<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 June 30, 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 ______________
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 August 8, 1994 was 14,062,380.
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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 Six Months Ended
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June 30, 1994 June 30, 1993 June 30, 1994 June 30, 1993
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<S> <C> <C> <C> <C>
Sales and service revenues $199,732 $161,991 $388,463 $319,800
Cost of sales and services 171,207 138,210 334,037 271,623
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Gross profit 28,525 23,781 54,426 48,177
Selling, general and
administrative expenses 15,604 14,145 30,264 28,875
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Income from operations 12,921 9,636 24,162 19,302
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Other deductions (income):
Interest expense-net 4,166 4,189 7,809 8,600
Other net 64 (162) 29 (170)
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4,230 4,027 7,838 8,430
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Income before income taxes and
cumulative effect of accounting change 8,691 5,609 16,324 10,872
Income tax provision 3,620 2,277 6,800 4,414
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Income before cumulative effect
of accounting change 5,071 3,332 9,524 6,458
Cumulative effect of accounting
change -- -- -- 576
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Net Income $ 5,071 $ 3,332 $ 9,524 $ 7,034
===================================================================================================================================
Earnings per share before cumulative
effect of accounting change $ .36 $ .24 $ .68 $ .46
Cumulative effect of accounting
change per share -- -- -- .04
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Earnings per share $ .36 $ .24 $ .68 $ .50
===================================================================================================================================
Dividends per share $ .10 $ .10 $ .15 $ .15
===================================================================================================================================
Average shares outstanding 14,044,000 14,021,000 14,035,000 14,018,000
===================================================================================================================================
</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>
June 30, 1994 December 31, 1993
(unaudited)
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<S> <C> <C>
ASSETS
Current Assets:
Cash $ 751 $ 3,320
Receivables (Note b) 151,194 127,743
Refundable income taxes -- 500
Inventories - at cost (Note c) 88,497 88,692
Prepaid expenses and deposits 11,316 9,946
Current assets of discontinued operations (net) 1,096 2,999
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Total current assets 252,854 233,200
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Investment in 50% or less-owned companies 1,920 1,824
Property, plant and equipment - at cost 256,278 249,384
Less accumulated depreciation and amortization 149,733 143,164
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106,545 106,220
Prepaid retirement costs (net) 45,252 43,627
Intangibles, net of amortization 1,098 1,120
Deferred charges 1,533 1,696
Other assets 1,659 1,518
Noncurrent assets of discontinued operations 23,614 23,714
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$434,475 $412,919
===================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 48,500 $ 28,000
Current maturities of long-term debt 7,000 7,000
Accounts payable 49,584 53,739
Advances from smelter 12,452 8,935
Other current liabilities 27,467 23,619
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Total current liabilities 145,003 121,293
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Long-term debt, less current maturities 178,770 188,750
Deferred income taxes 11,286 11,276
Shareholders' equity:
Common stock - par value $1; 60,000,000
shares authorized; 14,611,432 shares issued 14,611 14,611
Capital surplus 11,683 11,296
Retained earnings 77,831 70,414
Foreign currency translation adjustment (790) (951)
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103,335 95,370
Less: Treasury stock 549,052 shares - 1994
and 588,252 shares - 1993 at cost 3,573 3,770
Unearned compensation 346 --
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Total shareholders' equity 99,416 91,600
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$ 434,475 $ 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
Six Months Ended
-----------------------------------------------
June 30, 1994 June 30, 1993
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,524 $ 7,034
Adjustments to reconcile net income
to net cash provided (used) by operating activities:
Depreciation and amortization 7,642 8,135
Provision for doubtful accounts 544 528
(Gain) loss on disposal of property, plant
and equipment 60 27
Net retirement cost (1,625) (1,690)
Equity in earnings of 50%
or less-owned companies (90) (94)
Earned compensation - 1988 long-term incentive
and outside director stock option plans 128 112
Changes in assets and liabilities:
Accounts receivable (23,996) (10,452)
Refundable income taxes 500 --
Inventories 195 (6,488)
Prepaid expenses (1,446) (614)
Deferred charges and other assets (239) (716)
Accounts payable and other current liabilities 1,161 16,660
Advances from smelter 3,517 --
Deferred income taxes 10 2,568
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Net cash (used) provided by
operating activities (4,115) 15,010
