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Handy & Harman Ltd. Reports First Quarter Financial Results And Outlook For 2014

Handy & Harman Ltd. (NASDAQ:HNH) ("HNH" or the "Company"), a diversified global industrial company, today announced operating results for the first quarter ended March 31, 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 $161.8 million for the quarter, as compared to $149.0 million for the same period in 2013. Income from continuing operations before tax and equity investment was $8.2 million in the first quarter of 2014, as compared to $2.2 million in the 2013 period. Loss from continuing operations, net of tax, for the first quarter of 2014 was $0.4 million, or $(0.03) per basic and diluted common share, as compared to a loss of $1.5 million, or $(0.11) per basic and diluted common share for the same period in 2013.

HNH generated Adjusted EBITDA of $16.6 million for the first quarter of 2014, as compared to $17.6 million for the same period in 2013, a decrease of $(1.1) million, or (6.0)%. 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 $640 million to $782 million, and $82 million to $100 million, respectively. The Company's outlook for the second quarter of 2014 is for net sales between $180 million and $220 million and Adjusted EBITDA between $27 million and $33 million.

Financial Summary

  Three Months Ended
(in thousands, except per share) March 31,
2014     2013  
Net sales $ 161,847 $ 148,957
Gross profit 45,400 43,972
Gross profit margin 28.1 % 29.5 %
Operating income 9,690 11,199
Income from continuing operations before tax and equity investment 8,228 2,178
Tax provision 3,342 867
Loss from associated company, net of tax 5,298   2,837  
Loss from continuing operations, net of tax (412 ) (1,526 )
Net income from discontinued operations 42   9,541  
Net (loss) income $ (370 ) $ 8,015  
Basic and diluted (loss) income per share of common stock
Loss from continuing operations, net of tax, per share $ (0.03 ) $ (0.11 )
Discontinued operations, net of tax, per share   0.72  
Net (loss) income per share $ (0.03 ) $ 0.61  
 

Segment Results

Statement of Operations Data   Three Months Ended
(in thousands) March 31,
2014     2013  
Net sales:
Joining Materials $ 51,713 $ 44,530
Tubing 20,706 22,014
Building Materials 48,531 46,639
Arlon 26,360 21,305
Kasco 14,537   14,469  
Total net sales $ 161,847   $ 148,957  
Segment operating income:
Joining Materials $ 5,378 $ 5,747
Tubing 3,068 3,752
Building Materials 3,010 4,068
Arlon 4,368 3,091
Kasco 726   1,291  
Total segment operating income 16,550   17,949  
Unallocated corporate expenses and non-operating units (5,747 ) (5,489 )
Unallocated pension expense (1,136 ) (1,274 )
Gain from asset dispositions 23   13  
Operating income 9,690   11,199  
Interest expense (1,552 ) (8,446 )
Realized and unrealized gain (loss) on derivatives 140 (439 )
Other expense (50 ) (136 )
Income from continuing operations before tax and equity investment $ 8,228   $ 2,178  
 

Supplemental Non-GAAP Disclosures

Adjusted EBITDA   Three Months Ended
(in thousands) March 31,
2014     2013  
Loss from continuing operations, net of tax $ (412 ) $ (1,526 )
Add (Deduct):
Loss from associated company, net of tax 5,298 2,837
Tax provision 3,342 867
Interest expense 1,552 8,446
Unrealized loss on embedded derivatives related to sub-notes 793
Non-cash derivative and hedge gain on precious metal contracts (140 ) (354 )
Non-cash adjustment to precious metal inventory valued at LIFO 131 (350 )
Depreciation and amortization 4,377 3,934
Non-cash pension expense 1,136 1,274
Non-cash stock-based compensation 1,078 1,190
Other items, net 190   505  
Adjusted EBITDA $ 16,552   $ 17,616  
 

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.

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