Handy & Harman
Handy & Harman
Incorporated: 1867 as Peter Hayden & Co.
Sales: $451.1 (1997)
Stock Exchanges: New York
SICs: 3339 Primary Nonferrous Metals, Not Elsewhere Classified; 3341 Secondary Nonferrous Metals; 3398 Metal Heat Treating
Handy & Harman is a 125-year-old company whose business has undergone numerous transformations over the course of the century. Founded as a maker of silver harness fittings, by the turn of the century the company had become the largest U.S. silver trading firm. As the nature of the silver trade changed in the 1930s, Handy & Harman turned to manufacturing silver alloys for industrial use as well as recycling precious metals from scrap. A program of acquisitions from the 1960s through the 1980s left Handy & Harman as a diversified manufacturing company with two major segments: metal wire and tubing and precious metals used in a number of industrial applications including precision plating and finishing, silver alloyed wire and strip production and brazing alloy fabrications. Through these two business segments Handy & Harman provided components and engineered materials for specialized industrial, electronic, telecommunications, and automotive applications.
Company Origins in the 19th Century
The company that was to become Handy & Harman was founded in New York City in 1867 by Peter Hayden. Hayden was a harness maker specializing in producing custom-made decorative silver fittings for the horses of well-to-do New Yorkers. Obliged to purchase silver for his craft, Hayden decided that trading in the precious metal was potentially more profitable than working with it, and in 1867 he closed his harness works and opened a business on Nassau Street as a dealer in precious metal bullion and specie (coins). Hayden’s business prospered but in 1870 he decided to retire, selling his firm to Parker Handy, the vice-president of the Third National Bank of New York. Handy changed the company name to the Banking House of Parker Handy and added government bonds and general banking activities to the operations. In 1886 John F. Harman, who had been with the firm as clerk and cashier since its founding, was made a partner and the company name was changed to its current form, Handy & Harman.
The latter part of the 19th century was a period of tremendous growth for the American precious metals trade as new silver and gold mines in the west provided an abundance of raw material to be traded internationally. Handy & Harman was able to capitalize on this booming new market by specializing almost exclusively in the silver trade, and thereby gradually building a niche business with which few American firms could compete. In addition to trading in silver bullion, bonds, and American and foreign coins, Handy & Harman supplied silver bullion to silversmiths and jewellery manufacturers. By the late 19th century Handy & Harman had become the largest U.S. silver trading firm. The company’s preeminence in this market was recognized by the New York Stock Exchange, whose silver trading desk was manned by Parker Douglas Handy, son of company president, Parker Handy. In 1892 a century-long tradition was begun when Handy & Harman became the source of the American daily silver price quotation. Begun as a simple posting of the daily price in the company’s offices, Harman & Handy’s position in the industry soon made its determination of the price of silver in American dollars the standard used throughout the country. In keeping with the company’s authoritative role in the silver trading business, in 1917 Handy & Harman published its first “Review of the Silver Market.” This annual report became the definitive word on the state of the silver industry for the next 70 years and was used extensively by government and market analysts.
Diversification in the Early 20th Century
In 1900 Handy & Harman began to expand the scope of its operations with the acquisition of the Standard Metal Company of Chicago. Standard Metal was a processor of silver, melting bullion to produce anodes, alloys and mill forms. With the acquisition of Standard Metal, Handy & Harman could provide not only bullion but alloys and prefabricated silver bands, wires, and moldings to leading jewelers, marking the first step in the company’s future development as a supplier of processed metal to industry. The newly purchased company also engaged in the reclamation of precious metals from scrap materials, a process formerly undertaken primarily by jewelers themselves. Handy & Harman’s refinement and standardization of the reclamation process was to become one of the mainstays of the company’s business for the next 90 years. Standard Metal’s operations, renamed Handy & Harman, were moved to Bridgeport, Connecticut, in 1902 in order to be nearer the East Coast centers of silversmithing and jewelry making. Some ten years later a new plant, which was to remain one of the centers of Handy & Harman’s precious metals operations into the 1990s, was opened in nearby Fairfield. In 1905 Handy & Harman added to its precious metals processing operations with the acquisition of the Platt Company, a refiner of silver and gold and a manufacturer of silver solder.
Through the first two decades of the 20th century Handy & Harman continued to expand their precious metal processing operations. Particularly important for the firm’s future business, was the development of silver alloys used for brazing. Brazing, a process that uses a filler metal and flux at high temperatures to join two metal parts, became increasingly in demand in the 20th century as large scale casting of machinery was replaced by the assembly of smaller components. Handy & Harman became one of the chief American producers of the precious metal alloys used for this process.
By the mid-1930s Handy & Harman’s trading in silver bullion and coins had been discontinued as the global economy moved to other avenues of currency distribution and silver bullion became available directly through the Treasury. Run out of offices and a refining plant in New York and a processing plant in Fairfield, Handy & Harman’s precious metals processing, brazing, and reclamation operations continued to expand. In 1936 the company opened a Canadian subsidiary in Toronto, Ontario, that provided the entire range of the company’s precious metals products and refining services to the Canadian market.
