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

August 9, 2012

WHITE PLAINS, N.Y., Aug. 9, 2012 /PRNewswire/ — Handy & Harman Ltd.’s (NASDAQ(CM): HNH); (“HNH” or the “Company”) operating results for the second quarter and six months ended June 30, 2012 are summarized in the following paragraphs. Please read the Company’s Form 10-Q, which can be found at www.handyharman.com, for a full discussion of the operating results.

HNH reported sales of $187.2 million for the three months ending June 30, 2012 as compared to $187.5 million for the same period of 2011. Income from continuing operations before tax was $18.6 million in the second quarter of both 2012 and 2011. Net income for the second quarter of 2012 was $11.0 million, or $0.83 per basic and diluted common share, as compared to net income of $16.8 million, or $1.32 per basic and diluted common share, for the same period in 2011.

For the six months ended June 30, 2012 sales were $351.3 million as compared to $340.8 million for the same period of 2011. Income from continuing operations before tax was $27.1 million as compared to $18.4 million in 2011. Net income for the six months ended June 30, 2012 was $16.0 million, or $1.24 per basic and diluted common share, as compared to net income of $21.6 million, or $1.73 per basic and diluted common share, for the same period in 2011.

The principal reason for the decrease in net income for both the three and six 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 six month ended June 30, 2011 includes the benefits of such net operating loss carryforwards but the same periods in 2012 do not.

HNH generated Adjusted EBITDA of $26.2 million for the second quarter of 2012, as compared to $24.2 million for the same period in 2011, an increase of $2.0 million, or 8.3%. For the six months ended June 30, 2012, the Company generated Adjusted EBITDA of $43.7 million, as compared to $39.7 million for the same period in 2011, an increase of $4.0 million, or 10.0%. See “Note Regarding Use of Non-GAAP Financial Measurements” below for the definition of Adjusted EBITDA.

HNH previously provided its outlook for full year 2012 sales and Adjusted EBITDA in the range of $635 million to $776 million and $77 million to $94 million, respectively. HNH’s outlook for the third quarter of 2012, based on current information, is for sales between $156 million and $191 million and Adjusted EBITDA between $20 million and $25 million.

Financial Summary

                                              Three Months ended                        Six Months Ended
                                                        June 30,                            June 30,
                                                        --------                            --------
    (in thousands)                              2012             2011         2012                  2011
                                                ----             ----         ----                  ----

    Net sales                                         $187,213                     $187,453               $351,349  $340,782
    Gross profit                              54,774                  47,875                      98,733    86,901
    Gross profit margin                         29.3%                   25.5%                       28.1%     25.5%
    Operating income                          21,465                  16,874                      32,942    25,163
    Income from continuing operations before
     tax                                      18,575                  18,570                      27,057    18,397
    Tax provision                              7,623                   1,529                      11,009     2,535
                                               -----                   -----                      ------     -----
    Income from continuing operations, net of
     tax                                               $10,952                      $17,041                $16,048   $15,862
    Net income (loss) from discontinued
     operations                                    -                    (281)                          -     5,722
    Net income                                         $10,952                      $16,760                $16,048   $21,584
                                                       =======                      =======                =======   =======
    Basic and diluted per share of common
     stock
    Net income per share                                 $0.83                        $1.32                  $1.24     $1.73

Segment Results

    Statement of operations data:              Three Months Ended                     Six Months Ended
    (in thousands)                                  June 30,                              June 30,
                                                    --------                              --------
                                        2012                 2011         2012             2011
                                        ----                 ----         ----             ----
    Net Sales:
    Precious Metal                             $49,576                          $54,051                 $97,414   $98,697
    Tubing                            25,905                      24,474                 51,697          48,873
    Engineered Materials              77,014                      74,168                134,127         123,562
    Arlon                             21,703                      21,813                 41,708          43,842
    Kasco                             13,015                      12,947                 26,403          25,808
                                                                                         ------
    Total net sales                           $187,213                         $187,453                $351,349  $340,782
                                              ========                         ========                ========  ========
    Segment operating income:
    Precious Metal                     7,803                       5,612                 13,417          10,114
    Tubing                             4,574                       3,292                  8,119           7,573
    Engineered Materials              10,413                      10,050                 14,945          12,188
    Arlon                              3,970                       2,513                  6,498           4,649
    Kasco                                852                         961                  2,009           2,070
    Total segment operating income    27,612                      22,428                 44,988          36,594
                                      ------                      ------                 ------          ------
    Unallocated corporate expenses &  (5,521)                     (4,473)               (10,831)         (9,225)
             non operating units
    Unallocated pension expense         (652)                     (1,125)                (1,264)         (2,250)
    Gain on disposal of assets            26                          44                     49              44
    Operating income                  21,465                      16,874                 32,942          25,163
                                      ------                      ------                 ------          ------
    Interest expense                  (4,350)                     (3,297)                (8,199)         (7,626)
    Realized and unrealized gain on    1,612                       5,019                  2,510             855
             derivatives
    Other (expenses) income             (152)                        (26)                  (196)              5
    Income from continuing operations          $18,575                          $18,570                 $27,057   $18,397
      before income taxes

    Supplemental Non-GAAP Disclosures
    Adjusted EBITDA
                                                                            Three Months Ended                   Six Months Ended
                                                                                 June 30,                            June 30,
                                                                                 --------                            --------
    (in thousands)                                                        2012                 2011         2012                 2011
                                                                          ----                 ----         ----                 ----

    Income from continuing operations, net of tax                                $10,952                           $17,041             $16,048  $15,862
    Add (Deduct):
    Income tax provision                                                 7,623                       1,529                     11,009    2,535
    Interest expense                                                     4,350                       3,297                      8,198    7,626
    Unrealized gain on embedded derivatives related to sub-notes        (1,117)                     (3,704)                    (1,758)  (2,273)
    Non-cash derivative & hedge (gain) loss on precious metal contracts   (495)                     (1,315)                      (752)   1,418
    Non-cash adjustment to precious metal inventory valued at LIFO        (839)                        987                       (286)   1,257
    Depreciation and amortization expense                                3,730                       4,019                      7,643    7,886
    Non-cash pension and OPEB expense                                      669                       1,130                      1,299    2,255
    Non-cash asset impairment charge                                         -                          10                          -      700
    Non-cash stock-based compensation expense                            1,253                         771                      2,010    1,693
    Other, net                                                              58                         405                        277      741
                                                                           ---                         ---                        ---      ---
    Adjusted EBITDA                                                              $26,184                           $24,170             $43,688  $39,700
                                                                                 =======                           =======             =======  =======

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 pension expense; and
  • Adjusted EBITDA does not include discontinued operations.

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.

Our Company

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.

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

We sell our products and services through direct sales forces, distributors and manufacturer’s representatives. We serve 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.

We are based in White Plains, New York and our common stock is listed on the NASDAQ Capital Market under the symbol HNH.

http://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.


Source: PR Newswire