<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 September 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
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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)
<TABLE>
<S> <C>
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)
</TABLE>
(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 November 9, 1994 was 14,063,380.
<PAGE> 2
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 Nine Months Ended
------------------------------------ -------------------------------------
Sept 30, 1994 Sept 30, 1993 Sept 30, 1994 Sept 30, 1993
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<S> <C> <C> <C> <C>
Sales and service revenues $194,743 $162,017 $583,206 $481,817
Cost of sales and service 169,183 143,439 503,220 415,062
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Gross profit 25,560 18,578 79,986 66,755
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Selling, general and
administrative expenses 15,528 11,989 45,792 40,864
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Income from operations 10,032 6,589 34,194 25,891
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Other deductions (income):
Interest expense-net 3,815 3,796 11,624 12,396
Other (net) 240 2,428 269 2,258
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4,055 6,224 11,893 14,654
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Income before taxes on
income 5,977 365 22,301 11,237
Income tax provision 2,500 152 9,300 4,566
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Income before cumulative effect
of accounting change 3,477 213 13,001 6,671
Cumulative effect of accounting
change -- -- -- 576
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Net Income $ 3,477 $ 213 $ 13,001 $ 7,247
=============================================================================================================================
Earnings per share before cumulative
effect of accounting change $ .25 $ .02 $ .93 $ .48
Cumulative effect of accounting
change per share -- -- -- .04
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Earnings per share $ .25 $ .02 $ .93 $ .52
=============================================================================================================================
Dividends per share $ -- $ -- $ .15 $ .15
=============================================================================================================================
Average shares outstanding 14,063,000 14,023,000 14,043,000 14,020,000
=============================================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-1-
<PAGE> 3
HANDY & HARMAN AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(thousands of dollars)
<TABLE>
<CAPTION>
Sept 30, 1994 December 31, 1993
(unaudited)
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<S> <C> <C>
ASSETS
Current Assets:
Cash $ 5,013 $ 3,320
Receivables (Note b) 113,708 127,743
Refundable income taxes -- 500
Inventories - at cost (Note c) 88,313 88,692
Prepaid expenses and deposits 10,808 9,946
Current assets of discontinued operations (net) 467 2,999
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Total current assets 218,309 233,200
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Investment in 50% or less owned companies 2,200 1,824
Property, plant and equipment - at cost 270,908 249,384
Less accumulated depreciation and amortization 156,158 143,164
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114,750 106,220
Prepaid retirement costs (net) 46,065 43,627
Intangibles, net of amortization 23,018 1,120
Deferred charges 3,076 1,696
Other assets 1,643 1,518
Noncurrent assets of discontinued operations 23,551 23,714
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$432,612 $412,919
==============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 15,000 $ 28,000
Current maturities of long-term debt 7,000 7,000
Accounts payable 76,868 53,739
Advances from smelter 8,282 8,935
Other current liabilities 25,245 23,619
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Total current liabilities 132,395 121,293
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Long-term debt, less current maturities 185,760 188,750
Deferred income taxes 11,299 11,276
Shareholders' equity:
Common stock - par value $1; 60,000,000
shares authorized; 14,611,432 shares 14,611 14,611
Capital surplus 11,691 11,296
Retained earnings 81,308 70,414
Foreign currency translation adjustment (608) (951)
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107,002 95,370
Less: Treasury stock 548,052 shares - 1994
and 588,252 shares - 1993 at cost 3,568 3,770
Unearned compensation 276 --
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Total shareholders' equity 103,158 91,600
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$ 432,612 $ 412,919
==============================================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-2-
<PAGE> 4
HANDY & HARMAN AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited-thousands of dollars)
<TABLE>
<CAPTION>
Increase (Decrease) in Cash
Nine Months Ended
------------------------------------------
Sept 30, 1994 Sept 30, 1993
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 13,001 $ 7,247
Adjustments to reconcile net income
to net cash provided (used) by operating activities:
Depreciation and amortization 11,376 11,919
Provision for doubtful accounts 587 612
Provision for sale of business units -- 2,800
(Gain) loss on disposal of property, plant
and equipment 62 131
Net retirement cost (2,438) (2,845)
Equity in earnings of 50%
or less-owned companies (267) (49)
Earned compensation - 1988 long-term incentive
and outside director stock option plans 185 168
Changes in assets and liabilities:
Accounts receivable 16,410 (2,248)
Refundable income taxes 500 --
Inventories 1,167 (7,961)
Prepaid expenses (825) 1,160
