HANDY & HARMAN LTD. - FORM 8-K - EX-99.1 - January 27, 2015

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EXHIBIT 99.1

HANDY & HARMAN LTD.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On January 22, 2015, Handy & Harman Ltd. ("HNH") completed the previously announced sale of Arlon, LLC ("Arlon") to Rogers Corporation ("Rogers") for $157 million in cash. The operations of Arlon comprised substantially all of HNH's former Arlon Electronic Materials segment, which manufactures high performance materials for the printed circuit board industry and silicone rubber-based materials. The following unaudited pro forma condensed consolidated financial statements of HNH are being presented to give effect to the disposition of Arlon.

  •
The unaudited pro forma condensed consolidated balance sheet of HNH as of September 30, 2014 was prepared as if the disposition of Arlon had occurred on September 30, 2014, and the pro forma adjustments give effect to events that are directly attributable to the transaction, regardless if they have a continuing impact or are nonrecurring.
     
  •
The unaudited pro forma condensed consolidated income statements of HNH for the nine months ended September 30, 2014 and the years ended December 31, 2013, 2012 and 2011 reflect the removal of Arlon's historical operating results from continuing operations and were prepared as if the disposition of Arlon had occurred on January 1, 2013. The pro forma adjustments give effect to events that are directly attributable to the transaction and have a continuing impact on the reported results of operations of HNH.
     
These unaudited pro forma condensed consolidated financial statements of HNH are derived from the audited and unaudited consolidated financial statements of HNH included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014. The pro forma adjustments are based on factually supportable available information and certain assumptions that management believes are reasonable.

These unaudited pro forma condensed consolidated financial statements do not purport to represent what the results of operations or financial position of HNH would actually have been had the transaction occurred on the dates noted above, or to project the results of operations or financial position of HNH for any future periods. In the opinion of management, all necessary adjustments to the unaudited pro forma financial statements have been made.

These unaudited pro forma condensed consolidated financial statements should be read in conjunction with the related notes to these financial statements and with Management's Discussion and Analysis of Financial Condition and Results of Operations and the historical financial statements and related notes thereto of HNH included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014.

Beginning with HNH's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Arlon's historical financial results for periods prior to the sale will be reflected in HNH's consolidated financial statements within discontinued operations.

HANDY & HARMAN LTD.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2014


(in thousands)
  
(A)
Historical
HNH
  
(B)
Arlon
Operations
  
Pro Forma
Adjustments
  
Pro Forma
HNH
ASSETS
                        
Current Assets:
                        
Cash and cash equivalents
  
$
30,613
    
$
—
    
$
—
    
$
30,613
  
Trade and other receivables, net
  
97,421
    
(16,772
)
  
—
    
80,649
  
Inventories, net
  
76,400
    
(8,623
)
  
—
    
67,777
  
Deferred income tax assets - current
  
20,553
    
(1,241
)
  
—
    
19,312
  
Prepaid and other current assets
  
9,166
    
(734
)
  
—
    
8,432
  
Assets of discontinued operations
  
641
    
—
    
—
    
641
  
Total current assets
  
234,794
    
(27,370
)
  
—
    
207,424
  
Property, plant and equipment at cost, net
  
91,054
    
(24,699
)
  
—
    
66,355
  
Goodwill
  
77,564
    
(9,298
)
  
—
    
68,266
  
Other intangibles, net
  
44,933
    
(10,859
)
  
—
    
34,074
  
Investment in associated company
  
21,329
    
—
    
—
    
21,329
  
Deferred income tax assets
  
49,331
    
7,974
    
(20,600
)
(C)
36,705
  
Other non-current assets
  
16,922
    
—
    
—
    
16,922
  
Total assets
  
$
535,927
    
$
(64,252
)
  
$
(20,600
)
  
$
451,075
  
LIABILITIES AND STOCKHOLDERS' EQUITY
                        
Current Liabilities:
                        
Trade payables
  
$
49,031
    
$
(6,439
)
  
$
—
    
$
42,592
  
Accrued liabilities
  
28,311
    
(4,021
)
  
(190
)
(D)
24,100
  
Accrued environmental liabilities
  
1,786
    
—
    
—
    
1,786
  
Short-term debt
  
629
    
—
    
—
    
629
  
Current portion of long-term debt
  
352
    
—
    
—
    
352
  
Deferred income tax liabilities - current
  
401
    
—
    
—
    
401
  
Liabilities of discontinued operations
  
20
    
—
    
—
    
20
  
Total current liabilities
  
80,530
    
(10,460
)
  
(190
)
  
69,880
  
Long-term debt
  
220,272
    
—
    
(145,695
)
(E)
74,577
  
Accrued pension liability
  
128,659
    
(997
)
  
—
    
127,662
  
Other post-retirement benefit obligations
  
2,506
    
—
    
—
    
2,506
  
Other liabilities
  
6,452
    
(1,704
)
  
—
    
4,748
  
Total liabilities
  
438,419
    
(13,161
)
  
