<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/x/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended March 31, 1994
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or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number: 1-5365
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HANDY & HARMAN
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(Exact name of registrant as specified in its charter)
STATE OF NEW YORK 13-5129420
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 Park Avenue, New York, New York 10177
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(Address of principal executive offices) (Zip code)
(212) 661-2400
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since
last year.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
---- ----
The number of shares of issuer's Common Stock, par value $1.00 per
share outstanding as of May 10, 1994 was 14,023,780.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HANDY & HARMAN AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(unaudited-thousands of dollars except per share)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------
March 31, 1994 March 31, 1993
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<S> <C> <C>
Sales and service revenues $ 188,731 $ 157,809
Cost of sales and services 162,830 133,413
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Gross profit 25,901 24,396
Selling, general and
administrative expenses 14,660 14,730
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11,241 9,666
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Other deductions (income):
Interest expense-net 3,643 4,411
Other net (35) (8)
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3,608 4,403
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Income before income taxes and
cumulative effect of
accounting change 7,633 5,263
Income tax provision 3,180 2,137
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Income before cumulative effect
of accounting change 4,453 3,126
Cumulative effect of
accounting change -- 576
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Net Income $ 4,453 $ 3,702
===============================================================================================================
Earnings per share before
cumulative effect of
accounting change $ .32 $ .22
Cumulative effect of
accounting change
per share -- .04
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Earnings per share $ .32 $ .26
===============================================================================================================
Dividends per share $ .05 $ .05
===============================================================================================================
Average shares outstanding 14,023,000 14,016,000
===============================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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<PAGE> 3
HANDY & HARMAN AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(thousands of dollars)
<TABLE>
<CAPTION>
March 31, 1994 December 31, 1993
(unaudited)
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<S> <C> <C>
ASSETS
Current Assets:
Cash $ 2,573 $ 3,320
Receivables (Note b) 128,618 127,743
Refundable income taxes 500 500
Inventories - at cost (Note d) 87,953 88,692
Prepaid expenses and deposits 10,029 9,946
Current assets of discontinued
operations (net) 1,741 2,999
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Total current assets 231,414 233,200
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Investment in 50% or less-owned
companies 1,873 1,824
Property, plant and equipment -
at cost 252,173 249,384
Less accumulated depreciation
and amortization 146,234 143,164
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105,939 106,220
Prepaid retirement costs (net) 44,440 43,627
Intangibles, net of amortization 1,117 1,120
Deferred charges 1,787 1,696
Other assets 1,706 1,518
Noncurrent assets of discontinued
operations 23,700 23,714
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$ 411,976 $ 412,919
==============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 49,000 $ 28,000
Current maturities of long-term debt 7,000 7,000
Accounts payable 44,749 53,739
Advances from smelter 7,625 8,935
Other current liabilities 23,416 23,619
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Total current liabilities 131,790 121,293
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Long-term debt, less current maturities 173,772 188,750
Deferred income taxes 11,245 11,276
Shareholders' equity:
Common stock - par value $1; 60,000,000
shares authorized; 14,611,432 shares
issued 14,611 14,611
Capital surplus 11,607 11,296
Retained earnings 74,166 70,414
Foreign currency translation adjustment (1,033) (951)
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99,351 95,370
Less: Treasury stock 587,652 shares -
1994 and 588,252 shares - 1993 at
cost 3,767 3,770
Unearned compensation 415 --
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Total shareholders' equity 95,169 91,600
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$ 411,976 $ 412,919
==============================================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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<PAGE> 4
HANDY & HARMAN AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited-thousands of dollars)
<TABLE>
<CAPTION>
Increase (Decrease) in Cash
Three Months Ended
--------------------------------------------
March 31, 1994 March 31, 1993
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,453 $ 3,702
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 3,800 4,171
Provision for doubtful accounts 210 186
(Gain) loss on disposal of property,
plant and equipment -- (6)
Net retirement cost (813) (500)
Equity in earnings of 50%
or less-owned companies (56) (42)
Earned compensation - 1988 long-term
incentive and outside director
stock option plans 56 56
Changes in assets and liabilities:
Accounts receivable (1,086) 4,288
Inventories 739 (5,595)
Prepaid expenses (82) (603)
Deferred charges and other assets (438) (18)
Accounts payable and other current
liabilities (8,021) 3,477
Advances from smelter (1,310) --
Deferred income taxes (31) 884
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Net cash (used) provided by
operating activities (2,579) 10,000
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Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment 42 1,267
Capital expenditures (3,481) (3,104)
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Net cash (used) by investing
activities (3,439) (1,837)
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Cash flows from financing activities:
Short-term borrowings 21,000 (22,500)
Current maturities of long-term debt -- 6
Increase (decrease) in long-term debt (14,978) 14,785
Dividends paid (701) (700)
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Net cash (used) provided by
financing activities 5,321 (8,409)
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Effect of exchange rate changes on
net cash (50) (20)
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Net change in cash (747) (266)
Cash at beginning of year 3,320 2,812
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Cash at end of period $ 2,573 $ 2,546
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</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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<PAGE> 5
HANDY & HARMAN AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
a. In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments necessary to a fair
statement of the results for the interim periods.
