News Column

Handy & Harman Ltd. Reports Second Quarter Financial Results and Outlook for 2014

July 31, 2014

WHITE PLAINS, N.Y.--(BUSINESS WIRE)-- Handy & Harman Ltd. (NASDAQ:HNH); ("HNH" or the "Company"), a diversified global industrial company, today announced operating results for the second quarter and six months ended June 30, 2014, which 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 net sales of $195.5 million for the quarter, as compared to $182.1 million for the same period in 2013. Income from continuing operations before tax and equity investment was $21.0 million in the second quarter of 2014, as compared to $17.7 million in the 2013 period. Income from continuing operations, net of tax, for the second quarter of 2014 was $11.1 million, or $0.84 per basic and diluted common share, as compared to income of $10.2 million, or $0.76 per basic and diluted common share, for the same period in 2013.

For the six months ended June 30, 2014, net sales were $357.3 million, as compared to $331.0 million for the same period in 2013. Income from continuing operations before tax and equity investment was $29.2 million, as compared to $19.9 million in the 2013 period. Income from continuing operations, net of tax, for the six-month period was $10.7 million, or $0.82 per basic and diluted common share, as compared to income of $8.7 million, or $0.66 per basic and diluted common share, for the same period in 2013.

HNH generated Adjusted EBITDA of $29.7 million for the second quarter of 2014, as compared to $24.3 million for the same period in 2013, an increase of $5.4 million, or 22.2%. For the six-month period, the Company generated Adjusted EBITDA of $46.3 million, as compared to $41.9 million for the same period in 2013, an increase of $4.3 million, or 10.4%. See "Note Regarding Use of Non-GAAP Financial Measurements" below for the definition of Adjusted EBITDA.

Based on current information, the Company currently anticipates full-year 2014 net sales and Adjusted EBITDA in the ranges of $652 million to $749 million, and $82 million to $93 million, respectively. The Company's outlook for the third quarter of 2014 is for net sales between $168 million and $205 million and Adjusted EBITDA between $23 million and $28 million.

Financial Summary

     
 
Three Months EndedSix Months Ended
(in thousands, except per share)June 30,June 30,
2014   20132014   2013
Net sales $ 195,491 $ 182,084 $ 357,339 $ 331,041
Gross profit 57,104 51,665 102,505 95,637
Gross profit margin29.2%28.4%28.7%28.9%
Operating income 23,256 17,964 32,945 29,165
Income from continuing operations before tax and equity investment 20,967 17,687 29,195 19,867
Tax provision 8,649 7,038 11,991 7,905
Loss from associated company, net of tax 1,242   438   6,540   3,275  
Income from continuing operations, net of tax 11,076 10,211 10,664 8,687
Net income from discontinued operations   1,661   42   11,202  
Net income $ 11,076   $ 11,872   $ 10,706   $ 19,889  
Basic and diluted income per share of common stock
Income from continuing operations, net of tax, per share $ 0.84 $ 0.76 $ 0.82 $ 0.66
Discontinued operations, net of tax, per share   0.12     0.84  
Net income per share $ 0.84   $ 0.88   $ 0.82   $ 1.50  

Segment Results

     
 
Income Statement DataThree Months EndedSix Months Ended
(in thousands)June 30,June 30,
2014   20132014   2013
Net sales:
Joining Materials $ 56,462 $ 56,902 $ 108,175 $ 101,432
Tubing 21,361 23,366 42,066 45,380
Building Materials 76,301 66,733 124,833 113,372
Arlon 26,946 21,109 53,307 42,414
Kasco 14,421   13,974   28,958   28,443  
Total net sales $ 195,491   $ 182,084   $ 357,339   $ 331,041  
Segment operating income:
Joining Materials $ 6,755 $ 5,989 $ 11,897 $ 11,736
Tubing 3,806 4,736 6,874 8,488
Building Materials 11,917 9,871 14,926 13,939
Arlon 5,702 2,867 10,070 5,958
Kasco 659   838   1,385   2,129  
Total segment operating income 28,839   24,301   45,152   42,250  
Unallocated corporate expenses and non-operating units (4,474 ) (4,938 ) (9,984 ) (10,425 )
Unallocated pension expense (1,136 ) (1,394 ) (2,272 ) (2,668 )
Gain (loss) from asset dispositions 27   (5 ) 49   8  
Operating income 23,256   17,964   32,945   29,165  
Interest expense (1,617 ) (1,641 ) (3,169 ) (10,087 )
Realized and unrealized (loss) gain on derivatives (606 ) 1,492 (466 ) 1,053
Other expense (66 ) (128 ) (115 ) (264 )
Income from continuing operations before tax and equity investment $ 20,967   $ 17,687   $ 29,195   $ 19,867  

Supplemental Non-GAAP Disclosures

     
 
Adjusted EBITDAThree Months EndedSix Months Ended
(in thousands)June 30,June 30,
2014   20132014   2013
Income from continuing operations, net of tax $ 11,076 $ 10,211 $ 10,664 $ 8,687
Add (Deduct):
Loss from associated company, net of tax 1,242 438 6,540 3,275
Tax provision 8,649 7,038 11,991 7,905
Interest expense 1,617 1,641 3,169 10,087
Unrealized loss on embedded derivatives related to sub-notes 793
Non-cash derivative and hedge loss (gain) on precious metal contracts 606 (1,372 ) 466 (1,726 )
Non-cash adjustment to precious metal inventory valued at LIFO (367 ) (1,083 ) (236 ) (1,433 )
Depreciation and amortization 4,417 3,934 8,794 7,850
Non-cash pension expense 1,136 1,394 2,272 2,668
Non-cash stock-based compensation 1,321 1,213 2,399 2,403
Other items, net 12   890   202   1,413  
Adjusted EBITDA $ 29,709   $ 24,304   $ 46,261   $ 41,922  


Note Regarding Use of Non-GAAP Financial Measurements

The financial data contained in this press release includes certain non-GAAP financial measurements 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 income or loss from continuing operations before the effects of gains or losses from investment in associated company, realized and unrealized gains or losses on derivatives, interest expense, taxes, depreciation and amortization, LIFO liquidation gains or losses, and non-cash pension expense, 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 ("U.S. 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 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 gains or losses from the Company's investment in associated company;
  • Adjusted EBITDA does not reflect the Company's net realized and unrealized gains and losses 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 provision 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 and stock-based compensation;
  • 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 U.S. 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 U.S. GAAP financial measures, is the most informed method of analyzing HNH.

    The Company reconciles Adjusted EBITDA to income or loss from continuing operations, net of tax, and that reconciliation is set forth above. Because Adjusted EBITDA is not a measurement determined in accordance with U.S. 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, 2013.

    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 wholly-owned 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: Joining Materials, Tubing, Building 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, transportation, utility, medical, semiconductor, aerospace, aviation, military electronics, and food industries.

    The Company’s business strategy is to enhance the growth and profitability of the HNH business units and to build upon their strengths through internal growth and strategic acquisitions. Management expects HNH to continue to focus on high margin products and innovative technology. Management has evaluated and will continue to evaluate, from time to time, potential strategic and opportunistic acquisition opportunities, as well as the potential sale of certain businesses and assets.

    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 2014 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, 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, 2013, 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.




    Handy & Harman Ltd.

    James F. McCabe, Jr., 212-520-2300

    Senior Vice President and Chief Financial Officer

    JMcCabe@steelpartners.com


    Source: Handy & Harman Ltd.


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