New Products in the 1940s and 1950s
Like most American industry, Handy & Harman prospered during World War II as its silver alloys were used for such war related products as aircraft, tanks, torpedoes, and guns. In order to serve the West Coast aircraft industry that grew up during this period, the company opened first a branch office and later a manufacturing plant in California.
By the end of the war Handy & Harman, under the chairmanship of C.W. Handy, was the leading precious metals fabricator and refiner in the country. The company’s emphasis now lay squarely in industrial applications for precious metals including new brazing alloys and electrical contacts. New branch offices were opened in Chicago, Detroit, and Cleveland to serve the growing industries of the Midwest, and by 1950 sales had reached about $80 million. In the late 1950s Handy & Harman began to expand into non-precious metals with the 1958 acquisition of the Posen & Kline Tube Company of Norristown, Pennsylvania. Posen & Kline produced precision drawn stainless steel, carbon, and nickel tubing for a variety of industrial applications and, as the Handy & Harman Tube Co., remained one of the company’s core businesses into the 1990s.
Diversification in the 1960s and 1970s
The 1960s was a period of rapid diversification for Handy & Harman as a program of acquisitions, initiated by the company’s new president M.W. Townsend, expanded the company’s business to include a wide variety of non-precious metal products and services. The company acquired nine companies in the second half of the decade alone, including: the Orange Roller Bearing Co., a New Jersey maker of stainless steel conveyor belts; Maryland Specialty Wire, Inc., a producer of small diameter stainless steel wire, wire rope, and wire assemblies; Lucas-Milhaupt, Inc., a manufacturer of brazing preforms, washers, and special shapes; Ipsenlab, a Toronto, Canada-based company that performed heat treatment and furnace brazing of ferrous and non-ferrous metals; Ladek Metal Products, Inc., a Wisconsin fabricator of wire and metal ribbon; Consolidated Tube Fabricating Corp., a Connecticut manufacturer of small diameter tubing; the Attleboro Refining Co., a Massachusetts-based metal refiner; American Clad Metals, a Rhode Island maker of thin clad metal strip; and Bigelow Components Corp, a New Jersey fabricator of small cold-headed components for the electronics industry.
By the end of the decade Handy & Harman was providing metal parts and services to the jewelry, appliance, electronics, aircraft, and automotive industries. Although the majority of the company’s acquisitions were designed to increase the company’s non-precious metals operations, precious metals still provided the bulk of the Handy & Harman’s sales. New demands for precious metals in the electronics industry were met by the company with new product introductions including chemically processed precious metals and silver and gold cladding of non-precious metals. Handy & Harman’s precious metals reclamation operations benefited from price increases in silver and gold, and a new refinery was built in Attleboro, Massachusetts, to meet the growing demand. The company’s total sales, which had remained steady at about $80 million through the 1950s and into the early 1960s, now began to grow at an accelerated pace, reaching $206 million by the end of the decade.
Handy & Harman’s program of diversification within the metals industry continued into the early 1970s with the acquisition of Greenback Industries, a Tennessee producer of copper, tin, premixed bronze, and ferrite powders; and Rathbone Corporation, a Massachusetts manufacturer of cold-drawn profile shaped bars and pinion rods. Other acquisitions, including the American Chemical & Refining Co. and the Indiana Tube Co., were designed to expand the company’s capabilities in segments in which the parent already had a presence. It was in the late 1970s, however, that for the first time in its history Handy & Harman moved outside the metals business with the purchase of Merit Plastics, an Ohio-based auto parts manufacturer. Merit, Handy & Harman’s largest acquisition to date, made automotive control assemblies and molded plastic products for the automotive original equipment market and represented the first entry into an important new market for Handy & Harman. Company management felt that this diversification would enable Handy & Harman to reduce its reliance on the precious metals industry which had become extremely volatile in the mid-1970s. Although the company’s stated goal for its acquisition program was to derive 50 percent of profits from their non-precious metals operations, by the late 1970s precious metals still provided over 60 percent of the company’s $14 million net income.
Consolidation in the 1980s
Although Handy & Harman management was determined to strengthen the company’s financial position through diversification, many investors, including renowned business guru Warren Buffett, were attracted not by the company’s current operations but by its precious metal reserves. By means of last-in, first-out (LIFO) accounting, Handy & Harman had been able to carry the 288,000 ounces of gold and 18.5 million ounces of silver in its reserves on its balance sheet at the original 1940s purchase price. By 1981 the company had gold and silver reserves with a market value of $391.7 million carried at a book value of only $55 million. This huge LIFO cushion meant that each share was essentially backed by about $17.50 in precious metals, independent of the company’s actual performance. The benefit of the company’s reserves was severely curtailed in the 1980s, however, when the Windfall Profits Tax Act of 1980 wiped out much of the advantage of LIFO accounting. The new law required companies to pay taxes on their LIFO cushion at normal corporate rates in the event of a liquidation or sale of the company’s assets, thus greatly reducing the attraction of Handy & Harman’s stock to investors. A rider to the act, which provided that companies adopting a plan of complete liquidation by December 31, 1981, could avoid the newly imposed tax, led Handy & Harman to announce at its annual meeting in 1981 that it would consider total liquidation by year-end. Subsequent deliberation, however, revealed that the advantages to shareholders would be minimal and the company decided to maintain operations of the then 114-year-old company.
