Handy & Harman Ltd. (NASDAQ:HNH), a diversified global
industrial company, today announced operating results for the
second quarter and six months ended June 30, 2017. For a full
discussion of the results, please see the Company's Form 10-Q as
filed with the U.S. Securities and Exchange Commission, which can
be found at www.handyharman.com.
HNH reported that net sales for the 2017 second quarter
increased to $256.1 million from $200.9 million for the same period
in 2016. Income before tax and equity investment was $21.2 million
in the second quarter of 2017, compared with $2.6 million in the
2016 period. Net income for the 2017 second quarter rose to $12.5
million, or $1.02 per basic and diluted common share, compared with
a net loss of $0.7 million, or $0.06 per basic and diluted common
share, for the same period in 2016.
For the six months ended June 30, 2017, net sales grew to $490.8
million, from $361.7 million in 2016. Income before tax and equity
investment for 2017 was $29.4 million, compared with $11.6 million
in 2016. Net income for the first half of 2017 was $19.4 million,
or $1.58 per basic and diluted common share, compared with a net
loss of $0.3 million, or $0.02 per basic and diluted common share,
in 2016.
Results for the quarter and six months ended June 30, 2016
include certain significant acquisition and integration-related
charges associated with our recent acquisitions. In particular, the
Company approved the closure of JPS Composite Materials
Corporation's Slater, South Carolina operating facility during the
second quarter of 2016 and recorded non-cash asset impairment
charges totaling $7.9 million in connection with the planned
closure. The Company also recorded acquisition costs totaling $2.7
million and a non-cash charge of $1.0 million due to the
amortization of the fair value adjustment to acquisition-date
inventories during 2016 associated with the SL Industries, Inc.
acquisition.
HNH generated Adjusted EBITDA of $37.6 million for the second
quarter of 2017, compared with $25.4 million for the same period in
2016, an increase of $12.2 million, or 48.1%. For the six-month
period, the Company generated a 42.7% increase in Adjusted EBITDA
to $63.4 million from $44.4 million for the same period in 2016.
See "Note Regarding Use of Non-GAAP Financial Measurements" below
for the definition of Adjusted EBITDA.
"Operating results for the second quarter reflected
contributions from acquired operations, as well as improvements in
our Building Materials segment," said Bill Fejes, President and CEO
of Handy & Harman Group Ltd. "Results for the quarter were
consistent with our prior guidance. Our guidance for the remainder
of the year has been adjusted downward to reflect a combination of
weaker than anticipated demand, an unfavorable shift in product
mix, and expected higher material costs in the second half of 2017.
However, we believe that ongoing productivity investments and
continuous improvement through the Steel Business System will help
strengthen our performance over the longer term."
Based on current information, the Company's outlook for the 2017
third quarter is net sales between $218 million and $266 million
and Adjusted EBITDA between $26 million and $31 million. The
Company's outlook for the full 2017 year is net sales between $918
million and $1.013 billion and Adjusted EBITDA between $113 million
and $124 million.
On June 26, 2017, HNH and Steel Partners Holdings L.P.
(NYSE:SPLP), a diversified global holding company, announced they
have entered into a definitive merger agreement, pursuant to which
SPLP will make an offer to exchange, for each outstanding share of
HNH common stock not already owned by SPLP or its affiliates, 1.484
6.0% Series A preferred units of SPLP. SPLP beneficially owns
approximately 70.0% of HNH's outstanding shares. Consummation of
the offer is subject to customary conditions, including the tender
of a number of shares of HNH's common stock that constitutes at
least a majority of HNH's outstanding shares not owned by SPLP or
its affiliates. If the transaction is completed, HNH will no longer
be publicly traded.