(145,885
)
  
279,373
  
Commitments and Contingencies
                        
Stockholders' Equity:
                        
Common stock
  
136
    
—
    
—
    
136
  
Accumulated other comprehensive loss
  
(183,030
)
  
462
    
—
    
(182,568
)
Additional paid-in capital
  
568,110
    
—
    
259
  
(F)
568,369
  
Treasury stock, at cost
  
(70,298
)
  
—
    
—
    
(70,298
)
Accumulated deficit
  
(217,410
)
  
(51,553
)
(G)
125,026
  
(G)
(143,937
)
Total stockholders' equity
  
97,508
    
(51,091
)
  
125,285
    
171,702
  
Total liabilities and stockholders' equity
  
$
535,927
    
$
(64,252
)
  
$
(20,600
)
  
$
451,075
  

SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

HANDY & HARMAN LTD.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014


(in thousands, except per share)
  
(A)
Historical HNH
  
(B)
Arlon
Operations
  
Pro Forma
Adjustments
  
Pro Forma
HNH
Net sales
  
$
546,040
    
$
(77,483
)
  
$
—
    
$
468,557
  
Cost of goods sold
  
390,513
    
(52,258
)
  
—
    
338,255
  
Gross profit
  
155,527
    
(25,225
)
  
—
    
130,302
  
Selling, general and administrative expenses
  
97,497
    
(11,577
)
  
(397
)
(D)
85,523
  
Pension expense
  
2,892
    
(87
)
  
—
    
2,805
  
Operating income
  
55,138
    
(13,561
)
  
397
    
41,974
  
Other:
                        
Interest expense
  
5,627
    
(28
)
  
—
    
5,599
  
Realized and unrealized gain on derivatives
  
(854
)
  
—
    
—
    
(854
)
Other expense
  
114
    
25
    
—
    
139
  
Income from continuing operations before tax and equity investment
  
50,251
    
(13,558
)
  
397
    
37,090
  
Tax provision
  
19,944
    
(4,786
)
  
159
  
(H)
15,317
  
Loss from associated company, net of tax
  
7,783
    
—
    
—
    
7,783
  
Income from continuing operations, net of tax
  
$
22,524
    
$
(8,772
)
  
$
238
    
$
13,990
  
Basic and diluted income per share of common stock
                        
Income from continuing operations, net of tax, per share
  
$
1.75
                
$
1.09
  
Weighted-average number of common shares outstanding
  
12,858
                
12,858
  

SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

HANDY & HARMAN LTD.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2013


(in thousands, except per share)
  
(I)
Historical
HNH
  
(B)
Arlon
Operations
  
Pro Forma
HNH
Net sales
  
$
655,224
    
$
(84,060
)
  
$
571,164
  
Cost of goods sold
  
470,349
    
(59,007
)
  
411,342
  
Gross profit
  
184,875
    
(25,053
)
  
159,822
  
Selling, general and administrative expenses
  
128,583
    
(14,170
)
  
114,413
  
Pension expense
  
5,342
    
(136
)
  
5,206
  
Operating income
  
50,950
    
(10,747
)
  
40,203
  
Other:
                  
Interest expense
  
13,705
    
(43
)
  
13,662
  
Realized and unrealized gain on derivatives
  
(1,195
)
  
—
    
(1,195
)
Other expense
  
291
    
(51
)
  
240
  
Income from continuing operations before tax and equity investment
  
38,149
    
(10,653
)
  
27,496
  
Tax provision
  
16,028
    
(3,867
)
  
12,161
  
Gain from associated company, net of tax
  
(6,006
)
  
—
    
(6,006
)
Income from continuing operations, net of tax
  
$
28,127
    
$
(6,786
)
  
$
21,341
  
Basic and diluted income per share of common stock
                  
Income from continuing operations, net of tax, per share
  
$
2.12
          
$
1.61
  
Weighted-average number of common shares outstanding
  
13,251
          
13,251
  

SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

HANDY & HARMAN LTD.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2012


(in thousands, except per share)
  
(I)
Historical
HNH
  
(B)
Arlon
Operations
  
Pro Forma
HNH
Net sales
  
$
579,528
    
$
(80,815
)
  
$
498,713
  
Cost of goods sold
  
410,042
    
(54,829
)
  
355,213
  
Gross profit
  
169,486
    
(25,986
)
  
143,500
  
Selling, general and administrative expenses
  
116,383
    
(14,479
)
  
101,904
  
Pension expense
  
3,313
    
(118
)
  
3,195
  
Operating income
  
49,790
    
(11,389
)
  
38,401
  
Other:
                  
Interest expense
  
16,719
    
(31
)
  
16,688
  
Realized and unrealized gain on derivatives
  
(2,582
)
  
—
    
(2,582
)
Other expense
  
439
    
(5
)
  
434
  
Income from continuing operations before tax
  
35,214
    
(11,353
)
  
23,861
  
Tax provision
  
13,065
    
(3,429
)
  