If the 1970s were marked by growth through acquisitions, by the early 1980s Handy & Harman, now under the direction of President Richard N. Daniel, moved to consolidate its existing operations by investing heavily in the upgrading and expansion of facilities and the development of new products. Rises in precious metals prices contributed to a worldwide growth in the reclamations industry and Handy & Harman responded to this demand by opening a new refinery in Singapore, the company’s first major venture overseas. A state-of-the-art refinery was also opened in South Windsor, Connecticut. In keeping with the company’s aim to expand its non-precious metals operations, much of the emphasis of the capital improvements program was directed at the company’s automotive equipment business, which was reorganized as the Handy & Harman Automotive Group. A new manufacturing plant was constructed in Angola, Indiana, to supply fuel injection systems to major automakers, a facility was opened in Nuevo Laredo, Mexico, and the automotive radiator manufacturing facilities that had been acquired in the 1970s were expanded.
These efforts were successful in reducing Handy & Harman’s reliance on its precious metals business. By 1987 only 42 percent of the company’s revenues were provided by precious metals, with non-precious metals bringing in 23 percent and automotive equipment the remainder. The expenses involved in these improvements, however, caused long-term debt to jump from $56 million to $124 million. To make matters worse, poor conditions in the auto industry in the mid-1980s proved damaging for the company’s automotive unit, and in 1986 Handy & Harman recorded a net loss of almost $9 million, the first loss in the company’s history. Although Handy & Harman returned to profitability in the late 1980s net income remained stuck at a lackluster $9 million on sales that hovered around $600 million, well below levels reached in the early years of the decade.
Restructuring in the 1990s
By 1990 it became clear that Handy & Harman management would have to make a decisive move in order to lift the company out of the doldrums. In 1991 the company announced a major restructuring which would involve the sale of six non-core businesses, including automotive replacement parts, proprietary chemicals and metal powders, and the reorganization of the company into six operating groups: Precious Metals, Specialty Tubing, Specialty Wire, Automotive OEM, Wire, and Other Specialty Metals. After recording a net loss of $34 million in 1991 as the result of costs incurred by the restructuring, Handy & Harman returned to profitability the following year but net income failed to respond significantly, rising to only $16 million by 1994. The company undertook further restructuring in 1995 with the sale of the Handy & Harman Automotive Group, the divestment of the company’s karat gold product line, and the purchase of Sumco Inc., an electroplating operation.
In 1996 a chapter in Handy & Harman’s history came to an end with the sale of the company’s U.S. precious metals refining business. With this divestment and the purchase of the ele Corporation, a manufacturer of reel to reel molding for the electronics industry, the mid-1990s saw the company engaged in two major business segments: Specialty Wire and Tubing, producing alloy and stainless steel wire and cable, small diameter stainless steel tubing, and carbon steel refrigeration tubing; and Precious Metals, encompassing precision plating and surface finishing for electronic applications, and sterling silver, silver alloyed wire, strip and brazing alloy fabrications. By 1997 Handy & Harman’s net income had risen to almost $21 million on sales of $451 million.
As Handy & Harman entered the last few years of the century, the company appeared to have weathered the worst of its difficulties and to be poised to enter the next century as a solid, diversified manufacturer. The company’s precious metal reserves still provided an attractive lure to investors as well as to companies looking for potential acquisitions. In early 1997, Handy & Harman resisted one such takeover attempt but it remained possible that the company’s assets would attract other bids.
Handy & Harman Tube Company, Inc.; Indiana Tube Corporation; Camdel Metals Corporation; Micro-Tube Fabricators, Inc.; Maryland Specialty Wire, Inc.; Willing B Wire Corporation; Lucas-Milhaupt, Inc.; ele Corporation; Sumco Inc.; Olympic Manufacturing Group, Inc.; Continental Industries, Inc.; Handy & Harman of Canada Ltd.; Handy & Harman (Europe) Ltd.; Indiana Tube Danmark A/S; Lucas-Milhaupt Europe; Handy & Harman (Asia) S.A. (Singapore; 50%).
Principal Operating Units
Specialty Wire and Tubing; Precious Metals.
Boland, John, “Glitter at Handy & Harman,” New York Times, May 10, 1987, p. 10.
Briggs, Jean A., “Pricking the LIFO Cushion,” Forbes, November 23, 1981, p. 207.
Cuff, Daniel F., “Chairman Succeeded at Handy & Harman,” New York Times, December 25, 1987, p. 2D.
“Handy & Harman Shuns Liquidation,” New York Times, November 25, 1981, p. 3D.
Jaffe, Thomas, “Cheap Gold with a Yield,” Forbes, June 13, 1988, p. 146.
——, “Will Handy Finally Shine?,” Forbes, August 19, 1991, p. 148.
Kuntz, Mary, “Golden Opportunity?,” Forbes, November 3, 1986, p. 118.