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Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment 21 1,389
Capital expenditures (7,586) (7,124)
Investment in 50% or less owned companies -- (229)
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Net cash used by investing activities (7,565) (5,964)
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Cash flows from financing activities:
Short-term borrowings 20,500 (22,500)
Current maturities of long-term debt -- (49)
Increase (decrease) in long-term debt (9,980) 14,730
Dividends paid (1,404) (1,402)
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Net cash (used) provided by
financing activities 9,116 (9,221)
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Effect of exchange rate changes on net cash (5) (17)
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Net change in cash (2,569) (192)
Cash at beginning of year 3,320 2,812
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Cash at end of period $ 751 $ 2,620
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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 June 30, 1994 and December 31, 1993 is comprised
as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
(Unaudited)
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<S> <C> <C>
Trade accounts $ 89,067 $ 70,761
Notes 163 221
Allowance for doubtful accounts (3,783) (3,721)
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85,447 67,261
Sales of precious metals
for future delivery 65,747 60,482
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$151,194 $127,743
===================================================================================================================================
</TABLE>
c. Inventories at June 30, 1994 and December 31, 1993 is comprised as
follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
(unaudited)
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<S> <C> <C>
Precious metals:
Fine and fabricated metals in
various stages of completion $ 40,726 $ 38,879
Non-precious metals:
Base metals, factory supplies
and raw materials 24,300 25,635
Work in process 16,192 14,893
Finished goods 7,279 9,285
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$ 88,497 $ 88,692
===================================================================================================================================
</TABLE>
Lifo inventory - the excess of period end market value over Lifo cost
was $145,646,000 at June 30, 1994 and $141,273,000 at December 31,
1993.
d. These statements should be read in conjunction with the Summary of
Significant Accounting Policies and notes contained in the
registrant's Annual Report (Form 10-K for the year ending December 31,
1993).
e. In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". The Company 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.
f. In 1994 and 1993, the third quarter dividend, in the amount of $.05
was declared in the second quarter to be paid in the third quarter.
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HANDY & HARMAN AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
g. The following table presents certain selected financial data by
industry segment (expressed in thousands of dollars) for the three
months ended and six months ended June 30, 1994 and 1993:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------------- ------------------------------------
June 30, 1994 June 30, 1993 June 30, 1994 June 30, 1993
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<S> <C> <C> <C> <C>
Sales and service revenues:
Precious metals $110,291 $ 76,923 $210,998 $149,428
Automotive (OEM) 47,540 42,054 94,349 84,327
Wire/Tubing 38,198 35,427 75,819 71,282
Other non-precious
metal businesses 3,703 7,587 7,297 14,763
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Total $199,732 $161,991 $388,463 $319,800
===================================================================================================================================
Profit contribution before
unallocated expenses:
Precious metals $ 3,623 $ 2,119 $ 6,814 $ 3,757
Automotive (OEM) 4,817 4,656 9,402 9,163
Wire/Tubing 4,420 3,456 7,945 7,526
Other non-precious
metal businesses 447 67 872 26
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Total 13,307 10,298 25,033 20,472
General corporate expenses (450) (500) (900) (1,000)
Interest expense (net) (4,166) (4,189) (7,809) (8,600)
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Income from continuing
operations before taxes $ 8,691 $ 5,609 $ 16,324 $ 10,872
===================================================================================================================================
</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 $143,500,000 was utilized at June 30, 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 Second Quarter of 1994 vs. Second Quarter of 1993
Sales for the precious metals segment increased $33,368,000 (43%).
Sales of refined metal in bullion form increased from $14,687,000 in 1993 to
$40,118,000 in 1994. The profit margin on this business is less than the
margins on fabricated products. The average price for gold was $381.66 per
ounce and the average price for silver was $5.38 per ounce representing
increases of 6% for gold and 26% for silver from the second quarter of 1993.
The profit contribution (pre-tax income before deducting interest and corporate
expenses) increased $1,504,000 (71%) for this segment primarily due to new
product sales in 1994 to the telecommunications industry. This segment's
profit contribution for the balance of the year should continue to benefit from
the new product sales to the telecommunication industry as well as improvements
in the refinery earnings.
