,800 Options granted...................................... (162,000) 162,000 $ 15.125-15.438 Options exercised.................................... -- (22,800) $ 9.625-12.937 Options expired...................................... 28,200 (28,200) $ 11.313-16.625 -------- ------- --------------- Balance, December 31, 1995........................... 866,200 827,000 $ 9.625-16.625 ======== ======= ===============
There are 397,600 options exercisable under this plan at December 31, 1995. OUTSIDE DIRECTOR STOCK OPTION PLAN Under the Outside Director Stock Option Plan each outside director is awarded fully and immediately exercisable options, on an annual basis, to purchase Common Stock at an option price of $1. The market value of the Company's shares at date of grant less the option price is amortized to compensation expense during the year. Transactions under this Plan are summarized below:
1995 1994 1993 ------ ------ ------ Options outstanding January 1.................................... 8,791 7,062 7,379 Options awarded.................................................. 3,290 4,110 5,236 Options expired.................................................. -- (2,381) -- Options exercised................................................ (2,852) -- (5,553) ------ ------ ------ Options outstanding December 31.................................. 9,229 8,791 7,062 ------ ------ ------ Shares subject to award December 31.............................. 71,935 75,225 76,954 ====== ====== ======
All options outstanding under this plan are exercisable at December 31, 1995. 1988 LONG-TERM INCENTIVE PLAN Shares issued under the 1988 Long-Term Incentive Plan are in the name of the employee, who has all the rights of a shareholder, subject to certain restrictions or forfeitures. Of the 400,000 shares which may be awarded under this Plan 28,700 shares were issued in 1990, of which 400 shares were forfeited, 22,000 shares were issued in 1992, of which 1,000 shares were forfeited, and 28,600 shares were issued in 1994 of which 1,300 were forfeited. The market value of shares issued under the Plan is recorded as unearned compensation and shown as a separate component of shareholders' equity. This compensation is amortized to expense over the period the employees become vested. 34 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED Compensation expense for both the Outside Director Stock Option Plan and the 1988 Long-Term Incentive Plan amounted to $266,000, $277,000 and $214,000, in 1995, 1994 and 1993, respectively. 1982 STOCK OPTION PLAN The 25,000 options outstanding at December 31, 1994 expired in March 1995. NOTE 7: SEGMENT INFORMATION Information regarding the Company's industry segments and discontinued operations is contained on page 15 under the heading "The Company's Business" and is incorporated herein by reference. Additional information concerning industry segments, corporate and discontinued operations is as follows:
1995 1994 1993 ----------- ----------- ----------- Depreciation and amortization expense: Wire/Tubing....................................... $ 5,029,000 $ 4,355,000 $ 4,046,000 Precious metals................................... 6,132,000 5,059,000 4,645,000 Other non-precious metal businesses............... 543,000 504,000 1,748,000 Corporate......................................... 1,053,000 1,072,000 664,000 Discontinued operations........................... 3,911,000 4,693,000 4,713,000 ----------- ----------- ----------- $16,668,000 $15,683,000 $15,816,000 =========== =========== =========== Property, plant and equipment additions: Wire/Tubing: Expenditures................................... $11,378,000 $ 8,017,000 $ 6,310,000 ----------- ----------- ----------- Precious Metals: Expenditures................................... 8,431,000 5,647,000 5,650,000 ----------- ----------- ----------- Other non-precious metal businesses: Expenditures................................... 929,000 1,069,000 932,000 ----------- ----------- ----------- Corporate: Expenditures................................... 47,000 56,000 215,000 ----------- ----------- ----------- 20,785,000 14,789,000 13,107,000 ----------- ----------- ----------- Discontinued operations: Expenditures................................... 2,358,000 3,778,000 2,040,000 ----------- ----------- ----------- $23,143,000 $18,567,000 $15,147,000 =========== =========== ===========
35 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE 8: SUPPLEMENTAL INFORMATION
LIFE/ YEARS 1995 1994 ---------- ------------ ------------ a-Property, plant and equipment: Land.......................................... $ 3,872,000 $ 6,365,000 Buildings and improvements 10-50 48,594,000 68,491,000 Machinery and equipment....................... 3-20 140,107,000 169,099,000 Furniture and fixtures........................ 2-20 11,974,000 17,254,000 Automotive.................................... 4-8 515,000 1,160,000 Leasehold improvements........................ Lease Life 2,269,000 2,323,000 Construction in progress...................... -- 7,014,000 8,326,000 ---------- ------------ ------------ $214,345,000 $273,018,000 ========== ============ ============
Depreciation and amortization of property, plant and equipment charged to operations for 1995, 1994 and 1993 was $15,066,000, $14,633,000 and $14,659,000, respectively.