Deferred financing costs (1,886) --
Deferred charges and other assets 39 (276)
Accounts payable and accrued liabilities 22,990 13,230
Deferred income tax 23 2,727
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Net cash provided by
operating activities 60,924 26,615
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Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment 29 426
Capital expenditures (12,170) (11,032)
Divestitures, net of cash sold -- 2,123
Investment in 50% or less owned companies -- (229)
Acquisition, net of cash acquired (25,568) --
Net investing activities of discontinued
operations 500 --
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Net cash used by
investing activities (37,209) (8,712)
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Cash flows from financing activities:
Short-term borrowings (13,000) (22,500)
Current maturities of long-term debt -- (83)
Increase (decrease) in long-term debt (6,911) 5,711
Dividends paid (2,107) (2,103)
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Net cash used by
financing activities (22,018) (18,975)
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Effect of exchange rate changes on net cash (4) (26)
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Net change in cash 1,693 (1,098)
Cash at beginning of year 3,320 2,812
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Cash at end of period $ 5,013 $ 1,714
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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 September 30, 1994 and December 31, 1993 is
comprised as follows (in thousands):
<TABLE>
<CAPTION>
Sept 30, 1994 December 31, 1993
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(Unaudited)
<S> <C> <C>
Trade accounts $104,742 $ 70,761
Notes 144 221
Allowance for doubtful accounts (3,454) (3,721)
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101,432 67,261
Sales of precious metals
for future delivery 12,276 60,482
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$113,708 $127,743
====================================================================================================
</TABLE>
c. Inventories at September 30, 1994 and December 31, 1993 is comprised
as follows (in thousands):
<TABLE>
<CAPTION>
Sept 30, 1994 December 31, 1993
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(Unaudited)
<S> <C> <C>
Precious metals:
Fine and fabricated metals in
various stages of completion $ 38,149 $ 38,879
Non-precious metals:
Base metals, factory supplies
and raw materials 23,497 25,635
Work in process 18,611 14,893
Finished goods 8,056 9,285
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$ 88,313 $ 88,692
====================================================================================================
</TABLE>
Lifo inventory - the excess of period end market value over Lifo cost
was $152,104,000 at September 30, 1994 and $141,273,000 at December
31, 1993.
d. These statements should be read in conjunction with the Summary of
Significant Accounting Policies and notes contained in the
registrant's Annual Report (Form 10-K for the year ending December 31,
1993).
e. In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". The Company has adopted this standard in 1993, the
cumulative effect of which is a benefit of $576,000 or $ .04 per share
recorded in the first quarter of 1993.
f. In 1994 and 1993, the third quarter dividend, in the amount of $.05
was declared in the second quarter to be paid in the third quarter.
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<PAGE> 6
HANDY & HARMAN AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
g. The following table presents certain selected financial data by
industry segment (expressed in thousands of dollars) for the three
months ended and nine months ended September 30, 1994 and 1993:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
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Sept 30, 1994 Sept 30, 1993 Sept 30, 1994 Sept 30, 1993
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<S> <C> <C> <C> <C>
Sales and service revenues:
Precious metals $110,278 $ 91,129 $321,276 $240,557
Automotive (OEM) 41,906 32,436 136,255 116,763
Wire/Tubing 38,542 32,507 114,361 103,789
Other non-precious
metal businesses 4,017 5,945 11,314 20,708
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Total $194,743 $162,017 $583,206 $481,817
======================================================================================================================
Profit contribution before
unallocated expenses:
Precious metals $ 3,589 $ 3,534 $ 10,403 $ 7,291
Automotive (OEM) 2,194 765 11,596 9,928
Wire/Tubing 3,863 2,855 11,808 10,381
Other non-precious
metal businesses 596 (2,543) 1,468 (2,517)
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Total 10,242 4,611 35,275 25,083
General corporate expenses (450) (450) (1,350) (1,450)
Interest expense (net) (3,815) (3,796) (11,624) (12,396)
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Earnings before income taxes $ 5,977 $ 365 $ 22,301 $ 11,237
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</TABLE>
h. On September 9, 1994 the Company acquired 100% of Sumco Inc.'s shares
outstanding for $26,000,000. The acquisition has been accounted for
as a purchase; accordingly, the purchase price has been allocated to
the underlying assets and liabilities based on their respective
estimated fair values at the date of acquisition. The preliminary
estimated fair value of assets acquired is approximately $11,000,000
and liabilities assumed is $7,000,000. The excess of the purchase
price over the fair value of the assets acquired and liabilities
assumed was $22,000,000 and is being amortized over a period of 40
years. The results of operations of the acquired company have been
included in the Company's results of operations since the date of
acquisition.
