Handy & Harman Ltd. Reports Fourth Quarter and Year End 2013 Financial Results and Outlook for 2014

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WHITE PLAINS, N.Y.--(BUSINESS WIRE)--

Handy & Harman Ltd. (HNH) ("HNH" or the "Company"), a diversified global industrial company, today announced operating results for the fourth quarter and year ended December 31, 2013. They are summarized in the following paragraphs. For a full discussion of the results, please see the Company's Form 10-K, which can be found at www.handyharman.com.

HNH reported net sales of $152.3 million for the quarter, as compared to $126.1 million for the same period in 2012. Income from continuing operations before tax and equity investment was $4.3 million in the fourth quarter of 2013, as compared to $3.8 million in the 2012 period. Net income for the fourth quarter of 2013 was $12.5 million, or $0.95 per basic and diluted common share, as compared to net income of $4.5 million, or $0.34 per basic and diluted common share for the same period in 2012.

For the year ended December 31, 2013, net sales were $655.2 million, as compared to $579.5 million in 2012. Income from continuing operations before tax and equity investment was $38.1 million, as compared to $35.2 million in 2012. Net income for the year was $42.0 million, or $3.17 per basic and diluted common share, as compared to net income of $26.5 million, or $2.03 per basic and diluted common share in 2012.

HNH generated Adjusted EBITDA of $14.2 million for the fourth quarter of 2013, as compared to $12.3 million for the same period in 2012, an increase of $2.0 million, or 16.1%. For the year, the Company generated Adjusted EBITDA of $77.5 million, as compared to $70.6 million in 2012, an increase of $7.0 million, or 9.9%. See "Note Regarding Use of Non-GAAP Financial Measurements" below for the definition of Adjusted EBITDA.

The Company currently anticipates, based on current information, full-year 2014 net sales and Adjusted EBITDA in the ranges of $648 million to $792 million, and $83 million to $101 million, respectively. The Company's outlook for the first quarter of 2014 is for net sales between $145 million and $177 million and Adjusted EBITDA between $14 million and $18 million.

Financial Summary

   
Three Months Ended Year Ended
(in thousands, except per share) December 31, December 31,
2013   2012 2013   2012
Net sales $ 152,309 $ 126,084 $ 655,224 $ 579,528
Gross profit 39,341 37,644 184,875 169,486
Gross profit margin 25.8 % 29.9 % 28.2 % 29.2 %
Operating income 5,536 7,056 50,950 49,790
Income from continuing operations before tax and equity investment 4,278 3,818 38,149 35,214
Tax provision 2,465 627 16,028 13,065
Gain from associated company, net of tax (10,888 )   (6,006 )  
Income from continuing operations, net of tax 12,701 3,191 28,127 22,149
Net (loss) income from discontinued operations (204 ) 1,312   13,902   4,332  
Net income $ 12,497   $ 4,503   $ 42,029   $ 26,481  
Basic and diluted income per share of common stock
Net income per share $ 0.95   $ 0.34   $ 3.17   $ 2.03  
 

Segment Results

   
 
Income Statement Data Three Months Ended Year Ended
(in thousands) December 31, December 31,
2013   2012 2013   2012
Net sales:
Joining Materials $ 42,696 $ 36,903 $ 195,187 $ 174,621
Tubing 22,374 17,893 91,002 80,849
Building Materials 49,064 38,114 226,806 189,106
Arlon 22,924 18,523 84,060 80,815
Kasco 15,251   14,651   58,169   54,137  
Total net sales $ 152,309   $ 126,084   $ 655,224   $ 579,528  
Segment operating (loss) income:
Joining Materials $ (462 ) $ 5,714 $ 16,624 $ 23,942
Tubing 4,270 2,731 17,434 14,258
Building Materials 4,204 3,573 27,789 22,172
Arlon 3,093 1,929 10,769 11,594
Kasco 1,247   1,351   4,496   4,431  
Total segment operating income 12,352   15,298   77,112   76,397  
Unallocated corporate expenses and non-operating units (5,550 ) (7,421 ) (20,895 ) (23,387 )
Unallocated pension expense (1,341 ) (830 ) (5,342 ) (3,313 )
Gain from asset dispositions 75   9   75   93  
Operating income 5,536   7,056   50,950   49,790  
Interest expense (1,738 ) (4,812 ) (13,705 ) (16,719 )
Realized and unrealized gain on derivatives 492 1,412 1,195 2,582
Other (expense) income (12 ) 162   (291 ) (439 )
Income from continuing operations before tax and equity investment $ 4,278   $ 3,818   $ 38,149   $ 35,214  
 

Supplemental Non-GAAP Disclosures

   
 
Adjusted EBITDA Three Months Ended Year Ended
(in thousands) December 31, December 31,
2013   2012 2013   2012
Income from continuing operations, net of tax $ 12,701 $ 3,191 $ 28,127 $ 22,149
Add (Deduct):
Gain from associated company, net of tax (10,888 ) (6,006 )
Tax provision 2,465 627 16,028 13,065
Interest expense 1,738 4,812 13,705 16,719
Unrealized (gain) loss on embedded derivatives related to sub-notes (606 ) 793 (2,060 )
Non-cash derivative and hedge gain on precious metal contracts (492 ) (806 ) (1,988 ) (522 )
Non-cash adjustment to precious metal inventory valued at LIFO 1,407 (1,110 ) (426 ) (936 )
Depreciation and amortization 4,144 3,472 16,138 13,343
Non-cash pension expense 1,341 830 5,342 3,313
Non-cash stock-based compensation 1,213 1,017 4,860 4,476
Other items, net 608   838   969   1,009  
Adjusted EBITDA $ 14,237   $ 12,265   $ 77,542   $ 70,556  
 

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 Building Materials segment was formerly known as the Engineered Materials segment.

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.

Contact:
Handy & Harman Ltd.
James F. McCabe, Jr., 212-520-2300
Senior Vice President and Chief Financial Officer
JMcCabe@steelpartners.com

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