1995 1994 ----------- ----------- b-Intangibles (net of amortization): Patents and other............................................... $ 455,000 $ 704,000 Excess of purchase price over net assets acquired in business combinations................................................. 21,686,000 22,287,000 ----------- ----------- $22,141,000 $22,991,000 =========== ===========
NOTE 9: RETIREMENT PLANS AND OTHER BENEFITS RETIREMENT PLANS The Company and substantially all of its subsidiaries have noncontributory defined benefit plans covering most of their employees. The benefits are based on years of service and the employee's compensation at the time of retirement. Contributions are made by the Company as necessary to provide assets sufficient to meet the benefits payable to plan participants, and are determined in accordance with applicable minimum funding standard requirements as promulgated by the Internal Revenue Service. Such contributions are based on actuarial computations of the amount sufficient to fund normal (current service) cost plus an amortization of the unfunded actuarial accrued liability over periods of up to 30 years. The components of net periodic pension cost (credit) for 1995, 1994 and 1993 are as follows:
1995 1994 1993 ------------ ------------ ------------ Service cost-benefits earned during the period... $ 3,582,000 $ 3,858,000 $ 3,546,000 Interest cost on the projected benefits obligation..................................... 7,974,000 7,530,000 7,253,000 Return on plan assets............................ (37,283,000) 43,000 (15,563,000) Net amortization and deferral.................... 21,399,000 (15,540,000) (106,000) ----------- ----------- ----------- Net periodic pension cost (credit)............... $ (4,328,000) $ (4,109,000) $ (4,870,000) =========== =========== ===========
36 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED Assumptions used in the accounting at December 31 are:
1995 1994 1993 ---- ---- ---- Discount rate: Beginning of year................................................... 7.0% 6.5% 7.0% End of year......................................................... 7.0% 7.0% 6.5% Compensation increase................................................. 5.0% 5.0% 5.0% Expected asset return................................................. 8.0% 8.5% 8.5% ============ ============
The plans' funded status as of December 31 and the amounts recognized in the accompanying financial statements are as follows:
1995 1994 ------------ ------------ Actuarial present value of benefit obligations: Vested benefit obligation..................................... $106,422,000 $ 96,944,000 ------------ ------------ Accumulated benefit obligation................................ $111,635,000 $100,710,000 ------------ ------------ Projected benefit obligation.................................. $122,555,000 $112,920,000 Plan assets at fair value....................................... 181,835,000 150,575,000 ------------ ------------ Plan assets in excess of projected benefit obligation........... 59,280,000 37,655,000 Unrecognized net loss........................................... 4,032,000 30,074,000 Unrecognized prior service cost................................. (1,467,000) (3,418,000) Unrecognized net asset.......................................... (6,403,000) (13,145,000) ------------ ------------ Prepaid pension cost............................................ $ 55,442,000 $ 51,166,000 ============ ============
The plans' assets are invested primarily in stocks and insurance contracts. During the fourth quarter of 1995, the Company incurred a pension curtailment due to the sale of the automotive segment. The result was a gain of $1,354,000 which is included in the net periodic pension credit for 1995 and has been classified in discontinued operations. The cost of living provision in effect for a certain Company pension plan was eliminated with respect to benefits credited after October 31, 1992 and the definition of average pay was changed from a final five year average to career average pay starting January 1, 1993 for all units covered under the plan. The result was a decrease in the projected benefit obligation and a reduction in unrecognized prior service cost of $7,130,000. This amount is being amortized over 16 years. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS Certain operations of the Company provide postretirement medical benefits to current and retired employees. Certain employees of these operations become eligible for postretirement medical benefits after fulfilling minimum age and service requirements. Postretirement benefit costs were determined assuming discount rates of 7%, 6.5% and 7% for the years ended 1995, 1994 and 1993, respectively. The components of net periodic postretirement benefit cost are as follows:
