Handy & Harman Ltd. Reports Third Quarter Financial Results and Outlook for Full Year

WHITE PLAINS, N.Y., Nov. 9, 2012 /PRNewswire/ -- Handy & Harman Ltd. (NASDAQ(CM): HNH); ("HNH" or the "Company"), a diversified global industrial company, today announced operating results for the third quarter and nine months ended September 30, 2012.  They are summarized in the following paragraphs.  For a full discussion of the results, please see the Company's Form 10-Q, which can be found at www.handyharman.com.

HNH reported sales of $165.4 million for the quarter, as compared to $178.0 million for the same period of 2011.  Income from continuing operations before tax was $9.3 million in the third quarter of 2012, as compared to $9.7 million in 2011.  Net income for the third quarter of 2012 was $5.9 million, or $0.45 per basic and diluted common share, as compared to net income of $7.0 million, or $0.55 per basic and diluted common share for the same period in 2011.

For the nine months ended September 30, 2012, sales were $516.8 million, as compared to $518.8 million for the same period of 2011.  Income from continuing operations before tax was $36.4 million, as compared to $28.1 million in 2011.  Net income for the nine-month period was $22.0 million, or $1.69 per basic and diluted common share, as compared to net income of $28.6 million, or $2.28 per basic and diluted common share for the same period in 2011, which included net income from the sale of discontinued operations of $4.9 million, or $0.39 per share.

The principal reason for the decrease in net income for both the three- and nine-month periods was a significantly higher income tax provision in 2012, as compared to 2011.  The Company recorded the benefit of its remaining federal net operating loss carryforwards in the fourth quarter of 2011.  The Company's tax provision for the three and nine months ended September 30, 2012 includes the benefits of such net operating loss carryforwards, but the same periods in 2012 do not include any such benefits.

HNH generated Adjusted EBITDA of $21.0 million for the third quarter of 2012, as compared to $22.6 million for the same period in 2011, a decrease of $1.6 million, or 7.3%.  For the nine-month period, the Company generated Adjusted EBITDA of $64.7 million, as compared to $62.3 million for the same period in 2011, an increase of $2.3 million, or 3.7%.  See "Note Regarding Use of Non-GAAP Financial Measurements" below for the definition of Adjusted EBITDA.

The Company also reported that it anticipated that full-year 2012 sales and Adjusted EBITDA would be in the lower half of the previously reported ranges of $635 million to $776 million, and $77 million to $94 million, respectively.

On November 8, 2012, Handy & Harman Group Ltd., a wholly-owned subsidiary of HNH, entered into a $205.0 million senior secured credit facility, consisting of a revolving credit facility in an aggregate principal amount not to exceed $90.0 million and a term loan in an aggregate principal amount of $115.0 million.  The facility is further described in the Company's Form 10-Q (Note 20 - Subsequent Events).

Financial Summary



Three Months Ended


Nine Months Ended

(in thousands except per share)


September 30,


September 30,



2012


2011


2012


2011

Net sales


$

165,419



$

177,989



$

516,768



$

518,770


Gross profit


46,726



46,487



145,459



133,386


Gross profit margin


28.2%



26.1%



28.1%



25.7%


Operating income


14,870



16,364



47,811



41,524


Income from continuing operations before tax


9,331



9,739



36,388



28,134


Tax provision


3,401



1,921



14,410



4,455


Income from continuing operations, net of tax


5,930



7,818



21,978



23,679


Net (loss) income from discontinued operations




(796)





4,927


Net income


$

5,930



$

7,022



$

21,978



$

28,606


Basic and diluted income per share of common stock









Net income per share


$

0.45



$

0.55



$

1.69



$

2.28


Segment Results

Income Statement Data


Three Months Ended


Nine Months Ended

(in thousands)


September 30,


September 30,



2012


2011


2012


2011

Net sales:









Precious Metal


$

40,304



$

51,791



$

137,718



$

150,488


Tubing


23,081



25,188



74,778



74,061


Engineered Materials


68,367



69,170



202,493



192,732


Arlon


20,584



18,800



62,292



62,642


Kasco


13,083



13,040



39,487



38,847


Total net sales


$

165,419



$

177,989



$

516,768



$

518,770


Segment operating income:









Precious Metal


$

4,811



$

7,180



$

18,228



$

17,294


Tubing


3,764



3,798



11,883



11,371


Engineered Materials


8,376



8,761



23,320



20,950


Arlon 


3,168



1,802



9,666



6,451


Kasco


1,072



1,025



3,080



3,095


Total segment operating income


21,191



22,566



66,177



59,161


Unallocated corporate expenses and non-operating units


(5,137)



(3,739)



(15,968)



(12,968)


Unallocated pension expense


(1,220)



(2,487)



(2,483)



(4,737)


Gain from asset dispositions


36



24



85



68


Operating income


14,870



16,364



47,811



41,524


Interest expense


(3,709)



(3,802)



(11,907)



(11,428)


Realized and unrealized (loss) gain on derivatives


(1,340)



(1,488)



1,170



(633)


Other expenses


(490)



(1,335)



(686)



(1,329)


Income from continuing operations before tax


$

9,331



$

9,739



$

36,388



$

28,134


Supplemental Non-GAAP Disclosures

Adjusted EBITDA

Three Months Ended


Nine Months Ended

(in thousands)

