Handy & Harman Ltd. (NASDAQ:HNH), a diversified global
industrial company, today announced operating results for the
fourth quarter and year ended December 31, 2016, as summarized
in the following paragraphs. For a full discussion of the results,
please see the Company's Form 10-K as filed with the U.S.
Securities and Exchange Commission, which can be found at
www.handyharman.com.
HNH reported an increase in net sales to $235.9 million for the
2016 fourth quarter, from $163.9 million for the same period in
2015. Loss from continuing operations before tax and equity
investment was $16.2 million in the fourth quarter of 2016,
compared with income of $8.4 million in the 2015 period. Loss from
continuing operations, net of tax, for the fourth quarter of 2016
was $18.7 million, or $1.53 per basic and diluted common share,
compared with income of $3.0 million, or $0.25 per basic and
diluted common share, for the same period in 2015.
For the year ended December 31, 2016, net sales grew to
$828.3 million, from $649.5 million in 2015. Income from continuing
operations before tax and equity investment for 2016 was $8.4
million, compared with $41.5 million in 2015. Loss from continuing
operations, net of tax, for the year was $10.9 million, or $0.89
per basic and diluted common share, compared with income of $17.0
million, or $1.49 per basic and diluted common share, in 2015.
Results for the fourth quarter and year ended December 31,
2016 include certain significant acquisition and
integration-related charges associated with the Company's recently
completed acquisitions, as well as other non-cash goodwill and
asset impairment charges resulting from a decline in market
conditions and demand for certain of the Company's Performance
Materials product lines, and HNH's continual focus on operational
productivity and site rationalization.
For the 2016 fourth quarter, the Company recorded a non-cash
goodwill impairment charge of $24.3 million. For the full 2016
year, the Company recorded non-cash asset impairment charges
totaling $10.4 million, as well as acquisition costs totaling $3.2
million and non-cash charges of $1.9 million due to the
amortization of the fair value adjustments to acquisition-date
inventories. Comparable charges during 2015 included acquisition
costs totaling $1.0 million and non-cash charges of $3.7 million
due to the amortization of the fair value adjustments to
acquisition-date inventories, as well as asset impairment charges
of $1.4 million.
HNH generated a 51.4% increase in Adjusted EBITDA for the 2016
fourth quarter to $28.9 million, from $19.1 million for the same
period in 2015. For the full 2016 year, Adjusted EBITDA increased
34.7% to $106.7 million, from $79.2 million in 2015. See "Note
Regarding Use of Non-GAAP Financial Measurements" below for the
definition of Adjusted EBITDA.
"Our sales and Adjusted EBITDA performance in 2016 reflect the
Company's continued focus on enhancing value through profitable
growth and accretive acquisitions," said Bill Fejes, President and
CEO of Handy & Harman Group Ltd. "During 2016, we completed a
series of transactions to further enhance our product offerings and
position the Company for growth in our niche markets. We
concentrated on integrating our acquired companies and initiating
processes to enhance efficiencies. During 2017, we expect to
continue to evaluate our product portfolio and infrastructure costs
to enhance future productivity, and to invest in R&D to rapidly
scale growth opportunities," Fejes added.
Outlook
Based on current information, the Company anticipates full-year
2017 net sales and Adjusted EBITDA in the ranges of $0.871 billion
to $1.064 billion, and $113 million to $139 million,
respectively.
The Company's outlook for the first quarter of 2017 is for net
sales between $207 million and $253 million and Adjusted EBITDA
between $21 million and $27 million.
