<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, 1995
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________________ to ______________
Commission File Number: 1-5365
HANDY & HARMAN
(Exact name of registrant as specified in its charter)
STATE OF NEW YORK 13-5129420
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 Park Avenue, New York, New York 10177
(Address of principal executive offices) (Zip code)
(212) 661-2400
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last year.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ----
The number of shares of issuer's Common Stock, par value $1.00 per share
outstanding as of May 9, 1995 was 14,099,580.
<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
-------------------------------------
March 31, 1995 March 31, 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales and service revenues $ 198,270 $ 188,731
Cost of sales and services 167,269 162,830
- -------------------------------------------------------------------------------
Gross profit 31,001 25,901
Selling, general and
administrative expenses 16,063 14,660
- -------------------------------------------------------------------------------
14,938 11,241
- -------------------------------------------------------------------------------
Other deductions (income):
Interest expense-net 5,421 3,643
Other net 399 (35)
- -------------------------------------------------------------------------------
5,820 3,608
- -------------------------------------------------------------------------------
Income before income taxes 9,118 7,633
Income tax provision 3,930 3,180
- -------------------------------------------------------------------------------
Net Income $ 5,188 $ 4,453
===============================================================================
Earnings per share $ .37 $ .32
===============================================================================
Dividends per share $ .06 $ .05
===============================================================================
Average shares outstanding 14,091,000 14,023,000
===============================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-1-
<PAGE> 3
HANDY & HARMAN AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(thousands of dollars)
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
(unaudited)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 4,682 $ 2,559
Accounts receivable, less allowance for doubtful accounts
of $3,789,000 in 1995 and $3,597,000 in 1994 94,419 82,733
Inventories 92,413 89,939
Prepaid expenses, deposits and other current assets 12,034 12,105
- ---------------------------------------------------------------------------------------------------------
Total current assets 203,548 187,336
- ---------------------------------------------------------------------------------------------------------
Investment in affiliates, at equity 2,336 2,207
Property, plant and equipment - at cost 279,690 273,018
Less accumulated depreciation and amortization 159,537 155,818
- ---------------------------------------------------------------------------------------------------------
120,153 117,200
Prepaid retirement costs (net) 48,339 47,459
Intangibles, net of amortization 22,888 22,991
Deferred charges 2,898 2,745
Other assets 2,378 2,185
Noncurrent assets of discontinued operations 22,758 22,895
- ---------------------------------------------------------------------------------------------------------
$425,298 $405,018
=========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 43,850 $ 34,750
Current maturities of long-term debt 7,000 7,000
Accounts payable 51,406 45,044
Futures payable 17,345 37,772
Advances from smelter 737 4,118
Other current liabilities 23,235 24,909
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 143,573 153,593
- ---------------------------------------------------------------------------------------------------------
Long-term debt, less current maturities 156,750 131,750
Deferred income taxes 14,004 13,551
- ---------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common stock - par value $1; 60,000,000
shares authorized; 14,611,432 shares issued 14,611 14,611
Capital surplus 12,003 11,830
Retained earnings 88,456 84,114
Foreign currency translation adjustment (508) (720)
- ---------------------------------------------------------------------------------------------------------
114,562 109,835
Less: Treasury stock 512,852 shares - 1995
and 532,652 shares - 1994 at cost 3,391 3,491
Unearned compensation 200 220
- ---------------------------------------------------------------------------------------------------------
Total shareholders' equity 110,971 106,124
- ---------------------------------------------------------------------------------------------------------
$425,298 $405,018
- ---------------------------------------------------------------------------------------------------------
</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, 1995 March 31, 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,188 $ 4,453
Adjustments to reconcile net income
to net cash provided (used) by operating activities:
Depreciation and amortization 4,356 3,800
Provision for doubtful accounts 274 210
(Gain) loss on disposal of property, plant
and equipment 45 --
Net retirement cost (505) (813)
Equity in earnings of affiliates (22) (56)
Earned compensation - 1988 long-term incentive
and outside director stock option plans 68 56
Changes in assets and liabilities:
Accounts receivable (11,960) (9,985)
Inventories (2,474) 739
Prepaid expenses 71 (82)
Deferred charges and other assets (973) (438)
Accounts payable and other current liabilities 5,204 (1,262)
Advances from smelter (3,381) (1,310)
Deferred income taxes 453 (31)