1995 1994 1993 ---------- ---------- ---------- Service cost........................................... $ 174,000 $ 207,000 $ 261,000 Interest cost.......................................... 596,000 577,000 694,000 Amortization of transition obligation.................. 371,000 433,000 574,000 --------- --------- --------- $1,141,000 $1,217,000 $1,529,000 ========= ========= =========
37 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The Company's funding policy with respect to these benefits is to pay the amounts required to provide the benefits during each year. The following table presents the Company's postretirement medical benefits funded status as of December 31, 1995 and 1994. Accumulated Postretirement Benefit Obligation:
1995 1994 ----------- ----------- Retirees.......................................................... $ 4,272,000 $ 3,783,000 Future retirees................................................... 4,856,000 5,079,000 ----------- ----------- Total accumulated postretirement benefit obligation............... 9,128,000 8,862,000 Unrecognized transition obligation................................ (5,432,000) (5,969,000) Unrecognized actuarial gain (loss)................................ 594,000 814,000 ----------- ----------- Net postretirement benefit liability -- classified with prepaid retirement costs................................................ $ 4,290,000 $ 3,707,000 =========== ===========
The assumed discount rate used to measure the accumulated postretirement benefit obligation was 6.5% for 1995 and 7% for 1994. The unrecognized transition obligation amortization period is 20 years beginning on January 1, 1991, the implementation date. For measurement purposes, a 15% annual rate of increase in the health care cost trend rate was assumed for 1992 through 1994; the rate was assumed to decrease gradually to 6% by the year 2003 and remain at that level thereafter. A 1% increase in the assumed health care trend rate would not have a significant impact on the accumulated postretirement benefit obligation as of December 31, 1995 and 1994. SAVINGS PLAN The Company has a savings plan which qualifies under Section 401(k) of the Internal Revenue Code. This savings plan allows eligible employees to contribute from 1% to 12% of their income on a pretax basis to this savings plan. The Company matches 50% of the first 3% of the employee's contribution. Such matching Company contributions are invested in shares of the Company's common stock and become immediately vested. The charge to operations for the Company's matching contribution amounted to $932,000, $900,000 and $862,000 for 1995, 1994 and 1993, respectively. NOTE 10: COMMON STOCK PURCHASE RIGHTS In 1989, the Board of Directors declared a dividend of one Common Stock Purchase Right on each outstanding share of Handy & Harman Common Stock to holders of record on February 6, 1989. If the rights become exercisable, the rights will separate from the common stock and each right will entitle the holder to purchase from the Company a share of common stock at a predefined price. The rights are not exercisable until either ten days after certain changes in ownership of the Company occurs or ten days following the commencement of a tender offer for at least 20% of the Company's common stock. The rights are redeemable by the Company at a fixed price after certain defined events or at any time prior to the expiration of the rights on January 26, 1999, if such events do not occur. Through December 31, 1995, the Company had reserved common shares as issuable pursuant to these rights. At the present time, the rights have no dilutive effects on the earnings per share calculation. NOTE 11: PREVIOUSLY DISCONTINUED OPERATIONS On June 27, 1991, the Company announced its planned divestiture of six businesses which were involved in the manufacture of automotive replacement parts, proprietary chemicals, metal powders, pressurized vessels, coldheaded parts, and specialized platinum group metals refining and products. Accordingly, the 1994 and prior consolidated financial statements of the Company had been classified to report separately the net assets of these businesses. The remaining discontinued operations net assets were realized in September 1995 with proceeds amounting to $24,750,000 from the sale of the Company's investment in, and receivable from GO/DAN Industries, a joint venture partnership. 