9,636
  
Income from continuing operations, net of tax
  
$
22,149
    
$
(7,924
)
  
$
14,225
  
Basic and diluted income per share of common stock
                  
Income from continuing operations, net of tax, per share
  
$
1.70
          
$
1.09
  
Weighted-average number of common shares outstanding
  
13,032
          
13,032
  

SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

HANDY & HARMAN LTD.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2011


(in thousands, except per share)
  
(I)
Historical
HNH
  
(B)
Arlon
Operations
  
Pro Forma
HNH
Net sales
  
$
579,764
    
$
(81,282
)
  
$
498,482
  
Cost of goods sold
  
421,886
    
(58,790
)
  
363,096
  
Gross profit
  
157,878
    
(22,492
)
  
135,386
  
Selling, general and administrative expenses
  
105,283
    
(13,453
)
  
91,830
  
Pension expense
  
6,357
    
(41
)
  
6,316
  
Asset impairment charge
  
700
    
(690
)
  
10
  
Operating income
  
45,538
    
(8,308
)
  
37,230
  
Other:
                  
Interest expense
  
16,268
    
(79
)
  
16,189
  
Realized and unrealized gain on derivatives
  
(418
)
  
—
    
(418
)
Other expense
  
1,360
    
7
    
1,367
  
Income from continuing operations before tax
  
28,328
    
(8,236
)
  
20,092
  
Tax benefit
  
(106,088
)
  
(2,191
)
  
(108,279
)
Income from continuing operations, net of tax
  
$
134,416
    
$
(6,045
)
  
$
128,371
  
Basic and diluted income per share of common stock
                  
Income from continuing operations, net of tax, per share
  
$
10.71
          
$
10.22
  
Weighted-average number of common shares outstanding
  
12,555
          
12,555
  

SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

HANDY & HARMAN LTD.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)

(A)
Represents the unaudited consolidated balance sheet as of September 30, 2014 and the unaudited consolidated income statement for the nine months ended September 30, 2014 reported in HNH's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014.
   
(B)
Reflects the elimination of the assets and liabilities and results of operations of Arlon in accordance with Accounting Standards Codification 205-20, Discontinued Operations.
   
(C)
Reflects the utilization of $20,600 of HNH's U.S. federal net operating tax loss carryforwards in connection with the taxable gain on the sale of Arlon. The tax provision on the sale of Arlon is expected to total approximately $18,867, including the write-off of net current and non-current deferred tax assets (liabilities) totaling $1,241 and ($7,974), respectively, associated with the operations of Arlon and $5,000 in currently payable taxes. The unaudited pro forma condensed consolidated balance sheet assumes all cash taxes payable associated with the sale of Arlon were paid as of September 30, 2014.
   
(D)
Represents the elimination of one-time transaction costs associated with the sale of Arlon accrued ($190) as of September 30, 2014 and expensed ($397) by HNH during the nine months ended September 30, 2014. No similar adjustments are required for the years ended December 31, 2013, 2012 or 2011. The unaudited pro forma condensed consolidated balance sheet assumes all cash transaction costs, which include the broker's commission and other closing-related costs and exclude the non-cash stock-based compensation charges discussed below, associated with the sale of Arlon were paid as of September 30, 2014.
   
(E)
Represents the net cash proceeds, assuming payment of all cash taxes payable and one-time cash transaction costs, expected to be received in connection with the sale of Arlon. HNH is required to utilize the net cash proceeds to pay down amounts outstanding under its senior secured revolving credit facility. The amount of long-term debt to be repaid is comprised of the following:
   

Proceeds from the sale of Arlon
$
157,000
  
Reduction in sale proceeds for certain Indebtedness, as defined in the stock purchase agreement
(2,052
)
One-time cash transaction costs, excluding amounts paid prior to September 30, 2014
(4,253
)
Estimated cash taxes payable associated with the sale of Arlon
       (5,000
)
Total repayment of long-term debt
$   
145,695
  

(F)
Represents the estimated impact of the acceleration of unvested restricted stock grants previously made to Arlon employees upon the sale of Arlon under signed employment agreements.
   
(G)
Net adjustments to accumulated deficit in connection with the sale of Arlon are comprised of the following:

Proceeds from the sale of Arlon
$
157,000
  
Reduction in sale proceeds for certain Indebtedness, as defined in the stock purchase agreement
(2,052
)
One-time transaction costs, including the acceleration of restricted stock grants
(4,322
)
Book value of Arlon net assets transferred to Rogers, excluding deferred taxes
(57,824
)
Estimated tax expense associated with the sale of Arlon
(18,867
)
Reclassification of accumulated other comprehensive loss to income
        (462
)
Total adjustments to accumulated deficit
$     
73,473

(H)
Represents the tax effect of the elimination of one-time transaction costs associated with the sale of Arlon recorded by HNH during the nine months ended September 30, 2014 using HNH's effective tax rate for the period.
   
(I)
Represents the consolidated income statements for the years ended December 31, 2013, 2012 and 2011 reported in HNH's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

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