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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
March 16, 1998
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Date of Report (Date of Earliest Event Reported)
Handy & Harman
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(Exact Name of Registrant as Specified in Charter)
New York 1-5365 13-5129420
- ---------------------------- ---------------- ------------------
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
250 Park Avenue
New York, New York 10177
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(Address of Principal Executive Offices and Zip Code)
(212) 661-2400
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events
Filed herewith as Exhibit 99.1 is unaudited consolidated financial
information (Consolidated Balance Sheet, Consolidated Statement of Income,
Consolidated Statement of Cash Flows, Note 1: Retirement Plans and
Postretirement Benefits other than Pensions, and Note 2: Debt) of Handy &
Harman, a New York corporation (the "Company"), as of December 31, 1997 and 1996
and for each of the years in the three year period ended December 31, 1997 (the
"Unaudited Financial Information"). The Unaudited Financial Information does not
contain all of the footnote disclosures which are required by generally accepted
accounting principles and are being filed herewith to assist WHX Corporation
("WHX") in connection with its proposed financing of the tender offer (the
"Offer") by HN Acquisition Corp. ("HN Acquisition"), a wholly owned subsidiary
of WHX, for all of the Company's outstanding shares of common stock. The Offer
is being made pursuant to WHX's Tender Offer Statement on Schedule 14D-1, filed
with the Securities and Exchange Commission (the "Commission") on March 6, 1998,
in accordance with the previously announced Agreement and Plan of Merger, by and
among the Company, WHX and HN Acquisition.
The Unaudited Financial Information is subject to normal year-end audit
adjustments and does not purport to be complete and is qualified in its
entirety by reference to the audited financial statements of the Company, which
will be filed by the Company with the Commission as part of its Annual Report on
Form 10-K for the year ended December 31, 1997.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
99.1 Unaudited Consolidated Financial Information (Consolidated
Balance Sheet, Consolidated Statement of Income, Consolidated
Statement of Cash Flows, Note 1: Retirement Plans and
Postretirement Benefits other than Pensions, and Note 2:
Debt) of Handy & Harman as of December 31, 1997 and 1996 and
for each of the years in the three year period ended December
31, 1997.
2
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 16, 1998
HANDY & HARMAN
By:
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Paul E. Dixon
Senior Vice President, General Counsel
and Secretary
3
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EXHIBIT INDEX
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Exhibit Description
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99.1 Unaudited Consolidated Financial Information
(Consolidated Balance Sheet, Consolidated Statement
of Income, Consolidated Statement of Cash Flows,
Note 1: Retirement Plans and Postretirement
Benefits other than Pensions, and Note 2: Debt) of
Handy & Harman as of December 31, 1997 and 1996
and for each of the years in the three year period
ended December 31, 1997.
4
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Handy & Harman and Subsidiaries
Consolidated Statement of Income (Unaudited)
Year ended December 31 1997 1996 1995
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Sales $451,110,000 $407,107,000 $427,188,000
Cost of sales 349,411,000 293,572,000 348,737,000
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Gross profit 101,699,000 113,535,000 78,451,000
Selling, general, and
administrative expenses 54,116,000 44,504,000 45,524,000
Restructuring charge - - 5,342,000
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Income from operations 47,583,000 69,031,000 27,585,000
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Other deductions (income):
Interest expense (net) 14,452,000 9,682,000 12,598,000
Other (net) (2,920,000) 376,000 701,000
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11,532,000 10,058,000 13,299,000
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Income from continuing
operations before income
taxes and extraordinary item 36,051,000 58,973,000 14,286,000
Income tax provision 15,141,000 25,200,000 6,777,000
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Income from continuing
operations before
extraordinary item 20,910,000 33,773,000 7,509,000
Extraordinary loss on
early retirement of debt
(net of $2,030,000 income
tax benefit) - (2,889,000) -
Discontinued operations:
Loss from operations, net
of income tax benefit
$1,026,000, $252,000 - (1,354,000) (365,000)
Gain/(loss) on disposal, net
of income taxes/(benefit)
- ($9,190,000), $8,220,000 - (13,161,000) 11,496,000
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- (14,515,000) 11,131,000
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Net income $ 20,910,000 $ 16,369,000 $ 18,640,000
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Earnings per share-basic:
Income from continuing
operations before
extraordinary item $1.75 $ 2.45 $ .53
Extraordinary loss on early
retirement of debt - (.21) -
Discontinued operations - (1.05) .79
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Net income $1.75 $1.19 $1.32
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Basic average number of shares
outstanding 11,981,000 13,796,000 14,092,000
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Earnings per share-diluted:
Income from continuing
operations before
extraordinary item $1.74 $ 2.44 $ .53
Extraordinary loss on
early retirement of debt - (.21) -
Discontinued operations - (1.05) .79
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Net income $1.74 $1.18 $1.32
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Diluted average number of
shares outstanding 12,042,000 13,846,000 14,103,000
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Handy & Harman and Subsidiaries