b. Accounts receivable at March 31, 1994 and December 31, 1993 is
comprised as follows (in thousands):
<TABLE>
<CAPTION>
March 31, 1994 December 31, 1993
(Unaudited)
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<S> <C> <C>
Trade accounts $ 80,150 $ 70,761
Notes 203 221
Allowance for doubtful accounts (3,782) (3,721)
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76,571 67,261
Sales of precious metals
for future delivery 52,047 60,482
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$ 128,618 $ 127,743
===============================================================================================================
</TABLE>
c. Inventories at March 31, 1994 and December 31, 1993 is comprised as
follows (in thousands):
<TABLE>
<CAPTION>
March 31, 1994 December 31, 1993
(unaudited)
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<S> <C> <C>
Precious metals:
Fine and fabricated metals in
various stages of completion $ 39,242 $ 38,879
Non-precious metals:
Base metals, factory supplies
and raw materials 24,277 25,635
Work in process 15,618 14,893
Finished goods 8,816 9,285
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$ 87,953 $ 88,692
===============================================================================================================
</TABLE>
Lifo inventory - the excess of period end market value over Lifo cost
was $151,865,000 at March 31, 1994 and $141,273,000 at December 31,
1993.
d. These statements should be read in conjunction with the Summary of
Significant Accounting Policies and notes contained in the
registrant's Annual Report (Form 10-K for the year ending December 31,
1993).
e. In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". The Company had adopted this standard in 1993, the
cumulative effect of which is a benefit of $576,000 or $ .04 per share
recorded in first quarter of 1993.
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<PAGE> 6
HANDY & HARMAN AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
f. The following table presents certain selected financial data by
industry segment (expressed in thousands of dollars) for the three
months ended March 31, 1994 and 1993:
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------
March 31, 1994 March 31, 1993
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<S> <C> <C>
Sales and service revenues:
Precious metals $100,707 $ 72,505
Automotive (OEM) 46,809 42,273
Wire/Tubing 37,621 35,855
Other non-precious
metal businesses 3,594 7,176
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Total $188,731 $157,809
==============================================================================================================
Profit contribution before
unallocated expenses:
Precious metals $ 3,191 $ 1,638
Automotive (OEM) 4,585 4,507
Wire/Tubing 3,525 4,070
Other non-precious
metal businesses 425 (41)
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Total 11,726 10,174
General corporate expenses (450) (500)
Interest expense (net) (3,643) (4,411)
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Income from continuing
operations before taxes $ 7,633 $ 5,263
==============================================================================================================
</TABLE>
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<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Company's precious metal inventories, consisting principally of
gold and silver, may be considered as an equivalent to cash. Furthermore,
these precious metals inventories which are stated in the balance sheet at LIFO
cost have a market value substantially in excess of such cost. It is the
Company's policy to obtain funds necessary to finance inventories and
receivables from various banks under commercial lines of credit.
Trade accounts receivable resulting from sales of fabricated precious
metals are financed primarily by bank borrowings. 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. In addition, receivables
resulting from sales of precious metals for future delivery are also financed
by bank borrowings. The Company adjusts the level of its short-term borrowings
and credit facilities from time to time in accordance with its borrowing needs
for receivables, as well as other working capital items, and maintains bank
lines of credit well in excess of anticipated requirements. The Company has a
credit facility with twelve banks which provides $161,250,000 for a three year
period (extended an additional year in 1993) and $53,750,000 for 364 days, of
which $139,000,000 was utilized at March 31, 1994. The Company also has
arrangements for $50,000,000 of long-term borrowings maturing in 2002. The
proceeds are currently used to reduce portions of the previously mentioned
credit facility.
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 four wholly owned
subsidiaries, (one in Canada, two in the United Kingdom and one in Mexico), and
three equity investments (one in Asia, one in Mexico and one in Brazil).
Substantially all unremitted earnings of such entities are free from legal or
contractual restrictions.
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<PAGE> 8
Comparison of First Quarter of 1994 vs. First Quarter of 1993
Sales for the precious metals segment increased $28,202,000 (39%).
Sales of refined metal in bullion form increased from $16,350,000 in 1993 to
$33,427,000 in 1994. The profit margin on this business is less than the
margins on fabricated products. The average price for gold was $384.46 per
ounce and the average price for silver was $5.29 per ounce representing
increases of 17% for gold and 45% for silver from the first quarter of 1993.
The profit contribution (pre-tax income before deducting interest and corporate
expenses) increased $1,553,000 (95%) for this segment primarily due to new
product sales to the telecommunications industry. The introduction of new
products as well as continued improvement in refinery earnings should enhance
the profit contribution for this segment for the balance of this year.
The automotive (OEM) segment sales increased $4,536,000 (11%) and the
profit contribution increased $78,000 (2%). Continued strength in the
automotive industry's North American production rate should maintain this level
of operating performance in the next quarter. Maintaining this same level of
performance in the second half of 1994 is not anticipated.
Sales for the wire/tubing segment increased $1,766,000 (5%) primarily
due to volume increases in wire. The profit contribution decreased $545,000
(13%) primarily due to reduced levels of fabricated tubular sales to the
medical industry. Although the wire/tubing segment's profit contribution was
in a decline for the quarter, it is anticipated this segment will strengthen
over the balance of the year.
In the other non-precious metal segment, sales decreased $3,582,000
(50%) primarily due to the sale of three subsidiaries in 1993, however, profit
contribution increased $466,000 due to the elimination of operating losses
associated with the sold subsidiaries.
Interest expense decreased $768,000 (17%) primarily due to lower
effective interest rates in 1994 partially offset by higher borrowings.
The effective income tax rate was 41.7% for 1994 and 40.6% for 1993.
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<PAGE> 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the Company's Form 10-K Annual Report for the
year ended December 31, 1993, and to the proceedings described
therein under Part I, Item 3. Legal Proceedings.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits as required by Item 601 of Regulation S-K:
None required.
(b) Reports on Form 8-K:
None filed during the quarter for which this report is submitted.
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<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HANDY & HARMAN
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(Registrant)
Date: May 12, 1994 J.M. McLoone /s/
------------ ------------------------------
J.M. McLoone, Vice President -
Financial Services
Date: May 12, 1994 D.C. Kelly /s/
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D.C. Kelly - Controller
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