38 40 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Handy & Harman: We have audited the consolidated balance sheets of Handy & Harman and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Handy & Harman and Subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. As discussed in the Summary of Significant Accounting Policies, the Company adopted Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes" in 1993. KPMG PEAT MARWICK LLP NEW YORK, NEW YORK FEBRUARY 12, 1996 39 41 RESPONSIBILITY FOR FINANCIAL STATEMENTS The financial statements presented in this Annual Report were prepared by Handy & Harman which is responsible for their fairness. Such statements include, in some instances, judgments as to those amounts which are estimates and approximations and such amounts could differ from actual results. The Company believes that the consolidated financial statements are in conformity with generally accepted accounting principles. The Company depends upon an accounting system, including internal accounting controls, administered by a staff of corporate accountants. The controls are designed to provide reasonable assurance that the Company's financial records are reliable, that the corporate assets are safeguarded and that transactions are executed in accordance with the appropriate corporate authorizations and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. It must be recognized, however, that errors and irregularities may nevertheless occur, so the effectiveness of such a financial system depends to a great extent upon the careful selection of financial and other responsible managers. Also, estimates and judgments are required to assess and balance the relative cost and expected benefits of the Company's controls. The Company believes that its accounting controls provide reasonable assurance that errors or irregularities which could be material to the financial statements are prevented or would be detected within a timely period by employees in the normal course of performing their assigned functions. KPMG Peat Marwick LLP, independent certified public accountants, has been engaged by the Company to conduct quarterly reviews and an audit of the Company's financial statements in accordance with generally accepted auditing standards. Such standards provide for numerous procedures, including obtaining an understanding of the Company's accounting systems and performing reviews of internal accounting control systems and tests of transactions deemed appropriate by the auditors. KPMG Peat Marwick LLP is a member of the SEC Practice Section of the AICPA Division of CPA firms. For many years the Company has had an Audit Committee of the Board of Directors consisting exclusively of outside Directors of the Company. The Committee meets periodically with the independent auditors, internal auditors, management and corporate staff accountants to review and evaluate their accounting, auditing and financial reporting activities and responsibilities. The independent auditors as well as the internal auditors and the Corporate Controller have full and free access to the Audit Committee. The independent auditors meet with the Audit Committee, with and without Company employees present, to discuss their audit plan and at a later date the results of their audits. 40 42 S-1 HANDY & HARMAN AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
BALANCE, BALANCE, BEGINNING ADDITIONS DEDUCTIONS CLOSE DESCRIPTION OF PERIOD (A) FROM RESERVE OF PERIOD - ------------------------------------------------- --------- --------- ------------ --------- (Thousands of Dollars) Allowance for doubtful accounts receivable (deducted from accounts receivable): Year ended December 31, 1995..................... $ 3,597 $ 329 $ 905 $ 3,021 Year ended December 31, 1994..................... $ 3,721 $ 906(b) $1,030 $ 3,597 Year ended December 31, 1993..................... $ 3,325 $ 1,195 $ 799 $ 3,721
1995 1994 1993 ---- ---- ------ (a) Provision for doubtful accounts -- charged to costs and expenses...................................................... $329 $784 $1,195 (b) Includes $122 acquired through business combination.
41 43 EXHIBIT INDEX - ------------- Exhibits - ---------- 10(r) Amended and Restated Agreement between the Company and Mr. Grzelecki (Filed as Exhibit 10(r) to this Annual Report on Form 10-K. 10(s) Press Release of the Company dated November 6, 1995 (Filed as Exhibit 10(s) to this Annual report on Form 10-K. (21) List of Subsidiaries of the Company. Filed as Exhibit 21 to this Annual Report on Form 10-K. (27) Financial Data Schedule. EX-10.R 2 AMENDED AND RESTATED AGREEMENT 1 Exhibit 10(r) [CONFORMED] AMENDED AND RESTATED AGREEMENT AGREEMENT, dated as of November 3, 1995 by and between Handy & Harman, a New York corporation (the "Company") and Frank E. Grzelecki (the "Executive"). WHEREAS, the Company and the Executive entered into a Letter Agreement dated as of May 23, 1989, as amended (the "Agreement"), an Executive Agreement dated as of July 1, 1989, as amended (the "Executive Agreement") and an Amended Agreement dated as of September 22, 1994 (the "Amended Agreement"); and WHEREAS, the Amended Agreement provides that when the Executive's employment with the Company ends, whether the basis for such action being instituted on the part of the Company or the Executive, the Executive shall become entitled to the payment of severance benefits for one year in an amount equal to the Executive's annual salary at the date of termination (the "Severance Payment"); to full employee benefits coverage