Consolidated Balance Sheet (Unaudited)
December 31, 1997 1996
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Assets
Current assets:
Cash $ 7,259,000 $ 9,701,000
Accounts receivable, less allowance for
doubtful accounts of $1,634,000 in 1997
and $1,686,000 in 1996 59,084,000 51,572,000
Inventories net of LIFO reserve of
$106,201,000 in 1997 and $97,996,000
in 1996 77,294,000 70,357,000
Prepaid expenses, deposits and other
current assets 14,611,000 7,044,000
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Total current assets 158,248,000 138,674,000
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Investments in affiliates, at equity 3,870,000 3,122,000
Property, plant and equipment 218,052,000 195,623,000
Less accumulated depreciation
and amortization 123,064,000 112,418,000
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94,988,000 83,205,000
Prepaid retirement costs (net) (see note 1) 60,659,000 54,566,000
Intangibles, net of amortization 65,058,000 24,818,000
Other assets 9,974,000 12,079,000
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$392,797,000 $316,464,000
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Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings - $ 15,000,000
Accounts payable $ 36,999,000 30,163,000
Futures payable - 9,246,000
Other current liabilities 30,008,000 22,429,000
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Total current liabilities 67,007,000 76,838,000
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Long-term debt, less current maturities 190,880,000 127,500,000
Minority interest 1,555,000 1,259,000
Deferred income taxes 20,947,000 15,261,000
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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 14,410,000 13,432,000
Retained earnings 130,435,000 112,399,000
Foreign currency translation adjustment (1,462,000) (61,000)
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157,994,000 140,381,000
Less: Treasury stock 1997 - 2,596,460 shares;
1996 - 2,618,421 shares - at cost 45,586,000 44,308,000
Unearned compensation - 467,000
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Total shareholders' equity 112,408,000 95,606,000
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$392,797,000 $316,464,000
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Consolidated Statement of Cash Flows (Unaudited)
Increase (Decrease) in Cash
-------------------------------------
Year Ended December 31. 1997 1996 1995
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Cash flows from operating
activities:
Net income $ 20,910,000 $ 16,369,000 $ 18,640,000
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Extraordinary loss on
debt retirement - 4,919,000 -
Depreciation and
amortization (1) 14,194,000 12,000,000 16,668,000
Provision for doubtful
accounts 333,000 1,052,000 329,000
Gain on disposal of
property, plant and
equipment 8,000 68,000 91,000
(Gain)/loss on disposal
of business units - 8,704,000 (20,176,000)
Net prepaid retirement costs (6,093,000) (3,995,000) (2,339,000)
Equity in earnings of affiliates (942,000) (421,000) (451,000)
Minority interest 296,000 - -
Earned compensation - 1988
long-term incentive and
outside director stock
option plans 506,000 648,000 266,000
Restructuring and nonrecurring
charges - - 8,369,000
Changes in assets and
liabilities, net of effects
from acquisitions and
divestitures:
Accounts receivable (3,198,000) 3,659,000 3,369,000
Inventories (2,670,000) 13,227,000 (7,877,000)
Prepaid expenses and
other current assets (6,906,000) (3,767,000) 1,210,000
Deferred charges and
other assets 1,086,000 (1,050,000) (2,951,000)
Accounts payable and
other current liabilities 7,853,000 (4,662,000) (1,775,000)
Federal and foreign taxes
on income (77,000) (5,279,000) 6,730,000
Deferred income taxes 7,597,000 (274,000) (17,000)
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Net cash provided by
operating activities 32,897,000 41,198,000 20,086,000
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Cash flows from investing
activities:
Proceeds from sale of
property, plant and
equipment 43,000 864,000 520,000
Capital expenditures (18,460,000) (14,694,000) (23,143,000)
Acquisition, net of cash
and debt acquired (52,732,000) (3,700,000) -
Divestitures, net of cash
sold - 5,074,000 68,032,000
Investment in affiliates
- net - - 478,000
Net investing activities
of discontinued operations - - 24,750,000
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Net cash provided/(used) in
investing activities (71,149,000) (12,456,000) 70,637,000
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Cash flows from financing
activities:
Short-term borrowings (15,000,000) (27,199,000) 5,250,000
Net decrease in
revolving credit facility (120,000,000)
Proceeds from long-term
financing 183,380,000
Repayment of other long-
term debt - (64,500,000) (11,750,000)
Long-term revolving credit
facilities - 95,000,000 (30,000,000)
Net (increase)/decrease in
futures receivable - 7,681,000 (7,681,000)
Net increase/(decrease) in
futures payable (9,246,000) 9,246,000 (37,772,000)
Dividends paid (2,874,000) (3,341,000) (3,383,000)
Purchase of treasury stock (net) (347,000) (39,174,000) (1,222,000)
Penalties paid on early
retirement of debt - (4,640,000) -
Funding proceeds from joint
venture partner - 1,259,000 -
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Net cash provided/(used) in
financing activities 35,913,000 (25,668,000) (86,558,000)
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Effect of exchange rate changes
on net cash (103,000) (10,000) (87,000)
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Net change in cash (2,442,000) 3,064,000 4,078,000
Cash at beginning of year 9,701,000 6,637,000 2,559,000
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Cash at end of year $ 7,259,000 $ 9,701,000 $ 6,637,000
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Cash paid during the year for:
Interest, net of contango on
futures and forward contracts $ 12,745,000 $ 12,886,000 $ 20,979,000
Income taxes $ 3,084,000 $ 20,678,000 $ 6,365,000
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(1) Includes amortization of deferred financing fees of $685,000, $552,000, and
$820,000 in 1997, 1996, and 1995, respectively.