September 30,


September 30,


2012


2011


2012


2011

Income from continuing operations, net of tax

$

5,930



$

7,818



$

21,978



$

23,679


Add (Deduct):








Tax provision

3,401



1,921



14,410



4,455


Interest expense

3,709



3,802



11,907



11,428


Unrealized loss (gain) on embedded derivatives related to sub-notes

304



1,652



(1,454)



(621)


Non-cash derivative and hedge loss (gain) on precious metal contracts

1,036



(164)



284



1,254


Non-cash adjustment to precious metal inventory valued at LIFO

460



(458)



174



799


Depreciation and amortization expense

3,549



3,974



11,192



11,863


Non-cash pension expense

1,220



2,487



2,483



4,737


Non-cash asset impairment charge







700


Non-cash stock-based compensation expense

1,265



639



3,275



2,331


Other, net

98



950



411



1,698


Adjusted EBITDA

$

20,972



$

22,621



$

64,660



$

62,323


Note Regarding Use of Non-GAAP Financial Measurements

The financial data contained in this press release includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission ("SEC"), including "Adjusted EBITDA".  The Company is presenting Adjusted EBITDA because it believes that it provides useful information to investors about HNH, its business and its financial condition.  The Company defines Adjusted EBITDA as net income or loss from continuing operations before the effects of realized and unrealized gains or losses on derivatives, interest expense, taxes, depreciation and amortization, LIFO liquidation gain, and non-cash pension expense or credit, and excludes certain non-recurring and non-cash items.  The Company believes Adjusted EBITDA is useful to investors because it is one of the measures used by the Company's Board of Directors and management to evaluate its business, including in internal management reporting, budgeting and forecasting processes, in comparing operating results across the business, as an internal profitability measure, as a component in evaluating the ability and the desirability of making capital expenditures and significant acquisitions, and as an element in determining executive compensation.

However, Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States of America ("GAAP"), and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance.  Therefore, Adjusted EBITDA should not be considered a substitute for net income (loss) or cash flows from operating, investing, or financing activities.  Because Adjusted EBITDA is calculated before recurring cash charges including realized and unrealized losses on derivatives, interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business.  There are a number of material limitations to the use of Adjusted EBITDA as an analytical tool, including the following:

  • Adjusted EBITDA does not reflect the Company's net realized and unrealized losses and gains on derivatives and any LIFO liquidations of its precious metal inventory;
  • Adjusted EBITDA does not reflect the Company's interest expense;
  • Adjusted EBITDA does not reflect the Company's tax expense or the cash requirements to pay its taxes;
  • Although depreciation and amortization are non-cash expenses in the period recorded, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect the cash requirements for such replacement;
  • Adjusted EBITDA does not include non-cash charges for pension expense, stock-based compensation expense and asset impairments;
  • Adjusted EBITDA does not include discontinued operations; and
  • Adjusted EBITDA does not include certain other non-recurring and non-cash items.

The Company compensates for these limitations by relying primarily on its GAAP financial measures and by using Adjusted EBITDA only as supplemental information.  The Company believes that consideration of Adjusted EBITDA, together with a careful review of its GAAP financial measures, is the most informed method of analyzing HNH.

The Company reconciles Adjusted EBITDA to net income from continuing operations, and that reconciliation is set forth above.  Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.  Revenues and expenses are measured in accordance with the policies and procedures described in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

About Handy & Harman Ltd.

Handy & Harman Ltd. is a diversified manufacturer of engineered niche industrial products with leading market positions in many of the markets it serves.  Through its operating subsidiaries, HNH focuses on high margin products and innovative technology and serves customers across a wide range of end markets.  HNH's diverse product offerings are marketed throughout the United States and internationally. 

HNH's companies are organized into five businesses: Precious Metals, Tubing, Engineered Materials, Arlon, and Kasco.

The company sells its products and services through direct sales forces, distributors and manufacturer's representatives.  HNH serves a diverse customer base, including the construction, electronics, telecommunications, home appliance, transportation, utility, medical, semiconductor, aerospace, military electronics and automotive markets. Other markets served include blade products and repair services for the food industry.

The company is based in White Plains, N.Y., and its common stock is listed on the NASDAQ Capital Market under the symbol HNH.  Website: www.handyharman.com

Forward-Looking Statements

This press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that reflect HNH's current expectations and projections about its future results, performance, prospects and opportunities.  HNH has tried to identify these forward-looking statements by using words such as "may," "should," "expect," "hope," "anticipate," "believe," "intend," "plan," "estimate" and similar expressions.  These forward-looking statements are based on information currently available to the Company and are subject to a number of risks, uncertainties and other factors that could cause its actual results, performance, prospects or opportunities in 2012 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements.  These factors include, without limitation, HNH's need for additional financing and the terms and conditions of any financing that is consummated, customers' acceptance of its new and existing products, the risk that the Company will not be able to compete successfully, and the possible volatility of the Company's stock price and the potential fluctuation in its operating results.  Although HNH believes that the expectations reflected in these forward-looking statements are reasonable and achievable, such statements involve significant risks and uncertainties and no assurance can be given that the actual results will be consistent with these forward-looking statements.  Investors should read carefully the factors described in the "Risk Factors" section of the Company's filings with the SEC, including the Company's Form 10-K for the year ended December 31, 2011 for information regarding risk factors that could affect the Company's results.  Except as otherwise required by Federal securities laws, HNH undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

SOURCE Handy & Harman Ltd.



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