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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 metal inventories which are stated in the Balance Sheet at LIFO
cost have a market value of $152,104,000 in excess of such cost as of September
30, 1994.
It is the Company's policy to obtain funds necessary to finance
inventories and receivables from various banks under commercial credit
facilities. Fluctuations in the market prices of gold and silver have a direct
effect on the dollar volume of sales and the corresponding amount of customer
receivables resulting from sale of precious metal products. In addition,
receivables resulting from the sale of precious metal bullion for future
delivery are also financed by bank borrowings. The Company adjusts the level
of its credit facilities from time to time in accordance with its borrowing
needs for receivables and inventories and maintains bank credit facilities well
in excess of anticipated requirements.
Consistent with other precious metal refining and fabricating
companies, some of the Company's gold and silver requirements are furnished by
customers and suppliers on a consignment basis. Title to the consigned gold
and silver remains with the Consignor; therefore; the value of consigned gold
and silver held by the Company is not included in the Company's Balance Sheet.
The Company's gold and silver requirements are provided from a combination of
owned inventories, precious metals which have been purchased and sold for
future delivery and gold and silver received from suppliers and customers on a
consignment basis.
During the third quarter of 1994, the Company finalized $215,000,000
of Revolving Credit Facilities with twenty banks which replaced the existing
Credit Facilities dated March 16, 1992. These Credit Facilities provided
$161,250,000 for a three year period and $53,750,000 for 364 days. As of
September 30, 1994, $102,000,000 was borrowed under the long-term agreement and
there were no borrowings under the short-term agreement. In addition to the
Revolving Credit Facilities, the banks also provided $250,750,000 of Gold and
Silver Fee Consignment Facilities. The Fee Consignment Facility of
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<PAGE> 8
$125,375,000 is for a three-year period and the short-term Fee Consignment
Facility of $125,375,000 is for 364 days. All gold and silver consigned to the
Company pursuant to these Consignment Agreements will be located at the
Company's plants in Fairfield, Connecticut and East Providence, Rhode Island.
No gold or silver was consigned under these agreements at September 30, 1994.
The Company's program to expand productive capacity through
acquisition of new businesses and expenditures for new property, plant and
equipment will continue to be financed with internally generated funds and
long-term debt, if necessary.
International Operations
The Company's foreign operations consist of five subsidiaries, one in
Canada, two in the United Kingdom and two in Mexico, and two equity investments
in Asia and Brazil. Substantially, all unremitted earnings of such foreign
entities are free from legal contractual restrictions.
-7-
<PAGE> 9
Comparison of Third Quarter of 1994 vs. Third Quarter of 1993
Sales for the precious metal segment increased $19,149,000 (21%).
Sales of refining outturn, primarily in kilo bar and grain form, increased from
$47,792,000 in 1993 to $55,525,000 in 1994. This type of precious metal sales
can fluctuate significantly from period to period, however, the profit
contribution effect for such fluctuation is minor since the profit margin on
these sales is less than the margins on other products in this segment. The
average price for gold was $385.39 per ounce and the average price for silver
was $5.32 per ounce representing increases of 3% and 14%, respectively, from
the third quarter of 1993. The profit contribution (pre-tax income before
deducting interest and Corporate expenses) increased $55,000 (2%) due to strong
telecommunication industry sales offset by lower sales for other industrial
products caused by competitive pressures. Management is focused on improving
the profit contribution from this segment by its expansion into the precision
industrial electroplating market, as evidenced by the acquisition of Sumco Inc.
on September 9, 1994, by expanding capacity at Handy & Harman Electronic
Materials Corporation, and by rationalizing its facilities where necessary.
Refinery earnings continue to be subject to precious metal price fluctuations
as well as its ability to generate foreign earnings.
The automotive (OEM) segment sales increased $9,470,000 (29%) and the
profit contribution increased $1,429,000 (187%) due to the continued strength
of the automotive industry which is anticipated to continue for the balance of
the year.
Sales for the wire/tubing segment increased $6,035,000 (19%) due to
the improved economy both domestic and European. The profit contribution
increased $1,008,000 (35%) due to the increased sales as well as improved
manufacturing performance through recent capital investment which increased
capacity in both the wire and tubing companies. This segment's current level
of operating performance is expected to continue for the balance of the year.