Financial
Summary
Three Months Ended Six Months Ended (in
thousands, except per share) June 30, June 30,
2017 2016 2017 2016 Net
sales $ 256,145 $ 200,880 $ 490,786 $ 361,677 Gross profit 74,628
51,962 143,209 95,679 Gross profit margin 29.1 % 25.9 % 29.2 % 26.5
% Operating income 24,181 4,498 35,923 14,780 Income before tax and
equity investment 21,239 2,638 29,391 11,582 Tax provision 8,248
1,138 11,341 4,998 Loss (gain) from associated company, net of tax
478 2,234 (1,330 ) 6,862 Net income (loss) $
12,513 $ (734 ) $ 19,380 $ (278 )
Basic and
diluted income (loss) per share of common stock
Net income (loss) per share $ 1.02 $ (0.06 ) $
1.58 $ (0.02 )
Segment
Results
Statement of Operations Data Three Months
Ended Six Months Ended (in thousands) June
30, June 30, 2017 2016 2017
2016 Net sales: Joining Materials $ 50,286 $ 46,323 $ 96,826
$ 88,994 Tubing 16,925 20,053 34,928 40,323 Building Materials
87,446 81,434 155,744 139,736 Performance Materials 24,878 26,200
50,254 50,983 Electrical Products (a) 61,534 11,794 122,921 11,794
Kasco 15,076 15,076 30,113 29,847 Total
net sales $ 256,145 $ 200,880 $ 490,786 $
361,677 Segment operating income (loss): Joining Materials $
6,121 $ 6,127 $ 11,541 $ 10,542 Tubing 2,641 3,558 5,326 7,769
Building Materials 14,453 11,604 23,512 18,957 Performance
Materials 1,412 (7,258 ) 2,985 (6,965 ) Electrical Products (a)
6,412 (3,263 ) 10,101 (3,263 ) Kasco 557 565 1,243
1,545 Total segment operating income 31,596
11,333 54,708 28,585 Unallocated corporate
expenses and non-operating units (4,931 ) (4,876 ) (13,754 ) (9,859
) Unallocated pension expense (2,652 ) (2,132 ) (5,305 ) (4,283 )
Gain from asset dispositions 168 173 274 337
Operating income 24,181 4,498 35,923
14,780 Interest expense (2,910 ) (1,345 ) (5,840 ) (2,415 )
Realized and unrealized gain (loss) on derivatives 286 (416 ) (75 )
(539 ) Other expense (318 ) (99 ) (617 ) (244 ) Income before tax
and equity investment $ 21,239 $ 2,638 $ 29,391
$ 11,582
(a) - The Electrical Products segment is
comprised of the operations of SL Industries, Inc. and those of the
former Electromagnetic Enterprise division of Hamilton Sundstrand
Corporation, which were acquired on June 1, 2016 and September 30,
2016, respectively.
Supplemental
Non-GAAP Disclosures
Adjusted EBITDA Three Months Ended Six
Months Ended (in thousands) June 30, June
30, 2017 2016 2017
2016 Net income (loss) $ 12,513 $ (734 ) $ 19,380 $ (278 )
Add (Deduct): Loss (gain) from associated company, net of tax 478
2,234 (1,330 ) 6,862 Tax provision 8,248 1,138 11,341 4,998
Interest expense 2,910 1,345 5,840 2,415 Non-cash derivative and
hedge (gain) loss on precious metal contracts (286 ) 416 75 539
Non-cash adjustment to precious metal inventory valued at LIFO 126
(95 ) 236 286 Depreciation and amortization 9,772 6,663 20,335
12,350 Non-cash pension expense 2,652 2,132 5,305 4,283 Non-cash
asset impairment charges — 7,858 — 7,858 Non-cash stock-based
compensation 108 259 340 931 Amortization of fair value adjustments
to acquisition-date inventories — 984 —
984 Other items, net 1,038 3,156 1,839 3,181
Adjusted EBITDA $ 37,559 $ 25,356 $ 63,361
$ 44,409
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 U.S.
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 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
U.S. ("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 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;
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 net income or loss,
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, 2016.
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 U.S. and internationally.
HNH's companies are organized into six businesses: Joining
Materials, Tubing, Building Materials, Performance Materials,
Electrical Products, 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,
electrical, electronics, transportation, power control, utility,
medical, oil and gas exploration, aerospace and defense, 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, the Steel Business System, 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 New York, 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
2017 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, 2016 and the Company's Form 10-Q for the
quarterly period ended June 30, 2017, 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170808006463/en/
PondelWilkinson Inc.Roger S. Pondel,
310-279-5965rpondel@pondel.com
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