for one year (the "Severance Benefits"); to continued medical benefits for himself and his spouse until eligibility for Medicare (the "Medical Benefit"); and to certain retirement benefits as indicated in an Agreement dated May 12, 1992; and 1 2 WHEREAS, the Company considers its relationship with the Executive a vital element in protecting and enhancing the best interests of the Company and wishes to benefit from the Executive's substantial knowledge and experience by extending its relationship with the Executive, and the Executive desires to continue such relationship with the Company. NOW, THEREFORE, in consideration of the foregoing, the Company and the Executive agree as follows: 1. The Company and the Executive agree that this document, being entered into this day, shall replace both the Agreement and the Amended Agreement upon its execution and which shall provide for the payment of an amount equal to the Severance Payment, such payment to be made in installments over a five-year period. Notwithstanding any provision to the contrary herein, the Executive (or his beneficiary) may, upon written notice to the Company, call for the acceleration of the Severance Payment. Upon such written notice, the Company shall pay to the Executive (or his beneficiary) a lump sum amount equal to the remaining balance of the Severance Payment; and (i) In the case of the death of the Executive during the five-year period, the remainder of the Severance Payment shall be paid to his beneficiary; and 2 3 (ii) The Executive shall remain entitled to the Supplemental Retirement Benefits as provided by amendment to the Agreement, dated as of May 12, 1992, subject to the terms and conditions provided in such amendment and in the Agreement, which provisions are incorporated by reference in this Agreement as attached hereto as Exhibit A (a Certified Copy of the Resolutions of the Board of Directors of Handy & Harman dated May 12, 1992) to this Agreement; and (iii) From and after the date of the Executive's termination of employment, the Company shall provide the Medical Benefit, without cost to the Executive and his spouse, over the lives of both the Executive and his spouse. Such Medical Benefit shall be provided on a basis no less favorable to the Executive and his spouse than the medical coverage provided to active senior executive officers of the Company as of the date of execution of this Agreement; any future improvements in medical benefits adopted by the Company for active senior executive officers will be deemed to be in effect for the Executive and his spouse pursuant to the Medical Benefit, without cost to the Executive or his 3 4 spouse, on the date of effectiveness of such future improvements for active senior executive officers of the Company. (iv) The Company shall take all actions necessary and appropriate to cause all outstanding options to remain outstanding and continue to vest and become exercisable pursuant to the terms of the original grant, subject to the terms of the applicable stock option plan and the applicable stock option agreement. In addition, the Company shall extend the post exercise period for the Executive's options granted under the 1991 Long-Term Incentive Stock Option Plan to no less than one year from the effective (termination-retirement) date of the Executive or for the term of the Consulting Agreement, referenced in paragraph numbered 2 on page 5 of this Agreement, whichever period is longer, but not beyond the original term of such option. (v) The Executive shall be entitled to appropriate office space and related expenses, off of the premises 4 5 of the Company's headquarters in Rye, New York, along with appropriate secretarial services for the four-year period following severance of employment, which expenses shall not exceed $3,000 per month. 2. The Company and the Executive may enter into a Consulting Agreement (the "Consulting Agreement"), copy of which is attached hereto as Exhibit B. 3. The obligations of the Company under this Agreement shall be binding upon any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company. IN WITNESS WHEREOF, the Company and the Executive have caused this Amendment to be duly executed all as of November 3, 1995. HANDY & HARMAN By /s/ Paul E. Dixon ---------------------------------- Paul E. Dixon /s/ Frank E. Grzelecki ------------------------------------ Frank E. Grzelecki 5 6 Exhibits A and B (Omitted) 6 EX-10.S 3 PRESS RELEASE 1 Exhibit 10(s) FROM: ON BEHALF OF: Robert W. Block International Handy & Harman 30 East 60th Street New York, NY 10022 Contact: (212) 755-8047 Dennis C. Kelly FOR IMMEDIATE RELEASE: HANDY & HARMAN ANNOUNCES THIRD QUARTER RESULTS AND A PLAN TO BUY BACK UP TO 1.5 MILLION SHARES NEW YORK, NY -- November 6, 1995... Handy & Harman today reported results for the third quarter and nine months of 1995 and a plan to buy back up to 1.5 million shares of the Company's common stock. For