- ---------------------------------------------------------------------------------------------------
Net cash used by
operating activities (3,656) (4,719)
- ---------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment 12 42
Capital expenditures (6,964) (3,481)
Investment in affiliates (100) --
- ---------------------------------------------------------------------------------------------------
Net cash used by investing activities (7,052) (3,439)
- ---------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from short-term borrowings 9,100 21,000
Net increase/(decrease) in long-term
revolving credit facilities 25,000 (14,978)
Net (increase)/decrease in futures receivable -- (4,679)
Net increase/(decrease) in futures payable (20,427) 6,819
Dividends paid (846) (701)
- ---------------------------------------------------------------------------------------------------
Net cash provided by
financing activities 12,827 7,461
- ---------------------------------------------------------------------------------------------------
Effect of exchange rate changes on net cash 4 (50)
- ---------------------------------------------------------------------------------------------------
Net change in cash 2,123 (747)
Cash at beginning of year 2,559 3,320
- ---------------------------------------------------------------------------------------------------
Cash at end of period $ 4,682 $ 2,573
- ---------------------------------------------------------------------------------------------------
</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. Inventories at March 31, 1995 and December 31, 1994 is comprised as follows
(in thousands):
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
(unaudited)
- -------------------------------------------------------------------------------
<S> <C> <C>
Precious metals:
Fine and fabricated metals in
various stages of completion $ 37,787 $ 37,825
Non-precious metals:
Base metals, factory supplies
and raw materials 26,583 25,175
Work in process 18,397 18,521
Finished goods 9,646 8,418
- -------------------------------------------------------------------------------
$ 92,413 $ 89,939
===============================================================================
</TABLE>
Lifo inventory - the excess of period end market value over Lifo cost was
$148,014,000 at March 31, 1995 and $139,068,000 at December 31, 1994.
c. 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, 1994).
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<PAGE> 6
HANDY & HARMAN AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
d. The following table presents certain selected financial data by industry
segment (expressed in thousands of dollars) for the three months ended
March 31, 1995 and 1994:
<TABLE>
<CAPTION>
March 31, 1995 March 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales and service revenues:
Precious metals $103,778 $100,707
Automotive (OEM) 46,014 46,809
Wire/Tubing 44,431 37,621
Other non-precious
metal businesses 4,047 3,594
- --------------------------------------------------------------------------------
Total $198,270 $188,731
================================================================================
Profit contribution before
unallocated expenses:
Precious metals $ 6,869 $ 3,191
Automotive (OEM) 2,064 4,585
Wire/Tubing 5,560 3,525
Other non-precious
metal businesses 496 425
- --------------------------------------------------------------------------------
Total 14,989 11,726
General corporate expenses (450) (450)
Interest expense (net) (5,421) (3,643)
- --------------------------------------------------------------------------------
Income from continuing
operations before taxes $ 9,118 $ 7,633
================================================================================
</TABLE>
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<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA
The Company's precious metal inventories, consisting principally of gold and
silver, is readily convertible to cash. Furthermore, these precious metal
inventories which are stated in the Balance Sheet at LIFO cost have a market
value of $148,014,000 in excess of such cost as of March 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.
In the third quarter of 1992 the Company completed arrangements with four
institutional lenders for $50,000,000 of long-term borrowings at a rate of
8.83% maturing in 2002. The proceeds were used to reduce portions of other
long-term debt.
-6-
<PAGE> 8
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 March
31, 1995, $80,000,000 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 $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. As of March 31,
1995, 111,000 ounces of gold and 14,999,000 ounces of silver were leased under
this fee consignment facility. 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 $17,345,000. This
enabled the Company to reduce its bank borrowings.
CASH USED IN OPERATING ACTIVITIES
Net cash used by operating activities amounted to $3,656,000 in 1995 and
$4,719,000 in 1994. The cash used by operating activities decreased $1,063,000
primarily due to an increase of $1,754,000 in net income after adjustment for
non cash income and expense items which was partially offset by an increase in
working capital requirements amounting to $640,000.
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<PAGE> 9
CASH USED IN INVESTING ACTIVITIES
Net cash used by investing activities amounted to $7,052,000 in 1995 and
$3,439,000 in 1994. The increase of $3,613,000 in investing activities was
primarily due to the new tubing facility in Denmark and also the expansion of
production capacity in our precision electroplating companies and specialty
wire company in Great Britain.