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Note 1: Retirement Plans and Postretirement Benefits other than Pensions
Retirement Plans (Unaudited)
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 1997, 1996, and
1995 are as follows:
1997 1996 1995
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Service cost-benefits earned
during the period $2,491,000 $2,678,000 $3,582,000
Interest cost on the projected
benefits obligation 8,029,000 7,784,000 7,974,000
Return on plan assets (60,494,000) (26,000,000) (37,283,000)
Net amortization
and deferral 43,887,000 11,202,000 21,399,000
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Net periodic pension
cost (credit) ($6,087,000) ($4,336,000) ($4,328,000)
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Assumptions used in the accounting at December 31 are:
1997 1996 1995
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Discount rate:
Beginning of year 6.5% 6.5% 7.0%
End of year 6.5% 6.5% 6.5%
Compensation increase 5.0% 5.0% 5.0%
Expected asset return 8.5% 8.0% 8.0%
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The plans' funded status as of December 31 and the amounts recognized in the
accompanying financial statements are as follows:
1997 1996
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Actuarial present value of benefit obligations:
Vested benefit obligation $110,730,000 $107,909,000
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Accumulated benefit obligation $115,334,000 $113,260,000
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Projected benefit obligation $124,529,000 $119,544,000
Plan assets at fair value 249,240,000 196,253,000
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Plan assets in excess of projected
benefit obligation 124,711,000 76,709,000
Unrecognized net (gain)/loss (56,562,000) (10,974,000)
Unrecognized prior service cost 1,235,000 (925,000)
Unrecognized net asset (2,889,000) (4,553,000)
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Prepaid pension cost $ 66,495,000 $ 60,257,000
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The plans' assets are invested primarily in stocks and insurance contracts.
The Company recorded pension curtailment gains from discontinued operations
amounting to $287,000 in 1996 and $1,354,000 in 1995.
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
6.5%, 6.5% and 7% for the years ended 1997, 1996, and 1995, respectively. The
components of net periodic postretirement benefit cost are as follows:
1997 1996 1995
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Service cost $ 71,000 $134,000 $ 174,000
Interest cost 537,000 539,000 596,000
Amortization of transition
obligation 223,000 311,000 371,000
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$831,000 $984,000 $1,141,000
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In addition, a curtailment loss of $868,000 incurred on the 1996 sale of the
refining business is included in discontinued operations.
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, 1997 and 1996.
Accumulated Postretirement Benefit Obligation:
1997 1996
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Retirees $ 5,288,000 $ 4,414,000
Future retirees 3,216,000 4,041,000
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Total accumulated postretirement
benefit obligation 8,504,000 8,455,000
Unrecognized transition obligation (3,489,000) (3,762,000)
Unrecognized actuarial gain (loss) 821,000 998,000
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Net postretirement benefit liability -
classified with prepaid retirement costs $ 5,836,000 $ 5,691,000
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The assumed discount rate used to measure the accumulated postretirement benefit
obligation was 6.5% for 1997 and 1996. 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,
1997 and 1996.
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Note 2: Debt (Unaudited)
The Company's borrowing requirements are primarily related to the level of
working capital requirements and acquisition activity. At December 31, 1997, the
Company had outstanding short-term borrowings of $31,500,000 under short-term
uncommitted facilities. The Company's revolving credit facility and long-term
financing (see discussion below) gives the Company the ability to classify these
and other short term obligations aggregating $33,380,000 as long-term debt as of
December 31, 1997. At December 31, 1996, the Company had short-term credit
facilities of $50,000,000 and short-term borrowings of $15,000,000.
Long-term debt at December 31, 1997 and 1996 is summarized as follows:
1997 1996
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Credit facility $ 25,000,000 $120,000,000
Senior Notes (7.31%, due 2004) 125,000,000 -
Industrial revenue bonds,
floating rate, due 2004-2005 7,500,000 7,500,000
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157,500,000 127,500,000
Less installments due within year - -
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157,500,000 127,500,000
Reclass of short-term obligations 33,380,000 -
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Total long-term debt $190,880,000 $127,500,000
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On April 17, 1997 the Company completed unsecured long-term financing for
$125,000,000 at a fixed rate of 7.31% due 2004. On September 29,1997 the Company
replaced its prior $200,000,000 revolving credit facilty, which provided
$150,000,000 for a three year period and $50,000,000 for 364 days with a new
unsecured $200,000,000 revolving credit facility which provides $200,000,000 for
a five year period maturing in 2002, subject to annual one-year extensions. At
December 31, 1997 there was $25,000,000 borrowed under this facility.
All the above loans have restrictive covenants. At December 31, 1997, the
Company was in compliance with all convenants.