Financial
Summary
Three Months Ended Year Ended
(in thousands, except per share) December 31,
December 31, 2016 2015 2016
2015 Net sales $ 235,906 $ 163,872 $ 828,343 $
649,468 Gross profit 66,556 44,554 227,911 178,214 Gross profit
margin 28.2 % 27.2 % 27.5 % 27.4 % Operating (loss) income (14,914
) 9,287 15,049 45,914 (Loss) income from continuing operations
before tax and equity investment (16,223 ) 8,421 8,375 41,520 Tax
provision 2,105 4,137 13,893 17,997 Loss from associated company,
net of tax 373 1,245 5,426 6,532 (Loss)
income from continuing operations, net of tax (18,701 ) 3,039
(10,944 ) 16,991 Net (loss) income from discontinued operations —
(762 ) — 89,372 Net (loss) income $ (18,701 )
$ 2,277 $ (10,944 ) $ 106,363
Basic and diluted
(loss) income per share of common stock (Loss) income from
continuing operations, net of tax, per share $ (1.53 ) $ 0.25 $
(0.89 ) $ 1.49 Discontinued operations, net of tax, per share —
(0.06 ) — 7.86 Net (loss) income per share $
(1.53 ) $ 0.19 $ (0.89 ) $ 9.35
Segment
Results
Statement of Operations Data Three
Months Ended Year Ended (in thousands)
December 31, December 31, 2016
2015 2016 2015 Net sales: Joining
Materials $ 41,471 $ 38,608 $ 175,477 $ 182,702 Tubing 18,219
18,210 77,630 79,539 Building Materials 66,505 59,018 284,567
266,859 Performance Materials 25,366 31,470 101,567 59,535
Electrical Products 68,493 — 128,636 — Kasco 15,852 16,566
60,466 60,833 Total net sales $ 235,906
$ 163,872 $ 828,343 $ 649,468 Segment
operating (loss) income: Joining Materials $ 1,743 $ 3,728 $ 14,348
$ 19,906 Tubing 3,003 2,855 13,962 13,081 Building Materials 10,691
8,537 44,479 37,480 Performance Materials (24,670 ) 188 (32,078 )
(2,212 ) Electrical Products 1,218 — (1,804 ) — Kasco 552
1,274 3,040 4,336 Total segment operating
(loss) income (7,463 ) 16,582 41,947 72,591
Unallocated corporate expenses and non-operating units (5,674 )
(5,476 ) (19,379 ) (19,259 ) Unallocated pension expense (2,035 )
(1,573 ) (8,139 ) (7,480 ) Gain (loss) from asset dispositions 258
(246 ) 620 62 Operating (loss) income (14,914
) 9,287 15,049 45,914 Interest expense (2,714
) (1,115 ) (7,198 ) (4,598 ) Realized and unrealized gain on
derivatives 962 315 148 588 Other income (expense) 443 (66 )
376 (384 ) (Loss) income from continuing operations before
tax and equity investment $ (16,223 ) $ 8,421 $ 8,375
$ 41,520
Supplemental
Non-GAAP Disclosures
Adjusted EBITDA Three Months
Ended Year Ended (in thousands) December
31, December 31, 2016 2015
2016 2015 (Loss) income from continuing
operations, net of tax $ (18,701 ) $ 3,039 $ (10,944 ) $ 16,991 Add
(Deduct): Loss from associated company, net of tax 373 1,245 5,426
6,532 Tax provision 2,105 4,137 13,893 17,997 Interest expense
2,714 1,115 7,198 4,598 Non-cash derivative and hedge gain on
precious metal contracts (962 ) (315 ) (148 ) (588 ) Non-cash
adjustment to precious metal inventory valued at LIFO (149 ) 197
429 (44 ) Depreciation and amortization 16,313 5,832 40,097 18,380
Non-cash pension expense 2,035 1,573 8,139 7,480 Non-cash goodwill
impairment charges 24,254 — 24,254 — Non-cash asset impairment
charges — 1,398 10,398 1,398 Non-cash stock-based compensation 259
658 1,466 3,373 Amortization of fair value adjustments to
acquisition-date inventories — 56 1,924 3,655 Other items, net 632
138 4,529 (609 ) Adjusted EBITDA $ 28,873
$ 19,073 $ 106,661 $ 79,163
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 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
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;
- 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, 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, 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/20170228006884/en/
PondelWilkinson Inc.Roger S. Pondel,
310-279-5965rpondel@pondel.com
Handy & Harman Ltd. (NASDAQ:HNH)
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