The automotive (OEM) segment sales increased $5,486,000 (13%) and the
profit contribution increased $161,000 (3%). This segment's level of operating
performance was maintained due to the continued overall strength of the North
American automotive industry. While maintaining the same level of performance
in the second half is not anticipated, this segment's profit contribution is
expected to exceed that of 1993's second half.
Sales for the wire/tubing segment increased $2,771,000 (8%) and the
profit contribution increased $964,000 (28%) primarily due to sales to the
telecommunications industry. The second half sales to the telecommunication
industry by this segment have historically been below those of the first half
of each year, however, we expect increased sales to the medical industry in the
second half which should contribute to maintaining this segment's current
operating performance.
In the other non-precious metal segment, sales decreased $3,884,000
(51%) primarily due to the sale of three subsidiaries in 1993, however, profit
contribution increased $380,000 due to the elimination of operating losses
associated with these subsidiaries as well as increased sales to the natural
gas industry by this segment's remaining unit.
The effective income tax rate was 41.7% for 1994 and 40.6% for 1993.
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<PAGE> 9
Comparison of Six Months of 1994 vs. Six Months of 1993
Sales for the precious metals segment increased $61,570,000 (41%).
Sales of refined metal in bullion form increased from $31,037,000 in 1993 to
$73,545,000. The profit margin on this business is less than the margins on
fabricated products. The average price for gold was $383.16 per ounce and the
average price for silver was $5.33, representing increases of 11% for gold and
35% for silver from the six months of the previous year. The profit
contribution increased $3,057,000 (81%) as previously discussed in the
quarterly analysis.
The automotive (OEM) segment sales increased $10,022,000 (12%) and the
profit contribution increased $239,000 (3%) as previously discussed in the
quarterly analysis.
Sales for the wire/tubing segment increased $4,537,000 (6%) and the
profit contribution increased $419,000 (6%) as previously discussed in the
quarterly analysis.
In the other non-precious metals segment sales decreased $7,466,000
(51%) and the profit contribution increased $846,000 as previously discussed in
the quarterly analysis.
Interest expense decreased $791,000 (9%) primarily due to lower
effective interest rates in 1994.
The effective income tax rate was 41.7% for 1994 and 40.6% for 1993.
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<PAGE> 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the Company's Form 10-K Annual Report for the
year ended December 31, 1993, and to the proceedings described
therein under Part I, Item 3. Legal Proceedings and under Part II,
Item I. Legal Proceedings of the Company's Form 10-Q for the
quarter ended March 31, 1994. With respect to the Palmer Well
Fields, this matter has been settled by agreement among parties
without materially adversely affecting the financial position of
the Company.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held May 10, 1994,
the shareholders representing 12,017,430 shares voted to elect the
eight nominated Directors and to ratify the appointment of KPMG
Peat Marwick as the Company's auditors. The votes were as follows:
<TABLE>
<CAPTION>
Votes Votes Votes Brokers
For Against Withheld Abstentions Non-Votes
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<S> <C> <C> <C> <C> <C>
DIRECTORS
C.A. Abramson 11,726,520 0 290,910 -- --
R.E. Cornelia 11,727,239 0 290,191 -- --
R.N. Daniel 11,726,496 0 290,934 -- --
G.G. Garbacz 11,726,139 0 291,291 -- --
F.E. Grzelecki 11,715,906 0 301,524 -- --
G.M. Nichols 11,712,179 0 305,251 -- --
H.P. Sotos 11,726,478 0 290,952 -- --
L.M. Woods* 11,715,350 0 302,080 -- --
AUDITORS 11,943,412 55,644 0 18,374 0
</TABLE>
* L.M. WOODS RESIGNED AS OF JUNE 15, 1994
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> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HANDY & HARMAN
------------------------------
(Registrant)
Date: August 9, 1994 J.M. McLoone /s/
-------------- ------------------------------
J.M. McLoone, Vice President -
Financial Services
Date: August 9, 1994 D.C. Kelly /s/
-------------- ------------------------------
D.C. Kelly - Controller
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