CASH PROVIDED BY FINANCING ACTIVITIES
Net cash provided by financing activities amounted to $12,827,000 in 1995
and $7,461,000 in 1994. The net cash provided by financing in the first
quarter of 1995 was due to an increase in debt of $34,100,000, partially offset
by the payment of futures payable (the purchase of precious metal inventory for
future receipt) of $20,427,000 and the payment of dividends of $846,000. The
comparable period for 1994 provided cash by an increase in debt of $6,022,000
and an increase in net futures payable of $2,140,000, partially offset by the
payment of dividends of $701,000.
The Company's foreign operations consist of six wholly owned subsidiaries,
(one in Canada, three in the United Kingdom, one in Denmark and one in Mexico),
and two equity investments, (one in Asia and one in Brazil). Substantially all
unremitted earnings of such entities are free from legal or contractual
restrictions.
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.
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<PAGE> 10
COMPARISON OF FIRST QUARTER OF 1995 VERSUS FIRST QUARTER OF 1994
Sales for the precious metal segment increased $3,071,000 (3%). The
increase in sales was partially offset by sales of refining outturn, primarily
in kilo bar and grain form, which decreased from $33,427,000 in 1994 to
$30,262,000 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 less
than the margins on other products in this segment. The average price for gold
was $379.24 per ounce and the average price for silver was $4.70 per ounce
representing decreases of 1.4% and 11%, respectively, from the prior year. The
profit contribution (pre-tax income before deducting interest and Corporate
expenses) increased $3,678,000 (115%) primarily due to strong sales and
operating profits of our precision electroplating companies partially offset by
competitive pricing pressures for fabricated products. Management continues to
focus on improving the profit contribution from this segment by the current
expansion of production capacity at its precision electroplating companies and
by rationalizing other 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 decreased $795,000 (2%) and the profit
contribution decreased $2,521,000 (55%) due to additional expenses relating to
facility expansion and realignment to match changing volume requirements.
Earnings for this segment during the first half of 1995 are not anticipated to
be at the same level as the prior year's comparable period.
-9-
<PAGE> 11
Sales for the wire/tubing segment increased $6,810,000 (18%) due to the
improved economy, both domestic and European, and the increased capacity of the
wire and tubing companies. The profit contribution increased $2,035,000 (58%)
due to the increased sales as well as reduced product costs stemming from
improved manufacturing performance and reduced raw material cost. Partially
offsetting this favorable performance of this segment was the start-up costs of
the new tubing facility in Denmark which is expected to make a positive
contribution to earnings in the latter part of this year.
In the other non-precious metal segment, sales increased $453,000 (13%).
Profit contribution increased by $71,000 (17%) due to the increased level of
sales.
Interest expense increased $1,778,000 (49%) primarily due to higher interest
rates on borrowings and leased metal.
The Company's income taxes are primarily composed of U.S. Federal and state
income taxes. The higher effective income tax rate for 1995 over 1994 is
attributable to goodwill amortization associated with the acquisition of Sumco
in September 1994.
-10-
<PAGE> 12
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, 1994, and to the proceedings described
therein under Part I, Item 3. Legal Proceedings. Negotiations and
discovery procedures are continuing in this matter.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits as required by Item 601 of Regulation S-K:
None required.
(b) Reports on Form 8-K:
None filed during the quarter for which this report is submitted.
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<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HANDY & HARMAN
-----------------------------------
(Registrant)
Date: May 11, 1995 J.M. McLoone /s/
-----------------------------------
J.M. McLoone, Vice President -
Financial Services
Date: May 11, 1995 D.C. Kelly /s/
-----------------------------------
D.C. Kelly - Controller
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 4,682
<SECURITIES> 0
<RECEIVABLES> 98,208
<ALLOWANCES> 3,789
<INVENTORY> 92,413
<CURRENT-ASSETS> 203,548
<PP&E> 279,690
<DEPRECIATION> 159,537
<TOTAL-ASSETS> 425,298
<CURRENT-LIABILITIES> 143,573
<BONDS> 156,750
<COMMON> 14,611
0
0
<OTHER-SE> 96,360
<TOTAL-LIABILITY-AND-EQUITY> 425,298
<SALES> 198,270
<TOTAL-REVENUES> 198,270
<CGS> 167,269
<TOTAL-COSTS> 167,269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 274
<INTEREST-EXPENSE> 5,421
<INCOME-PRETAX> 9,118
<INCOME-TAX> 3,930
<INCOME-CONTINUING> 5,188
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,188
<EPS-PRIMARY> 14,091
<EPS-DILUTED> 14,091
</TABLE>