the quarter ended September 30, 1995, Handy & Harman's results were net income of $1,708,000 or $.12 per share compared to $3,477,000 or $.25 per share for last year's comparable period. Sales for the third quarter of 1995 and 1994 were $166,395,000 and $194,743,000, respectively. Net income for the first nine months of 1995 amounted to $12,266,000 or $.87 per share prior to nonrecurring after-tax charges of $6,491,000 or $.46 per share for costs related to the decision to exit the karat gold fabricated product line in East Providence, RI, for additional costs primarily related to the Company's ongoing operation in Fairfield, CT and also for the sale of the Company's two automotive cable business units. After including these nonrecurring charges, nine month operating results were net income of $5,775,000 or $.41 per share compared to net income for the comparable period last year of $13,001,000 or $.93 per share. Sales for the nine months ended September 30, 1995 and 1994 were $560,678,000 and $583,206,000, respectively. (more) 2 Commenting on the results, Richard N. Daniel, Chairman and Chief Executive Officer, said, "Lower third quarter profits were the result of summer shutdowns at customer facilities, particularly automotive assembly plants; of continuing competitive pressures in the refining sector; and of ongoing new product start-ups in the automotive O.E.M. segment. Business activity levels and operating performance for the last quarter of the year are improving and we expect results to return to previous year levels." Additionally, the Board of Directors has authorized the buy back of up to 1.5 million shares of currently outstanding common stock. The Company has approximately 14 million shares outstanding. The shares may be purchased from time to time in the open market or unsolicited negotiated transactions including block purchases. The timing of the program and the amount of stock repurchased will be dictated by overall financial and market conditions. Regarding the stock buy back plan, Mr. Daniel stated, "As we complete our exit from the gold fabrication business, we are moving to liquidate a portion of our precious metal inventory in order to match levels of ownership with current requirements. The proceeds from such sales, along with cash provided from recent divestiture of several business units, will be used to fund the stock buy back plan, and, at the same time, provide capital for growth and expansion opportunities." Handy & Harman is a diversified manufacturer providing engineered products, system components and precious metal fabrication and refining for industry worldwide. Founded in 1867, Handy & Harman is headquartered in New York. The shares of Handy & Harman are traded on the New York Stock Exchange with ticker symbol: HNH ### EX-21 4 LIST OF SUBSIDIARIES OF THE COMPANY 1 Exhibit 21 HANDY & HARMAN SUBSIDIARIES AS OF DECEMBER 31, 1995 A-1 Sales, Inc. Alloy Ring Service, Inc. American Chemical & Refining Company, Incorporated Camdel Metals Corporation Con-Ind Limited Continental Industries, Inc. Daniel Radiator Corporation Exxtrusions Corporation H&H Productions, Inc. (Formerly Greenback Industries, Inc.) Handy & Harman Automotive Group, Inc. (Formerly Handy & Harman Radiator Corporation) Handy & Harman Electronic Materials Corporation (Formerly New Industrial Techniques, Inc.) Handy & Harman Envirotech Systems, Ltd. (Formerly Monico Manufacturing & Supply Co., Inc.) Handy & Harmon Europe Ltd. Handy & Harmon of Canada, Limited Handy & Harmon International, Ltd. Handy & Harmon International (Korea) Limited Handy & Harmon Peru, Inc. Handy & Harmon Tube Company, Inc. Indiana Tube Corporation Jackson Industries, Inc. Jet Tool Company, Inc. 2 KJ-VMI Realty, Inc. (Formerly Valley Metals Inc.) Kontite U.K. Limited Lexington Tube Co., Inc. Lucas-Milhaupt, Inc. Maryland Specialty Wire, Inc. Micro-Tube Fabricators, Inc. Northvale Design & Development Company, Inc. Pal-Rath Realty, Inc. (Formerly Rathbone Corporation) Platina Laboratories, Inc. Rigby-Maryland (Stainless), Ltd. South Windsor Metallurgical, Inc. Sumco Inc. U.S. Auto Radiator Manufacturing Corporation Willing B Wire Corporation In addition to the wholly-owned subsidiaries listed above, the Company has a 5% interest in Mizuno Handy Harman, Ltd. and a 50% interest in Handy & Harman (Asia), S.A. Handy & Harman (Asia), S.A. owns 100% of Handy & Harman (HK) Limited and 75% of Handy & Harman Manufacturing (Singapore) Pte. Ltd. The Company owns 12-1/2% of Handy & Harman Manufacturing (Singapore) Pte. Ltd. The Company also has a 1% interest in Ravel Inc., formerly named R.V.L. Investments, Inc. EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 6,637 0 71,738 3,021 84,422 163,101 214,345 122,939 341,049 113,621 93,500 0 0 14,611 105,783 341,049 595,497 595,497 505,197 505,197 0 329 17,337 14,650 6,926 7,724 10,916 0 0 18,640 1.32 1.32
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