In the other non-precious metal segment, sales decreased $1,928,000
(32%) primarily due to the sale of three businesses in 1993. Profit
contribution increased $3,139,000. Excluding the charge of $2,800,000 in 1993
relating to the sale of Valley Metals, Inc. and New Industrial Techniques, Inc.
the profit contribution increased $339,000 primarily due to the increased sales
to the natural gas industry by this segment's remaining unit.
The effective income tax rate was 41.8% for 1994 and 41.6% for 1993.
-8-
<PAGE> 10
Comparison of Nine Months of 1994 vs. Nine Months of 1993
Sales for the precious metals segment increased $80,719,000 (34%).
Sales of refining outturn, primarily in kilo bar and grain form, increased from
$109,169,000 in 1993 to $158,457,000 in 1994. This type of precious metal
sales can fluctuate significantly from period to period, however, the profit
contribution effect for such fluctuations is minor since the profit margin on
these sales is less than the margins on other products in this segment. The
average price of gold was $383.90 per ounce, an increase of 8%, and the average
price of silver was $5.33 per ounce, an increase of 27%, from the nine months
of the previous year. The profit contribution increased $3,112,000 (43%)
primarily due to strong telecommunications industry sales, along with gains in
shipments to the electronic, semiconductor and computer industries.
The automotive (OEM) segment sales increased $19,492,000 (17%) and the
profit contribution increased $1,668,000 (17%) as previously discussed in the
quarterly analysis.
Sales for the wire/tubing segment increased $10,572,000 (10%) and the
profit contribution increased $1,427,000 (14%) primarily due to the sales to
the telecommunications industry, gradual improvement in sales to the medical
industry as well as improved manufacturing performance through recent capital
investment.
In the other non-precious metals segment sales decreased $9,394,000
(45%) and the profit contribution increased $3,985,000 as previously discussed
in the quarterly analysis as well as the elimination of operating losses
associated with the sale of three businesses in 1993.
Interest expense decreased $772,000 (6%) primarily due to lower
effective interest rates in 1994.
The effective income tax rate, was 41.7% for 1994 and 40.6% for 1993.
-9-
<PAGE> 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the Company's Form 10-K Annual Report for the
year ended December 31, 1993, and to the proceedings described
therein under Part I, Item 3. Legal Proceedings and under Part II,
Item I. Legal Proceedings of the Company's Form 10-Q for the
quarters ended March 31, 1994 and June 30, 1994. As of the date
hereof, with respect to the Montvale, New Jersey Facility,
extensive discovery procedures are being undertaken by the Borough
of Park Ridge in order to attempt to obtain evidence to support its
claims in the litigation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits as required by Item 601 of Regulation S-K:
None required.
(b) Reports on Form 8-K:
On October 12, 1994 the Company filed a current report on Form
8-K with respect to (i) the acquisition by the Company on
September 9, 1994 of all the shares of capital stock of Sumco
Inc. and (ii) the execution of certain credit agreements by the
Company on September 28, 1994.
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<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HANDY & HARMAN
-------------------------------
(Registrant)
Date: November 10, 1994 J.M. McLoone /s/
-------------------------------
J.M. McLoone, Vice President -
Financial Services
Date: November 10, 1994 D.C. Kelly /s/
-------------------------------
D.C. Kelly - Controller
-11-
<PAGE> 13
EXHIBIT INDEX
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Exhibit No. Description
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27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<CASH> 5,013
<SECURITIES> 0
<RECEIVABLES> 117,162
<ALLOWANCES> 3,454
<INVENTORY> 88,313
<CURRENT-ASSETS> 218,309
<PP&E> 270,908
<DEPRECIATION> 156,158
<TOTAL-ASSETS> 432,612
<CURRENT-LIABILITIES> 132,395
<BONDS> 185,760
<COMMON> 14,611
0
0
<OTHER-SE> 88,547
<TOTAL-LIABILITY-AND-EQUITY> 432,612
<SALES> 583,206
<TOTAL-REVENUES> 583,206
<CGS> 503,220
<TOTAL-COSTS> 503,220
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 587
<INTEREST-EXPENSE> 11,624
<INCOME-PRETAX> 22,301
<INCOME-TAX> 9,300
<INCOME-CONTINUING> 13,001
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,001
<EPS-PRIMARY> 14,043
<EPS-DILUTED> 14,043
</TABLE>
